Since its founding in 2012, global payment company Ripple has forged a position in the “internet of value” by developing a blockchain network designed to facilitate global enterprise payments. The network can utilize cryptocurrencies, such as XRP, to give banks and payment providers a sure and instant option to source liquidity for cross-border payments. The blockchain network, called RippleNet, enables these banks and payment providers to transact enterprise payments with higher speeds, lower fees, and increased security than traditional systems.
Here, Ripple SVP of Product, Asheesh Birla talks about the origins of Ripple, the progress of crypto exchanges, and where it’s all headed in the coming years.
Q: Six years ago, crypto was barely on the map. No one really knew what it was or where it was going. Tell us a little about Ripple’s origin story and what drew you in to join the team at that time?
A: I’m going to date myself here a bit, but when I graduated college from the University of Michigan, we were just starting to get email. I also grew up in Michigan where it was all about manufacturing and the auto industry, but I was watching this interesting evolution happen where we were starting to connect everyone around the world with the Internet. Most of my friends at the time were moving to New York or Chicago to start their careers and I decided to go out to Silicon Valley and launch my career on top of a trend—that trend being the Internet.
After a few years, I was in between jobs, my company sold to Intel and I thought, “that’s just not what I want to do.” I was looking for what was next and got interested in Bitcoin. At the time, though, Bitcoin was a bit underground, associated with the Silk Road and that sort of thing. I actually went to the first Bitcoin conference in Amsterdam and it was an interesting crowd. After that, I was debating whether I should get involved with this wacky tech no one knows much about yet, but seems interesting, or if I should go into social commerce, which was starting to really take off at the time. I actually asked Avi about this at the time and he said to me, “Do you want to sell T-shirts online, or do you want to change the world?” And I just thought, “This guy’s right.” Who doesn’t want to change the world?
I ended up joining Ripple when we were about six people and were just getting started, just a few blocks from here. There were only 4 crypto exchanges at the time, with the largest one being Mt. Gox, and the total daily volume was maybe $700,000. Fast forward to now, there are over 350 exchanges around the world, 10 in the US alone, and the total trading volume is $30B per day. I feel like I’ve been a part of this emergence of the next internet but for value and it’s been really interesting to watch this progression.
Q: That’s a great backstory. Let’s talk about what Ripple does and what you all are working on.
A: Cryptocurrencies are digital assets. You can think of a cryptocurrency as an engine. We realized early on that an engine is useless unless you build everything else you need to go around it for payments—the tires, the frame, seatbelts, even the roads. We picked our focus to be global payments. On top of using a cryptocurrency, we needed to figure out how people were going to get on and off the network, how were people going to access it, how was it going to integrate with the real world.
Again, think back to 2013, there wasn’t anything like smart contracts. Many folks in the crypto community were heavily against working with financial institutions but our purview was always that we need to work with the system to improve it. Our customers from the beginning have been financial institutions, FinTechs, mobile wallets, banks. We started signing on those partners to help facilitate global money transfer and partnered with a lot of crypto exchanges around the world.
Q: What has the progression of cryptocurrencies looked like in this time?
A: It’s funny how far this ecosystem has come. In 2014, I became really interested in this crypto exchange in Mexico called Bitso and I thought we should go down and visit them. We ended up going down to Mexico that year and the address was to someone’s house. We got there and it wasn’t even our contact’s house, it was his mom’s! Well, they now do about $1 billion in trading volume per month.
But what was super interesting about Bitso is, for the first time ever, you can have four people anywhere in the world connect to a global ecosystem and send money across borders. Before Bitcoin and XRP, if you wanted to do cross-border payments you had to be Citibank or HSBC or JP Morgan. And I thought, "Whoa… This is the start of something really interesting where four guys in a basement can now send money on the same playing field as these huge banking giants." Those three companies are somewhat of an oligopoly, as they control 80% of global money movement around the world. But now a small tech shop in Mexico is able to send global payments through this technology. It’s truly revolutionary.
Today the largest crypto exchange in Asia has reported higher profits and more retail users than Deutsche Bank. This is the fabric of this new financial world and this new payment ecosystem. In the case of Ripple, it’s a combination of working with established players but also these new players, like crypto exchanges, and bringing them together with our technology to facilitate better cross-border payments.
Q: So that’s where we are today. What are some developing trends you’re seeing in terms of where crypto and blockchain are headed in the future?
A: There was an interesting phase around 2013 where everyone was creating a token. Today you have Bitcoin as the largest (by market cap), Ethereum as the second-largest, and XRP as the third-largest token. But in 2017 the ICO craze came along where everyone was raising money using tokens. That has now been outlawed in the U.S. because it was violating securities laws.
What happened was the SEC started going after any company that did an ICO in the U.S., the exchanges that listed ICOs, and any investor that invested in an ICO that was in the United States also got a subpoena. It just killed the ICO market. Despite that, I believe that securities law is very much a good thing for digital assets. You’re not going to scale this industry unless you have the proper regulation. The stats are astonishing with ICO’s—80-something percent of them have lost value. 40% were fraudsters, meaning the money’s just gone. People just raised money and took off with it. We need SEC law—it’s there to protect consumers buying and selling equity in these companies.
While many ICO’s were definitely illegal, that doesn’t mean the people behind the larger concept weren’t onto something. Now we’re in this phase of tokenization where people are taking assets that are really illiquid and making them liquid, meaning very tradeable. This has applications across many different areas. One use case that comes to mind is tokenizing real estate, which is typically very cumbersome to buy or raise money for. And if you can make something tokenized and liquid, you can then think about derivative products on top of that. Another example is trading secondary stock of a company, which is quite complicated today. There are two main platforms in the US: SharesPost and EquityZen. Otherwise, you’re just doing OTC trading, which means that you have to find a broker to go and sell shares.
But this concept, the tokenization of illiquid assets, is something that I’m bullish on. And then you can factor in smart contracts, which is a programming layer on top of it all to govern the asset trading.
A good example for all of us here in the Valley is company equity. Smart contracts would govern our ownership of company equity, for everything like vesting and so forth. If we had that in place now, it would free up our legal teams from dealing with stock transfers and let them focus more on helping our product teams get into new markets. That’s what we’ll see in the future.
The founder of Ethereum, Vitalik Buterin, (also the editor at Bitcoin magazine and working with us at Ripple around 2014-2015), was talking about this concept of smart contracts before anyone else really.
What was interesting about Vitalik’s vision is that normally one entity or one corporation is running code or an application, and with this concept of a smart contract platform, no single corporation or entity is running it. Instead, hundreds or thousands of nodes around the world are running that application. This enables code to become decentralized.
I think this is interesting because it allows new kinds of financial products to be built on top of cryptocurrencies. Think about loans, tokenization of real estate, etc.—essentially all of these products are possible without a big bank. This is a bit farther out, but this is the next trend we’re thinking about. What are some things that can be built on top of what Wall Street owned in the past and now can be decentralized code?