The CEO of Ripple, Brad Garlinghouse, recently went on the Stanford Legal podcast to speak about the current state of cross-border payments and the result it has on the global financial ecosystem. He also spoke about rewiring it with blockchain, as it was built a long time ago.
When speaking about the existing correspondent banking system, Garlinghouse spoke about how base layer innovation of the system can reduce the cost associated with cross-border payments. He stated:
“I think about the novelty of blockchain technologies is it allows two parties to transact without trust. Today, if you want to have two parties transact you have to have a trusted intermediary; that’s called a central counterparty. That central counterparty then has trust on both sides and they’re effective that transitive trust is passed in between those two.”
He went on to say that “anybody in the central counterparty business” should at least pay attention to advancements in the blockchain space. Even as we live in a world that is three decades into the Internet, Garlinghouse stated that he found it “amazing” that lots of transaction-based technologies have a central counterparty. He said:
“That takes time and friction and any type of talk about friction, it’s cost. If we do it more efficiently, we can accelerate the global industries that we’re talking about.”
On the exact use of XRP by Ripple, the CEO spoke about how Ripple Labs builds technologies on top of the XRP Ledger, which in and of itself is an open-source technology. He stated:
“Some of our products are built a hundred percent using XRP, and some have nothing to do with XRP. You could use Bitcoin for some of the products we offer. The problem is, Bitcoin has some serious scalability challenges.”
He illustrated his point with an example of paying for a coffee with Bitcoin, where the transaction itself costs around $1.8. This would effectively double the price of the coffee itself, along with the transaction occurring only after 45 minutes or so. He elaborated:
“I am personally long Bitcoin. I think Bitcoin is not going to be a panacea that some people thought it would be for many different kinds of transactions and instead you’re seeing specialize in kind of use case dynamics for different kinds of transactions.”
At this point, Garlinghouse spoke about XRP as “extremely efficient for settling payment transactions”, especially in the case of cross-border transactions. He stated that a decrease of 100 basis points in bips for a transaction for over $20 trillion is “massive savings” for financial institutions and their consumers.
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Ripple’s initiative invests in Bolt Labs to improve secondary payment channels and expand interoperability
Ripple’s arm, Xpring which invests and incubates in companies and individuals which help improve the XRP ecosystem, invested in Bolt Labs. With the new investment, Xpring hopes to develop solutions that will help improve the security of secondary payment channels and increase the interoperability by integrating with the ILP.
Bolt is a private, off-chain scaling solution which was built on top of Z-cash, a privacy-focused cryptocurrency, has attracted more than a few well-known investors in the crypto-space and Ripple’s Xpring is one among them. In a blog, Bolt Labs said that their solution will focus not only on ZCash but also other publicly available cryptocurrencies that do not have inherent on-chain privacy features.
It also stated:
“The potential for these implementations to be networked together with technologies like Interledger opens the potential further for cross-chain interactions with these privacy guarantees baked in.”
The above statement suggests that they might have a “potential” implementation for these on Interledger Protocol [ILP]. ILP was created at Ripple developed by the Interledger W3C Community Group. ILP aims at connecting two different blockchains, to integrate two different ledgers and have seamless operations between them.
This would vastly benefit the payments industry, which is facing a revolution at the hands of a nascent technology like blockchain. Ripple, a payments provider, which is leveraging cryptocurrency and blockchain to facilitate faster payments, would benefit largely from this partnership. In addition, this could also signify a potential development on the XRP Ledger and its on-chain/off-chain privacy and the currency, XRP.
A Twitter user @XRPCentre tweeted:
“If the solutions being developed by the company are able to improve the privacy of the ILP transactions, they would also be enhancing the privacy of XRP/ILP payments, which is a very demanded feature…. It’s all about interoperability and destroying network effects. If ILP succeeds in being the best protocol for cross-protocol/ledger transactions, you’d naturally search for the best asset therein.”
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