Brad Garlinghouse may be a Bitcoin hodler, but he’s no fan of the technology behind the world’s top cryptocurrency. At a panel of the World Economic Forum in Davos, Switzerland, the Ripple CEO called out several problems with Bitcoin and the blockchain industry as a whole.
The twenty-six minute panel can be watched in full, here.
Bitcoin’s “Significant Limitations”
During the panel, Garlinghouse highlighted the limitations of Bitcoin technology, as compared to the speed and efficiency of the XRP asset.
“The long term value of any digital asset will be derived from the utility it delivers,” Garlinghouse said. “If you take Bitcoin as it exists today, the scalability problems, proof of work as a model has some real, real, significant limitations.”
However, Garlinghouse shied at the last fence, acknowledging that Bitcoin’s problems could be overcome by clever developers. “I’m not prepared to say Bitcoin goes to zero,” he said, placing his stance among the more cautious of the panel’s members.
Blockchain a “great technology in search of a problem”
Garlinghouse kept firing throughout the panel, with a few shots at the hype surrounding blockchain technology:
Silicon Valley deserves the critique it gets. Oftentimes you have a great technology in search of a problem instead of a problem in search of a great technology. That’s clearly the case in the blockchain space…
The CEO pointed at the scores of industry participants which define themselves as “blockchain” or “crypto” companies, as well as the number of tokens with no clear utility.
By contrast, Garlinghouse said, Ripple has always seen itself as a “payments” company, one that could use the power of blockchain or tokens but does not depend on them.
Unlike most companies in the world of DLT, Ripple’s business model does not depend on using cryptocurrency, even though XRP figures in some of the company’s products. “We use blockchain technology to settle transactions between banks,” said Garlinghouse. “Some banks just do that with fiat.”
The coming Internet of Value
For Ripple, the core problem to be solved is the cost of trust, represented by the number of intermediary third parties in financial transactions. This cost is incurred in generous amounts every time money is sent across borders.
“That will change,” said Garlinghouse. “There will be an Internet of Value that will allow value to move the way information does today.”
Defined as an online environment in which users are free to directly exchange value without intermediaries, the Internet of Value could free up some $10 trillion dollars currently locked up in nostro/vostro accounts, used to facilitate cross-border financial transactions.
To re-wire the payment systems, Ripple needs to bring the weight of the XRP cryptocurrency to bear. But, as the panel highlighted, the monetary value of cryptocurrencies should not be given too much importance. This value will be naturally set through the utility delivered by the technology underlying the cryptos, and in this regard – in Garlinghouse’s view – Ripple is superbly positioned.
Andrew Ancheta contributed writing.
The author has investments in Bitcoin, which is mentioned in this article.
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