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The cryptocurrency market has had a very low year, but blockchain companies like Ripple are too busy building decentralized apps and next-generation payment tools to pay close attention to coin prices.
Ripple's XRP cryptocurrency spent much of the year playing with Ethereum for the second most valuable currency behind Bitcoin, but Ripple the company is not the same as XRP, the digital resource, and Ripple does not control the XRP protocol open. The company itself is building on the decentralized XRP network to create applications such as xRapid for on-demand liquidity, xCurrent for the processing of business payments and xVia for cross-border payments without fraud.
Asheesh Birla is Ripple's Senior Vice President of Product Management. Asheesh sat down with PCMag to talk about the difference between cryptocurrency and blockchain technology, regulation around the world, Ripple's cross-border payment targets and the future of decentralized apps.
PCMag: let's start with the price conversation and put it off the road. Ripple was not immune to the big swings and the crash of the cryptocurrency market took place this year after the boom in 2017. Ripple and Ether have climbed a couple of times over the last few months as the second largest cryptocurrency. How big is the price of Ripple's day-to-day operations?
Asheesh Birla: Day by day we do not think about the price. Back in 2013, when most digital resources were almost useless, we did not actually have any price factors. We do not even do so much right now; we take a long-term view of the entire market. I think our founders did a good job in defining a vision and making it clear that if you're here for a one or two year blip, this is not the right place. Your [crypto] the project must be adapted over the long term instead of daily volatility.
This is my third accident now in the crypto-market, and I do not have the chance. The downside is that sometimes you happen to crash and eliminate all those who are not focused on solving real problems and real use cases. And I think you'll see some really interesting companies coming out of this next recession.
This is a feeling that I have heard from many people because I have treated the crypt in the last two years; blockchain companies that separate money from technology. I often find that the perception of cryptocurrencies as digital titles is frustratingly reductive. How much concentration do you think should be placed on the price of coins and on market capitalization compared to the real technology underlying the work and what is used in the real world?
So, at the end of the day, what will increase volume and liquidity through a digital app? If you have volume and liquidity, then it remains an important digital app. But he is solving the problems of the real world. It must be a product, in Silicon Valley, that we call a 10 times better experience, e [if] you can not offer a better 10x experience using blockchain, so do not use blockchain. In recent years we have seen many products that are a bit like blockchain tourism. For example, it looks like a database. It looks like you have to use Google Google Sheets, not a sophisticated decentralized blockchain database. So this was the frustrating part. When prices rise, people use it as marketing to get funding or to get rid of [their coins].
People always talk about the coming year in which "the blockchain becomes mainstream", but it is a cocnversation at the surface level. What does Ripple see as an app to blockchain distributed on a larger scale? It means app for blockchains that go beyond a database or Google Sheet, as you said, to actually use this decentralized calculation model to solve real-world problems.
The foundation of this technology is that without friction, without permission, I can shift the value from one blockchain to another. Today, if you want to make money across borders, you are essentially relying on Citi Bank, JPMorgan or HSBC. These three banks control most of the cross-border flow. Either directly or indirectly, you will trust these three companies to move money on your behalf and they will pay the taxes they want. If they do not care about the emerging market or other companies, the expenses rise and rise.
So what a digital app allows you to do is, instead of trusting those three companies, you can now start transferring value internationally using digital assets. This is what Ripple has with xRapid. Customers tell us that they need to trust Citibank, where they have to pay an arm and a leg and it takes days, or if I want an immediate payment I have to open a local bank account in my destination for each country. This takes months. These are my two options in 2018. You can get an Uber at your home in two minutes, but getting money internationally is still a mess.
What we did with xRapid is to use a digital resource and this new infrastructure, using digital exchanges like Bittrex and so on, and convert them from US dollars to XRP, immediately move XRP to Mexico and then exchange it for Mexican Pesos and get paid. All this happens in a few minutes, for much less than I can today, and I do not have to create accounts in the destination countries.
On this topic, Ripple has a very interesting perspective on cross-border payments all over the world, given all the markets in which you are operating. What would you say are the countries or markets in which you are seeing the most active on this front, or the citizens in the most desperate need of these types of solutions for things like remittances, for example in Venezuela.
Good question; much is driven by regulation. We are witnessing many activities in Southeast Asia, where regulators are realizing that this technology can help to further increase their economies. Just like they did with mobile phones and mobile devices, they want to bypass the West in terms of modern financial inclusion.
There are a couple of trends behind this. One, the regulators are really friendly. Second, the GDP of these economies is growing by 7-8 percent in the year, and the number three, are moving from cash to digital via mobile payment in a crazy clip. So those countries are now saying that we are going to build a modern financial product. We will not use the wire technology of the 50s or the SWIFT technology; we will use the blockchain.
Regulation is an important point. Beyond any government agency in the US as the SEC is doing, worldwide we are seeing a lot of countries laying the groundwork for opening so-called "cryptographic ports" for businesses and investments. Are there any particular markets where the regulatory environment and financial factors are believed to be ripe for blockchain-based payment technology to scale quickly in the next year or two?
All these criteria are valid for most of the countries of Southeast Asia. Even now, if you look at the interest in digital apps, 80 percent of the entire volume of cryptographic exchanges is coming out of Asia. So there is a lot of interest from consumers, there is a great regulatory interest, and I think that in the latest trend there are these countries that are growing so fast that passing from cash to digital you will see all the new technology products emerge that will be the next generation financial companies in the region.
I go to Asia probably twice in the year, and every time I come back it's a different story. The last time I came back there was an owner of a kiosk who did not speak English and could not read very well, but accepted payments via a mobile device. Just eight months ago, he said he did not have a telephone and only accepted cash. It's changing right in front of our eyes.
How is Ripple this potential payment market of many billions or trillion dollars? What are the major objectives for building financial infrastructure in addition?
The important thing is pushing further into the countries that really matter. We take India, for example. That market is moving so fast that I do not just need to think about the bank that accepts the payment and the regulated financial institution that receives the payment, but I must also introduce myself to the next-generation financial institution. We want to connect with cell phones. In the next five years, especially in India, people will access their bank accounts primarily through their phones. The other goal is to educate regulators that this is a fundamentally different and better way to transfer money. Our regulatory team continues to build on this progress.
Returning to this evolution of blockchain technology in 2019 and beyond, apart from the payments, where will you fall into the debate on the types of app and blockchain distributions that will carry the charge? Public and private blockchains, cryptocurrency, app and blockchain services, etc.
In the digital app part of it, you should think of it as the combustion engine. You can not really do anything on your own with the digital resource. You need to build something around it. You need the rest of the car. Public digital resources like XRP and Bitcoin have a lot of value, but they are a piece of the puzzle. What I think Ripple has learned over the past five years is that you have to build around that technology to make it useful.
On private blockchains, my opinion is that I do not see the point. I think it's another word of a database. If you're building your entire product on a private blockchain, you're a great marketing company.
Ripple has collaborated with several banks and financial institutions like Santander, AMEX and BBVA, but Ripple CTO David Schwartz told Reuters at the start of this year that for banks, blockchain-based cross-border payments are not still scalable for a number of reasons. How does Ripple straddle this line between working with traditional financial markets and at the same time building these open source solutions that decentralize what banks have centralized?
We have decided to work with financial institutions and I think it has paid off, but we must also think about all the financial requirements and regulations. In 2013, it was the peak of Bitcoin: "We do not need any of this, we no longer need government, banks or companies, only Bitcoin". This approach does not work. Working with financial institutions and regulatory authorities is a longer way, but it's the right one.
These two ideas do not always coexist well … to the point that the International Monetary Fund has begun to talk about governments establishing their own digital currencies supported by central banks.
I have not read the IMF piece, but I know that many of the larger banks have some sort of what I call "tourism blockchain". There is always a secondary team or a collection of innovation workshops working on a blokchain product. But at the end of the day, even though a country like the United States has created a centrally supported currency, the reason Ripple works for cross-border payments is because there is no central bank for the world. It is unlikely that the central bank of the United States will trust the central bank of Argentina. This is why it is useful to have a digital resource that both entities could essentially trust.
But for that level of cross-border trust, central banks should give up control.
Yes, they should be willing … that does not seem likely. All central banks should come together, probably somewhere like Davos. But can you imagine the US government saying, "Wait, hold on, my credit is very high and you want me to trust the Argentine peso?"
Speaking of connecting the world, I also wanted to talk about some of the social impact initiatives you are working on on cross-border payments and remittances. Specifically, in serving the populations of the underworld, are there markets where you guys are concentrating and needing the most help and that Ripple really thinks he can provide some tools to those present?
Mexico is our first xRapid corridor. We are seeing a lot of traction there because it is an under-served population. In these markets, the biggest correspondents do not want that business anymore. They are bending and limiting on it so that larger banks now occupy only 8% of their market. It's too expensive to work. So I think it's a perfect insertion point for us to come up with something that's much cheaper than anything else they've seen, which we can get up and running in a couple of weeks.
Finally, I want to touch future trends. What are some of Ripple's blockchain payment targets at the horizon for 2019? Perhaps a partnership with a large e-commerce provider?
I would look at a lot of companies that build apps on XRP. Ripple is a company with cross-border payments. The reel is another company that relies on XRP accounting after micropayments. It is a technology that goes through the browser and then goes to different websites to automatically pay for streaming content. Omni is another company that relies on XRP accounting that uses XRP for rental and storage.
These are both funded by Xpring, a Ripple initiative that will invest, incubate, buy and provide grants to companies and projects using the XRP digital asset and registry. The first Xpring entrepreneurs are funding Scooter Braun, Stefan Thomas (Coil) and Tom Mcleod (Omni).
