The man at Ripple one thousand dollars

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From an early age, David Schwartz was obsessed with door handles and locks. At age 5, he used a screwdriver to disassemble and remove them from household doors, so that family photos show gaping holes where pimples should be.

"The function of a door knob is to control the movement between two spaces. It's a gateway, a barrier and an obstacle. It's a control, "says Schwartz. "When this barrier disappears, you understand it. It sounds silly, but for me it could have been magical as well.

At age 48, Schwartz, bearded and bald with medium-length hair, is Ripple San Francisco's gandalfesque wizard and the co-creator of the third most valuable cryptocurrency, XRP. As the company's newly appointed Chief Technology Officer, Schwartz's mission is to dismantle and rebuild one of the world's largest gates, connecting almost every bank in the world so billions of dollars can pass through. from one account to another.

In short, Schwartz wants to disrupt SWIFT, the company for the world interbank financial telecommunication, a Belgian co-operative organization founded in 1973 that has more than 10,000 financial institutions and is the ultimate intermediary in the banking sector. Suppose you want to transfer $ 5,000 from your JPMorgan Chase account to your cousin in La Paz, Bolivia. Chase sends a secure message via the extensive SWIFT network to the receiving bank in Bolivia. In the end, this translates into currency exchanges and a transfer of funds, often via many correspondent banks. The process involves regulatory oversight, compliance checks and other levels of protection, and is facilitated by a complex series of service agreements. SWIFT processes approximately 25 million messages of this type per day and the result is estimated at 6.7 billion trillion dollars in transfers. However, the SWIFT network is far from effective. At a time when secure emails are being transmitted instantly and bitcoin and ethereum blocks chains are moving in millions of minutes, most international money transfers take at least three days to settle, with opaque and varied fees.

Under Schwartz's technical leadership, Ripple would like to bring global money transfers into the 21st century. The company has recruited hundreds of the world's largest financial institutions – from UBS and BBVA to American Express and the Bank of Indonesia – to test Ripple's new tools designed to modernize the way they move their money. . But Schwartz, who has just returned from a tour of European banks, faces many obstacles. There are critics in cryptoverse who doubt that Ripple's technology is what the company claims to be – decentralized and uncontrolled by one authority. And if convincing bankers to switch to the Ripple platform, which was not yet proven, was not difficult, the company also faces competition from many other startups, including Stellar, a transfer of funds created in 2014 by one of Ripple's founders.

"We want to create a payment network like SWIFT. But an institution where regulation, the actual movement of money, plumbing below the surface, would be a decentralized and open network, "says Schwartz. "The end game is only money that moves invisibly, as easily as information."

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The background of chwartz reflects that of many technologists today. As an early schoolboy in the suburbs of Long Island in the 1970s, he began programming his father's Texas Instruments and Hewlett-Packard calculators, primarily to create images on their tapes.

In high school, he was the prototypical nerve: sports were not his thing, but chess. In 1990, he graduated in Electrical Engineering from the University of Houston. The following year, he gets his first patent – 20 years before Satoshi Nakamoto invents the bitcoin blockchain – for a distributed computer network that he designed to ease the burden of a processor central.

In 1992, Schwartz and his father, a doctor of internal medicine, co-founded a medical technology company that developed a non-invasive device to record heart murmur data. The product did not sell well, but the demand for programmers has increased during the internet era, and Schwartz has pursued a number of network – related programming positions. Meanwhile, he was interested in cryptography. In 2001, he landed at a company in Santa Clara, California, called WebMaster Inc., where he helped design a cloud-based storage system. During his decade, he was also a consultant for the National Security Agency (NSA), contributing to the integration of the agency's networking software with existing security and public key infrastructure technology. In other words, Schwartz gained a working knowledge of cryptography at a high level. "It was a fantastic experience," says Schwartz.

"The end game is simply money that moves invisibly, as easily as information."

Along the way, Schwartz developed an online character, JoelKatz (the name was inspired by Stimpson J. Cat's The show Ren & Stimpy), to publish pseudonym his philosophical meanders. His blog JoelKatz, widely read, is subtitled "Democracy is vulnerable to a 51% attack," an allusion to the tipping point where a party could take majority control of a cryptocurrency, not making it more decentralized. @JoelKatz, his Twitter account, has more than 100,000 subscribers.

In early 2011, Schwartz was looking for something new. Crypto-anarchists were beginning to explore the bitcoin blockchain as a way of avoiding central surveillance. Although Schwartz did not identify himself as a libertarian, he had bought some bitcoins and agreed with many of the ideals of the movement. He was particularly troubled by the centralized control of money.

"If no bank does business with me, I do not get a hearing in court, I do not read the law, I can not cope with my accusers. They apply the law in a way that has none of the normal protections that law enforcement officials are supposed to have. And it really bothers me, philosophically, "says Schwartz. "This idea of ​​disintermediating those shadow regulators who are not democratically responsible and who are not elected, but act like police in some way in resonance with me. That brought me into the bitcoin community.

At that time, Schwartz met Jed McCaleb, the founder of Mt Gox's Bitcoin Scholarship and one of Napster's early competitors called eDonkey 2000. They met at a café, where McCaleb shared an idea that he had called NewCoin. . At the end of the conversation, the two leaders decided to see if they could build a financial infrastructure similar to that of bitcoin, which would consume much less energy and significantly reduce transaction time.

Read more: Tales of a crypto trader

"Initially, my goal was just to see if it was true," says Schwartz, who started working on the code that could possibly underpin the XRP cryptocurrency. "And then, probably a month and a half later, we reached the point where I proved to him that yes, it would work, it would be possible, but we did not know what it could serve. It was like inventing a new material. Is it really light? Is it really strong? Is it manufacturable? Is it sustainable? Does it rust? And then, once you have all these properties, is there a case of use for that?

McCaleb and Schwartz joined forces and quickly hired another programmer, Arthur Britto, to help Schwartz complete XRP's technical architecture. In 2012, while Schwartz and Britto wrote the code, Chris Larsen, a former technical director, who previously worked at Prosper Loans, joined Ripple as the first managing director. Larsen quickly searched for hundreds of global banks to test early versions of Ripple's technology. In 2014, McCaleb became unhappy and left, "forking," or copying, XRP code to launch his rival Stellar.

Schwartz then helped create two financial tools that would become Ripple's first staple products: xVia, a payment interface designed to allow users to send payments globally, and xCurrent, software that allows banks to launch and settle transactions. By moving transactions to a shared, shared registry that only authorized users can access, Ripple claims to be able to facilitate transactions in seconds instead of days.

The banks were quick to see the potential of Ripple. In 2015, Ripple formed the RippleNet Committee, a consulting team of major banks, including Bank of America Merrill Lynch, Japan's MUFG Bank, Standard Chartered Bank, Westpac and Banco Santander Spain. Technology.

The banks' interest in Ripple coincided with the widespread infatuation around Bitcoin in 2016 and 2017. Although none of Ripple's early banking partners used XRP cryptocurrency, his Penny rate, coupled with confusion with Ripple, XRP will skyrocket on cryptographic trading to a record high of $ 3.65 in January 2018, up from $ 0.006 just a year ago. This gave the untested currency a market value of $ 140 billion. Larsen, who received 9 billion XRP chips as CEO, saw his crypto holdings grow to $ 60 billion.

Ironically, Schwartz, Ripple's most zealous ambassador, opted for a salary and 2% stake in Ripple, instead of the XRP cryptocurrency he helped create. To this day, Schwartz is not cited as co-founder of Ripple, although he is the number two employee and its chief architect. With a Ripple value of $ 4.7 billion (and a market capitalization of $ 13 billion), Schwartz's net worth is estimated at approximately $ 90 million.

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or a company on mission to become the connective tissue of global banks, the location of Ripple's ultramodern headquarters in San Francisco's financial district could not have been more propitious. To reach the offices, one must first cross a large arch that resembles that of the Italian time of the Medici. On both sides are the offices of Bank of America and U.S. Trust. The Schwartz open office, located on the second floor and centrally located, is austere: you'll find only two flat screens and an ergonomic black keyboard.

To date, Ripple has launched three major products: xVia, xCurrent and the new xRapid, which aims to solve a long-standing problem facing international banks. Most major banks are forced to maintain local currency accounts around the world for use in money transfers. xRapid frees this capital and reduces costs by substituting local currencies for XRP cryptocurrency. Importantly, while only authorized institutions can use Ripple products, xRapid is designed to make it easier for banks to use XRP cryptocurrency, which everyone can buy, and the XRP platform on which all world can be based. Ripple hopes to turn the XRP into a decentralized reserve currency for international banks.

The adoption of Ripple products has been modest so far. In Spain, Banco Santander, who serves on SWIFT's board of directors, has launched a mobile retail application called One Pay FX using Ripple's xCurrent payment product. The smartphone app allows customers to transfer money between four pilot countries, namely Spain, the United Kingdom, Brazil and Poland.

Ripple's xrapid product also gained some converts. Mercury FX, a London-based exchange company that offers customers an alternative to banks when sending and receiving international currencies, will soon switch from its xRapid pilot program to live production.

"SWIFT has a monopoly for so long," said Mercury CEO Alastair Constance, "Why did not they pass on the costs and time savings? The answer is that inefficiency and laziness have saved them a lot of money. "

Ripple is not the only blockchain startup after SWIFT. Banco Santander, for example, is working with two other blockchain financial infrastructure platforms, Hyperledger Fabric and Ion, to explore other applications. "Like many banks, we have to place different bets in different areas," says Santander's general manager, John Whelan.

Competition has put SWIFT into action. Last year, she launched her Global Payment Innovation (GPI) initiative to make payments in real time. By June 2018, some 180 banks were using this encrypted alternative, without blockchain, to transfer approximately $ 100 billion in cross-border payments per day.

"GPI is not a reconstruction of its entire back office," says Harry Newman, Global Head of Banking at SWIFT. Fabian Vandenreydt, former director of SWIFT Global Securities, adds that the problem is not whether Ripple's technology works, but whether it allows banks to save more money than it costs.

He mentions a project completed in 2015, when the European Central Bank launched a new platform to link 20 Central Securities Depositories (CSDs). The process took seven years and was estimated at $ 400 million.

"It's a bit like heart surgery," says Vandenreydt. "You have to move things so that the system always works during the transition, and that's where the cost is."

By June 2018, some 180 banks were using this encrypted alternative, without blockchain, to transfer approximately $ 100 billion in cross-border payments per day.

Schwartz rejects such objections: "When you try to update a legacy system, you tend to be forced to keep things rather than replace them. I think the clean-sheet approach will almost always produce better design at a lower cost. "

With more than 10,000 banks in the SWIFT network, Newman hopes to be able to transfer all SWIFT members to its new GPI system by 2020. Although GPI is not necessarily a horn, it is another serious hurdle to eliminate.

^I

In May, as if to acknowledge that he had been neglected in Ripple's history and creation hierarchy, Schwartz was quietly appointed chief technology officer of the company he had helped build from scratch.

As technical director, Schwartz will report to CEO Brad Garlinghouse, but in terms of Ripple's technical vision, he is responsible. "David is not a guy who will need a lot of micromanagement," says Garlinghouse. Chris Larsen, Executive Chairman of Ripple, adds, "It is, if not the soul, a key part of the spirit of what we are trying to do here."

Ironically, Schwartz's number one priority is to persuade the blockchain community and potential customers that his Ripple team is losing control of the technology they have built.

In a bizarre version of the blockchain era, Ripple is accused of being as centralized as SWIFT itself.

The debate revolves around trust. Although the XRP blockchain was designed to be open to everyone and therefore independent and reliable, Ripple has always had a disproportionate influence on its governance. On bitcoin and ethereum blocks, for example, validation comes from independent miners seeking to confirm new blocks of transactions in exchange for cryptocurrency. The founders of Ripple, on the other hand, created the 100 billion XRP chips in one go in 2011. They sell the coins periodically and have distributed a lot to the insiders. In fact, more than half of the XRP that will exist will still be owned by Ripple.

All transactions recorded on the XRP block chain are confirmed using a consensus system that includes groups of validators that analyze network transactions. These validators, or nodes, are in turn organized into groups that support each other, called UNLs, or "unique node lists." While validators choose their own UNL, the list assembled by Ripple creates a possible centralization area.

To compensate for fears that the company could flood the cryptocurrency market or manipulate prices, Ripple has locked its XRP into smart contracts that keep the currency in deposit, temporarily freeing 1 billion chips per month. But to truly decentralize the system, Schwartz urges others to rely on the XRP block chain in the same way as Ethereum. "You do not need our permission and we can not stop you," says Schwartz.

Regarding the validators, Schwartz says that only 10 of the 150 currently supporting the network are managed by Ripple. For bitcoin, about 58% of transactions are handled by four mining pools, mainly in China. About 57% of ether production is controlled by three mining basins. What remains unclear (by design) is how many "ripple-free" validators are relying on UNLs. In other words, the cryptographic community fears that, like SWIFT, Ripple's system remains more centralized than it appears. How many transactions depend on validators sanctioned by Ripple? "We do not know" is the official response from a spokesperson for the company.

Ironically, Schwartz himself may be Ripple's best weapon to prove that the XRP blockchain is truly decentralized and therefore reliable and secure. Credibility is a valuable asset to cryptoland these days, and Schwartz, little known and under the spell of the XRP appreciated by his peers, presents himself as a kind of cryptocurrency Eagle Scout. "My personal fortune is in sync with the success of the company and its products," says Schwartz bluntly. "If that's the best solution, use it. If not, why do I want to deceive or force people to get substandard results?

Reach Michael del Castillo at [email protected]. Cover image of Jamel Toppin for Forbes.

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^F

From an early age, David Schwartz was obsessed with door handles and locks. At age 5, he used a screwdriver to disassemble and remove them from household doors, so that family photos show gaping holes where pimples should be.

"The function of a door knob is to control the movement between two spaces. It's a gateway, a barrier and an obstacle. It's a control, "says Schwartz. "When this barrier disappears, you understand it. It sounds silly, but for me it could have been magical as well.

At age 48, Schwartz, bearded and bald with medium-length hair, is Ripple San Francisco's gandalfesque wizard and the co-creator of the third most valuable cryptocurrency, XRP. As the company's newly appointed Chief Technology Officer, Schwartz's mission is to dismantle and rebuild one of the world's largest gates, connecting almost every bank in the world so billions of dollars can pass through. from one account to another.

In short, Schwartz wants to disrupt SWIFT, the company for the world interbank financial telecommunication, a Belgian co-operative organization founded in 1973 that has more than 10,000 financial institutions and is the ultimate intermediary in the banking sector. Suppose you want to transfer $ 5,000 from your JPMorgan Chase account to your cousin in La Paz, Bolivia. Chase sends a secure message via the extensive SWIFT network to the receiving bank in Bolivia. In the end, this translates into currency exchanges and a transfer of funds, often via many correspondent banks. The process involves regulatory oversight, compliance checks and other levels of protection, and is facilitated by a complex series of service agreements. SWIFT processes approximately 25 million messages of this type per day and the result is estimated at 6.7 billion trillion dollars in transfers. However, the SWIFT network is far from effective. At a time when secure emails are being transmitted instantly and bitcoin and ethereum blocks chains are moving in millions of minutes, most international money transfers take at least three days to settle, with opaque and varied fees.

Under Schwartz's technical leadership, Ripple would like to bring global money transfers into the 21st century. The company has recruited hundreds of the world's largest financial institutions – from UBS and BBVA to American Express and the Bank of Indonesia – to test Ripple's new tools designed to modernize the way they move their money. . But Schwartz, who has just returned from a tour of European banks, faces many obstacles. There are critics in cryptoverse who doubt that Ripple's technology is what the company claims to be – decentralized and uncontrolled by one authority. And if convincing bankers to switch to the Ripple platform, which was not yet proven, was not difficult, the company also faces competition from many other startups, including Stellar, a transfer of funds created in 2014 by one of Ripple's founders.

"We want to create a payment network like SWIFT. But an institution where regulation, the actual movement of money, plumbing below the surface, would be a decentralized and open network, "says Schwartz. "The end game is only money that moves invisibly, as easily as information."

^S

The background of chwartz reflects that of many technologists today. As an early schoolboy in the suburbs of Long Island in the 1970s, he began programming his father's Texas Instruments and Hewlett-Packard calculators, primarily to create images on their tapes.

In high school, he was the prototypical nerve: sports were not his thing, but chess. In 1990, he earned a degree in Electrical Engineering from the University of Houston. The following year, he gets his first patent – 20 years before Satoshi Nakamoto invents the bitcoin blockchain – for a distributed computer network that he designed to ease the burden of a processor central.

In 1992, Schwartz and his father, a doctor of internal medicine, co-founded a medical technology company that developed a non-invasive device to record heart murmur data. The product did not sell well, but the demand for programmers has increased during the internet era, and Schwartz has pursued a number of network – related programming positions. Meanwhile, he was interested in cryptography. In 2001, he landed at a company in Santa Clara, California, called WebMaster Inc., where he helped design a cloud-based storage system. During his decade, he was also a consultant for the National Security Agency (NSA), contributing to the integration of the agency's networking software with existing security and public key infrastructure technology. In other words, Schwartz gained a working knowledge of cryptography at a high level. "It was a fantastic experience," says Schwartz.

"The end game is simply money that moves invisibly, as easily as information."

Along the way, Schwartz developed an online character, JoelKatz (the name was inspired by Stimpson J. Cat's The show Ren & Stimpy), to publish pseudonym his philosophical meanders. His blog JoelKatz, widely read, is subtitled "Democracy is vulnerable to a 51% attack," an allusion to the tipping point where a party could take majority control of a cryptocurrency, not making it more decentralized. @JoelKatz, his Twitter account, has more than 100,000 subscribers.

In early 2011, Schwartz was looking for something new. Crypto-anarchists were beginning to explore the bitcoin blockchain as a way of avoiding central surveillance. Although Schwartz did not identify himself as a libertarian, he had bought some bitcoins and agreed with many of the ideals of the movement. He was particularly troubled by the centralized control of money.

"If no bank does business with me, I do not get a hearing in court, I do not read the law, I can not cope with my accusers. They apply the law in a way that has none of the normal protections that law enforcement officials are supposed to have. And it really bothers me, philosophically, "says Schwartz. "This idea of ​​disintermediating those shadow regulators who are not democratically responsible and who are not elected, but act like police in some way in resonance with me. That brought me into the bitcoin community.

At that time, Schwartz met Jed McCaleb, the founder of Mt Gox's Bitcoin Scholarship and one of Napster's early competitors called eDonkey 2000. They met at a café, where McCaleb shared an idea that he had called NewCoin. . At the end of the conversation, the two leaders decided to see if they could build a financial infrastructure similar to that of bitcoin, which would consume much less energy and significantly reduce transaction time.

Read more: Tales of a crypto trader

"Initially, my goal was just to see if it was true," says Schwartz, who started working on the code that could possibly underpin the XRP cryptocurrency. "And then, probably a month and a half later, we reached the point where I proved to him that yes, it would work, it would be possible, but we did not know what it could serve. It was like inventing a new material. Is it really light? Is it really strong? Is it manufacturable? Is it sustainable? Does it rust? And then, once you have all these properties, is there a case of use for that?

McCaleb and Schwartz joined forces and quickly hired another programmer, Arthur Britto, to help Schwartz complete XRP's technical architecture. In 2012, while Schwartz and Britto wrote the code, Chris Larsen, a former technical director, who previously worked at Prosper Loans, joined Ripple as the first managing director. Larsen quickly searched for hundreds of global banks to test early versions of Ripple's technology. In 2014, McCaleb became unhappy and left, "forking," or copying, XRP code to launch his rival Stellar.

Schwartz then helped create two financial tools that would become Ripple's first staple products: xVia, a payment interface designed to allow users to send payments globally, and xCurrent, software that allows banks to launch and settle des transactions. En déplaçant les transactions vers un registre partagé et partagé auquel seuls les utilisateurs autorisés peuvent accéder, Ripple prétend être en mesure de faciliter les transactions en quelques secondes au lieu de quelques jours.

Les banques n’ont pas tardé à voir le potentiel de Ripple. En 2015, Ripple a formé le comité RippleNet, une équipe de conseil composée de grandes banques, dont Bank of America Merrill Lynch, la société japonaise MUFG Bank, Standard Chartered Bank, Westpac et l’Espagne Banco Santander. Technology.

L&#39;intérêt des banques pour Ripple a coïncidé avec l&#39;engouement généralisé autour de Bitcoin en 2016 et 2017. Bien qu&#39;aucun des premiers partenaires bancaires de Ripple n&#39;utilisait la crypto-monnaie XRP, son cours de penny, associé à la confusion avec Ripple, XRP va monter en flèche sur les échanges cryptographiques à un sommet de 3,65 $ en janvier 2018, en hausse par rapport à 0,006 $ seulement un an auparavant. Cela a donné à la devise non testée une valeur de marché de 140 milliards de dollars. Larsen, qui a reçu 9 milliards de jetons XRP en tant que PDG, a vu ses avoirs en crypto atteindre 60 milliards de dollars.

Ironiquement, Schwartz, l’ambassadeur le plus zélé de Ripple, a opté pour un salaire et une participation de 2% dans Ripple, au lieu de la crypto-monnaie XRP qu’il a aidé à créer. À ce jour, Schwartz ne figure pas parmi les cofondateurs de Ripple, bien qu’il soit le numéro deux des employés et son architecte en chef. Avec une valeur de Ripple de 4,7 milliards de dollars (et une capitalisation boursière de 13 milliards de dollars), la valeur nette de Schwartz est estimée à environ 90 millions de dollars.

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ou une entreprise en mission pour devenir le tissu conjonctif des banques mondiales, l’emplacement du siège ultramoderne de Ripple dans le quartier financier de San Francisco ne pouvait être plus propice. Pour atteindre les bureaux, il faut d’abord traverser une grande arche qui ressemble à celle de l’époque italienne des Médicis. Des deux côtés se trouvent les bureaux de Bank of America et de U.S. Trust. Le bureau ouvert de Schwartz, situé au deuxième étage et situé au centre, est austère: vous ne trouverez que deux écrans plats et un clavier noir ergonomique.

À ce jour, Ripple a lancé trois produits importants: xVia, xCurrent et le nouveau xRapid, qui vise à résoudre un problème de longue date auquel font face les banques internationales. La plupart des grandes banques sont obligées de maintenir des comptes en monnaie locale dans le monde entier pour les utiliser lors des transferts d’argent. xRapid libère ce capital et réduit les coûts en substituant les devises locales à la crypto-monnaie XRP. Fait important, alors que seules les institutions autorisées peuvent utiliser les produits Ripple, xRapid est conçu pour faciliter l’utilisation par les banques de la crypto-monnaie XRP, que tout le monde peut acheter, et la plate-forme XRP sur laquelle tout le monde peut se baser. Ripple espère ainsi transformer le XRP en une monnaie de réserve décentralisée pour les banques internationales.

L&#39;adoption des produits Ripple a été modeste jusqu&#39;à présent. En Espagne, Banco Santander, qui siège au conseil d’administration de SWIFT, a lancé une application mobile de vente au détail appelée One Pay FX utilisant le produit de paiement xCurrent de Ripple. L&#39;application smartphone permet aux clients de transférer de l&#39;argent entre quatre pays pilotes, à savoir l&#39;Espagne, le Royaume-Uni, le Brésil et la Pologne.

Le produit xrapid de Ripple a également gagné quelques convertis. Mercury FX, une entreprise de change basée à Londres qui offre aux clients une alternative aux banques lors de l&#39;envoi et de la réception de devises internationales, passera bientôt de son programme pilote xRapid à la production en direct.

«SWIFT a le monopole depuis si longtemps», explique le PDG de Mercury, Alastair Constance, «Pourquoi n’ont-ils pas répercuté les coûts et les gains de temps? La réponse est que l’inefficacité et la paresse leur ont fait gagner beaucoup d’argent. "

Ripple n&#39;est pas le seul démarrage de blockchain après SWIFT. Banco Santander, par exemple, travaille avec deux autres plates-formes de blockchain d&#39;infrastructure financière, Hyperledger Fabric et Ion, pour explorer d&#39;autres applications. «Comme beaucoup de banques, nous devons placer différents paris dans différents domaines», explique le directeur général de Santander, John Whelan.

La concurrence a mis SWIFT en action. L&#39;année dernière, elle a lancé son initiative Global Payment Innovation (GPI) dans le but de faire ses paiements en temps réel. En juin 2018, quelque 180 banques utilisaient cette alternative cryptée, sans blockchain, pour transférer environ 100 milliards de dollars de paiements transfrontaliers par jour.

“GPI isn’t a rebuild of their entire back office,” says Harry Newman, SWIFT’s global head of banking. Fabian Vandenreydt, a former head of SWIFT Global Securities, adds that the issue isn’t whether Ripple’s technology works but whether it saves banks more money than it costs.

He mentions a project completed in 2015, when the European Central Bank launched a new platform for linking 20 central securities depositories (CSDs). The process took seven years and was estimated to cost $400 million.

“It’s a bit like heart surgery,” Vandenreydt says. “You need to move things so that the system still works during the transition, and that’s where the cost is.”

As of June 2018, some 180 banks were using this encrypted, non-blockchain alternative to transfer about $100 billion in cross-border payments per day.

Schwartz dismisses such objections: “When you try to update a legacy system, you tend to be pressured to keep things as opposed to replacing them. I think the clean-sheet approach is almost always going to produce a better design at a lower cost.”

With more than 10,000 banks in SWIFT’s network, Newman is hopeful that he can transition all of SWIFT’s members to its new system GPI system by 2020. While GPI isn’t necessarily a Ripple-killer, it presents another serious hurdle for Ripple to clear.

^I

n May, as if to acknowledge his being overlooked in Ripple’s original creation story and hierarchy, Schwartz was discreetly named chief technology officer of the company he helped build from scratch.

As CTO, Schwartz will report to CEO Brad Garlinghouse, but in terms of Ripple’s technical vision he’s in charge. “David’s not a guy who is going to require a lot of micromanagement,” Garlinghouse says. Chris Larsen, Ripple’s executive chairman, adds: “He’s, if not the soul, he’s a key part of the soul of what we’re trying to do here.”

Ironically, Schwartz’s number one priority is persuading the blockchain community and potential customers that his team at Ripple is losing control of the technology they built.

In a bizarre blockchain era twist, Ripple is accused of being as centrally controlled as SWIFT itself.

The debate centers around trust. While the XRP blockchain was designed to be open to anyone and therefore independent and trustworthy, Ripple has historically had disproportionate influence over its governance. On the bitcoin and ethereum blockchains, for example, validation comes from independent miners vying to confirm new blocks of transactions in exchange for the cryptocurrency. The founders of Ripple, by contrast, created all 100 billion of the XRP tokens at once in 2011. They sell the coins periodically and have distributed many to insiders. In fact, more than half the XRP that will ever exist are still owned by Ripple.

All the transactions recorded on the XRP blockchain are confirmed using a consensus system comprising groups of validators that analyze the network&#39;s transactions. Those validators, or nodes, are in turn organized into groups that trust each other called UNLs, or “unique node lists.” While validators get to choose their own UNL, the list assembled by Ripple is the default, creating a possible area of centralization.

To help offset concerns that the company could flood the cryptocurrency market or manipulate prices, Ripple has locked up its XRP into smart contracts that hold the currency in escrow, temporarily releasing 1 billion tokens a month. But to truly decentralize the system, Schwartz is urging others to build on the XRP blockchain the way ethereum has. “You don’t need our permission, and we can’t stop you,” Schwartz says.

As for the validators, Schwartz claims that only 10 of the 150 currently supporting the network are managed by Ripple. For bitcoin, about 58% of transactions are processed by four mining pools, mostly in China. Some 57% of ether production is controlled by three mining pools. What remains unclear (by design) is how many of the “non-Ripple” validators are relying on the UNLs Ripple has actually deemed to be trustworthy. In other words, there is worry in the crypto community that, like SWIFT, Ripple’s system remains more centrally controlled than it appears. How many transactions rely on Ripple’s sanctioned validators? “We don’t know” is the official response from a company spokesperson.

Ironically, Schwartz himself may be Ripple’s best weapon to prove that the XRP blockchain is actually decentralized, and thus trustworthy and secure. Credibility is a precious asset in cryptoland these days, and Schwartz, little-known and passed over during the XRP windfall enjoyed by his peers, comes off as something of a cryptocurrency Eagle Scout. “My personal fortune is aligned with the success of the company and its products,” Schwartz says bluntly. “If it’s the best solution, use it. If not, why do I want to trick or force people to get a substandard outcome?”

Reach Michael del Castillo at [email protected]. Cover image by Jamel Toppin for Forbes.