The Weekend Read: Oct 11

1. Ripple Announcements

Earlier this week, Ripple Labs made a slew of announcements, including a re-branding from Ripple Labs to just Ripple. The announcements also covered an additional investment from Santander Innoventures, two repackaged licensable products and, most interestingly, an open source Interledger Protocol (ILP). Ripple CTO Stefan Thomas describes it further in this CoinDesk article:

In terms more familiar in the industry, Thomas compared ILP to Blockstream's sidechains project, which is seeking to extend the functionality of the bitcoin network by allowing bitcoin assets to be moved back and forth between altnerate cryptographic ledgers and the public blockchain.
"Interledger is a complement to sidechains," he said. "Sidechains is about how do you create these ledgers, ILP is putting them together. At ILP we're mostly thinking about if you're trying to connect a bitcoin sidechain and a PayPal ledger, how do you get from one place to another."

2. The Road to SIBOS and Money 20/20

[ed. note: I will be participating in Money 20/20 later this month. If you would like to meet up during the conference, please let me know.]

 Don't forget to bring your own napkins...

Don't forget to bring your own napkins...

To celebrate the upcoming payments-themed events, enjoy the articles below. Speaking of enjoy, those of you currently in Singapore for SIBOS 2015 should make sure to visit the crispy duck rice man at Marina Food House near Raffles Place, you wont be disappointed!

R3 partner bank BNY Mellon recently released this report entitled Innovation in Payments, which serves as an excellent overview of the broader fintech-related trends in banking. The report goes into some detail about the promise and challenges of using blockchain related tech for improving payment rails:

The speed of fintech-fuelled change in the payments arena means banks need to shake off their reputation as being slow to adapt by implementing swifter technology development cycles and replacing legacy payments systems. The financial services industry already has one of the highest ratios of IT spend as a proportion of revenue, with levels expected to reach US$197 billion in 2015. That said, over three quarters of this is estimated to be in maintenance rather than new services. Banks need to redress this imbalance.
Indeed, digital currency-based solutions and the potential they hold in terms of settlement mechanisms and exchange of value are forecast to act as a disruptive force in the wholesale payments sector as various fintech start-ups launch their offerings in the medium- to long-term.

"Potential" is the key word in the passage above, since most of the benefits of blockchain based approaches to payments and remittances has yet to be borne out. This past week alone, we have seen this article by a Rebit.ph employee admitting that bitcoin for remittance didn't address the true cost issues residing within the 'last mile' of payments, plus another report of one (unfortunately named) startup abandoning bitcoin altogether in their remittance model.

3. Banks and Blockchains (cont.)

The long delayed Gemini exchange, backed by the Winklevii, officially launched Thursday in NYC. Instead of going the BitLicense route, the exchange opted to mimic the approach of fellow exchange itBit and was granted a trust charter by NY State: "if we are going to build a bridge to the financial mainland, then Gemini must look and feel as safe, secure and compliant as any other top tier financial institution in the world."

This collection of recent quotes concerning banks' blockchain exploration was one of the more enjoyable reads of the week. I am still trying to parse out the Che Guevara analogy...

And finally, Coinbase's Nick Tomaino echoes the sentiment above with a brief posting on the folly of permissioned systems:

The reality right now, though, is that most banks aren’t talking about this technology breakthrough when talking about “blockchain.” It’s too disruptive to most banks, which have existing business models and profits to protect. What most banks are talking about when discussing “blockchain strategy” is a shared database that could have been built long before Bitcoin existed. [snip]
In the short-run the bank private blockchain noise is slightly confusing. But in the long-run, these experiments are likely to be positive for the ecosystem and accelerate adoption by exposing more people inside banks to these concepts. Ultimately, the disruptive nature of the Bitcoin blockchain will be clear to all. Next time you find yourself thinking about the Bitcoin blockchain and private blockchains, read some Clay Christensen.

In the end I know that we all tend to talk our own book, but I struggle with the use of the Christensen reference at the end. As I have mentioned previously, having a network where validators are permissioned does not preclude the existence of permissionless innovation!