In 2017, the SWELL conference contained a wealth of excitement, famous keynote speakers, and of course the worldwide initial fascination with the concept of decentralized digital assets. There was drama to be found in the 'David-takes-on-Goliath' role of Ripple in its decision to host the conference at the same time and in the same city where SIBOS was happening, which is their competitor's annual conference.
This year builds on that momentum in a different way, with Ripple finding its footing in a greater number of banks adopting its technology to settle payments in real-time on RippleNet.
This time, Ripple organized the conference in its hometown of San Francisco, home of a myriad of fintech and Silicon Valley companies. They've invited customers to attend and speak at the conference, in addition to hosting what will probably prove to be a large number of attendees from the banking industry. The conference is about to start on Monday, October 1st in San Francisco, California, and runs for two days. 1
The headline speaker, as most of us know already, is former US President Bill Clinton, whose final term saw the rise of the Internet and its resultant dotcom boom. Now, in the early days of blockchain technology, his keynote is very appropriate as the world enters what could be considered the second phase of that global information exchange, heralding the rise of the "Internet of Value" as Chris Larsen has coined it.
The conference is planned to contain a number of sessions that should prove vital to advancing the adoption of blockchain technology in banking. Of course, the one session I'm most interested in is the last one listed on day two, "The 800 Pound Gorilla," which focuses on digital asset adoption. Here is a shortened list of the sessions:
Santander Flashtalk: How To Launch a Payments App for Millions
Embracing Blockchain Across Europe
Central Banks Show and Tell
Movers and Shakers: Lightning Round
Survey Says (Cory Johnson revealing private research findings)
Crypto Regulation Around the World
The Future of Commerce
Siam Commercial Bank Flashtalk: How We Improved Retail Remittances
BeeTech & InstaRem Flashtalk: Improving Customer Experience
TransferGo: Solving Cross-Network Settlement
The 800 Pound Gorilla: Digital Asset Adoption
There are many that believe that the biggest news is not what's listed officially on the agenda, but what could be announced during the conference, or included in one or more demonstrations. This belief was given more weight by the late-breaking revelation of the first bank to implement "Multi-Hop," a feature available for RippleNet bank members. Ripple announced on Friday, September 28th that Siam Commercial Bank in Thailand was the first bank to pioneer its use. (Note that Siam Commercial Bank also featured prominently in one of Ripple's recent videos highlighting the use of its technology for retail remittances)
However, Ripple has been what I'd term 'deliberately low-key' about the event this year, focusing with precision on the real-world utility of its technology instead of the crypto market enthusiasm for the digital asset used in one of its products.
Instead, we've heard the executive team talk about the critical importance of interoperability and the way in which Ripple technology supports real-time settlement across borders. They've also been consistently emphasizing the importance of regulatory clarity for digital assets, which will be discussed in at least two of the scheduled sessions.
Ripple indicated that, unlike last year's SWELL conference, this year's will not be live-streamed; however, they've indicated that recordings will be available for most sessions, and should be published within the same day. This change reflects a more guarded approach to media interaction from the company than we've seen previously. Generally, while the first year was dramatic, the company is evolving into a combination of Silicon Valley excitement and banking industry conservatism. This transformation was unavoidable. I can only communicate my own response to this subtle change in 2018: I am impressed, because managed transformation is what leadership is all about.
Congratulations to Ripple in advance of the start of the second SWELL conference, and I look forward to the news this week!
General Crypto News
The website 'howmuch' has created some revealing graphics about the size of the cryptocurrency market compared to more traditional financial markets, and while the size of the entire cryptomarket has expanded and contracted in dramatic fashion throughout the last year, its size is still quite small compared to other markets, as depicted in their latest bubble diagram:
This site's purpose is to represent market and demographic trends in a visual fashion, and this diagram seems to strike a chord with those in the crypto space; we intuitively know that we're very small compared to other more established markets, but having a convenient way to visually share this with others is helpful.
The rise of digital assets like XRP has only just begun.
On Tuesday, September 25th, a public discussion was held at the Library of Congress, titled "Legislating Certainty for Cryptocurrencies" to ask a number of crypto market representatives their opinion on the development of US regulations. In the official invitation letter, the discussion's host, Representative Warren Davidson (R-Ohio), posed eight questions to the participants, and subsequent to the session, its recording was made available via YouTube: 2 3
Ryan Zagone, Ripple's Head of Regulatory Relations, speaks at the 26:40 mark during the initial testimony. Here are some of his comments:
"We see recognition, globally, that blockchain and crypto-assets will play a pivotal role in the next generation of finance and our national economies. And there are countries racing to provide regulatory certainty so they can be the winner in this race; they can essentially take a stake as the global capital of finance, which is now in the US ... moving elsewhere.
We're seeing national, holistic frameworks in other countries designed to drive the adoption of this tech. You can look at the UK; Singapore; Japan; in the UK, there's now more people working in fintech than (in) New York, also Japan, Singapore, and Australia combined. So the race is real.
They're winning because they have one framework that covers this entire technology. It gives certainty to the market across a variety of these technologies. 'Certainty' is that prerequisite for adoption, and it's enabling much faster growth. From the US perspective, that's a strategy we (the US) invented; in the early nineties, with the advent of the Internet, the White House came forth with one framework for electronic commerce that gave certainty to the market for Internet development, and that spurred the US to be a leader in Internet technology.
We see an opportunity to take the same move today; one framework for this entire technology. From a legislative perspective, one low-hanging fruit we can pull on is driving more coordination among regulators, particularly on token taxonomy and discussions on how risk should be addressed at company levels. What kind of (mitigation), what type of best practices, and what type of licensing and registration."
It was a powerful and eloquent statement provided by Ryan Zagone "straight from the hip," describing his own intuitive viewpoint on the current state of US regulation for cryptocurrency.
The testimony portion of the session ended after one hour, and then the "Compliance and Consumer Protection" portion of the session began at approximately 1:05. In this session, there were a number of statements that were fascinating, including one from Bittrex about the impact of regulatory guidance on exchange reporting and how to help the US enforce things like sanctions. There was also an emphasis for the US regulators to define "what is decentralization." Other questions were posed that focused on consumer protections in relation to ICOs and in other novel financial arrangements.
In general, both sessions were positive steps, and indicated that at least some US legislators understand the importance of moving quickly on crypto regulation to prevent an exodus of blockchain talent from the US. The meeting ended with a reminder from some about the 'call for papers' which indicates an additional avenue for participants to express more detailed viewpoints.
Lobbying Firm Hired
In an interesting book-end to the topic of US regulation, it was reported on September 27th that Ripple, Coil, Hard Yaka, PolySign, and RippleWorks all collaborated to hire a lobbying firm in Washington DC to help guide future legislation and advocate for the use of crypto-assets in mainstream finance. The group of companies is calling itself "Securing America’s Internet of Value Coalition," and has an interesting payment arrangement: It is paying the lobbying firm of Klein/Johnson Group a combination of cash plus XRP. 4
Chris Larsen, the Executive Chairman of Ripple, commented on the formation of the coalition and its procurement of lobbying services, saying:
"We understand this is really complicated, and there is a lot of misinformation out there. The good news is there is a lot of interest in this topic in D.C.”
The terms of the monthly payment to the lobbying firm are: $25,000 plus 10,000 XRP. Chris Larsen also spoke about this arrangement:
“It gives them some upside and gives them some risk. Hopefully it gives them a taste of the industry in a way that hits home.”
From those of us that own XRP, I'm sure there is a lot of agreement with that comment. It's good to see some mainstream movers and shakers in Washington DC having a very direct stake in XRP's future.
On Friday, September 28th, Ripple announced the formalization of a feature initially demonstrated in early 2017, called "Multi-Hop." They made the announcement via an article on their Insights blog, describing how a RippleNet bank member, Siam National Bank in Thailand, would be the first customer to use the product. Multi-Hop was described thus: 5
"(Multi-Hop) allows them (banks) to settle friction-less payments on behalf of other financial institutions on the network. This eliminates the need for a direct one-to-one connection (or bilateral relationship) between financial institutions to settle a payment. Using Multi-Hop, SCB will be able to receive and forward on a payment without a bilateral relationship between the originator and beneficiary institutions."
The article went on to describe the end-state of the implementation:
"With Multi-Hop, financial institutions can connect directly to SCB, which can settle and payout across the region without exchanging currencies multiple times and adding heavy fees. The result is a seamless payments experience into and out of the ASEAN region.
This last paragraph indicates SCB is handling the transition of currency from one into another using its own liquidity, along with its own nostro-vostro accounts in partner banks throughout Asia. The result would look something like this:
NOTE: This is not Ripple's representation of Multi-Hop, but my own interpretation of their description.
As you can see in my interpretation, Multi-Hop provides the ability for one bank outside of Asia to leverage the existing relationships that Siam Commercial Bank has with its own partner banks. Siam Commercial Bank in this instance is still using nostro account relationships of its own to settle the payment on RippleNet using xCurrent.
This approach would allow for fast settlement of the transaction, perhaps even real-time. However, it is not as cost-effective as xRapid's use of XRP, because the "USA Small Bank" in my example would need to incur some charges from Siam Commercial Bank to use its relationships to settle.
Is my understanding correct? Here's what Dilip Rao, Ripple's Global Head of Infrastructure Innovation, had to say in a follow-up the next day after the official announcement: 6
"Multi-Hop on RippleNet solves for (1) reach and (2) liquidity with (3) lower risk than via traditional correspondent banks today.
A ‘Multi-Hop’ transaction consists of coordinated debits and credits on the ledgers of three or more banks in a chain, from sender to ultimate beneficiary.
Multi-Hop for reach: Banks don’t do business with banks they do not know (due diligence and account opening can take 6-9 months!). Multi-Hop enables a bank to connect indirectly (via a bank they share accounts with) to many more they do not know.
Multi-Hop for increased liquidity: An intermediary ‘hub’ bank acts as a ’connector’ as well as an ‘exchange’ to deliver funds at the next bank in a chain, perhaps in a different currency (for a fee).
While this works with fiat today, the use of XRP would enable intermediaries to expand their delivery network without holding piles of fiat all over the world. Holding a universally convertible digital asset is more optimal (forecasts for (this) might be 5-20% wrong)
Multi-Hop for lower risk: Since all banks in a multi-hop chain can see all transaction data and approve each after screening, AML/CFT risks can be better managed. Since ALL legs of an ‘atomic’ transaction settle at the same time, no bank is exposed to credit risk at another."
My take? While not restricting settlement to using XRP, multi-hop opens a general region for settlement on RippleNet. And if one leg of a multi-hop ends up involving two parties that use xRapid (and XRP) for liquidity, then so be it; Multi-Hop extends the reach of both xRapid and xCurrent and helps bridge the gap between the two.
Can XRP be used in combination with Multi-Hop? Yes, it appears so. Does Multi-Hop require XRP to settle? No. Here is what David Schwartz, Ripple's Chief Technology Officer, stated in one of his followups on social media:
"Some banks may just not be willing to become an xRapid customer for various reasons such as regulatory or just international payments not being that important to them. Multi-hop means they can use other xRapid instances to settle their payments and still get many of the benefits."
"Other" xRapid instances means that Multi-Hop can be used in conjunction with others that are using XRP to settle - in the same payment flow.
This is an exciting first step in transitioning to direct and efficient settlement using digital assets directly among all members of the network. It's an interesting transitional move for Ripple, and it shows that they have a plan now that addresses regulatory uncertainty even as specific global areas begin to use digital assets for settlement en masse.
As usual, it shows the forward thinking and planning by Ripple, as well as its customer-centric approach to problem-solving. More details may be forthcoming during SWELL, given the timing of this announcement directly before the beginning of the conference.
In a recent blog, I noted that the website for the MoneyTap application, the mobile application created by the Japanese Banking Consortium (JBC) that are members of RippleNet, had been updated. This indicated that the consortium was preparing for the launch of MoneyTap as planned in the last part of 2018.
In a follow up to this, it was reported that both SBI, and SBI Ripple Asia, the company that was formed as part of the collaboration between SBI and Ripple, were recently approved as 'payments services' in Japan by the Ministry of Finance. 7 Now that Money Tap is registered as a payments service, there are reported to be no remaining legal hurdles before its official launch.
It's important to note that while Money Tap is an exciting addition to the RippleNet network of banks, it does not use digital assets for settlement as of yet. Money Tap facilitates instant domestic payments within the country of Japan, no matter the time of day or night, and settles in real-time for the customer. It does this through the use of Ripple's technology, and probably uses the xCurrent solution, or a variation of it.
Demo of Money Tap
In addition to its approval as a payments service, SBI Ripple Asia also demonstrated the Money Tap mobile application at the Nikkei X Financial Services Agency's FIN/SUM 2018 conference:
The tweet was sent out by the CEO of SBI Ripple Asia, Takashi Okita, indicating that his team was available to demo the application throughout the conference, and he was also interacting with people on social media throughout. It's not live yet, but these recent developments indicate that Money Tap is about to be deployed.
What is a Blockchain?
The Chief Technology Officer of Ripple, David Schwartz, recently authored a new blog on his site "Distributed Agreement." It addresses the definition of the word "blockchain" and then defines each of the required components.
In methodical, rational fashion, he discusses the concepts of 'secure references,' 'state transitions,' and 'distributed ledgers.' Here is one excerpt:
"A blockchain is a series of states of a distributed ledger where each state, except the first, contains a secure reference to the prior state and sufficient information to demonstrate that the transition from that prior state is valid according to the system’s rules...
... This gets us a system where every change in the system’s state can be independently verified by every participant in the system. The most important rules in the system are enforced by every part of the system rather than inside some specific secure portion of the system."
Of course, I left out some very heady and philosophical topics that he addresses in high-precision fashion. This blog entry is one in a series, and he hints at forthcoming topics at the end of the blog.
"The Ripple Drop" is a video series produced by Ripple that delves into news about Ripple, its customers, its technology offerings, and its people. It started in July of this year, and typically, a new one is released every first and third Monday of each month. The latest one, episode five, was released on September 24th, and covered a variety of topics including the SWELL conference, the latest developments related to RippleNet membership, and Ripple's inclusion in a LinkedIn list of Top Start-ups:
Monica Long, Ripple's Senior VP of Marketing, emphasized that SWELL will allow customers to communicate their own firsthand experiences and results after implementing Ripple solutions:
"Most of the airtime at SWELL, in the program, is given to RippleNet customers, so I'm really excited and honored to have folks from Santander, BeeTech, InstaRem, and more."
Reinhard Cate, Head of Content for Ripple and the facilitator of the series, then asks Max Nivaud, Ripple's Senior Director of Customer Success, about what type of remittances seem to be driving the current volume on RippleNet. Max Nivaud's answer:
"The two that we see right now with these customers are, number one, retail remittances. So, migrant workers from these areas in Southeast Asia that work in the UK; that work in Europe; they're looking for a faster and cheaper alternative to send money back home. And you also have small-to-medium size enterprises (SMEs)."
This comment provided insight into the portion of the market where Ripple has found the most traction: high-frequency payments that improve the customer experience. I predict that these two groups will prove to be a key group; customer experience and satisfaction normally drives adoption numbers, in addition to other benefits to the financial organization, such as reduced cost and ease of reconciliation.
CFCon USA 2018
I covered an interview that Chris Larsen recently gave to Cheddar.com on the sidelines of the 2018 Crypto Finance Conference (CFCon). While the interview itself provided insights from Chris Larsen into some of the more contemporary topics regarding Ripple technology and XRP, the actual video from his presentation was also recently released by the conference organizers:
During his presentation, Chris Larsen spoke about XRP's role in the new Internet of Value (IOV), saying: 8
“We are betting (on) XRP ledger and XRP as the digital asset of choice where we are talking about the blockchain component of this Internet Of Value. XRP clearly has, among the majors (cryptocurrencies), the lowest transaction costs. It is the fastest, about three seconds to settle, and it has the highest throughput of the major blockchains.”
In addition, he went on to cover the importance of interoperability, emphasizing how Codius, the smart contract platform that is a part of the XRP ecosystem, fits into that vision, as well as ILP (Interledger Protocol):
“It’s (ILP) a protocol that’s been underway for many, many years. It is a completely open protocol, as decentralized as you can possibly get. There’s a group called the ‘W3C’ that is helping with the standard around the protocol. There are almost 300 organizations that are contributors to it. So our bet is that this is going to be a successful interoperability protocol, a key component of this internet of value."
This emphasis on interoperability - and the goal to connect - has created a consistent and powerful vision for XRP's future role in global transactions.
Ripple for Good
On September 27th, Ripple announced a new philanthropic endeavor that they are naming "Ripple For Good." Ripple has donated $25 million to start the effort. In the words of Ken Weber from Ripple, Ripple for Good is:
"a corporate social impact program that will support mission-driven organizations and initiatives with the potential to expand financial inclusion worldwide. The program will also focus on STEM, FinTech education and financial literacy as key drivers of a new and increasingly inclusive global digital economy."
"STEM" stands for "science, technology, engineering, and mathematics," so it looks like this effort is focused on education as one if its two central pillars:
Ripple's formal announcement indicated that the project will also cooperate actively with the organization that Chris Larsen and Doug Galen founded, known as RippleWorks:
"One organization we’re fortunate to be able to turn to is RippleWorks, a nonprofit organization co-founded by Chris Larsen and Doug Galen. RippleWorks has a wonderful track record of identifying, funding and rolling up its sleeves to support social ventures across multiple sectors. RippleWorks has a wealth of experience in financial inclusion and we can’t wait to learn from them."
I think this is a great step, and builds on Ripple's philanthropic focus on education - whether it be donations to DonorsChoose or the founding of the UBRI (University Blockchain Research Initiative), Ripple is now demonstrating a pattern of funding education to help modernize the global economy and include many global groups that are now considered 'unbanked.' This strategy is one that is more than just a win-win, and reflects an effort that may serve to accelerate a new global economy that includes whole new population groups and businesses.
One of the trailblazing developers in the XRP Community is Cale 'RetryW' Robertson. In the past, he's published multiple blogs about different technical projects and has also penned a guide to helping new developers create their first Codius smart contract.
Now, he's extended that track record even further, creating a tool to help new Codius hosts test whether their implementation and hosting platform has been set up and configured successfully:
He uses a smart contract that is integrated with Coil to do the job. The new Codius host can use his tool to check on their implementation using the following steps:
- The new Codius administrator types their server (Codius host) name into Cale's website.
- Cale's website then asks for a quote, for how much it costs to upload Cale's contract for 5 minutes.
- If the quote isn't too expensive (~0.00015XRP), then Cale's server starts sending packets over the ILP to their Codius server.
- Once the agreed amount is sent from Cale's server to the new Codius host, their server will then start hosting Cale's contract until the paid duration expires.
Cale indicated that the tool works effectively in its present state, but that he also plans on adding new features moving forward. He's received positive feedback so far, as well as a number of requests from fellow developers:
"People have asked for a bunch of features, or asked 'why don't you add this?' The reason why is (that) it's currently ... bare-bones and simple ... because that's exactly what I was aiming for. I wanted the Codius Pod Upload Tool to be the quickest, easiest, and simplest way to upload a live and functioning contract to your host. You literally just type in the host-name of your server, and the tool does the rest, it'll let you know if it succeeded and show you how long the contract is live ... If it fails it'll return the error that was encountered to help with debugging.
I've added a few features so far, such as statistics on how many uploads have been successful (which is currently over 7000!), as well as making it so the contracts that get uploaded now have web monetization implemented, which allows me to accept Interledger payments through the contract, such as streaming donations from Coil for time spent viewing the contract."
He indicated that, while Codius has its own self-check now implemented as well, his tool goes a bit further and allows Codius hosts to check on a variety of their implementation details that the default check doesn't cover.
His Codius Pod Upload tool is a welcome addition to the Codius ecosystem of tools and code: https://upload.host1.codius.live/
The latest addition to the list of retail establishments that accept direct XRP payments as settlement includes a coffee shop from Romania, called the Lăpușneanu Lounge & Coffee Shop:
Cryptocurrency is generally becoming much more prevalent at retail establishments worldwide, and as the current generation matures with their level of sophistication about payment options, this trend will continue. XRP is ideal for the retail experience, because any way that it's settled - via a third party or directly on the ledger, it takes under four seconds.
FX Choice is a ForEx platform that is registered and headquartered in Belize, and has been in operation since 2010. 9
They recently announced that they would be accepting XRP, but with an interesting twist: They are not actively trading XRP currently, but instead are allowing traders to use XRP to move value into and out of the exchange. Essentially, they notified users that XRP can be used for both withdrawal and deposit. 10
Although they also support other cryptocurrencies such as Bitcoin, this is a positive step and one additional exchange that may end up listing cryptocurrencies at some point in the future, now that they actively support deposits and withdrawals.
If 2017 was the year that Ripple tested the waters of traditional finance and introduced its product offerings formally to banks, 2018 will be marked as the year of steady progress in building RippleNet, working alongside customers, and helping to achieve regulatory clarity for usage of digital assets in traditional finance.
We've watched for the past year as Ripple shifted gears and, if anything, became even more focused on expanding its global reach amid increasing competition as larger banks observed the startup's adoption in all parts of the globe. Their work has been marked by increasing precision of communication, an emphasis on customer experience, and civil leadership in driving meaningful regulation worldwide.
The theme for 2018 is 'be connected' and while this phrase may conjure images of social media applications, Ripple has redefined the notion to mean something much more progressive; the inclusion of the un-banked; the creation of entire new asset classes & markets; and the supercharging of global commerce with real-time settlement. Ripple's 'be connected' means something far greater and more promising for the entire world, and the results from its efforts are about to be felt globally.
Sources and Credits:
Cover Art: Thank you to Raw Pixel
- https://en.myfxchoice.com/faq/trade-with-us/#1 http://www.ifsc.gov.bz/licensed-service-providers/list-f/
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