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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