Blockchain to Banking with Brad Garlinghouse (Ripple) and Michael Arrington (Arrington XRP Capital)

What sets XRP apart from the rest of the crypto crowd, and what’s in store for this intriguing if volatile category.

Thanks for joining us everyone Yeah well French branded water now we Have TechCrunch Brundage will see yes Quite a lot has changed trip has changed There’s even there’s even coffee Backstage it’s incredible we’re gonna Sort of set up the conversation a little Bit You know when Satoshi Nakamoto invented Bitcoin during the last recession he she Or they who knows who they were Imagine a completely decentralized world With the Bitcoin blockchain but it Required constant mining obviously to Unearth its cryptocurrency Now ripple represented here by CEO Brad Is a real-time gross settlement system Currency exchange and remittance network Created by ripple labs which is a fin Tech company now it’s built on a Consensus ledger and the crypto currency Known is XRP so hello Now when ripple decided to supreme mine Its XRP currency pre mined it okay so it’s Already or mind and then institute a Handful of centralized nodes to create a Highly scalable network in FinTech is Really neat scalability however here’s What happened all hell broke loose Because crypto libertarians who believed In decentralization effectively did you Know thought this is a ridiculous Ridiculous idea then along comes mr.

Arrington fresh from having leaving Venture capital fund crunch fund Launched his own crypto fund Arrington Xrp so named because the fund is built On XRP using ripple that sorry using Actor P and using ripple to transfer Money globally at speed between LPS Companies funding funding is etc but the Critical apparent libertarians to this Day rail against ripple and XRP and Anyone who will deal with them including Arrington xrp so Brad some of these the Rotarians they vet some of them actually Literally called you the devil Lucifer Lucifer I know I’m not the devil Can you prove it look I think it’s an Interesting start in part because I Think there are a lot of religious Zealots in the crypto space and I think People believe things in a way that you Would kind of describe as religious Zealotry ripple took a contrarian view Pretty early in our evolution and said Look if you want to really revolutionize The way payments work if you really want To revolutionize the way transactions Work in this regard it’s not going to Happen by everybody giving up their Existing infrastructure and just Switching to something new as much as I Am actually a bowl on Bitcoin the Bitcoin blockchain is not there’s not Any one ledger to rule them all Ripple invented a series of technologies

Built upon the XRP ledger that allows Institutions banks and even in some Cases governments to take advantage of These technologies and dramatically Accelerate the nature of transactions Fully into talking points now look I’m Trying to explain the thing I’m getting To is simply the idea that the people Who say that ripple is somehow that your Word the devil it’s because we we’re Partnering with the man we decided if You want to enable an Internet of value Going to connect the repositories of Value and their repositories of value Are the banks why couldn’t the banks Have went for a more fully centralized Network thing well in to some degree That’s what they use today I mean Cross-border payments today which are Slow and expensive so I fully Decentralized them at say the XRP ledger Is fully decentralized Ripple the Company cannot control the XRP ledger Apart from the fact that you control a Handful of nodes we could draw a handful Of nodes but I mean we control I think Seven runs 7% of all of the public nodes On the XRP ledger so I mean contrast you Have miners in China that control you Know north of you know three miners Control nodes and 50% to the Bitcoin Blockchain By any measure the Bitcoin blockchain is More centralized than the XRP ledger why

Did why did you pick XRP as feel fund Well first of all Something go ahead I’m sorry I’m just Used to being I was worried they’re Gonna be too interviewers and why are You well no I just you could roll back Transactions right on your ledger could Have all the nodes so this is one of the Fun to kind of misinformation things That people say like ripple can block a Transaction not true can we roll back a Transition not you could you just Wouldn’t ever do that we actually can’t Oh I thought you could no I was hoping You could all right so I chose I does That make is that gonna affect you I was Under the impression that we could no I So there’s there’s the there’s two Answers both partially true as to why I Went with XRP the first answer that’s Partially true is when I decided to do a Crypto fund which was last year after I Made a couple of investments on my own And through crunch funds I naturally Went to Brad because we become very good Friends not everybody knows this but TechCrunch was originally sold to AOL And eventually became part of the Verizon behemoth because of Brad because He was at AOL wouldn’t have happened Without him he was the primary person That made that deal happen naturally I’m His friend He made me wealthy not as wealthy as him

But wealthy and so and I also like him As a human being so I went to hit that Corner he was yes another so when I went To him he was the CEO of Ripple and so I Would talk to him about the fund and True story when Brad first joined Ripple I told him it was the dumbest career Move he’d ever made in a long string of Bad career moves and it turns out now He’s the fifth richest person in California or something but I went to Him for advice and and he helped you Know he helped me raise the fund all the Ripple isn’t an LP he helped me by Introducing me to most of our large LPS That hold large amounts of XRP the other Answer which is also true is XRP is a Fantastic currency to use for among Other things hedge funds we need to move A lot of money very quickly we make Investments all over the world our LPS Come from all over the world and using Banks to move money is a pain in the ass I mean it takes a day or two to move Money around the world and with XRP our Very first close with 50 million we Moved that money and I’m not [ __ ] You in like three seconds and Think it costs 20 or 30 cents that’s you Really need to think about that but That’s fantastic to use your new thing At using the ripple protocol but the Problem is is that who use the excess in Order to do that he’s okay

You’re using the Excel pure legend but There’s an issue I didn’t know anything Somebody else did it but I just know That the money moved in like that like Literally like that and it was it cost Nothing and have you ever sent money in An international wire I mean that’s a Pain in the end then you got a call did You get it and what no I didn’t get in It it’s it’s truly real well I mean you Can use you know there’s lots of Startups transferwise etc that will do That kind of thing but obviously there Are charges and obviously larger amounts I think transfer Rises a fabulous Company and they’ve done some very Clever things by hacking the existing System What transferwise does is optimize the Existing infrastructure and it effect Hack the system so that you have a Better outcome What ripple is trying to do is say look Can we reset the rail transferwise loves What we’re doing because if we’re Successful it makes their job actually Easier oh there’s a lot of companies That spend a lot of time and energy and Transfer eyes and currency cloud are Examples that are taking the existing System and saying how can I put accounts All over the place and I’m gonna have my Own effectively ledger within transfer Eyes to debit and credit so I can make

Funds available more quickly than Otherwise would be the case but one of The one of the issues let’s be honest is That you come up with a fantastic Ability to move money around the planet But there’s also this issue of XRP the Currency which prices are crashing all Over the place you’re trying to get Banks to use the actual currency that Some of them are using the ripple Protocol but they’re not using XRP are They so how do you address that in a way You pre mined all this currency made a Heck of a lot of money let’s talk about Let’s talk about that but then now You’re trying to get people to use Expert XRP you’re getting Madonna to Talk about XRP you’re talking getting Mad at or ripple getting Ashton Kutcher To talk about it I mean these aren’t Necessarily the people who stayed Bankers normally listen to did you have To pay Madonna I don’t know about so a Whole bunch of things got conflated in So let our set apart first of all I Actually we please talk about the margin Second how does that happen is it like You know the agent you guys share the Question about what’s happening crypto Crashes ripple has been very proactive As a company both its leadership team as Well as the company and being Philanthropic we have supported we gave 45 million dollars to DonorsChoose which

Funded every brother if you don’t know DonorsChoose it is one of the most Incredible organizations I’ve ever seen Because you had all this crypto left Over when you mind it like I think as a General statement Silicon Valley good Enough to give back Google didn’t fund Donors to lots of companies in Silicon Valley have a lot of money I mean I was True I’ve never been we may be accused Of being the devil in terms of how we Impart nerd with the system I’ve never Been accused of being the devil for you Know being philanthropic and supporting Causes that are actually good for the Planet Alright thank coming to speak to that What about answering the question about I was trying to question you were Talking about Madonna we’re talking About the Krypton crash first of all Let’s level set 18 months ago the entire Crypto market was worth 20 billion Dollars today it’s worth two hundred Thirty billion dollars now granted in Between it hit about 850 billion so it’s Crashed from 850 by any normal measure If we drew a straight line from 18 Months ago to today you’d say it’s been A huge bull market I also point out like There have been over the last five or Six years multiple quote crashes that Have been effectively reconsolidation And we’ve seen as utility and problems

Are solved with these technologies You’re going to see a separation I think Between those that are purely Speculative and those that are actually Solving real utility real solving real Problems in the marketplace which one Are you well I mean we’ve already talked About your own experience of using x RP And using Ripple’s technologies to solve Real problems which ones are the ones That are joke in the top ten I’m not going there why look the other Thing you taught us is a huge pile of [ __ ] do you know what I will say what Are the projects huge pile of [ __ ] I Think that these projects that come out And raise a lot of money in some cases Billions of dollars are they don’t need That much money and so I always think It’s odd and I think that if you look Back at the history of Silicon Valley There are as far as I know zero examples Of companies that have raised massive Amounts of funding before they launch a Product and being successful if there’s Examples I can’t think of did ripple Nights but is ripple and LP and your Phone in our internet shopping did they Give you Did they give you access our Peter Helped start the fund well no I mean You’re saying like they’re not an Investor do they just give me a bunch of Free XRP it’s a fantastic idea yeah I

Think it’s like a marketing expense Would be Madonna get how did much yeah Right so that’s what that is marketing You are in heart Madonna you’re you’re One of the biggest voices in it not a Charity Madonna can I just say we didn’t Give money to Madonna I gave money to a Philanthropic effort around that Madonna Was a champion okay and no he was Delivery I mean he and Madonna are Friends and so he has been active in That but what is it by the way what is It with this these XRP fanboys on Twitter you’ve got anybody you want to Follow a called XRP trump on twitter You’ve got a like burger a woman called Tiffani Hayden who basically just goes Except amazing all the time she’s fed What’s going on I paying them to shill That’s read that’s a little rude that’s A little rude to accuse him of pain well It’s just a question it’s a fair Questions we do not pay I mean I might Be mocking we have a lot of Advocates Pay them to you know okay yeah he’ll see Why do you think that they just trying To boost the currency what they’re doing Is correcting the record they’re going Out and saying look somebody says Something frankly similar to what you Said which is the XRP ledger centralized Yeah it’s factually not It okay let me see something so this Goes to is he the devil as well so you

Know there are there’s we haven’t you Need to come back yeah there I mean look That one of the most interesting books I’ve ever read is Guns Germs and Steel And I’m sure many of you people in this Room have read it and we are we Naturally are tribal and we form teams And when you add steroids to that in the Form of money you’ve got a situation Where you have what from the outside Looks crazy of these everybody forming Up in these teams and I have been sort Of de facto named to the XRP team even Though we hold a very small amount of x RP today because our LPS actually want Us to diversify but I’m just sort of Given I’m sort of named part of that Team and you got the fanboys for Everybody and they’re all the same I Mean they really are the fanboys for Bitcoin and the fanboys for XRP are Literally the same I mean and they’re Saying this almost the same things and It’s just sort of creepy and weird but Some of these people and some of the Ones you named aren’t creepy and weird They’re actually like enthusiasts who’ve Changed their lives and the lives of Their family I mean you mentioned Tiffani she’s like a single mom who has Helped raise her children because of her Investments in cryptocurrency that’s not A joke I mean that’s a real thing yes That comment that’s fair comment what

About some I mean one of your views also Your criticisms of theorem is that I Mean it’s got a big developer Network And you’re trying to boost the amount of Developers using a XRP with exper in This project called Spring or spring it’s built with an X But it’s called spring which you’re Trying to get developers onto it that’s A bit like Microsoft trying to get Developers to develop apps anyway isn’t It you’re trying to boost the market do You think well I think there’s lots of People that invest in developer Ecosystems yeah you know the the Observation I’d make about the theorem Ecosystem today is there’s a lot of Experimentation yeah there is not a lot Of successful deployed we’re solving a Real problem we feel about aetherium What’s the old general view there’s a Lot of interesting experiments going on I’ll be interested I don’t own anything But you do Bitcoin I do So look I think I think one of the Mistakes and Mike was Mike’s likes to Make fun of me for lots of things but One of the things he was talking about Backstage is years ago I wrote this Thing called the peanut butter manifesto There was a long time ago And with the thesis was that Yahoo where I worked at the time was spreading Itself too thin it was trying to do too

Many things serving too many masters as Opposed to really specializing and being The best in the world at something and I Think in many ways what’s going on in The crypto land is similar you have Ripple has very specifically decided to Go very deep in a particular vertical With a clear customer a clear value Proposition and solving a clear problem Yeah there’s a lot of these things I Mean look you know you read these things I read I was meeting with some of the IBM team and they were talking about Using a blockchain to track flower Freshness I think I don’t I don’t get it Yeah you know first of all I think a Database unit fist More often than not a database is gonna Be more efficient than a blockchain and People use words like blockchain and Crypto as catnip for the investors that Were up here before us that’s true There’s some do you feel that ripple Will try and replace Swift in the Banking system is that I hope it does Well I something has to improve upon Swift swift is it’s like we never even Got email right I mean it’s like we’re Still using snail mail for everything And something has to have to give in That I mean we’re gonna have the SEC by The way at some points I mean what would Happen do you think if the SEC decided To declare XRP your security well first

To answer that we got to make sure we Understand what is a security right a Security is something that represents Ownership and a company gives you rights To dividends give you rights to Governance things like that XRP and Ripple are two separate things there’s We have shareholders and ripple the Company we have investors that include Google Ventures we have banks that have Invested they own shares of ripple the Company when you buy XRP that doesn’t Give you any rights to the profits or Ownership of ripple the company I the Other thing that’s important Understanding you think that’s gonna That’ll okay again that’s an air gap Between you and there’s multiple air Gaps there the amount of misinformation On this one I think is also profound If if ripple the company I mean we have Joked we had an all-hands about a couple Months ago and you know some people Didn’t think it’s very funny but he’s Pointed out that if ripple the company Shut down tomorrow The xrp ledger would continue to operate So if X RP is a security it’s a security Of what now one of the other things that People talk about is information Asymmetry that if a company has Information that could influence the Price then maybe that is more like a Security and the irony there is one of

The major drivers of inflection of the Price of X RP is coinbase the rumors About is coinbase gonna list X RP or not So does that mean x RP uses security of Coinbase Or ripple so look I think the facts are Pretty clear that x RP is not a security And I think that you know as time goes By that’ll become clearer so I don’t Spend a lot of time working up you seem Pretty relaxed about it I actually am pretty I think the facts Are on our side like you’re you’ve been Doing ton of traveling as an investor Now the you you’ve famously said that You’re devoting the next 10 years or so To crypto and watch-chain instead of you Know the old traditional VC model from Crunch fund you know Israel Singapore Europe do you think the SEC is is Eventually going to start to regulate This or our view about how the position They’re saying that they talk to you the House [ __ ] SEC so first of all yeah I Got a letter I invested in a company as A private person last year not as a fund And they sent me a subpoena and it was Like literally accusing me of crimes Because the company the CEO of the Company had once spoken at a TechCrunch Conference years after I left TechCrunch And like some quid pro quo and like I Always think they’re actually making Like criminal and my lawyer had to deal

With it I haven’t spent about thirty Thousand dollars getting him to [ __ ] off And I’m like so first of all I don’t Like I’m a libertarian I don’t like the Government in general but the SEC Forgetting my personal issues with them Because it was just money I’m actually like irate because the SEC Is single-handedly [ __ ] this industry In the US and so we have a few good US Investments properties one I’m wearing Their t-shirt another one is reserve a Company in Oakland And a couple of others but 80 to 90% of Our investments are in Asia Europe and Israel right now because they actually There are actually countries where There’s enough regulatory certainty the Countries that that entrepreneurs feel Safe Starting country token companies their Bitcoin or it’s like blockchain Companies they’re here they don’t There’s so much regulatory uncertainty And then add to that the tax burden and The visa burdens of coming here and then Our current federal government’s stance On immigration in general they’re just Saying [ __ ] it and they’re staying in Singapore or Israel or Europe instead of Coming here and starting companies it’s An it is it is the SEC needs to get Their act together because if they had Done that with the internet in 94 95

TechCrunch and this none of us would be Here we’d all be living in in Shanghai Or somewhere else where ever managed to Get their act together so when the SEC Person comes on stage first slide kick Him out the conference but if they Actually come up on stage and ask him Like you realize you’re single-handedly Like wrecking the next stage of Technology development and how do you Feel about that and you know see what She says so I think might feel strongly About that one I really I really I Really feel like fairly strongly about That like I will Mike and I agree on some of that we Actually disagree on some of it and he Did I’ve talked about this when you’re a Trump supporter right so that’s probably California I’d like to confirm or deny Like the thing I would say you look Looking right you just look actually I Know you don’t like Trump yeah yeah I Can neither confirm nor deny look on the Topic of the SEC the one thing I will Say is there are unequivocally bad Actors in the ico ecosystem there have Been fraud serve in massive scams Hundreds of millions if not billions of Dollars have been heisted and if Anything I’m surprised the SEC hasn’t Been more aggressive going after some of Those bad actors like who now that Doesn’t take away the clarity would be

Very helpful and I agree with him that There is a risk that a lot of this Development ends up non-us and the Impact on the United States economy for Having the the internet that we think of Today being very us centric in many ways Been very very positive the United States oh yeah I’ll talk positively About some there’s a project that I find Variation called auger I’m very Interesting what happen there I’m free Do you like trunk because he’s about Tearing up all the regulation like Ripple as a company wants to work with Regulators around yes or no what he’s Going the talking points he’s like my Public donations to political figures is Documented on the Internet fair comment Well unfortunately I don’t have access So Michael finally you you’ve moved you Famously moved from confounded tech runs About thank you by the way thank you for Having me And you are the oldest I am I am about Three thousand years old yes I didn’t Mean how older you actually have been Here longer than any you’re actually one Of only a couple people who were here When I was here a couple of people left Of us yes still going yeah pletely yes We love it it’s good that there’s still A couple people here we love what we do Because now there’s so many of you That’s a lot of I don’t even know like

There’s a question in here someone left TechCrunch you founded crunch front Famously I remember the unplayed burger T-shirts and he founded Crunch fund and last year he founded Arrington XRP really boots in all boots Into crypto but I mean how’s the how’s The relationship with crunch fund now Did you leave on good terms any bad Blood Oh yeah I know everything’s fine I just Think that I wanted to do crypto and my Partner didn’t as much and I believed in This obviously it wasn’t just that I Believe in crypto it’s also I’m a little Tired of the VC game it’s very different It’s all new players in crypto it’s Younger fresher more interesting people From all over the world the VC game has Gotten very very tiring to me also and I Could go into that but I won’t but also Crypto moves much more quickly those of You in the audience who in here Considers themselves a crypto person It’s a you actually more than I thought You know like the crypto world moves Like significantly faster than the Normal tech world which already moves Quickly but a few months feels like a Year to encrypt And I actually like that I think it’s Keeping me young it’s keeping me excited And it’s just a lot more fun so yeah so Brad finally are you actually the

Richest person in California now I have no idea even how to start Answering that question it’s a very rude Question I apologize Well I should leave it there then I Think Larry Ellison I think he must win That I think Larry or Sergey or the – Larry’s Larry Page I overlaid them yeah Yeah guys thank you very much thank you Thank you appreciate it [Applause]

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