This is epicenter. Bitcoin, episode 131 with guests, Stefan, Thomas, and Evan Schwartz. this episode of epicenter Bitcoin is brought to you by hi dot me, protect yourself against hackers and Safeguard your identity online with a first-class DPN go to High Dot me slash epicenter and sign up for a free account today. Hi, welcome to episode a Bitcoin, the show, which talks about the Technologies, projects, and people driving decentralisation and the global cryptocurrency Revolution.
My name is Sebastian quechua, and my name is Brian Feldman crane. We're here today with Stefan Tomas and Evan Schwartz. Stefan many listeners are probably knows. He's been on the show before
he's the CTO of repo. Evan is a software developer a triple apps, and they are also the co-creators of the intellect or protocol intelligence very exciting because they're trying to tackle one of to believe really hard problems which is interoperability when you have 100 new project, coming up with your own blockchain and people trying to integrate that into all kinds of other systems. It's 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. So yeah even actually I we've been we've been sort of harassing you guys to come on for. I don't know how long 6 months perhaps and no no I'm excited that it's finally working out and I think Avenue also gave a talk, I'd meet up in Berlin about this.
No. And you also gave, you should also add, I think there was maybe a year before or maybe even longer than that a workshop on code use once. So can you talk briefly just sort of where those into logic come from. And how does that relate to to code? Use your? So when we were working on the code use projects, one of the
project. One of the things that really came out of that was like starting to think Beyond a blockchain and thinking, thinking beyond having one cryptocurrency that everything sort of tied to we didn't want everyone to have to use extra P or Bitcoin or just one specific cryptocurrency to pay for Cody has 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's really join that time that we started to think about interoperability and like, how do you make it so that the user can pay with one thing and Dakota's host can accept another thing and have it still work. And it also have sort of a standard protocol to kick off payments into control where money is, no matter what kind of Legend you're talking about, could be, you know, blockchain the centralized Ledger Etc. And so that's where this sort of
key sort of core. It's probably came from for us and I'll just add that a lot of like today. If you want to make payments most Payment 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 Sefa 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, We have no match and maybe there's no way for we don't want to get another account. We'd like to, when we talk about the decide, this vision of the internet of value. What we see is an experience worth 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 thing, connecting to all kinds of different things. Send you know, people can issue assets on Whipple and then everything kind of moves
smoothly as well. Okay was even the idea of a Bitcoin. I mean if you think about it without the, that was one of the promises of Bitcoin is that you can use Bitcoin to send money anywhere around the world without having used Banks and and that in Bitcoin provides a layer of interoperability all those people I guess was did make the step that you say, okay, you can issue a US dollar on Ripple or something like that.
Yeah, this this obviously, you know, really speaks to me the way that you're putting it because that has been really my journey. In terms of the goals always been the same. It's been two to make, you know, the movement of money as frictionless as information, but that was the reason I got into Bitcoin. And what I noticed with in Bitcoin, was that why you needed support for different currency? So I joined Ripple.
And then I noticed with ripple that yes, you know, we have different currencies, but you still have sort of this issue that you're all have to be connected to one Ledger. It doesn't address how to move the money from um, that ledger to all the other systems out there, just never going to be one Ledger that all data is stored on all, you know, all transactions happen on and the reason is not even scalability.
I think we could solve scalability with with sharding and with other cool Concepts. But the problem is that there's a sort of scalability of functionality, as sort of, 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 It's going. Micro payments going to be good for moving, billions of dollars is the same system 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 and still makes it possible to transact. As 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 Ins that are made, and often there's some Compares economic interests in people using your Ledger. What do 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 your 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 impasse you end up with a very Action 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 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 So what's what's interesting here is that you use this term Ledger 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 distributed Ledger's, but does it make sense to speak of Ledger's and when you speak about PayPal and all these other systems that you want to be interoperable here, In general, the term Ledger just refers to back in the day, really back in the day and in some places still 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 you can see everything from, we use that as a, kind of general term because every every one of these different cryptocurrencies banks pay A pallet cetera. Are they all operate, Ledger's? Maybe it's possible that they don't think of them set 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 mean, when we say Ledger and one should also add write that into Ledger itself is actually not a lecture, right, correct? Yeah. There's no Ledger built-in. It's, it's purely a protocol for interoperability person. Protocol suite for interoperability between different Ledger's. I think also interesting to point out and perhaps what when people initially think of these things?
I think of a network and internally other is not a network even it's it's a protocol at clearly at the base layer, 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 inter Ledger and the internet. That's also part of why we chose the name. So for example on intellegent there is a way A to address different Ledger's that address accounts in different Ledger's. Just like the Internet Protocol.
IP has IP addresses to address host on different networks. There's also other similarities. So for example, on into the protocol Suite, you have TCP and you have UDP, which are what's called transport, protocols and so they take care of things like retries and we transmissions and so there's an equivalent intelligence. Well, so it's just a parallel in terms of internet is not a network. It is just something that ties different networks together.
There is minimal way possible. That's a really key point because when so, a lot of different cryptocurrencies 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. Two 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 Within To Ledger. It's really just a way for different networks to peer with one another. So there's no, there is no one enter Ledger in the same way that there's no real. There isn't really one internet. It's just it's a network of
telecommunications networks. And what we talked about it as one thing, but it's really an abstract concept that just made up of this network of Networks. Yeah, and then me what's interesting in the literature that you written in the white paper, is that you reference, these are seized from the late 80s that describe the Internet Protocol and describe. Yeah, IP, and it's really fascinating to me that I mean, these these, these ideas have been around for so long and we
can get into this later. But it seems to me that inter Ledger itself. The fact that it's happening Eating now and of course, like you guys are in the Bitcoin world and ecosystem, and what have you? But I mean intellegent 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 into Ledger and here, at least possible. So it's sort of fascinating that it's happening.
Now like 25 years after the web was created and know 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 it's a really good observation. I gave some guest lecturers
recently for for some students. And one thing that that I told them is that, I think the biggest contribution that the Bitcoins really made is that it's brought a lot of really smart people into the space of Finance where, you know, a lot of them might have not even thought of themselves as Financial Engineers, anything like that or something that that would be something they could ever have an impact on and think Bitcoin. If everybody sort of this
realization that no, you can have a huge impact by working in this space and by working on these Technologies. 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 everyone nowadays is it what are we doing
about blockchains? And I 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? The doors are all open right now. Yeah. I think what Bitcoin May might have brought all sorts of this change in mindset, then this idea that you can innovate without permission, and in this financial space, which is highly regulated, and sort of, you
know, cordoned off. So let's, let's talk about it into larger, the architecture, can you give us a description of what are the different layers of the architecture? Sure of the protocol. So we use a model with hardly four layers. And the four layers are at The Ledger layer, the inter Ledger layer, the transport layer, and the application layer from bottom to top. So, the bottom layer to Ledger layer is basically where you find The Ledger protocols. This is where you find the
Bitcoin protocol. The Ripple protocol, you know, ISO 20000 22, which is with a lot of banks use. So this is where you find sort of the nuts and bolts of making Money movements making transfers on individual ledgers. The next layer is the inter Ledger layer and on the intelligent layer, what you find is basically the header, the information that is necessary to associate a transfer with what's supposed to happen on another Ledger afterwards.
So if you see an intellectual transfer on one Ledger, a connector can look at that header. And look at that into Ledger layer data and knows what to do with that transfer going forward. Now with that, you have sort of this this graph of nodes Ledger's and connectors. And the next thing you need to do is you need to actually send something across that without without dropping the money or things falling apart halfway. And so for that, we have a transport layer and so just like
TCP takes care of retries. We have a transport protocol called UTP Universal transport protocol, which basically takes care of retries and takes care of putting money in escrow such that it can't. Get lost on the way. And then finally, you have an application layer. And so on the TCP IP site on the internet side, you would find the HTTP there. You'd find smtps. There's lots of different application layer protocols. This probably the layer where there's the most diversity.
And so we think with intelligent could be very similar where there are sort of a, you know, a bread-and-butter standard protocol which we haven't designed to Edge which is the equivalent to http. But then there's lots of other ones that are for specific use cases. So for example, within Ripple, we have one called payment service protocol, that is proprietary, that is completely just used within Ripple. That's an application layer protocol. That builds on the open, I'll be
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So, talking about the first one, The Ledger layer as sort of Did the fundamental I guess it would it be correct to say The Ledger layer is really kind of a set of requirements that different Ledger's have to fulfill in order to be part of intellectual. There's a couple different different ways you can look at it. So The Ledger layer is the Estefan was saying the protocols that individual ledgers use. So the Bitcoin protocol for
example. And so here we in we put out this architecture document and in there. One of the things that talks about is different, light levels of functionality that an individual Ledger might use in order to support inter Ledger best.
So the absolute minimum is, you have some protocol for expressing transfers from one account to another That's like, really that the absolute minimum and having a, having a way to either have a unique identifier or a memo, some kind of memo attached to that transfer is, is on, is like, on the lower lower end of functionality. So if 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 what would an example of this me? That's a step up payment where you have an idea. Band, and, you know, you stand in the mound, and then, you can also send some text with the payment. Yeah, exactly. Exactly.
Today we're kind of in that phase where, like, when you talk about set by as a ledger with into Ledger, like the first thing that comes to my mind is as fast as sepa isn't as efficient as set by is, is it really that kind of, you know, legit, I could participate in its alleged transaction and something that's really put that in context.
For me recently is like looking at some old videos when people are 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 that phone receiver that you putting on to the thing and then it makes a noise in the phone receiver, picks it up, right? That that sort of old school stuff and so that's kind of the phase that we're in right now.
Yeah, you could make an intellect, your payment over set, but we also imagine that interest going to put a lot of pressure on Ledger's to get a lot faster, a lot more efficient and the true intelligent Vision won't be realized until Ledger's have sort of. Yeah I just have caught up with it essentially. That's where I can. I can speak a little bit more to what some of those requirements would look like. So Stephane mention things like speed and like, latency and scalability.
So that's that's one piece of it. That a lot of letters right now are not very scalable and so that would sort of limit the throughput. Obviously, another part of it is when Stefano was talking about the different transport protocol. So the way the universal transport protocol works is specifically what it's trying to address is we have the way into
a ledger works. Is you have Ledger's and you have connector sitting in between them and a connector, is some party that has an account on both Ledger's. 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 print. 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 inter Ledger.
And that's what the universal in the white paper. It's called Universal mode. Now, we're calling it, The Universal transport. Also what that is all about, is I don't actually want to just send the money to, let's say, Stephane 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 that either, you have your money, either, you keep your money or you get a
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 and so with Bitcoin you'd use hash time lock with other things you could use as a dedicated sort of escrow thing. But the key point is that The Ledger itself is providing the
escrow. So I tried Money in escrow and it only comes out if Stefan can deliver me that cryptographically signed receipt from the recipient. And so we set up this chain of escrows and so, everybody's putting money in escrow all the way down the chain. Then the recipients. He's 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 one of your talks, you described it as The escrow goes from. So if you have like payments going from left to right, yes, Crow comes back right to left. Can you perhaps give some more detail as to how the connectors are sending money back and forth in the escrow like a net transaction.
And by the way, so what they're for people, who are listening, who want to get, Better sort of visual understanding what this looks like you can go to slideshare.net /, general ledger and there's some slides there and I'll put the link in the show notes as well that sort of illustrate what this looks like. Yeah, I would say that, you know it, you can dive as deep as you
want. If you really want to get the defense and the Really expected explanation of this protocol, I would refer you to the white paper which is on intellegent org. But I'll try to give sort of a very high level description based on what evidence already said. So, If I'm a connector and kind of keeping with that same example, everyone's to send
money, I'm the first connector. I don't just want to put money 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 why the money that the escrow is kind of going from left to right and then the execution well the recipient is the one who
generates that receipts. So clearly the receipt has to come back from right to left and so that's why you kind of see that like left-to-right preparation, right? Left execution, right? So Stefan has the connector, doesn't trust me as the sender, but he's not going to do anything. I ask until he sees money, but the thing he does trust, is there some Ledger that 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. We can get into exactly how that would work. But 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 transfer corresponding transfer on a later ledger. So, and what I'm interested, as the connector is that the two conditions are the same because again, I trusted to Ledger's on either side of me.
And so if the two conditions are exactly the same, I know that whenever the right hand side transfer is going to be fulfilled, I can take that fulfillment that signature and pass it on to the left hand side Ledger. ER, and will be valid there as well. So in many ways, it's very similar to sort of the hash lock Concept 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. And I trust this way even though those Ledger's may be very different and 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 Work. So I think to to kind of really understand it when needs to like sort of really walk through it.
Yeah. What you just mentioned the trust this point in one way to look at this is if Bitcoin and all of these cryptocurrencies have brought away so that you can make an individual Ledger trustless. What what inter Ledger does is make it so that you can try, you don't have to trust a connector, that's some party. That's relaying money between different Ledger's.
Right. Okay. So as long as your yeah, we because because you're within that payment network, if that pain that occur provides an escrow, then you trust that payment network, not exact connector. Okay. So, coming back on this idea of connectors, you've compared them to relay nodes on, on the Internet Protocol. What would they be analogous to what? They'd be analogous to an ISP or like an organization like level 3? How can we compare our connectors to existing internet infrastructure?
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 router and it's basically a system which is on two networks.
It's usually a lower level number of high-level Network or on the Tier 1 level, it sort of connecting to two isps networks together and it basically knows, How to take a packet that's coming in on one network and figure out which of the other networks that it's connected to to, to forward it on. 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 recipient will receive are not responsible rounding. It means that the ledgers are the networks themselves. Are not responsible for the routing and at me keeps them all
very simple. And so the the complexity within the internet protocols is very much sort of concentrated into Routers and even their like it's concentrated in the largest routers, the routers that are actually used at the tier one providers and so your home router can also be pretty simple. And what that does is it means that the only people 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 it tends to be a thing that gets upgraded very easily. And so you can have your Or your laptop, you can have your phone. Stay pretty much the same and still benefit from these improvements.
So, you would compared to sort of the Tier 1 internet routing, like, companies that do writing, like, I don't know, like companies that do like level 3. For example, I'm not, I don't really remember all the names of the companies, so, so they're not the only ones to do Rowdy, right? Like, they do routing on the large scale, but then you have a home router and you do routing on a small scale and you could make sort of a mesh router and routing a different way.
That's really all all up to you. You can create your own routing protocol if you want, but I think most of the complexity is concentrated among those larger, I see. Okay, so you could have for instance, some lower-level connectors that maybe do like connecting sepa to PayPal and then you may have some smaller connectors that are 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 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, survive service provider in China, for example, that you may have to go through some smaller 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 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? May banks will do that?
Or is it more like in Bitcoin way sort of a independent entities that may be anonymous in some location? Like, what's that going to look like? It's A funny because it's kind of like the first person to discover is gold in California. Trying to imagine, like, who's going to be rich off of this? Well, whoever is there first, you know, like whoever can capitalize on that opportunity
to quickest. So, it could be Banks because they already have some of the Regulatory and compliance of background to do this, but the kind of more slow-moving. So maybe it's more like payments companies like venmo Square. Google Apple could be those guys that 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, you know, very large Network providers, whoever it is.
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 at some point Enter Ledger becomes like as big as the internet and like everybody's using enter Ledger all payment platforms and payment service providers have integrated all the conditions to be fully supported and we just have this network of payments between different types of ledgers.
What does that mean for you know things like exchanges that traditionally Serve that role or even the stock market. Like if I can just send money to myself from one payment Network to another than doesn't that whole infrastructure of, you know, third-party exchanges, sort of crumble. So I think that that exchanges are essentially connectors,
right? They are connected to more than one ledger so we could be a Bitcoin Ledger and sepa, and they provide liquidity between those two Ledger's and and their customers provide liquidity. Between those two letters. And so one of the primary models that we see the connectors could work is by being exchanges by having people trading and then using some of that equality to facilitate payments.
So what will be different then in a world where those exchanges are talking to their customers to inter lodger rather than what we have now? So if you just want to compare exchanges today with with how connectors work and enter, Ledger's primarily I think the difference would be the degree of automation. 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.
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 that, but I need to go and actually type that in myself and then they will go and we'll have
some process for doing that. On the other Ledger, what info Ledger does is standardizes that way of doing it so that you can automate more of this so that you could see 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 way you could see it is that exchanges, we 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 really competing on the strength of it as at self as a ledger 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 Ledger's be both more competitive but also be used for a lot more because it if you can automate things, it makes it a lot. Lot easier to wrap payments to them.
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 don't really have to worry about it. Like I don't worry which which path my messages take because it pretty much works and one of the reasons for that isn't necessarily that it the protocols are so amazing 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 Up here with me and it will automatically find the routes that are the best.
And so for compared to the financial Network like today if I want to get money from Bitcoin Litecoin and someone wants to provide that service, they have to actually have a brand, I have to kind of trust them a little bit and I have to figure out that they exist, I have to find them. So we have to be marketing branding, all these things.
And so there are companies out there already that are connectors, this shaped of connecting different cryptocurrencies, there's companies that are connecting, let's say, PayPal to and pay son and you can Them. So, they are out there, but they have to have all this overhead of being a branded. And having customer service all that kind of stuff, where's really? It should be automated and it should be something that that is
just 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. So before you mention that, this was a big opportunity to become such a connector, I mean, if there's no Grand involved, really if it's a, so, isn't this just kind of like a race to the bottom and we'll 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, if you are the best connector you will grow. And once you have economies of scale, you will be permanently cheaper than your Editor. So I mean it's not the kind of opportunity like being a correspondent bank today where you literally can you know, have a cost basis of one or two basis points and charge people 20. I don't think that'll be like that because there's too much competition for that but you can definitely capture the margin of
the economies of scale. And so if you get to be very large, you can make a lot of money with that. 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 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 is 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 You have a pallet - have PayPal you accept Bitcoin. Are you don't accept Bitcoin then now and like we have this whole manual negotiation, which just means, we don't use. We don't use it a lot. I think the statistic is like, people in the u.s. spend 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 if it doesn't it, you know, 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 this 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. This other thing that I'm doing where you never would have thought of doing that before because you have to do sign ups, you have to do all of this kind of overhead. It wouldn't be worth it to build payments into all the, all of these things. But if you get that interoperability right, then you can build payments into a lot more stuff. So, we fully expect the volume to just explode with something like this. Yeah, absolutely.
I totally see that. So this thing you mentioned economies of scale regarding connectors is there some kind of centralization risk here that you say like, well that gives you undue 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 six years now, it's given me a lot of time to think about that and thinking back and At what the sensation, the centralization really means is, it means that you have the choice, you have the ability to go with whatever provider gives you the best option. It's almost like more about competitiveness than it is about what the actual physical topology is.
So think about something like something like Bitcoin, Bitcoin isn't centralized just because there is a there's one network Bitcoin. This is a decentralized network underneath and so the reason for that is because anyone can I'm a minor. And so, for something like inter Ledger, 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 different connector, I just get the new rate and that's it. And so, if anyone out there can offer better rate, they can become the new new big connector that really puts a check on, on even a monopolist. Like you can have it in competition. Really doesn't matter how many players you have, only how hard it would become. It would be for someone else to enter the market and undercut them, it's actually a good
thing. If you have some very large players that are able to take advantage of economies of scale just as long as they don't become able to keep other people out of the market. Yeah I know that make sense are there some other attack vectors? Like could, could they abuse connectors and pews abuse their position in some other way? And potentially, you know, steal money from people?
I mean so that the protocol kind of keeps keeps A from, from the connector pretty much like, as we mentioned, there's escrow connect to can't really steal anything. There's certainly the ability for people to do s each other. One of the things that's actually kind of interesting about intelligent is that it's both a way to send payments, but we also can use into ledger to prevent the US attacks against
inter Ledger, right. You can actually make certain requests that are expensive to process cost something 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 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 a very large connector would be able to just outright Sable the competition because it is just a protocol because I can set up a path, however, I want. So it soon as someone misbehaves 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 you made because I think it's a really cool one that When you talk about denial of service attacks today, there's a lot of different ways that people address denial-of-service 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 and 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 in this gets back to what I was saying about. I think the Volume of payments will explode. It's like if you just made some very, very tiny payment 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. If I'm operating some service with an API service, I could use into Ledger along with that to cut down on denial service. What's the fun was saying is that we can also use that very feature within enter ledger to cut down. Down on denial-of-service attacks against inter Ledger itself because after all the connectors and things are just servants are just internet internet services that are similar to other ones and just
just add that. And so we're going on for a long time but it's something that's very exciting for us. Is a lot of distributed systems have these incentive problems and so a lot of the people come to us at looking for Solutions. Our people are working on mesh networks, on distributed file. And that kind of stuff where they're trying to figure out how to, you know, pay for the utility people.
Add to the system in a decentralized way and I think intelligence is a great solution for those types of protocols. And so, I'm excited about what intelligent can do for the decentralized future. Where, you know, I've almost gotten a little bit, you 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 kind of control that the kind of setting the rules if they're
kind of defining. In the protocol but insulin should really lets you get away from that. And so it allows you to build decentralized systems that are I guess more the centralized 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 it, it's I would call it the centralized but I would call it distributed and having more
freedom to choose. I guess, whereas, with something like Bitcoin, you're sort of stuck with one system, you mentioned economic incentives, coming to sort of, you know, this is very interesting. And, you know, theoretically, it's very will and and but if you know, somewhere down the line, we expect companies to start using inter Ledger and making their Ledger's cryptographically So enter integrated cryptographic escrow into their services.
What is the incentive for a company like PayPal where, you know, 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 in perhaps you know using other services that might be better. What is the incentive there to, you know for parent companies to
Come around this protocol. Yeah. So that's actually kind of an interesting question that I was struggling with this well and I kind of looked at the history of the internet for some inspiration. And when you think about the history of especially the web where you kind of had this transition from the days of the online service providers, to online services networks, where you had AOL CompuServe Cheney, which were all sort of closed
networks. And they were competing on the number of services that were on each Network just like PayPal. Repeating on the number of users and Merchants that are on their on their Ledger. And so what happened?
Was that some of the smaller guys not necessarily the number one, number two, but maybe the number three, four and five saw the interoperability that the web provided as a way to expand the services that they could offer at the if we 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 the reach and it eventually it gets to a point where this sort of open protocol has enough content on it that if you're not
on it. It's a pretty, major omission and so if you're one of the largest guys to start, getting that request from your customers saying like why aren't you on that? I, you know, like this is the biggest 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 the eventually added that support and 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 and people going to Value those x-ray of all services. And so, they are going to stay on a well. But what happened long-term was was Is the internet. Just became like one Global Market.
And so, the most successful companies were the ones that stop worrying about the size of their Network and stop worrying about the added value that they could provide, and rather just try to be as efficient as possible. Try to provide the best customer access to this to the internet itself. That's real interesting. I really love these internet and allergies with with enter larger because I think the they really tie into how networks develop.
So tell us what, where's the, where's the project at? Right now what have you accomplished? Maybe talk about some of the efforts going on with the w3c to try to bring this as some sort of standard level dry. So we came out with the white paper last Oh, brr, so that's available on into Ledger dot org. That's kind of the technical defensive it 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 into Ledger and then a lot of the develop 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 community group there that's focused on Agent. 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.
We have unintelligible dot-org. It says a bunch of different ways you can find us. There's mailing list, IRC, things like that. But the Main Avenue is to join the community group. That's where a lot of the development is happening. And what's? What kind of remains to be done? Like what, where do you see intellectual at year from now? Two year for two years from now? Like how long do you think this is the option is going to take
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 was the prettiest specification for how Ledger's Express and validate the escrow the reason why that's the most fundamental thing is because all the ledgers have to validate the escrow in the same way for going back to that example, where I'm a connector, if the Ledger on the left of me, let's say Bitcoin Village on the right of me validate different types, of cryptographic
conditions of escrow conditions, then When I can't, I can't possibly take a payment between them and so, it's really key that those cryptographic conditions are as standardized now. Obviously there are cryptographic standards already so for example Bitcoin or in implements sha-256. So one thing that we did was just sort of adopt some of the standards that are already most widely used so that as many existing ledgers as possible including Bitcoin was other cryptocurrencies.
And ripple, of course all already support. Intellectual as is without any changes. The next thing though was to sort of plan for the future and we wanted, for example to have distributed systems, decentralized systems, be able to sign things that then trigger intelligent payments. And so for that, we needed the ability to express signatures with multiple signers, standard multisig. And so we kind of came up with a spec for that. So that's the first part.
The second part was to work on routing and so, the conditions being pretty much Final, I think that we're still looking for input, of course, but we have a working spec for that. The second part being routing. So we need to figure out how the routing tables at the connectors, actually get populated. And so that's the thing that were most actively working on right now. We just added it to a reference implementation, the way that we
think it should work initially. Obviously, that's going to be something that's gonna be a lot of innovation over decades, I think on this, but we have a working sort of model right now, so you can take the Friends information today and make payments if you use descriptive conditions and use that routing.
And so the next part for us is kind of to make a lot more easy interfaces and kind of clients and other things that make it easy for people to use the system as well as make it easier to run some of scalable Ledger scalable connectors and so on, we might ought to a lot of optimization kind of trying to make it faster, trying to reduce the latency of payments but really the two key pieces were the conditions in the routing.
We're just getting to a point. Now we're both of those are starting to stabilize a little bit. Yeah. So the point that it's at is that if people are interested in trying it out you can go and look at the code and download it.
We have it. There's a demo that that kind of 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 defined was explaining before, one of the goals with this project is to make it so that the interface to using inter Ledger 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 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 read the white paper. Look at some of the routing docks 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
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 That and even if the internet Protocols are in for 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 kind of thinking about. Okay? How do I get involved in this? The best thing right now is to go to intellectual dot org and go to the w3c community group and join that and sort of start participating on the mailing list and IRC Channel.
And then we are very aware that our website is severely lacking right now so we are working on On a better one. The kind of brings all the different documentation that we have and all different specs and everything into one place by. Now, that stuff is kind of all spread all over the place. So expect a better website in the next couple weeks.
Next, couple months today's magic word is Bell's bella0021 less 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 of like businesses or Banks or maybe payments companies or like working with you guys on integrating that and you have plans on sort of actively trying to get this
adopted? Yeah. So right now what we're mostly interested in is like people can help us figure out About the technology rights to individual developers. Individual contributors who either have some background with designing protocols or simply just have the free time to Decay to a project like this, which is already. You know, a lot of people aren't that lucky, you know. So I think the right now we have a number of contributors some coming more from a community
background. So for example, there's that somebody who's been working on mesh networks and sort of looking at intelligent for that, there's someone who works for well-known payment startup and he's kind of providing Some input on the protocol, he's worked on, I think TLS before. So yes some background in that and that's based on
cryptography. And so on, there's a scribe the guys behind Big Chain DB who've been very very involved and kind of helping us every step of the way they have one of the most scalable Ledger's. 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. You know. Whoever has the best Ledger's has the most interest in interoperability I think and so yeah they've been some. Lee contributors.
We're definitely eager to grow that. Now that we've had a little bit more to show, it's always a little bit hard to, you know, advertise too much when you're still just writing the initial specs and still just writing digital stuff down. But yeah, we're at the point where we're hoping that more people will get interested. So we fled before we talk about Ripple and wrap up. So Evan, you brought opted to use case of micro payments.
He mentioned it a few times. Like why is that such a good fit with intellectual and like, why is that going to be so
important? Yeah. So right now, there's a lot of different people are talking about micro payments and won't one of the I think the drawbacks with a lot of the a lot of the non integer solutions for micro payments is that in the same way with regular payments, if you I have 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 more interchangeable. And so, when talking about micropayment, 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. Nation 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 because enter legit, because there's no network and there's no scalability problems to enter Ledger because it's not a thing in and of itself, it's just a protocol between different networks. You could use enter Ledger for an unlimited number of micro payments which was one of the Big issues to address with micro
payments. And obviously, you need the ledgers to support that, but if you have say dedicated, micropayment Ledger's 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 micro payments through and actually I have 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.
Working on recently as trying to include micro payments in Torrance and what I would say is that 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 micropayment solution and you have to use PayPal.
And then someone else is like, no, no, no. I have the best micro payment solution, and but you have to use Bitcoin and everybody will cut your end up with a Some different systems like that. Again, you have no interoperability between them and your kind of suck.
Because the way that standards work is that you in order to build something like payments into other standards, whether it's BitTorrent 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 micro payments to think about what you could do with something like enter Ledger. ER where you can express
payments in a generic way that can use any underlying ledger to carry them out. So that's why we talk about micro payments. So, you guys are doing all this work on inter Ledger, you know, as as part of your job, a triple, why is Ripple investing so much in this Vise is such an important project for ripple of Ripple apps? Yeah. So so Ripple, we are now 125 people about four or five of, those are working on into Ledger and just to put things in perspective.
And the reason we do that is because intelligence used to purple Zone It's kind of like how you know a company that that's using a database internally might open source that database the way that we've open sourced, triple D, you know it's kind of something that is very foundational and we built a lot of, you know, value-added proprietary stuff on top of that. But we with interoperability is kind of pointless to keep that in house, you know?
Like what's the point of having hdp if you're going to make a closed source. So for us it's just a way of Open Source open sourcing that protocol and Also, it helps us a little bit in terms of, you know, why should Banks upgrade? Why should Banks upgrade their infrastructure? And a lot of especially the largest banks are pretty comfortable right now because the system sucks for their customers, but their customers have no other alternative.
And so the way that I described earlier, you know, intelligent makes it so that if someone has a better path that the even goes around some of the big hubs of liquidity and is a little bit, cheaper intellectual be able to take off the bench of those paths. So it basically gives the smaller players Way to make their systems more interoperable and different, make themselves more efficient, as an alternative to some of the big hubs that are out there.
And that of course, makes the big hubs one to upgrade, and that's where we're Ripple provides products. And so, it also creates a little bit more demand for our solution. So also at that Inn in general, ripples Vision has always been talking about the internet of value concept, where it says easy to move money as information and connecting lots of different currencies.
And previously, the setup has been focused on Tan, 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 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, 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 a lots of other people who have other use cases that Interested in to use this as well. I want to quickly mention something that you brought up the Ripple consensus Ledger and I'm sure there's a lot of people out there that sort of have a question like What Becomes of that?
What's the future of this lecture with the future effects are P. So we think that that that that's Ledger is going to continue to be the The Ledger for xrp and we believe that xrp will be an attractive currency that to use as a bridge currency. So, whenever you're going through a multi currency transaction, a Currency exchange because it's very inefficient to create markets between all possible pairs that tend to be
Bridge currencies, that emerge. And so Ripple, you know, we'll try our best to position X RP as as a bridge currency, not the only one, of course, but as one of the better ones, and so from our perspective, it's always been something that people know what the current city use Bitcoin.
And so it's been frustrating for us having, you know, let's say, you know, higher transaction processing or lower latency and so on and not having it. Be used because people weren't weren't aware of it or weren't using it. And so intellectual, hoping we're hoping that it actually creates a bigger market for X of P because, you know, if it's the cheap as if it's the fastest which we believe it is, it'll have an advantage over other systems that are slower.
So, you mean because once you have into Ledger widely adopted, if I want to send US dollars to your account, I'll have to hop through something. And then you can because ripples going to it's going to be easy to ride through anything. Then ripples Ledger. And xrp might become one of those routing stations where the actual currency exchange takes place. Yeah. So I said earlier that it He's very attractive to, you know, try to scale up your Ledger and try to become a very efficient
hub for liquidity. And so we certainly want to play that game. We certainly want to compete for that for that Revenue. So weather will be successful. I don't know, there's nothing just to be totally clear, but all the conspiracy theories to rest like there's nothing in it. Alleged that would particularly Advantage xrp. But we are. We are thinking that it is the best Ledger out there right now. It's the best decentralized.
Ager. And so as that it should it should do really well in the system. Okay cool. Well thanks so much guys, thanks for coming on and it will be very exciting. I think to see how intellectual progresses and how it's going to be adopted, how companies are going to use it and what the reception will be thanks for having us. And yeah, of course we will have links 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, you know, you'll know where to go. So we're project. LTE network is lots of shows, you can find on. Let's all pick on.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. Episode of Bitcoin and well thanks so much and we look forward to seeing you next week.
Episode of Bitcoin and well thanks so much and we look forward to seeing you next week.