🤷 Opinions Alexander Goborov

Let’s Talk Stablecoins: Interview with the Co-Founder of Cred and Former GM at PayPal, Dan Schatt

🤷 Opinions
With many HODLers and crypto enthusiasts looking for investment advice, insights from a top expert in the fintech field, Dan Schatt, are sure to come handy
Let’s Talk Stablecoins: Interview with the Co-Founder of Cred and Former GM at PayPal, Dan Schatt
Contents

Dan Schatt is the Co-Founder and President of Cred, former General Manager of Financial Innovations at PayPal, and a bestselling author of Virtual Banking: A Guide to Innovation and Partnering. Earlier this week, we sat down with Dan to talk about the crypto market in general and stablecoins in particular.

From Mainstream to Crypto

U.Today: Hi Dan. You had a solid career in mainstream finance, including a leading position within PayPal. Why did you decide to go crypto?

Dan: I became interested in the Blockchain technology and crypto space in 2012, back when I was working at PayPal. While PayPal hoped to become the Internet of Money, my “Aha” moment was that crypto would become the Internet of Value, eclipsing PayPal in every way, i.e. Blockchain would prove more secure, transparent, and allow for the tokenization of all asset classes. It is unbelievable to me how quickly we’ve moved to a legally permissible, tokenized version of the US Dollar!

I believed crypto would also attract a larger developer community than PayPal could ever hope for. You just can’t compete with a world computer or a non-inflationary world currency that can be used by anyone with Internet access.

I later published a book in 2014 called Virtual Banking, with a chapter on Bitcoin and crypto. I’ll never forget my interviews with Wences Casares, who really opened my eyes to the power of Bitcoin.

U.Today: Please tell us a bit about your present company that you, as we understand, also co-founded. What does Cred do exactly?

Dan: What is the best possible loan you can get, other than a free friends and family loan? Probably a home equity line of credit. The problem is most people can’t get a home… Replace the home with crypto and that is essentially what Cred has created: the world’s first Crypto Line of Credit (C-LOC™). We allow people the ability to use their BTC, ETH and XRP as collateral and get cash. Cred has amassed over $300 million in lending capital to provide liquidity against crypto assets. We are set to revolutionize the lending industry by merging an established global lending network, a diverse fintech team, machine learning, and the power of the Blockchain technology.

U.Today: It seems that education, among other fields, is moving onto the Blockchain. The UC at Berkeley now has its own Blockchain, and your company is somehow connected to it through a third entity, is that right?

Dan: Yes! Cred and Blockchain at Berkeley, are two of the founding members of the Universal Protocol Alliance. Howard Wu is Cred’s Chief Scientist and a Founder of Blockchain at Berkeley, the largest US University Blockchain associated in the United States. They have an incredible amount of talent coming through their program and we are lucky enough to benefit from their thought leadership when we created the Alliance, which is dedicated to bringing important pieces of infrastructure to the crypto community and act as a bridge for the next 100 million users of crypto.

Stablecoins and the Current Market

U.Today: What are your thoughts on Bitcoin’s collapse last month? Did it come as a surprise to you? Where does this situation leave us now?

Dan: I guess it all depends on your time horizon. I’m a big believer that crypto assets will become the preferred store of value and means of exchange in the future. As a store of value, just look at BTC and gold in 2011. Gold is down roughly 30% since 2011 while BTC is up ~118,000% but is still just 1% of gold’s market cap. And how many times has BTC “collapsed”?  

Price volatility is massive at this time because wealth is highly concentrated and institutional involvement is still limited. This will evolve as the Internet did. Development of infrastructure and practical applications takes time… You can’t rush a pregnancy to 1 month by adding 9 doctors. It will still take 9 months.

U.Today: Let’s move on to stablecoins. Certain critics claim that some of them, e.g. Tether (USDT), are a disguised form of centralized fiat currency since they are pegged against the USD. How would you rate this assessment?

Dan: For the last few hundred years, governments have legitimized fiat currency by backing it with gold. Eventually, as trust grew in government currencies, there was no longer a need to connect it with gold. The same is now happening with crypto stablecoins. Will it matter at some point if they are “backed” by fiat? Probably not. At some point, the trust will be in the finite supply, greater transparency, stronger security, increased utility and ability for it to travel as far and wide as the Internet. Governments will eventually work to tokenize their own fiat currencies, but there will always be demand for a store of value or means of exchange that cannot be controlled by any government.

U.Today: Do you think businesses should strive to move away from governments? Then isn’t there a dissonance pertaining to how this ideal can be achieved with stablecoins which by default rely on central banks?

Dan: Governments and businesses will increasingly be pulled in a direction by the Blockchain, i.e. a path toward more transparency, inclusion, and the democratization of financial services. It will become increasingly difficult for governments to close their borders, impose capital controls, and attract talent if they do not support crypto. And, crypto communities need to leverage some of the valuable components of the existing financial ecosystem—the role of professional custody and basic investor safeguards—because inheritability and token recoverability are needed if we are to provide crypto services that will appeal to the next 100 million users.

U.Today: For better or worse, do you think the demand for stablecoins is bound to increase since they seem to demonstrate more stability during crashes?

Dan: Absolutely, but not just because they are stable. They will ultimately be used as a better means of exchange, remittance vehicle, and as core component in automated commerce.

But, not all Stablecoins are created equal. They’re more likely to be ‘stable’ if they are pegged 1:1 and verifiable on-chain, and can allow for anyone to review how the value is substantiated, not just a professional auditor.

The Future Talk

U.Today: What are your predictions for 2019? Will we see more widespread adoption of stablecoins? If yes, do you see it as a positive thing?

Dan: We are building to deliver practical use cases. There are many examples of this: an Argentinian who needs to get out of an unstable fiat currency, or a Turkish expat looking to make a remittance more cost effectively. Stablecoins can deliver on these use cases. I may live in a country with an unstable currency, and I’d like to move into something stable as soon as I can. I may not have access to a US bank account, to buy USD, but now I can buy a better version of the US Dollar. There are now lots of opportunities that broaden the use cases and bring more people in… So yes, a very positive thing!

U.Today: Some claim that DLT is the future of commerce: the fintech sector will change the global economy, drastically reshaping how we do business. Your thoughts on this?

Dan:

Commerce needs more than a distributed ledger to function. Cred, for example, is providing low cost credit to be used in commerce. Others are providing core banking services such as payroll for crypto companies. The future of commerce involves a host of next generation financial services. How those ingredients are combined with DLT is the secret sauce.

U.Today: Finally, what advice would you give to those who are thinking about entering the crypto world? How should one behave in order to succeed in this still largely unexplored domain?

Dan: Keep your ear to the ground and listen for real problems that need to be solved. The more specific, the better. Tools and infrastructure are still needed to allow crypto to go mainstream. Think years vs. months. We’re headed in the right direction, so make sure not to get caught up in the hype cycles, whether crypto is on the way down, or on the way up!

💼 Related Article
Bitcoin ETF, a Tail Wagging the Dog: Interview with the Founder of Virtuse Exchange, Ras Vasilisin
🔥 Hot
1 month 2 weeks
256
Bitcoin ETF, a Tail Wagging the Dog: Interview with the Founder of Virtuse Exchange, Ras Vasilisin

🤷 Opinions
569 views views
👓 Recommended articles
🤷 Opinions Darryn Pollock

Are Ripple and XRP Getting Ready to Replace SWIFT?

🤷 Opinions
SWIFT has long been the go-to for cross border payments, but it is in dire need of an upgrade and Ripple believes they are the ones to do it
Are Ripple and XRP Getting Ready to Replace SWIFT?
Contents

SWIFT, the Society for Worldwide Interbank Financial Telecommunication, provides a network that enables financial institutions worldwide to send and receive information about financial transactions in a secure, standardized and reliable environment.

It has been in operation going on 46 years now and has become the global standard in sending money across borders. However, in its time, it has also picked up some undesirable issues, and it is also starting to show its age – now 46 years old.

It is for this reason that the disruptive power of blockchain technology is being touted as the future of cross border payments, but more specifically, Ripple and its XRP token are looking to be the new standard in this regard.

Ripple, in regards to cryptocurrencies, is probably most similar to SWIFT in that they do have a centralised control hub for their XRP token, but they also have a lot of the added benefits of being decentralised and on the blockchain.

SWIFT has become a political tool in the past, especially in relation to sanctions, and it is also totally reliant on the organisation for the continued running of the network. This is where Ripple can offer a lot more for payments across the globe.

Still running

The combination of having a controlling organisation, such as Ripple for the XRP token, while maintaining the decentralised benefits of a blockchain means that Ripple has a few edges over SWIFT that make it far more attractive for today’s financial world.

Ripple sales director Ross D’Arcy explained during a fintech conference in Croatia:

“I think SWIFT is a really interesting example. Because SWIFT, if you think about it, kind of crosses the lines sometimes and plays a bit of a political role. We don’t see our customers’ transactions. Our customers’ transactions go over the internet. So Ripple could shut down as a business tomorrow and our customers could still transact using our software. The same wouldn’t be the case with SWIFT.”

Non-political

Adding onto the statement from D’Arcy, XRP is a decentralised token that operates on a blockchain and because of this, it is not easy to manipulate or utilise as a tool. SWIFT has been controlled by the US government at times, making them exclude certain countries from the network in order to enact their sanctions.

However, with the XRP token, this will be extremely difficult as, even if Ripple Labs was to be coerced into doing the bidding of a government, they only have seven percent control of the validation of transactions.

A decentralised control that is appealing

Ripple’s benefits over SWIFT are quite clear as the outdated system suffers from a lot of legacy issues. But even the XRP benefits make it more attractive as a successor for SWIFT.

Ripple has been looking to appease and welcome regulators and governments, and by extension banks, by playing by the financial rules. This element of control makes XRP more appealing for companies and countries to adopt.

However, in an ever decentralising world, XRP’s blockchain offering means that there can be no monopolisation or manipulation when it comes to cross border payments.

🤷 Opinions
708 views views
👓 Recommended articles
🤷 Opinions Darryn Pollock

Despite the Criticism, Ripple Arguably More Decentralised Than Bitcoin

🤷 Opinions
Many won’t even class XRP as crypto because of Ripple’s control, but they could also argue that the XRP token is more decentralised than BTC
Despite the Criticism, Ripple Arguably More Decentralised Than Bitcoin
Contents

Ripple, and its token, XRP, have faced a constant barrage of criticism relating to their decentralization of the token over the years. Many cryptocurrency purists have criticised their inner workings with Ripple, the company, clearly in charge of the XRP token and its distribution.

However, this allegation has been as equally denied by the those at the head of Ripple; in fact, it has even seen the CEO, Brad Garlinghouse, state that the XRP ledger is in fact more decentralized than both Bitcoin and Ethereum.

This statement alone will get many raring for a fight, but a closer inspection and interpretation of what it means to be decentralised could indicate that Ripple has a point. They could indeed argue that they are more decentralized than the other two major cryptocurrencies, based on the mining pools.

It is well known that controlling the majority of the mining of traditional proof-of-work coins, like Bitcoin and Ethereum, can lead to a 51% attack, which destroys the decentralisation of the blockchain and hands full control to one person, or group, or pool.

Bitcoin has been flirting with the 51% attack recently, and previously, but for Ripple, it is a different story, as they only have seven percent control of the validators. Looking at the interpretation of decentralisation, there technically have been more chances for Bitcoin to be controlled by one group than there has Ripple – so is it less decentralised?

Making claims

To be honest, the idea of decentralisation is really up for debate, and it is also dependant on interpretation, thus the claims being made on their side of these fence are debatable, but it is interesting to hear the thoughts of Garlinghouse.

“It is very clear that the XRP ledger is decentralized,” said the CEO of Ripple. “Ripple runs seven validators, which is about four percent of all public validators.”

He added:

“By almost any measures now, the XRP Ledger is more decentralized than the Bitcoin ledger or Ethereum ledger, where you have a very small number of miners controlling you know well past 50% of mining power.”

It is true that Bitcoin’s mining has almost been monopolised in the past by the likes of Antpool, BTC.com, and ViaBTC, with Bitmain at times having the power to launch a 51 percent attack, but never acting on this. However, it shows just how much the mining has been centralised in Bitcoin.

Ripple’s argument

If one was to base the mining and validation of cryptocurrencies as the key determining factor of their centralisation, then it would be preposterous to say that Bitcoin is decentralized.

Ripple, the company, despite having control in different areas of the XRP token, only controls seven percent of its validation. Thus, on this basis, they have very little control and it should be argued that XRP is decentralised.

cryptocurrency

 

A lot of this argument is also predicated on the algorithms that these two coins use, however.

Bitcoin and Ethereum use proof-of-work algorithms. This system rewards miners for validating transactions by paying a fee for their work. This was a great starting point for a decentralized system that incentivizes complete strangers to contribute to the greater good of a network and make forward progress.

But as time has gone on, clear limitations have manifested. Blockchains that use proof-of-work can be subject to centralized control, where a few miners have significant control over the system.

The XRP Ledger uses a consensus protocol that relies on a majority of validators to record and verify transactions without incentivizing any one party. Validators are different from miners because they aren’t paid when they order and validate transactions.

Today, these validators operate at locations across the globe and are run by a broad range of individuals, institutions, asset exchanges and more.

More to it

As mentioned, this form of argument in regards to decentralisation only takes into consideration one aspect. But in this aspect, indeed, Ripple is superior. However, when it comes to purists and believers in how blockchains should operate, many have an issue with a company having discretion over tokens.

Ripple has been a coin that differs substantially from most of the top 20 coins by market cap – that does not necessarily mean it is wrong, nor right, but it is certainly showing that things can be done in different ways in the blockchain space.

🤷 Opinions
261 views views
👓 Recommended articles
🤷 Opinions Darryn Pollock

Ripple Believes XRP Should Be Viewed Just Like Bitcoin

🤷 Opinions
Most cryptocurrencies are in a legal classification grey area, especially in the US, but Ripple believes XRP should be viewed like Bitcoin.
Ripple Believes XRP Should Be Viewed Just Like Bitcoin
Contents

Regulatory uncertainty surrounding cryptocurrencies has become one of the biggest bugbears of cryptocurrency businesses and users alike. There are very few hard and fast rules or legal frameworks around the digital assets, leaving anyone who operates them in a grey area.

It has led to many lawmakers and regulators to start to try and delve into how these cryptocurrencies can fit into the current legal framework, and in the case of the United States, it has seen the SEC declare Bitcoin at least as not a security.

However, the SEC has more jurisdiction over other cryptocurrencies, declaring a huge swath of ICOs as securities, but leaving the rest of the more established coins, such as Ripple, for example, in the dark.

This has led Ripple to implore the SEC to make a decision on XRP and treat it just as they would Bitcoin. It is a decision that surely needs to be made, but will be more difficult for the SEC in comparison to Bitcoin, as the XRP token differs significantly from the major cryptocurrency.

However, the argument from Ripple is that the XRP token is more suited to not being classified as a security due to its regulatory adherence and US-base.

A policy of uncertainty

The relationship between the cryptocurrency ecosystem and regulators has been a complex and dynamic one. The original face of Bitcoin was one of defiance of the governmental rules and regulation, covering itself in a ‘cypherpunk’ cloak and being used predominantly on the dark web.

However, as it has entered the mainstream, and regulators have found it legitimate enough to put levels of control over it, the cryptocurrency community has understood that in order for digital assets to advance and become accepted, they need to adhere to the rules.

This has now led to many seeking legal classification and clarification, including Ripple.

“The challenge for adoption comes back to policy. The policy uncertainty around some of the assets has limited adoption, particularly here in the US,” said Ryan Zagone, director of regulatory relations.

“And I’m speaking from Ripple and XRP, because we use that asset because it’s a half a cent per payment. It’s basically free. It scales. And it’s efficient, with 1,500 transactions per second and nearly no energy burn. So we’re at a point today where there are real solutions to all of these challenges that already exist.”

According to Zagone, US regulators should treat XRP the way same way they view Bitcoin and Ethereum.

“Today, the policy certainty in the US exists for Bitcoin and Ethereum, despite the fact that those are China-controlled platforms. So activity goes to those platforms. What we need to do from a policy perspective in the US is look at places where there are uncertainty.”

“And one place I’m speaking directly for me here is XRP, where it looks like Bitcoin. It’s decentralized. It’s open-source. We have a small 7% of the validation power on that. Rather small on there. Giving clarity to those ones that are very similar to Bitcoin and Ethereum that have the same characteristics and should be classified the same way. And then we’re creating a level playing field across all the cryptos.”

Difficulty in classification

It is not an easy task for the SEC, and other regulatory bodies across the globe, to determine which cryptocurrencies are securities, or other such entities, and which are not. However, the the process thus far has been slow and bureaucratic.

This is not only hindering the growth and potential of cryptocurrencies, but also making it unattractive for the companies and businesses to adopt and utilize the powerful technologies. For Ripple, this includes major banks which have seen the potential but are unsure of the regulatory standpoint. 

🤷 Opinions
120 views views
👓 Recommended articles
🤷 Opinions Darryn Pollock

Big Bitcoin Mining Pools Losing Control as “Unknown” Miners Take Profit

🤷 Opinions
Bitcoin mining is slowly moving away from the big mining pools, like Bitmain, and ‘unknown’ miners are starting to come in to grab profits
Big Bitcoin Mining Pools Losing Control as “Unknown” Miners Take Profit
Contents

Part of the appeal of Bitcoin and other cryptocurrencies is that their design allows for a decentralised network based on a large network of miners. But in recent times, major mining pools have taken control of the mining arena, limiting the decentralised nature of the cryptocurrency, and making mining unfavourable and unprofitable for the everyday miner.

But there is a change in the air as the major pools, like Bitmain and others, are starting to lose their grip with a surge of “unknown miners” now helping decentralise the cryptocurrency further in what could be a return to profitability for individual miners.

Research has shown that the likes Antpool, BTC.com, and ViaBTC are now validating far less Bitcoin blocks than this time last year. Rather, there is an emerging group of “unknown” or untied miners that are currently validating more blocks than any individual pool.

This group of “unknown miners” could well be individuals flexing their own muscle as they look to profit from the fall in difficulty that has been seen over the past few months in the Bitcoin mining algorithm.

Who is in charge?

Blockchain research unit Diar has published new data that shows the control once held by major mining pools is waning, and is likely being overtaken by the more casual miner. Anonymous, and unknown miners, not tied to any pools, are now finding profit in mining the major cryptocurrency.

Who is in charge?

“Unknown miners closed December having solved a whopping 22 percent of the total blocks, up from 6 [percent] at the start of last year,” reported Diar. “The Bitcoin network is currently less likely to experience an attack given the fact the BTC.com controlled pools have lost dominance over the network.”

Protecting against attack

Not only is it that the casual miner could be profiting from Bitcoin mining again, it is helping accentuate the decentralisation of Bitcoin by diluting the power held by a single mining pool.

It is well known that if a blockchain is controlled by more than 51 percent by one miner or mining pool, that blockchain becomes the target of a 51% attack, which can have devastating outcomes for the cryptocurrency.

Bitcoin has been under threat of a 51 percent attack in the past because of the mining monopoly of Bitmain, but it has never come to fruition, and now, it cannot currently.

Diar reports that in early 2018, Bitmain’s mining pools accounted for 53 percent of Bitcoin’s hash power. Theoretically, this would have allowed them to collude to take control of Bitcoin with a 51 percent attack.

This reduction in their influence is positive for those wary of such an attack. Recently, Ethereum Classic suffered such an attack that led to $1.1 million being stolen from cryptocurrency exchanges.

🤷 Opinions
85 views views
👓 Recommended articles
🤷 Opinions Darryn Pollock

Ripple Focusing on Where the Money Is – the MENA Region

🤷 Opinions
Ripple has seen significant uptake in the MENA region of the Middle East and North Africa, so it is taking its focus there
Ripple Focusing on Where the Money Is – the MENA Region
Contents

The Middle East, despite the strife and conflict, has grown to be a place of vast wealth with the likes of Dubai and Abu Dhabi shining bright in that region as places of immense wealth. This region, along with North Africa, known as the MENA region, is thus a very important place, especially for Ripple.

Ripple has stated that it is focusing a lot of its attention on the MENA region, and it is a two-part approach as it is aware of the potential there, but it has also seen significant interest from the region already.

Not only is the MENA region one of the fastest adopters of Ripple’s product, but they are also friendly to digital assets in terms of a regulatory standpoint. Since October, Ripple has been trying to expand there in a move which is quite smart.

The banking-focused cryptocurrency XRP and its parent company Ripple have been seeking partnerships in the MENA region, and it is starting to show, as they are starting to see traction.

The place to be

Ripple’s Head of Infrastructure Innovation Dilip Rao has spoken on the importance of the MENA region, recently mentioning that it is adopting the distributed ledger technology solutions from Ripple at a rapid rate.

They have been signing up banks in Saudi Arabia and UAE and other countries like Oman and Kuwait.

Rao said:

“The enthusiasm of the regulator, the central banks to also encourage the use of Ripple technology to build new infrastructure for payment rails.”

It makes sense that Ripple has decided to focus its efforts into the Middle East, especially with the interest it has there, and also because of the potential in its expanding and impressive banking system.

Banks showing their interest

For Ripple, it is mostly about partnering with banks so they utilize the blockchain assets of their XRP token in order to make the intra-banking payments easier, cheaper and more efficient.

So far, they have seen strong interest from the banks in the MENA region, and are thus driving deeper in. The banking system in the MENA region, especially in the developing middle eastern countries are far less attached to their legacy banking systems, something that has been a handbrake for the general adoption of blockchain and cryptocurrencies.

Banks in the MENA region are thus far happier to use the XRP token and xRapid product to solve visibility and liquidity problems in global remittances.

There are also far more lenient and open minded regulators in the Middle East which are willing to look into the new and forward-thinking options that are out there. It is because of this that Ripple has decided to pursue this region, and should it be a success, it would be the perfect platform to launch a more global offensive in terms of adoption.

Regulation inclined

Ripple has always been a cryptocurrency which has taken a different path from most others. Its intention is to work with traditional financial structures and help upgrade them rather than replace them, and to this end, it relies heavily on a welcoming regulatory standpoint.

In the MENA region, Ripple has found an open minded general approach to these financial tech rules, and to that end it has seen adoption start taking hold. It remains to be seen if Ripple can totally colonize the MENA region with its solutions, but it is positive that it is focusing in on an area which has an open pathway.

🤷 Opinions
234 views views
👓 Recommended articles