EB131 – Stefan Thomas & Evan Schwartz: Building The Internet Of Payments With Interledger

Transcript

[Music] this episode of epicenter Bitcoin is brought to you by high. me protect yourself against hackers and Safeguard your identity online with a FirstClass DPN go to high. me/ epicenter and sign up for a free account today hi welcome to epicenter Bitcoin the show at talks about the Technologies projects and people driving decentralization and the global cryptocurrency Revolution my name is Sebastiano and my name is Brian fan crane we're here today with Stefan Tomas and Evan Schwarz Stefan many listeners

will probably know he's been on the show before he's the CTO of Ripple and Evan is a software developer at Ripple labs and they are also the co-creators of the interledger protocol interledger is very exciting because they're trying to tackle one of the really really hard problems which is interoperability when you have a 100 new projects coming up with their own blockchain and people trying to integrate that into all kinds of other systems it just becomes a bigger and bigger problem so we're glad that they're they're trying to tackle that and we're excited to speak about that project today so thanks so much for joining us guys thank you thanks so yeah Evan actually I we've been we've been sort of harassing you guys to come on

for I don't know how long six months perhaps and no no I'm excited that it's finally working out and and I think I you also gave a talk at the Meetup in Berlin about this yeah and you also gave we should also add I think that was maybe a year before or or maybe even longer than that a workshop on codius once so can you talk briefly just sort of where does interledger come from and and how does that relate to to codus yeah so when we were working on the codus projects one of the project one of the things that really came out of that was like starting to think Beyond um a blockchain and thinking thinking beyond

having one cryptocurrency that everything's sort of tied to um we didn't want everyone to have to use xrp or Bitcoin or just one specific cryptocurrency to pay for codus contracts and we also wanted the contracts to then be able to trigger payments without having to integrate with you know 10 different types of blockchains and so it was really during that time that we started to think about interoperability and like um how do you make it so that the user can pay with one thing and the codou host can accept another thing and have it still work and then also have sort of a a standard protocol to kick off payments and to control where money is no matter what kind of Ledger you're talking about could be you know blockchain a centralized Ledger Etc and so that's where the sort of key sort of core of

interoperability came from for us yeah and I'll just add that a lot of like today if you want to make payments most payments pay systems in the world work fine as long as you want to send a payment to someone else who's on that same payment system so if I'm in Europe and want to send a payment using sepa works well if I have Bitcoin and you have Bitcoin works well if I have PayPal and you have PayPal probably works well the problem comes in if I have one of those and you have a different one and we have no match and maybe there's no way for we don't want to get another account we'd like uh when we talk about the this this vision of the internet of value what we see is an experience where it's much more like how the internet

actually works where I have whatever money or whatever I'm on whatever Network I want and I can send money to you so that's a lot of where the in the interoperability goal comes from but wasn't this originally kind of also the idea of Ripple that you can sort of then Connect into all kinds of different things and you know people can issue assets on Ripple and then everything kind of moves smooth smoothly as well heck it was even the idea of of Bitcoin I mean if you think about it that was one of the promises of Bitcoin is that you can use Bitcoin to send money anywhere around the world without you know having to use Banks and and and that and Bitcoin provides a layer of interoperability although although Ripple I guess was did make the step

that you say okay you can issue like US Dollar on Ripple or something like that yeah this this obviously you know really speaks to me like the way you're putting it because that has been really my journey in terms of um the goals always been the same it's been to to make you know the movement of money as frictional as as information um but that was the reason I got into Bitcoin and and what I noticed within Bitcoin was that well you needed support for different currencies so I joined Ripple and then I noticed with ripple that um yes now we have different currencies but you still have sort of this issue that you all have to be connected to one Ledger it doesn't address how to move the money from that ledger to all the other systems out there there's never going to be one

Ledger that all data is stored on and all you know all transactions happen on um and the reason is not even scalability I think we could solve scalability with with sharding and with with other cool um Concepts but um the the problem is that there's a sort of scalability of functionality a sort of um you know diversity in terms of the use cases where you can't have one system that really perfectly serves each use case is the same system that's doing micr payments going to be good for moving billions of dollars is the same system um that that's really decentralized good for someone who wants like the lowest latency possible probably not so it's probably good to have some layer on top that allows a little bit of diversity in terms of the

ledgers um and still makes it possible to transact as uh without thinking about the difference of Ledger and thinking about I have to go from this network to this network and what we've also seen is that because there's so much that goes into the design of a specific Ledger and there's so many decisions that are made and often there's some there's economic interests in people using your Ledger what you end up having is someone's let's say I come up with a ledger that's going to be the Ledger for interoperability it has all the best features Etc so I I go to you and I say here come get on my ledger and then but you're you already have the Ledger that you're using and you say no you should get on my ledger not the other way around and then you're at an impass and

you end up with a very fractured system where everyone is saying my ledger is the best one for interoperability but you don't end up with interoperability because everyone stays in their own camps and so what what we saw the need for was something that could bridge that that allows everybody to use whatever The Ledger they want and it doesn't matter and we can still get that payment experience we're looking for exactly so what's what's interesting here is that you use this term Ledger is is a ledger an accurate description for all these different systems that hold value because I've always kind of heard Ledger in the context of blockchains right we speak about of distri did ledgers but

but does it make sense to speak of ledgers when you speak about PayPal and all these other systems that you want to be interoperable here so in general the term Ledger just refers to back in the really back in the day and in some places still uh a ledger is just a book with accounts and balances and it records changes to those and ultimately what you care about is like I have this account how much of the thing that I'm tracking does that one own and and you can see everything from we use that as a kind of general term because every every one of these different cryptocurrencies banks PayPal Etc are they all operate ledgers maybe it's possible that they

don't think of them that as being their primary function they may think of themselves as a payment Network for example but underlying all of that you have some listing of accounts and balances and that's what we talk about when we meet when we say Ledger and and one should also add right that into Ledger itself is actually not a ledger right correct yeah there's no Ledger built in it's it's purely a protocol for interoperability or it's a protocol suite for interoperability between different ledgers I think also interesting to point out and perhaps what when when people initially think of these things they think of a network and and Inter lger is not a network even it's it's it's a protocol at and clearly at the

base layer of what a protocol is it allows people to organize around the same way to communicate yeah so there's actually a pretty close analog between interledger and the internet that's that's also partly why we chose the name um so for example on on interledger there is a way to address different ledgers and address accounts on different ledgers just like the Internet Protocol IP has IP addresses to address hosts on different networks um there's also other similarities so for example on an Internet Protocol Suite you have TCP and you have UDP which are what what's called transport protocols and so they take care of um things like retries and retransmissions and so there's an equivalent intell as well so um it's just a a parallel in terms of internet

is not a network it is just something that ties different networks together in the minimal way possible that's a really key point because when so a lot of different cryptocurrencies uh have have been called at different times protocols for money and a key thing to understand about that is that all of these cryptocurrencies Bitcoin Ripple Etc have protocols that they use to communicate with one another but the really key point is that in order for me to use the Bitcoin protocol usefully I have to be connected to the one true Bitcoin Network there's not really any purpose for you and I to use the Bitcoin protocol with one another if we're not both talking about the exact same

network because then basically what you're talking about is a fork or an altcoin or you know a different chain and that's not that's not Bitcoin that's your other thing and so while they do have protocols in order to use them usefully with both Bitcoin and ripple you have to be connected to the network of specific validators Etc whereas with interledger it's really just a way for different networks to peer with one another so there's no there is no one interledger in the same way that there's no re there isn't really one internet it's just it's a network of telecommunications networks and what we we talk about it as one thing but it's really an abstract concept that's just made up of this network of

networks yeah and what's interesting in the literature that you've written in the white paper is that you reference these rfc's from the late 80s that describe the Internet Protocol and describe uh yeah IP um and it's it's really fascinating to me that I mean these these these ideas have been around for so long and I mean we can get into this later but it seems to me that interledger itself uh the the fact that it's happening now and of course like you you guys are in the Bitcoin world and ecosystem and what have you but I mean interledger could have existed a long time ago even before Bitcoin there's nothing that I don't think anyway that

Bitcoin brought anything new to the table that made interledger inherently possible so it's uh it's sort of fascinating that it's happening now like you know 25 years after theb was created and no whatever how long after the internet was created and it took so long to get here when all these principles have been around for for quite some time that's a really good observation I uh gave some guest lectures recently for for some students and uh one thing that that I told them is that I think the biggest contribution that that bitcoin's really made is that it's brought a lot of really smart people into the space of of Finance where you know a lot of them might have not even thought of themselves as Financial Engineers or

anything like that or or something that that that would be something they could ever have an impact on I think Bitcoin gave everybody sort of this realization that no you can have a huge impact by working in this space and by working on these Technologies um and so I think that's a really powerful contribution and I think that's why these types of efforts are happening now it also got a lot of financial networks to say oh hey we should probably look at this new technology that's coming out and what you know what every everyone nowadays is like what are we doing about blockchains uh and that that's also a really big thing to get existing existing Financial players to come along and say Yeah we actually we like that Vision that you're pitching how can we be part of it right the doors are all open right now yeah I

think what Bitcoin may may have brought also you know this change in mindset and the this idea that you can innovate without permission in in this financial space which is highly regulated and sort of you know courted off um so uh let's uh let's talk about it interledger the arure uh can you give us a description uh of what are the different layers of the architecture of the protocol M um so we use a a model with currently four layers um and the four layers are The Ledger layer the interledger layer the transport layer and the application layer from bottom to top um so the bottom layer The Ledger layer is basically where you find The Ledger protocols this is where you find the Bitcoin protocol the Ripple protocol um

you know ISO 20 22 which is what a lot of banks use so this is where you find sort of the the nuts and bolts of of making money movements making transfers on individual ledgers the next layer is the interledger layer and on the interledger layer what you find is um basically uh the header the information um that is necessary to associate a transfer with what's supposed to happen on another Ledger afterwards um so if you see an interledger transfer on on one Ledger um a a connector can look at that that header and can look at that interledger layer data and knows what to do with that transfer going forward um now with that you have sort of this this graph of nodes of ledgers and connectors

um and the next thing you need to do is you need to actually send something across that um without without dropping the money or or things falling apart halfway um and so for that we have a a transport layer and so just like TCP uh takes care of retries uh we have a transport protocol called a UTP Universal transport protocol um which basically uh takes care of retries and takes care of um putting money in escrow such that it can't just get lost on the way um and and finally you have an application layer and so on the tcpip side on the internet side you would find the HTTP there you'd find smtps there's lots of different application layer protocols um that's probably the layer where there's the most diversity um and so we think with

intell could be very similar where um there are sort of a um you know a bread and butter standard protocol which we haven't Des signed yet which is um the equivalent to HTP but then there's lots of other ones there for specific use cases so for example within Ripple we have one called payment services protocol that is proprietary that is completely just used within Ripple that's an application layer protocol that builds on the open ILP protocols let's take a short break to talk about high. me you know you need a VPN provider to protect yourself against those nasty hackers trying to steal your private information with high. me it could be easier you just install their application on all your devices iOS or Android log in and you have a cushiony cozy tunnel in which your data can move

freely and unencumbered all the while protecting you from those meal hackers and that's boom to sign up for the free plan go to he top me/ Center the best thing is when you use that URL if you ever go premium later you're going to get 35% off and premium comes with unlimited bandwidth using up to five devices at the same time you can use all their servers worldwide you can pay with Bitcoin and best of all it comes with a feeling of peace and satisfaction like having tea with the Dalai Lama we would like to thank k. me for their support of epicenter Bitcoin so talking about the the first one The Ledger layer as sort of the the fundamental I guess would it be correct to say The

Ledger layer is really kind of a set of requirements that different ledgers have to fulfill in order to be part of V Ledger there's a couple different different ways you can look at it so the The Ledger layer is the as Stefan was saying the protocols that individual ledgers use so the Bitcoin protocol for example and so there we in uh we put out this architecture document and in there one of the things it talks about is different L levels of uh functionality that an individual Ledger might use in order to support interledger best so the absolute minimum is you have some protocol for pressing transfers from one account to another that's like the really the the absolute minimum and uh

having an having a way to either have a unique identifier or a memo some kind of memo attached to that transfer uh is is on is like on the lower lower end of functionality so you have basic transfers from one account to another with some data attached to be able to say this is that transfer we talked about so would an example of this be let's say sepa payment where you have an iban and you know you send an amount and then you can also send some texts with the payment yeah exactly exactly today we're kind of in that phase where like when you talk about sepa as a as a ledger within Ledger like the first thing that comes to my mind is is as fast as sepa is and as efficient as sepa

is is it really that kind of um you know Ledger that could participate in an intell Leger transaction and um something that's really put that in context for me recently is like looking at some old videos when when people were first experimenting with internet protocols and they were also using a lot of not so great networks you know you can kind of think of the the phone um a receiver that you're putting onto the thing and then it makes a noise and then the phone receiver picks it up right that that sort of old school stuff um and so um that's kind of the phase that we're in right now yeah you could make an interledger payment over sepa but we also imagin that interledger is going to put a lot of pressure on ledgers to get a lot faster a lot more efficient and

the true interledger Vision won't be realized until ledgers have sort of yeah just have caught up with it essentially yeah so I can I can speak a little bit more to what some of those requirements would look like so Stefan mentioned things like speed and like latency and scalability so that's that's one piece of it that a lot of ledgers right now are not very scalable and so that would sort of limit the throughput obviously um another part of it is D when Stefan was talking about the different transport protocols so the way the universal transport protocol works is specifically what it's trying to address is we have the way interledger works is you have ledgers and you have connectors sitting in between them and a connector is some party that has an account on both ledgers and what you want to do is

I want to send my money to a connector that shares a ledger with me and I want them to pass it on the pro the immediate problem you run into when you're talking about that is what happens if they steal it or lose it and so that was the first thing that that we had to address with interledger and that's what the universal mode in the white paper it's called Universal mode now we're calling it The Universal transport protocol so what that is all about is I don't actually want to just send the money to let's say Stefan is the connector and he may be trustworthy maybe not but there's there's some other people behind him as well and so I really only I want one of two things I either want a guarantee that I want a guarantee that either I

will get a signed receipt from my final recipient saying yep I got the money or I want my money back and so that's the guarantee that the universal transport protocol has is that either you have uh your money either you keep your money or you get a ass signed receipt and so the way that works briefly is basically with escrow where instead of sending the money directly to Stefan because he might run away with it or steal it what I'm going to do is put it in escrow on my ledger so with Bitcoin you'd use hash hash time lock um with other things you could use a dedicated sort of escrow thing but the key point is that The Ledger itself is providing the escrow so I I put my money in escrow and it only comes out if Stefan can deliver me that

cryptographically signed receipt from the recipient um and so we set up this chain of escros and so everybody's putting money in escrow all the way down the chain then the recipient sees oh there's money in escrow for me just pending my signing this receipt they sign the receipt and that trickles back all the way along the chain okay so I think in in one of your talks you described it as uh the escrow goes from so if you have like payments going from left to right the escrow comes back right to left uh can can you perhaps uh give some more detail as to like how the

connectors um are sending money back and forth in the escrow like in a transaction and by the way so what there for people who who are listening who want to get a better sort of visual understanding what this looks like you can go to slideshare.net interger and there's some slides there and I'll put the link in the show notes as well um that sort of illustrate what this looks like yeah I would say that you know it it you can dive as deep as you want if you really want to get the the the the defense and the Really the explanation of this protocol um I would refer you to the white paper which is on in.org um but I'll try to give sort of a very high Lev description based on what what events are said um so if I'm a connector and kind of keeping with that same

example everyone wants to send money I'm the first connector um I don't just want to put money on on into escrow on some other Ledger until I know that Evans actually committed to this payment so I'm waiting for him to put money in escrow first and that's that's why the money the the escro is kind of going from left to right um and then the execution well the recipient is the one who generates that receipt so clearly the the receipt has to come back from right to left um and so that's why you kind of see that like left to right uh preparation right to left execution all right so Stefan as the connector doesn't trust me as the sender so he's not going to do anything I ask until he sees money but the thing he does trust is there's some Ledger that's shared between us

let's say that's the Bitcoin Ledger and so he trusts the Bitcoin Ledger I trust the Bitcoin Ledger if he sees that there's a transfer set up for with money on the Bitcoin Ledger for him and that could be yeah we can get into exactly how that would work but um that there's there's money sitting there that's committed to this specific transaction then he's like okay I don't trust Evan but I do trust Bitcoin and so I'm going to take that and I'm going to go and set up a transf a corresponding transfer on a later Ledger um so and what I'm interested in as the connector is that um the two conditions are the same because again I trust the two ledgers on either side of me um and so if the two conditions are exactly the same I know that whenever

the rightand side transfer is going to be fulfilled I can take that fulfillment that signature and pass it onto the left hand side Ledger and it'll be valid there as well um so in many ways it's very similar to sort of the hash loock Concept in in lightning if you're familiar with that and one should probably add that this is actually a really brilliant cryptographic little neat little trick right because it allows you to do these things in a in a trustless way even though those ledgers may be very different um and it's it's sort of you know simple Works universally and it's not it's not very intuitive right it doesn't it doesn't make sense I think if one just sort of explains why this will

work so I think to to kind of really understand it one one needs to like sort of really walk through it yeah what you just mentioned the the trustless point and one way to look at this is if Bitcoin and all of these cryptocurrencies have brought a way so that you can make an individual Ledger trustless what what interledger does is make it so that you can TR you don't have to trust a connector that's some party that's relaying money between different ledgers right okay so as long as you're yeah because because you're within that payment network if that payment Network provides an escrow then you trust the payment network not the connector okay um so coming back on this idea of connectors uh you know you've compared

them to relay nodes uh on on the Internet Protocol uh what would be they be analogous to would they be analogous to an ISP or like uh an organization like level three how can we compare a connectors to existing internet infrastructure you know participants so there's one role in the Internet Protocol that's a very very close analog and that role used to be called the gateway today we most most usually call it the the router um and it's basically a system which is on two networks it's it's usually a lower level Network higher level Network or on the tier one level it's sort of um connecting two two isps networks together um and it

basically knows how to um take a packet that's coming in on one network and uh figure out which of the other networks that it's connected to to to forward it on um and so the the gateways and the routers are responsible for the routing and one thing that's really powerful about that is that it means that the sender and the rece receiver are not responsible for the routing it means that the ledgers are the the networks themselves are not responsible for the routing and at keeps them all very simple and so the the complexity um within internet protocols is very much sort of concentrated in the routers and um even there like it's concentrated in the largest routers the routers that are actually used at the tier one providers and so um your home router can also be

pretty simple um and what that does is it means that the only people who have to upgrade the protocol regularly for it to work well are people who are going to have companies they're going to be very invested in it they're going to be competing with each other to be on the latest version and so um it tends to be a a thing that that gets upgraded very easily um and so you can have your your laptop you can have your phone stay pretty much the same and still benefit from these improvements so you would compare it to sort of the tier one internet uh routing like companies that do routing like I don't know like companies that do like level three for example I'm not I don't really remember all the names of the companies so so they're not the only ones who do routing right like they do

routing on a large scale but then you have a home router and you do routing on a small scale um and you could make sort of a mesh router and and do routing a different way um that's really all all up to you you can create your own routing protocol if you want um but um I think most of the complexity is concentrated among those larger companies oh I see okay so you could have uh for instance some some lower level connectors that maybe do like connecting sepa to PayPal and then you may have some smaller connectors that are you connecting some obscure cryptocurrency to some other obscure cryptocurrency at some and so you have different levels there and depending on how big the network is that you're

trying to send payments to you may stay on that lower level Network where there's a lot of traffic and a lot of volume but you know if you want to get into something like some little payment service provider in China for example then you may have to go through some smaller um connector router and find a route to it exactly yeah so the connectors are like routers and just like there's various degrees of routers and various complexities same same thing we expect to see with the connectors so what kind of companies are going to be running this like will we see companies like Google in the end running those big the big more complex routing things or isps or will this be a

more of a financial service thing where banks will do that or or is it more like in Bitcoin where you sort of independent entities that uh maybe be anonymous in some location like what's what's that going to look like it it's it's kind of funny because it's kind of like uh the first person who discovers golden California trying to imagine like who's going to be rich off of this well whoever is there first you know like whoever um can capitalize on that opportunity the quickest so it could be Banks because they already have some of the Regulatory and um compliance sort of background to do this but they're kind of more slow moving so maybe it's um more like payments companies like venmo Square Google Apple um could be those guys it could be Bitcoin startups could

be that Bitcoin exchanges are just the only ones that adopt a protocol like this and so they just grow to be um you know very large Network providers um whoever it is um we think it's a huge opportunity and so it's just a matter of like who's going to be there first and speaking of exchanges you know if if at some point interledger becomes as big as the internet and like everybody's using interledger all payment platforms and payment service providers have integraded all the conditions to be fully supported and we just have this network of payments um between different types of ledgers what does that mean for you know things like exchanges that

traditionally have served that role or even the stock market like if if I can just send money to myself from one payment Network to another then doesn't that whole infrastructure of you know third- party exchanges sort of crumble um so I think that that exchanges are essentially connectors right they they um are connected to more than one ledger so it could be a Bitcoin Ledger and sepa um and they provide liquidity between those two ledgers and and their customers provide liquidity between those two ledgers and so one of the uh primary models that we see the connectors could work is by being EX changes by having people trading um and then using some of that liquidity to to

facilitate payments so what would be different then in a world where those exchanges are talking to their customers through interledger rather than what we have now so if you just want to compare exchanges today with with how connectors work in interledger primarily I think the difference would be the degree of Automation and so if I want to use an exchange today I actually need to go on one network and like manually type in a bunch of things in order to send a payment to them and they may have maybe have custom instructions to say you know include this transaction ID or send to this Bitcoin address or something like

that they have custom instructions to be able to correlate an incoming transfer from me to them but I need to go and and actually type that in myself and then they will go and they'll have some process for doing that on the other Ledger what interledger does is standardizes that way of doing it so that you can automate more of this so that you could even see it as like a standardized protocol between exchanges so that I can talk to each of my exchanges on different networks in the same way which just makes it a lot easier to route a lot more payments through them and so one one way you could see it is that uh exchanges would need to be very competitive because they could having a standardized protocol in some ways makes them more

interchangeable but what the way I would look at it is that you also make it a lot more useful because if I could you know if I can pay with Bitcoin really for anything and not just to people who accept Bitcoin then I'm purely competing and Bitcoin is purely competing on the strength of it as a itself as a ledger um as opposed to needing to go and get all the network effects of getting lots of people to accept it and and use it for everything and so you could have exchanges and ledgers be both more competitive but also be used for a lot more because it if you can automate things it makes it a lot easier to Route payment through there I want to stay on that point really quick because it's an

extremely important Point like you think of the internet as this extremely frictionless system that you know you don't really have to worry about it like I don't worry which which path my uh messages take because it pretty much works and one of the reasons for that isn't necessarily um that it it the protocols are so amazing or or so special but because of the competitive environment that the internet creates if I'm a network that drops a bunch of packets all the time people are not going to want to peer with me and it'll automatically find the routes that are the best um and so for compared to the financial Network like today if I want to get money from Bitcoin to Litecoin um and and someone wants to provide that service they have to actually have a brand I have to kind of trust them a

little bit um and I have to figure out that they exist I have to find them so you have to do marketing branding and all these things um and so there are companies out there already that are connectors there shape shift connecting different cryptocurrencies there's companies that are connecting let's say PayPal to imp PESA and you can use them um so they are out there but they have to to have all this overhead of being like branded and um having customer service and all that kind of stuff whereas really it should be um automated and it should be something that um that is just uh competitive so if I can offer a better rate I should be able to just put that in the system and have traffic go through me immediately right but so before you mentioned that this was a big opportunity to become such a connector I

mean if there's no uh brand involved really if it's a so isn't this just kind of like a race to bottom and will be done at cost or why do you think there's such an opportunity here so there are in the internet again speaking speaking from that model um if you're the best connector you will grow and once you have economies of scale you will be permanently cheaper than than your competitor so um I mean you it's not the kind of opportunity like being a correspondent bank today where you literally can you know have a cost basis of of one or two basis points and charge people 20 um I don't think that it'll be like that because there's too much competition for that um but you can definitely capture the margin of of um

the economies of scale and so if you get to be very large you can make a lot of money with that the the other thing I really want to highlight though is if you compare this to the development of the internet and looked at just this the scope the scale of how many for example payments are being sent today we very much expect that the volume of payments sent will explode in the similar way to how much information was being sent exploded on the internet because if you can dramatically reduce the cost of sending an individual message to the point where you don't really think about it and then if you have that interoperability so that you also don't have to think about like if I want to send you money today we have this whole negotiation about you know do you have the same do you have PayPal no you don't

have PayPal do you accept Bitcoin no you don't accept Bitcoin no and like we have this whole manual negotiation which just means we don't you we don't use it a lot I think the statistic is like people in the US send 2.1 payments per day I have no idea how many packets I'm I'm sending across the internet today because I don't care it it doesn't it you know I'm I'm thinking on a different scale I'm thinking about my cell phone's data plan which is like huge numbers of packets and so we fully expect that to happen with payments as well because if you can automate all of this and then stop thinking about it where you know I'm just going to build payments into this other thing that I'm doing where you never would have thought

of doing that before because you have to do signups you have to do all of this kind of overhead it wouldn't be worth it to build payments into all all of these things but if you get that interoperability right then you can build payments into a lot more stuff so fully expect the the volume to just explode with with something like this yeah absolutely toally see that so so you mentioned economies of scale regarding connectors is there some kind of centralization risk here that You' say like well that gives undo power to those entities if they become massive yeah so I mean we obviously get that question a lot and so having been in the quote unquote the centralization industry for almost yeah six years now

um it it it's given me a lot of time to think about that and um thinking back and at at at what thecentral decentralization means is it means that you have the choice you have the ability to um go with whatever provider gives you the best option it's almost like more about competitiveness than than it is about what the actual physical topology is so um think about something like um something like Bitcoin um Bitcoin isn't centralized just because um there is a there's one network Bitcoin is is um a decentralized network underneath and so the reason for that is because anyone can become a minor and so for something like interledger if anyone can become a connector then even if the connector is very large it doesn't mean

that they have this power over you it's not like Facebook where if I if I leave all my my contacts are gone right if I switch to a different connector I just get the new rate and that's it and so if anyone out there can offer a better rate they can become the new new big connector um that really puts a check on on even a monopolis like you can have it in competition it really doesn't matter how many players you have only how hard it would become would be for someone else to enter the market and undercut them um it's actually a good thing if you have um some very large players that are able to take advantage of economies of scale just as long as um they don't become able to keep other people out of the market yeah I know that makes sense

are there some other attack vectors like could could they abuse connectors abuse abuse their position in some other way and potentially you know steal money from people um I mean so the the protocol kind of keeps uh keeps you safe from from the connector pretty much like uh as we mentioned there's escrow uh connector can't really steal anything um there's certainly the ability for people to Dos each other um one of the things that's actually kind of interesting about interledger is that um it's both a a way to send payments but we also can use interledger to prevent the US attacks against interledger right you can actually make um certain requests that are expensive to process cost something um and so that's that's that's true for any kind of distributed system

that you can use incentives to solve a lot of these type of attack vectors so um I mean I can't predict the future but certainly if I play it out in my head I can't think of any way that um a very large connector would be able to just outright um disable the competition because it is just a protocol because I can set up a path however I want so as soon as someone misbehaves um to a certain extent it'll be worth it for people to to make sure they route around them I want to just highlight what that point that that you made because I think it's a really cool one that um for when you talk about denial of service attacks today there's a lot of different ways that people address denial and surface attacks but fundamentally where the problem arguably comes from is that when

you make a request to a server you're asking it to do some work for you but you're not giving it anything in exchange and so the servers have to try really hard to figure out who's doing it legitimately and who's not but with if you could just send these little tiny payments and this gets back to what I was saying about I think the the volume of payments will explode is like if you just made some very very tiny pay to every server that you talk to in the world it would be a completely negligible cost to you but that would completely cut out denial of service attacks not only in so we can we can talk about that in a general sense so if I'm operating some service an API service I could use interledger along

with that to cut down on denial of service what Stefan was saying is that we can also use that very feature within interledger to cut down on denial of surface attacks against interledger itself because after after all the connectors and things are just Ser are just internet internet services that are similar to to other ones and just just to add to that and sorry we're going on for a long time but it's it's it's something that's very exciting for us is a lot of distributed systems have these incentive problems and so uh a lot of the people who come to us at looking for uh Solutions are people who are working on mesh networks on um you know distributed file systems and that kind of stuff where they're trying to figure out how to um you know pay for the

utility people add to the system in a decentralized way and I think iner is is a great solution for for those types of protocols and so I'm excited about what interledger can do for the decentralized future where you know I've almost gotten a little bit um I don't know disillusioned with this idea of like okay we're going to have this like decentralized Ledger really huge Ledger but there's still going to be some people who kind of control that they're kind of setting the rules they're kind of defining the protocol U but intelligent really lets you get away from that and so it allows you to build the centralized systems that are I guess more decentralized or decentralized in a more real sense right because there's no not even a group of developers that kind of controls the whole thing yeah it's decentralized uh it it's

it's I wouldn't call it decentralized but I would call it um distributed and having more U freedom to choose I guess uh whereas with something like Bitcoin you're sort of stuck with one system um you me mentioned uh you know economic incentives uh you know coming to sort of you know this is this is very interesting and you know theoretically it's it's it's very cool and and and but if uh if you know it's somewhere down the line we expect companies to start using interledger and making their ledgers cryptographically um uh so inter integrated cryptographic escro into their services um what is the

incentive for a company like PayPal where you know their their interest is to have as many users as possible and to be using their service if you're creating really easy avenues for interoperability and for perhaps you know using other services that might be better what is the incentive there to u to you know for for for payment companies to come around this protocol yeah so so that's actually kind of an interesting question that that I was struggling with as well and I kind of looked at the history of the internet for some inspiration and um when you think about the history of of especially the web where um you kind of had this transition from the days of the online service providers online services networks where you had AOL you had

CompuServe Genie um which were all sort of con closed networks and they were competing on um the number of services that were on each Network just like PayPal is competing on the number of users and Merchants that are on their on their Ledger and so what happened was that um some of the smaller guys not necessarily the number one number two but maybe the number three four and five um saw the interoperability that the web provided as a way to expand the services that they could offer if way expand the content that you could get through their Network and so that gives them a way to compete with some of the larger ones on on the reach and it eventually it gets to a point where this um sort of open protocol has enough content on it that if you're not on it it's a pretty major

emission and so if you're one of the largest guys you start getting that request from your customers saying like why aren't you on that I I you know like this is the biggest um set of content out there why can't I access that through AOL that's crazy and so AOL the way that they responded to that was they eventually added that support and um they thought about it as well we're going to connect to that but we're still going to have all the extra AOL services so people going to Value those extra AOL services and so they are going to stay on AOL um but what happened long term was was um the internet just became like one Global Market and so the the most successful companies were the ones that um stopped worrying about the size of their Network and sto worrying about the

added value that they could provide and rather just try to be as efficient as possible and try to provide the best customer access to this um to the internet itself that's really interesting I I love these internet analogies with uh with interger because I think they're they really tie into how how networks develop um so tell us what where's the you know where's the project at right now what have you accomplished uh maybe talk about some of the uh efforts going on with the w3c to try to bring this to some sort of standard level sure so um we came out with the white paper last October um so that's available on inter. org that's kind of the technical defense of it uh we've

been working on putting out more documentation things like that we have the there's an open source reference implementation that's under heavy development that you can find that on GitHub github.com interledger um and then a lot of the develop the kind of core development is going on there's at the the w3c is the web is one of the web standards organizations and we have a a community group there that's focused on interledger and so that's where a lot of the discussions and Technical development is happening so you can if you're interested in tracking the progress you can find us on uh we have on in.org it says a bunch of different ways you can find us there's ma a mailing list IRC things like that uh but

the the Main Avenue is to join the community group that's where a lot of the development is happening and and what what kind of remains to be done like what where do you see inter leure at a year from now two year two years from now like how long do you think this adoption is going to take and and how does it have to happen so I would say the the first thing the most low-level thing that we had to achieve uh was the uh create a specification for uh how ledgers Express and validate the escrow um the reason why that's the most fundamental thing um is because all the ledgers have to validate the esre in the same way going back to that example where I'm a connector if the Ledger on the left of me let's say Bitcoin Ledger on the right

of me um validate different types of of cryptographic conditions of of escro conditions um then I can't I can't facilitate a payment between them and so it's really key um that those cryptographic conditions are standardized now um obviously there are cryptographic standards already so for example Bitcoin already implements chart to 56 so one thing that we did was just sort of um adopt some of the standards that are already most widely used so that as many existing ledgers as possible including Bitcoin most other cryptocurrencies um and ripple of course um all already support Inger as is without any changes um the next thing U though was to sort of plan for the future and we wanted for example to have

uh distributed systems decentralized systems be able to um sign things that then trigger intelligent payments and so for that we needed the ability to express signatures uh with multiple signers standard multisig um and so we kind of came up with a spec for that so that's the first part um the second part was uh to work on um routing and so the crypto conditions being pretty much final I think that we're still looking for input of course um but we have a working uh spec for that the second part being um uh routing so we need to figure out how the routing tables at the connectors actually get populated and so that's the thing that we're most actively working on right now we just added it to a reference implementation

the way that we think it should work initially um obviously there going to be something there's going to be a lot of innovation over decades I think on this um but we have a working sort of model right now um and so you can take the reference implementation today and make payments that use these crypto conditions and that use uh that routing um and so the next part for us is kind of to make a lot more uh easy interfaces and and kind of clients and other things that make it easy for people to use the system um as well as make it easier to run sort of scalable ledgers scalable connectors and so on we might do a lot of optimization kind of trying to make it faster um trying to reduce the the latency of payments um but really the the two key pieces were the crypto

conditions and the routing we're just getting to a point now where both of those are um starting to stabilize a little bit yeah and so the the point that it's at is that if if people are interested in trying it out you can go and and look at the code you can download it we have a there's a demo that that kind of show shows off a lot of this functionality that's all working and and there there are some of the internal details that are still being worked on but as Stefan was explaining before one of the goals with this project is to make it so that the interface to using interledger can stay the same and the internals of it can keep getting better and better over time so we're trying to make it as easy as possible for developers who I kind of

think of it as there's two classes of of developers that might be interested in this one may be really interested in the technical details and understanding the routing protocols and everything about how this works internally and so for that kind of person I would say to get involved in the community group to um read the white paper look at some of the the routing docs that are going to be coming out shortly and really dive into that and definitely looking for people who are interested in that I would say there's another group of people who don't care how all of this works internally they just basically just want to use payments in their other thing that they're building and so for that audience we're trying to have really good documentation and very simple interfaces to use this so that you don't

have to understand all of the details of how this works similar to how I don't understand all of the details about how the internet works but I can still use it and even if the internet protocols in or the routing protocols and whatnot are being constantly upgraded I'm still I still just have basically the same interface to use use the internet so just to boil that all down for someone who's watching and kind of thinking about okay how do I get involved in this the best thing right now is to go to in.org and go to the w3c community group and join that instead of start participating on the mailing list and the IRC Channel um and then we are very aware that our website is severely lacking right now so we are working on a better one uh that kind of brings all the different documentation that we have

all different specs and everything into one place right now that stuff is kind of all spread all over the place so um expect a better website in the in the next couple weeks um next couple months today's magic word is Bells b e l LS head over to Let's stock bitcoin.com to sign in enter the magic word and claim your part of the listener award so just one last question on on this thing here like what is the adopt is there any adoption happening in terms that like businesses or or Banks or maybe payments companies or like working with you guys on integrating that and do

you have plans on sort of actively uh trying to get this adopted yeah so right now U what we're mostly interested in is like people can help us figure out the technology right so individual developers individual contributors um who either have some background with designing protocols or simply just have the free time to dedicate to a project like this which is already you know a lot of people aren't that lucky you know so um I think the right now what we have is like a number of contributors some coming more from a community background so for example there's uh somebody who who's been working on mesh networks and sort of looking at interledger for that um there's someone who works for for a well-known payment startup and he's kind of providing um some input on the protocol he's worked on I think TLS

before so he has some background in that in that space on cryptography and so on um there's a um ascribe the the guys behind Big Chain DB um who've been very very involved in kind of helping us every step of of the way um they have one of the most scalable ledgers and so they have an interest in interoperability because you know it's going to make their Ledger look really good compared to all the other ones um you know whoever has the best ledgers has the most interest in interoperability I think um and so yeah there' have been some early contributors um we're definitely eager to grow that um now that that we've had a little bit more to show it's always a little bit hard to you know advertise too much when when you're still just writing the initial specs and still just writing the

initial stuff down um but yeah we're at the point where are we hoping that more people will get interested so briefly before we talk about Ripple and and R up so Evan you brought up the the use case of micro payments you mentioned it a few times like why is that such a good fit with interledger and like why is that going to be so important yeah so um right now there's a lot a lot of different people are talking about micro payments and one one of the I think the drawbacks with a lot of the a lot of the non- interledger solutions for micro payments is that in the same way with regular payments if you tie it to for example one currency or one Ledger you have the limitation of you need to get everybody to use your

one Ledger and we've already talked about the reasons why we think it's more powerful if you have interoperability between these and it's it's more interchangeable and so when talking about microp payment use cases if you had a system that had all of the benefits that people talk about of micro payments but let made it so that I can accept dollars and you can pay with Bitcoins or whatever combination of those things that's much more powerful than having to go and sign up for a thing a different thing than what you already have so that's one of the reasons I think it's a really good use case for it as well as um because interledger because there's no network and there's no scalability problems to interledger because it's it's not a

thing in and of itself it's just a protocol between different networks you could use interledger for an unlimited number of micro payments which was one of the big big issues to address with micro payments and obviously you need the ledgers to support that but if you have say dedicated micr payment ledgers that are really really scalable and can can handle that kind of volume then it becomes a non-issue to send lots and lots of micr payments through yeah and actually add one more thing to that which is a lot of people talk about including micro payments in other standards and so that's everything from talking about http micro payments to a project that I've been working on recently is trying to include micro payments in Torance and what I would say

is that um if your micro payment solution is tied to one specific currency or one specific Ledger you're going to run into a problem because you run into that same issue of you come and say oh I have the you know the best micr payment solution and you have to use PayPal and then someone else is like no no no I have the best microp payment solution and but you have to use Bitcoin and everybody will you'll end up with lots of different systems like that again you have no interoperability between them and you're kind of sunk because the way that standards work is that you in order to build something like payments into other standards whether it's bit torrent or HTTP or other things it has to be truly neutral where there's no party that gains from

using that and so you can't tie it to a specific thing and so I think it's much more powerful if you're interested in microp payments to think about what you could do with something like interledger where you can express payments in a generic way that can use any underlying ledger to to carry them out so that's why we talk about micro payments so you guys are doing all this work on interledger you know as as part of your job at Ripple why is Ripple investing so much in this and why is this such an important project for ripple or Ripple laps I should yeah so so Ripple um we are now 125 people um about four or five of those are are working on interledger and

um just to put things in perspective and and the reason we do that is because intell used in Ripple's own products it's kind of like how um you know a company uh that that's using a database internally might open source that database um the way that we've open sourced Ripple D you know it's kind of something that um is very foundational and we built a lot of um you know value ad proprietary stuff on top of that um but we with interoperability it's kind of pointless to keep that inhouse you know like what's the point of having hdp if you're going to make it close Source um so for us it's it's just a way of of open sour open sourcing that protocol and also um it helps us a little bit in terms of um you know why should Banks upgrade why should Banks upgrade their

infrastructure and uh a lot of especially the largest banks are pretty comfortable right now because um the system sucks for their customers but their customers have no other alternative and so the way that I described earlier um you know intellig makes it so that if someone has a better path that that even goes around some of the big hubs of liquidity and is a little bit cheaper intell will be able to take advantage of those paths so it basically gives the smaller players a way to um make their systems more interoperable and therefore make themselves more efficient um as an alternative to some of the big hubs that are out there and that of course makes the big hubs want to upgrade and that's where where Ripple provides products and so um it also creates a little bit more demand for for fora Solutions also add

that in in general Ripple's Vision has always been talking about this internet of value concept where it's as easy to move money as information and connecting lots of different currencies and previously the the setup has been focused on the Ripple consensus Ledger but you know we've discussed endlessly now the problems with trying to attract everyone to one Ledger and so the the vision of ripple from the beginning was to create this internet of value and we think this is a really good way of doing this as well as there's also also lots of interesting use cases outside of the ones that Ripple as a company are are interested in that are more focused on Bank Banks using this so we want to get lots of other people who have other use cases that they're interested in to use

this as well um I want to quickly mention something she brought up the Ripple consensus Ledger and I'm sure there's a lot of people out there that that sort of have the question like what What Becomes of that what's the future of Ripple consensus L what's the future of xrp um so we think that that that Ripple consens Ledger is going to continue to be the the root Ledger for xrp and um we believe that xrp will be an attractive currency that to use as a bridge currency so whenever you're going through um a multicurrency transaction a a currency exchange um because it's very inefficient to create markets between all possible pairs there tend to be Bridge currencies that emerge and so Ripple you know will try our best to to position xrp as um as a bridge currency

um not the only one of course but um as one of the the better ones and so from our perspective it's always been something that um you know people know about Bitcoin so they use Bitcoin and so it's been frustrating for us having you know say you know higher transaction processing or lower latency and so on and not having it be used because um people weren't uh weren't aware of it or weren't U using it and so intet hoping we're hoping that it actually creates a a bigger market for xrp because um you know it if it's the cheapest if it's the fastest which we believe it is um it'll have uh an advantage over um over other systems that are slower so you mean because once you have Ledger widely

adopted uh if I want to send US dollars to your account I'll have to hop through something and then you think because Ripple is going to it's going to be easy to ride through anything then Ripple Ledger and xrp might become one of those routing stations where the actual currency exchange takes place yeah so I said earlier that it was very attractive to um you know try to scale up your Ledger and try to um become a a very efficient hub for liquidity and so um we certainly want to play that game we certainly want to compete for that for that uh Revenue so uh whether we'll be successful I don't know there's nothing

just to be totally clear put all the conspiracy theories to rest like there's nothing in intell that would particularly Advantage xrp um but we are uh we are thinking that it is the best Ledger out there right now it's the best uh decentralized Ledger and so as that it should it should do really well on the system okay cool well thanks so much guys thanks for coming on and uh it will be very exciting I think to see how interl progresses and how it's going to be adopted how companies are going to use it and uh what the reception will be thank you for having enough uh and yeah of course we will have links to to the white paper to some of the presentations they've done to the working group and all of those in the

show notes so listeners who want to dive deeper or get involved there you know you'll know where to go um so we're part of the LTB Network there's lots of shows you can find on let's of bon.com and we put out new episodes every Monday you can subscribe to it on your favorite podcast app or watch the videos on youtube.com/ epicenter Bitcoin and uh well thanks so much and we look forward to seeing see you next week [Music]