Ripple exec says DLT not ready for banks...yet

Ripple exec says DLT not ready for banks...yet

A lack of scalability and privacy issues are preventing banks from using distributed ledger technology (DLT) to process cross-border payments, says a senior executive at one of the most prominent startups in the DLT space.

Ripple's chief cryptographer David Schwartz told Reuters that: "I will concede, we haven't gotten there yet."

International payments have been identified by banks as a process that could be made faster and cheaper by new technology such as DLT. And while several banks are currently using Ripple's bi-directional messaging service xCurrent, it "is not a ditributed ledger" said Schwartz.

This may be news to Ripple's numerous banking clients, such as Banco Santander which used xCurrent as the basis for its cross-border payments service One Pay FX which was hailed as an early use of blockchain-based technology upon its release in April.

Distributed ledgers are based on the principle of immutable databases updated by a network of computers and secured by cryptography as opposed to the traditional model of a centralised authority.

XCurrent employs an "interledger" protocol which improves upon existing payment models and can offer instant settlement, However, it should not be seen as DLT which Ripple says lacks the scalability and privacy that banks and their clients require. 

"What we hear from many of our customers is that its imperative to keep their transactions private, process thousands every second and accommodate every type of currency and asset imaginable," said Schwartz.

"The feedback from banks is that you can't put the whole world on a blockchain," added Ripple's senior vice president of customer success Marcus Treacher.  

The same weary scepticism among banks about the potential of blockchain technology was evident at EBAday2018, the European payments conference in Munich this week. Speaking at the event, Gottfried Leibbrandt, Swift chief executive said there is "no way" blockchain can scale to replicate capabilities already available in global payments, a view that was repeated by many of the 1000 or so payments professionals at the conference. The banks at EBAday were instead rather more enamoured with the rapid advances in aritifical intelligence and machine learning technologies as production-ready systems far-reaching implications transforming the banking landscape.

Comments: (3)

Nick Ogden
Nick Ogden - - London 14 June, 2018, 14:051 like 1 like

Having sat and listened to a group of very senior economists and academics from around the world debate the world of crypto and blockchain at the Bank of Finland this week, I walk away with two big questions or are they actually serious worries?

The first is Forking, the ability for a lone miner, or miners in concert to split the blockchain, this has occurred already when BitCoin and Bitcash "split". 

The second is a  consequence of forking and that is Orphaned Blocks - theses are the blocks that hold or held a "monetary" value that is left isolated and worthless on the dead side of a fork. 

As this is apparently really possible, does it imply that no DLT transaction blocks are actually safe from fork isolation and consequent value destruction hence perhaps the Ripple statement above?  

Craig Ramsey
Craig Ramsey - ACI Worldwide - Watford 14 June, 2018, 15:031 like 1 like

The cross-border payments market will see without doubt a lot of innovation in the next few years.

I believe that Ripple should be part of any real-time and global payments processing solutions for financial institutions. Working alongside SWIFT and other global payments processing solutions, Ripple can be a valuable component of the go to market strategy.

But it’s not an all-or-nothing approach, banks won’t try to use Ripple for everything. The real strategy is to have flexibility and be open to different options and possibilities.

Srinivas Chintakrinda
Srinivas Chintakrinda - Technologies - Minneapolis 14 June, 2018, 15:39Be the first to give this comment the thumbs up 0 likes

As I identified long time ago, Ripple has the constraint of having its own Ripple network to engage the Payment Value Chain providers for instant settlements. In order to be real time, not just among its participants, but across banking institutions - there must be a different way.

Also possibly by adapting flexibility and be open to options, it can be one of the strong player in the Payments eco system rather an end to end player.