EB128 – Jed Mccaleb: Stellar And The Vision Of An Open Financial System

Transcript

[Music] this episode of epicenter bito is brought to you by Ledger now accepting pre-orders for The allnew Ledger blue Developer Edition a Bluetooth and NFC touchscreen Hardware signing device learn more about The Ledger BL at Ledger wallet.com and use the discount code epicenter to get 10% off your first order hello and welcome to epicenter Bitcoin the show which talks about the technology projects and startups driving decentralization and the global blockchain Revolution my name is Brian

Fabian Crane and I'm M Roy today we have a very special guest Jed MB he's currently the C of Stellar but previously he has been the founder of e donkey Mount gox the Bitcoin exchange Ripple and and Stellar itself so we're going to talk about what Stellar is doing what kinds of Market it's targeting what kind of cons technical Challen uh technical uh systems it's building and uh before that let's have an intro from Jed yeah hi guys um thanks for having me on the show um uh yeah I like like you said I'm uh Jed maleb you know I've been involved in distributed systems for

years and years uh and was involved in Bitcoin from fairly early on um and was super super excited about it and wanted a way to buy Bitcoins and so founded malx um which only ran for a short bit but yeah and how how did you go from Mount goau to something like Ripple and then Stell um well when I first learned about Bitcoin um I was you know prior to that I didn't think there was a way to even solve this problem this uh this whole idea that you could have um a distributed database essentially distributed database that that nobody has direct control over but no one can change arbitrarily that it's changed by this fixed set of rules um and once you kind of see that that that there's a potential to do that it's like super

exciting um so um I really like the idea of Bitcoin but I just started to think of other ways to solve the consensus problem just because um that's you know I've been a a computer programmer for a very long time and that's kind of what you do is like when you see uh one solution you kind of trying to think of other Solutions as well so um so yeah so I so I I started Mount gox just as a way to get Bitcoins essentially and and because at that point there was really no exchange and uh it was just clear that there needed to be a Marketplace for them um but but that that problem itself is not very interesting to me which is why I um didn't basically I pretty soon uh sold it to this guy in Japan um markk unfortunately um so uh

but uh but yeah so then but then after after I kind of was done with M Ox I was still like intrigued by this this whole uh problem of consensus and and how you can have a distributed database with with um uh you know with with everybody agreeing on the state of the database but no one controlling it which is which can be used in lots of different ways as we're starting to see now um and so basically I came up with this idea of how to do it that that evolved into being Ripple um uh so so basically a way of a way of solving consensus problem without the mining so that that's kind of what led me to Ripple so yeah so one of the things that just just as you know us and and a lot of people listening right who are so

involved in this in this space with Bitcoin and blockchains and cryptocurrencies you know sometimes it it all sort all starts feeling a little bit normal and this is just you know the way the world the way this world works right but then uh one of the books uh that so there's a book called digital gold we had Nathaniel poer on as well to talk about that uh but that sort of writes about the the history of Bitcoin really and it's a fantastic book I really recommend people check it out but I I thought what it really um made me sort of made very kind of obvious to me and like brought to light it's just what a crazy story this is and like what an

insane concept an insane Vision uh so it does a fantastic job with that and and and you play a significant role role in there um and it really does I actually just went back before and and look briefly at the on you know on Amazon one can look for the search for currencies and it talks a little bit about those early days right when M go started and before there was basically no way really of buying Bitcoin I mean you could maybe email some person and then you started my go and within no time it just completely took off so yeah yeah yeah it was it was definitely a very interesting

time I mean it was totally unclear whether the project would work or not um and I think most people were were hopeful but but didn't like thought you know realistically this is probably not going to work but just because the idea is awesome but it's you're asking to change kind of the fundamental structure of how how things are done and and you know usually that doesn't work so um it was always just kind of amazing I think for everybody involved early on it was always just amazing anytime like it would get further adoption or like you know you would You' read about it in some some article or or you know you would some famous person would say something about it like every time something like that happened everyone got got really excited and just slowly became more and more real like over the years like when when I like talk about

it with people I knew from back then it's just always like wow this is so surreal like when we came into it it was like literally a penny of Bitcoin and and now it's like this worldwide thing so yeah the whole time was like super exciting especially like the whole cast of characters was was very like Fringe of the internet so it interesting to see it kind of become more legitimate over time and and and just how that whole whole thing has changed it's just yeah it's been cool so yeah so today the whole blockchain Space has really taken on a a very different role like today right a lot of the activities and people investing most heavily in this Are banks right probably is the last thing people expected back then

yeah I know everybody would always talk about well as soon as blanks Banks understand this or like realize what what's happening here they're all just going to try to like do some conspiracy theory to shut this thing down or like everyone is like super paranoid of it but yeah I mean the reaction to from Banks has been like the most surprising thing to me because like literally I think every Bank on the planet has their blockchain exploration division at this point where they're all interested in this technology I think they all see that that the world is Shifting this way and it's it's it's a really important technical development and nobody wants to kind of be left behind in it so yeah so yeah the the reaction has been super positive actually and then yeah Ripple too right very exciting project and and sort of

very early on I mean had also Stefan Tomas on before to talk about that so so the original Vision um for for ripple was to enable Fiat currencies on on sort of peer-to-peer Fiat payments is that correct um sort of yeah so basically uh when I came up with the the the ideas behind Ripple like how you could you could essentially just because architecturally you could have it you could um store other stuff in the it was it is closer to a database than what Bitcoin is like Bitcoin is is less of the way a traditional database Works than what Ripple is um just just because technically the way it's um designed

right so there's Bitcoin is essentially this chain of transactions where you have to know all the transactions in the chain to be able to know the balances of individual accounts whereas Ripple has uh has an account and it'll have a balance and then uh so basically you just need you just need the current Ledger um to know what's going on and so it makes it easier to stick other information in there like other assets and so the original idea was just to do um something similar to B Bitcoin where there is just one token but then we kind of realized hey you know you could send you could put other Assets in here um and then have these trade against each other and make this more of like a full full full featured payments Network where uh it doesn't matter what currency people are holding they can all kind of

interoperate so it kind of moved in that direction over over the development of it um but yeah uh basically now um you know now that is certainly the focus where it's it's on the the actual other Fiat currencies in it so and so what was the story of how you left Ripple and and then ended up starting Stellar yeah so um basically the person I brought on to be CEO we ended up having like lots of personal or just the relationship kind of went sour and and the direction the company was going wasn't really something that I thought would work or really be a part of so so I left and then I took some time off and

uh you know I wasn't really intending to do another thing in in the cryptocurrency space but I just couldn't get my mind off of it just because it is I think we are in this transitional time where um we're moving from you know the way the way money Works uh the traditional way money and payments works is like kind of you know a big mess right it doesn't does nothing really interoperates and uh it leaves a lot of people out of the financial syst system and it's it's kind of like the pre- internet days of of the way you know information was sent around and then then there was this internet that came along and kind of democratized the whole thing and opened it up to everybody and I think we're going through a similar shift with money and to me it's going to be even more it's even more exciting

because not only is it information it's like economic activity which uh which I think can be more empowering and and and uh you know um much more exciting so like I just didn't see like I I took basically a year off and like I didn't see anyone in the blockchain space kind of solving the this particular problem where um what what seller is really trying to do is connect all these different Financial networks together so um you know there's like Swift and sepa and a and like mobile money things in Africa and other parts of the developing world and none of these things uh interoperate with each other seamlessly right so um what the goal of seller is to connect all these things so it's it's you should be able to send 50 cents to somebody in Mexico or you know um you

know just in the same way you can send an email to anyone in the world it doesn't it doesn't matter what domain provider they're using or anything like that that the payment should work the same way and so um we basically we just wanted to solve that problem so that's why you know that's what kind of led us to sell her so so I mean the the original F like the original vision for ripple was something very similar where um when Ripple started and I and I used Ripple for the first time um I got the feeling that this is consumer Focus play right you wanted um you wanted like a lot of people to come onto the Ripple Network a lot of consumers to come on the network transfer money all around the world and uh and have very low friction doing it

right but off late like when I see Ripple I see that their focus is kind of Shifting away from the consumer play and into a a bank play right like they have they have been focusing a lot on correspondent banking they they actually shut down Ripple trade which I which I which I really liked and which I used as a consumer and I see that they are kind of focusing more towards Banks now on the one side and then they have the interledger protocol which is meant to make uh Financial ledgers of banks interoperate with each other right but is it would it be correct to stay say that Stellar is still focusing on the original vision for ripple which is a consumer focused play

um I mean yeah I'm not sure sure what what Ripple's plans are currently like I haven't followed them too closely but it does seem like as an outsider view it does seem like they're pivoting to kind of be like Swift 2.0 um which we're certainly not doing um I I think um I I don't know if we're a consumer Focus play I mean basically our our our like thesis and for like a lot of reasons I think where we want to focus our efforts is in the developing world because you know payments doesn't work perfectly in like the US and Europe you know but you can use like on PayPal it is easy to send like maybe it's not as quick as it should be or as cheap cheap as it should be but it's pretty low friction right but whereas in uh places like Nigeria

you know half the people don't have bank accounts um you know there's several different mobile money operators and none of them connect to each other so if you're on one you can't send to another um you know payments are a huge huge problem there right so for us like we want to solve uh that problem where the pain is kind of the greatest um you know for a few reasons I mean I think you know just morally for us like those those people are are are you know not part of the financial system and and that's and and financial access is like one of the huge uh blockers for poverty alleviation I think that's why like Gates Foundation and all these other big institutions have kind of made this part of their uh mandate recently just because uh they've kind of realized as

they're trying to do programs there that you know if people don't have Financial access then it's hard to give them like education or or pay for healthcare or like make small savings accounts things like this so it's it's it's a it's a huge problem for a large part of the world and uh I we feel like if we can solve that problem not only is it massively beneficial but it is it is the like when we go and talk to people there they get some the system like Stellar instantly because they do understand the need for this kind of thing whereas people in the US and Europe you kind of have to like walk them through like why this is better than what they have now um so it's the the the need is not as impared so our our goal is basically to um get Stellar working really well in in

one region um specifically Nigeria right now um and then once we've kind of demonstrated that then other people can copy it in other countries or um you know it can just be replicated because it is an open system so anybody can kind of plug into it so yeah cool I mean yeah that that really seems like in like a very good Vision right like youve kind of zeroed it into Nigeria and like completely focusing on that and kind of your blog also reflects that right it has so many articles about financial inclusion that it's in a sense it's it's very rare in the Bitcoin space like you would go to a conference and uh and have this guy talk about Bitcoin in Africa right but when you when you go to the websites of Bitcoin Community like of Bitcoin

companies like there's no there doesn't seem to be any real action towards that direction but like when you go to the stellers website I see that so many blogs and like you have programs for enabling women in certain parts of Africa have access to mobile money and things like that right yeah yeah I mean yeah I mean I think the rest of I mean just the rest of in the same way that like Silicon Valley and technology in general is pretty much focused on the developed world just because that's where people live and that's what they're used to um but but you know so it is rare that that companies are kind of focusing outside of that not not even in the Bitcoin space and just in the you know technology in general so but yeah we've just found that like this this just makes the most sense to us and it

is the most compelling use of it right now I think I mean we we do hope that eventually the whole world adopts this and in fact like to solve Financial inclusion like they have to be connected not only to to their local communities but to The Wider world because they that that's what that means is that they can they can transact with people in Europe and us just as easily as we can right so let's take a short break so we can go to Paris I stopped into lame Bitcoin the house of Bitcoin at The Ledger offices and I met with Ledger CEO Eric L so he could tell me all about The Ledger wallet Chrome app The Ledger wallet Chrome app is the perfect companion app for your Ledger hw1 or Nano we have a very powerful and cool feature you can use multi accounts

for instance personal accounts business accounts this is very useful also when you want to make a transaction we use a second factor of verification you can either use a physical security key or cryptographically securely pair your Android or iOS smartphone to your Nano this way when you issue a transaction payment the transaction will pop up on your Android or iOS phone and you will be able to verify the amount and destination address finally The Ledger Chrome app has an API with which you can easily integrate third party applications for instance if you want to create a multi- signature account with coin kite or cop it will be done using

The Ledger wallet Chrome app Ledger is making Hardware wallets easy and convenient without compromising on security if you want to get a secure setup for storing your Bitcoins go to Ledger wallet.com and use the code epicenter to get 10% off your order we'd like to thank Ledger for their support of epicenter Bitcoin so uh one of the one of the other other key differences that I noticed with uh with with uh with ripple because and and and I'm and I'm framing this in terms of Ripple because that's what people understand more today but uh because teror is a newer project so is uh is the consensus algorithm itself right like uh like as far as I'm aware there was uh there was this event in the July of 2015

where the seller Network experienced some difficulties uh regarding consensus right and then you have shifted a lot of your focus into into solving solving those right so just walk us through what this event was and what what what what are the kinds of things you're doing on that front sure yeah so uh yeah Stellar originally when we launched we we forked the Ripple code base so we we started with Ripple's open source code uh and um started growing the network from there um we knew pretty early on that there was that the consensus algorithm wasn't very well specified and that we would have to do some work there um I I started uh talking to Professor David mazeras who runs the SEC the

secure Computing group in Stanford um about about the algorithm and like hey how is there ways we can make this better like what what do we need to do to make get a formal proof of this and basically he kind of looked at it and was well I don't really think that this direction is quite right maybe I'll just start from scratch and he got super excited about the problem and basically came up with this new algorithm which eventually became SCP the Stellar consensus protocol um and wrote a long white paper about that which is available on our site if you want to like dig deeper but um so uh but along while this was happening um we were also doing the the giveaway of the lumens um which maybe we can talk about a bit later but but uh so we were growing

really quickly and so we got to once we got to about 2 million 3 million accounts the the network was having like scalability issues um and it was causing like servers to go really slow like to become really slow and like come back and stuff like that so so there was all these like kind of timing issues come happening because the servers would be like one server would be like delayed and send its messages a little bit late things like this and eventually what happened is uh because the the the consensus algorithm wasn't robust in the face of these like timing issues um the the network Fork so like some of the servers thought the didn't see some of the transactions that some of the other servers saw so so basically what we had to do is unfortunately we we just

reduced it to uh one server so one server was running the network so it couldn't disagree with anybody uh and then because we're already pretty far along in the process of of rewriting the the network at this point uh and so we were like well we'll just run it like this for the next few months until we can switch over to the the new consensus algorithm and so that's what they did that's what we did and then so uh probably a few months ago we actually um got the got the new the new software in production ready and and rolled that out so um to to us it's like way it's uh it's um really nice to be on the new code essentially so it's it's much it's much safer it's much more scalable it's much easier to use um it's it's a complete rewrite it doesn't have any of the code

from the previous software um so it's much safer because it uses a stellar consensus protocol which is like provably safe and correct and has this nice formal proof um uh so we could we're sure that it won't it won't Fork again it won't Fork it but what happens is basically basically with these distributed systems you have a choice to make right you can either uh there's a proof that you can't have um uh fault tolerance uh safety and liveness so what that means is uh you can't make you can't you can't be sure that um that uh that that that that it won't Fork U that a distributed system won't Fork both won't fork and uh that it will keep making progress right so you have to

choose which of those options you want to um forgo and so uh the old the old code was forgoing uh safety and now we're forgoing liveness so if if there's ever an issue with safety um basically the network will stop making progress and then you'll manually have to go in and like figure out what's going wrong right so um but you have to make this choice and for us like if it's a choice of of not confirming new transactions that's a better outcome than confirming transactions that you're like later people are disagreeing about right so it just would lead to more chaos so um so that's the kind of the the choice that the new network makes um uh which is we think is a lot better and then it's also much much more scalable so in the face uh like we've tested it up to you know

like half a billion accounts and like many thousands of transacts the second and it's working fine um and it's much more modular easier to use we separated the code into like smaller components um so it's easier to maintain we push a lot of stuff away from the C++ Stellar core into uh like like a more um like like like more like traditional web services system so like you know basically we have like this system written in go that that talks to Stellar core so both these things can be indepently maintained and they kind of they they have different responsibilities so um and API is nicer and things like this so yeah so so people know of course Bitcoin right the proof of work so you know all

listeners are familiar with that and then well we've also had tender on right which has some of the same choices there in terms that uh there can be no Forks but it can happen that the network halts if there's disagreement so can you can you explain how uh the Stell consensus protocol differs from bitcoin's proof of work and from something like tender sure yeah uh with Tinder minint I think that they're built on pbft if I'm if I'm not mistaken which which is which is a a a a consens algorithm that existed prior to bitcoin and basically the way it works is the the drawback with pbft is you have a you have a fixed set of nodes

right you you can't have arbitrary nodes joining it like coming and leaving the network right so um but under those conditions I think I pretty sure pvft Al um favors safety over liveness like the network or halt if there's ever some some catastrophic issue um uh with Bitcoin Bitcoin is like a pretty interesting and novel solution to this this consensus problem like it doesn't really draw from the from you know paos and pbft and all these like traditional distributed systems algorithms um which is why it was so cool because like prior to it people kind of like hit this wall they're like okay we can't actually solve this problem um or maybe they didn't even think that they should try but um uh so uh kind of the way it

differs from SCP is uh I mean it differs in a few ways like so um you know obviously there's this mining process that that requires a lot of computational effort um whereas SCP doesn't have that it's just message passing um you know because it's just message passing uh the transactions confirm much faster in in Stellar like it only takes a couple seconds um and just the way we've designed it you don't need the history the whole the complete history whereas Bitcoin you need the complete history of all transactions ever um whereas with with Stellar you just need the current state of the world and then you can kind of move from there um so there's some of the kind of differences yeah

um so so let's let's kind of kind of reframe uh reframe what you said what You' have said so there's two things which one is safety and one is liveness so the way our kind of listeners could imagine that is um like imagine like like you you know the Bitcoin Network well like imagine a scenario in which uh for some reason no messages can be sent to China for a certain period of time right like uh the whole Western World can communicate with itself but there has been some disaster either man-made or natural MH uh maybe the Chinese government went and cut all the cables and then you can't uh send any messages to China what would happen in Bitcoin right so the Chinese miners

would uh would would build their blockchain Bitcoin blockchain and the miners outside China would build a fork right there would be like two different blockchains yeah so so the network would keep running that means the network is live which means if I am a consumer in India trying to send a transaction to the US the Western uh miners will confirm my transaction right so the system is live it's not dead right but then once you have messages coming in between China and the Western World then you have basically like two different blockchains mhm and there might be some transactions confirmed in one of the blockchain one one one blockchain and some transactions which are which are conflicting with those in the other

blockchain right so this is this is a system which favors liveness over safety right yep and what you're saying is Stellar is the opposite that's right yeah uh I mean Bitcoin has an interesting take on it because uh though it does favor um liveness over safety you that's why you wait for more than one confirmation right because uh you you like there becomes less and less of a chance of a of a reorg like of of picking a different chain like the further down your transaction is right so um you know so if you wait for one confirmation yes it's totally possible that like somebody mines two blocks and then yours gets is not included in the ultimate chain but if if there's like 20

or 100 confirmations then it's really really really unlikely that it'll switch right somebody would have to do a lot of mining to to make your transaction go away but but yes it is technically possible right so that that's in that sense it favors life and server safety so and and the other thing that we talked about which is pbft practical bantine fall tolerance so uh in in Bitcoin what's happening is the people that are coming to consensus um which might be the minors and the full nodes uh they can change right like I can become a minor right now and drop off an later or like that right but in pbft what tends to happen is you have a fixed set of uh validators or

node so like if you want to imagine pbft imagine like what would uh five banks do if they wanted to run a payment system together right the five banks know each other and they know that only they should be able to run the system so they use pbft because they know each other okay and now Stellar is uh something very interesting where um in theory you know the other participants in the network but it also has some Bitcoin like characteristics right so describe what these what these tradeoffs are right so I mean kind of the the big innovation that David came up with is that you what you want you do want this system that is like Bitcoin where nodes can come and go right so um the the the the Innovation is that

basically you can have this set of of nodes out there in the world that are validating transactions but you don't have to know all of them right so you only have to to pick a certain subset that you're listening to um so say there's like 100 validators in the world and you pick like 20 right that that you're saying you know if you know if uh you know two-thirds of these guys think that this this this next Ledger is valid that I'm willing to say okay this next Ledger is valid um and the interesting thing is is uh everybody doesn't have to pick the same set of people um that what you you can as long as there is a certain overlap between the people that are are picked in the same way um you can kind of think of like in Facebook like people are different

friends with different groups but there is some like chain of connection where people are all you know you know maybe I'm not friends with you but I'm friends with someone else who's friends with someone else who's friends with you right and and it's the same way with Stellar like you know you you have your 20 guys somebody else on the other side of the network has their 20 guys and then maybe there's someone in the middle that has some of both guys and then you can show that if the network is connected in particular ways that there is this Confluence of of of Quorum essentially where um where if with certain amount of interconnectedness then then everyone will agree upon the same value right if you follow the SCP algorithm so so either either the whole network will agree on this one value or or they won't right so um yeah so that

that's kind of the the KNE trick is that is that you you don't actually have to know everybody in the network and you can you can have people coming on off the list of people that you're listening to and it doesn't really affect the safety of the network as a whole so so so if Bitcoin right one one of the things that proof of work uh was meant to solve was to protect from civil attacks right and then with with something like pbft you well you don't have civil attacks because not anybody can validate so are you saying that with Stellar the way you can protect from something like civil attack is because a civil attacker basically because of the network looking at the Topography of the network and basically saying well you know if somebody creates like a million new accounts they aren't connected to

other accounts in those CRI way so yeah so I mean this is kind of one of the trade-offs is is you uh it requires a little more active participation on the part of the person running the validator you you you're not picking your nodes that you're listening to randomly like you shouldn't do that you need to know who they are right so maybe you'll pick these three Banks and like this this nonprofit these like two developers that you know and that will be your Quorum set right um so but the thing that you need to be careful about is the Civil attack thing right you don't want to pick uh 100 people and they're really all owned by the same they're controlled by the same person right so um so you need to make sure that the the the people that you put on your list are actually unique like that

and that that that burden is on the operator of the validator which is different than what the way it is in Bitcoin in Bitcoin you you shift that burden onto the hope that not one person can control all the mining power so but presumably right so let let's say now I wanted to participate in the the seller process and I download the software like how would I initially choose those noes does it come with a with a predefined set of default validators uh no it doesn't but but you can there's you can you can listen to the network and then basically you can see who other people are are trusting and then also we hope people will publish their validation key right so like if you're if you're a stellar

business and you running Stellar core you should say hey this is my uh this is my validator and so people can add them you know so they could add different exchanges or or different whatever right so um but you kind of have to go discover them right so Ian we we will we do publish a list of here's other people out there in the world that are running validators and you can kind of look through it and say okay I trust this one this one this one right so um but yeah but it's it's and and you can see what other people have trusted so you can see the graph of the network you can see all the nodes that exist in the network and who they're trusting but you shouldn't just add people blindly you should know who they are so yeah so I guess that

will be one of the challenges right especially if the network scar because most people will take the default path right so they they may not want to go to the effort of consciously choosing validators yeah I don't think I don't think the common like I don't think just end users are going to run Stellar core I I think people that are um you know that are that have businesses that depend on Stellar will run Stellar core you know maybe maybe people at universities will run it um or like developers that are super super interested but I don't think it'll just be like an end user running Stell core um the way kind of Stellar is designed it's less necessary than with Bitcoin just because you're you're usually dealing with Fiat so you're usually

trusting uh a particular entity anyway like if your if your uh anchor is you know if you have dollars from your anchor some Bank basically if if that bank decides to to like cheat you then they're going to cheat you right whether you have running Stellar core or not so you might as well just let them run the Stellar core so so you also have a concept of well first of all light noes and and then do how do you see that playing out like do you think there's going to be tons of people running validators like in Bitcoin thousands or or is it more going to be a few hundred like I guess with ethereum I think know with Casper the expectation might be that there's only

going to be maybe a few hundred um validators yeah I mean it's super early so it's hard to say I mean I I would imagine maybe a few hundred yeah I mean I think yeah I mean that makes sense I I think I think the main people that will run them will be the Stellar businesses so to the extent that they adopt it I mean if you're you know maybe if thousands of banks adopt it then thousands of people will be running them so but we'll see so what's the incentive to run a stellar node if I'm a stellar business why why why would what would drive me towards running a node um so like bear in mind that it's way less expensive to run a stellar node than a Bitcoin miner right there's not not this like CPU overhead you're just you're

just you just have a server there that's kind of exchanging transactions with other people right so it's it's um not that much of a burden um and you would run one because you want direct access to the network right you don't want to like if you're if you're um having to like submit lots of transactions to the network you want to do it to your own Stellar core rather than to somebody else's and you know with the same token as if you're receiving lots of stuff you want to have that those messages come immediately and you also want to you know you're depending on seller so want to participate you want to you want to have you want to make sure that everyone is obeying the rules correctly and and validate that this is this money that you're getting in is actually money you're supposed to be getting in so just

for for like safety reasons and and for performance reasons really so and what are performance characteristics here so will there be something like sharding as well or or is Stellar actually able to scale uh to you know handle the global volume of of transaction and commerce um Stell can scale pretty far right now I mean the the transaction of like the global scale of Commerce is is quite high so um uh So eventually we would have to do some sort of sharding or something I mean one of the things that we're looking in pretty heavily right now and I think is our next big project is implementing uh the lightning Network on seller as well and making it

interoperable with the Bitcoin on which I think will be pretty exciting um you know for all the same reasons why people are interested in Bitcoin I mean it's a really uh cool idea is that you're basically you can send you know essentially millions of transactions and it's all off Ledger and doesn't like have any kind of uh scaling burden on the rest of the network and like what we're finding is like between two big institutions like say Bank a wants to integrate and Bank B wants to integrate uh and they're sending lots of stuff back and forth they might as well just have this channel that that keeps it all private between them and and doesn't burden the the larger Network and the same idea behind lightning where if there's ever disagreement then you can go back to the ledger to to settle the dispute um or just settle there

occasionally periodically or something like this so uh I think that's the route that we think is most promising right now that there'll be kind of this um Global seller Network that's handling a large scale of transactions but um but you can get far beyond that through these kind of off offchain transactions so so in terms of raw numbers how much how much can this sell Network handle and does it depend on the number of nodes or something like that uh it really depends on the hardware you're running Stellar core on so it's hard to give um solid numbers I mean we've gotten it up to uh like 4,000 transactions a second and that wasn't on really that crazy of Hardware it

basically just a machine with an SSD card so uh or SSD drive um but um but yeah I mean I think you could take it much further on on on big Hardware we also haven't put in a ton of effort into optimizing too much right I mean we're you know the network is still very small so it seems silly to get it to much much faster than it can do right now um so yeah but but we're pretty confident there's a lot of areas where you can optimize still so um yeah and and it also inherits the the great transaction latency properties of Ripple right right in a few seconds your transaction gets confirmed yeah that's right yeah I mean the confirmation times are pretty comparable yeah today's magic word is galactic

that's g a l a c t i c head over to let's talk bitcoin.com to sign in enter the magic word and claim your part of the listener reward and in terms of like the um like in tripple uh what you could do is uh if you I was say holding um let's say Norwegian CR uh issued by just coin you know that was like one of the one of the gateways on rle yeah then I could basically uh and if say Jed I wanted to make a payment to Jed and he wants US Dollars then I just have to uh issue my transaction and the Ripple Network would

just convert my Norwegian kuna into dollars and have those dollars in in Jed's uh account right so in terms of these properties is Stellar the same right like or have you innovated on in that direction as well yeah I mean uh I mean I mean basically at a high level it's it's similar I mean the technical details are a bit different but uh yeah I mean you can still hold any kind of asset uh and trade any of these assets between each other there's still an order book where you can put up offers to buy and sell these different assets against each other um and one of the one of the big things that I hope people do with it is is it becomes like this decentralized exchange for Bitcoin right where uh you don't have to depend on one particular exchange and I think this

would be really beneficial because it would be this it would kind of pull all the liquidity because right now it's split between all these exchanges right so like you can either trade on coinbase or mid stamp or Kraken or whatever but you're not you're not getting the full pool of liquidity whereas if there was this distributed exchange where everyone can kind of participate in one Global uh order book then it would be much better story for the spreads would be lower and things like that so and you can move higher volumes I think it would just be a lot better so um but that's a little bit ways off like we have to start convincing people to like do the trading there so but but it's a direction I hope that it would go so how would that work because I mean presumably right if I if

I'm going to trade Bitcoins with uh you know someone else for like let's say US dollar I mean one of the lessons I think we have learned know in the history of Bitcoin is that a US dollar in in a Bitcoin exchange you know they're not all the same yeah so how can you have a global order book there uh I mean you would still the dollars are still tied like when you put an asset into Stellar it's still tied to a particular institution so it would be like Kraken dollars or coinbase dollars things like this so yeah so they would still be tied and those things can actually trade against each other like if one of them their website sites responding then maybe it'd be at a discount so I wanted to Circle back a little bit to something

you said before which was the idea that um Stellar is focused on making all these systems interoperable um like how does that work and how does it differ with uh interledger and and that approach um I feel like well so what we're what I mean by that is is basically for instance you know there's a mobile money operator in Nigeria that we're integrating with right now so what will happen is they all their customers um they will essentially they they'll all get well basically they're this mobile money operator will integrate

with Stellar so what that means is all their customers can now send and receive through Stellar to anybody else on Stellar right so this mobile money operator integrates some other mobile money uh operator integrates in Nigeria as well and then now any customer of theirs can send anyone on seller which is just these guys so um so now they can interoperate so so say some Bank in the US integrates so now this this bank's customers can now send and receive from anyone on Stellar so then now they can send and receive to these these mobile money people right and then further this this bank is connected to a in the US right because all banks are connected to a in the US essentially so uh they could route a payment from from this Nigerian guy that's sending it over their mobile phone to somebody on the a system in

inside the US so now it's connected essentially ACH to this whole mobile money system right and so we hope that this process kind of continues through you know like all these networks maybe there's a bank on in Europe that's on sepa things like this right and so it just kind of spreads to where it becomes this kind of universal system where you can easily send around to anybody like that that's what we mean by like connecting all the different Financial networks uh Inger is a way to connect different um uh cryptocurrencies together so yeah okay that makes sense and there's another thing I wanted to ask about which is also sort of a question that I keep coming back to because it's it's I think it's a really important question although people generally don't like to answer it uh which is what is the governance in the longer term going to

be of of the int of the seller protocol like how are these decisions going to be made I mean we have all seen the issues with Bitcoin where it's a complete mess at the moment and doesn't seem any way getting better like how how do you anticipate preventing that do you think the the the foundation is going to continue to play a critical role there um yeah I mean that that's that's one of the reasons I mean that's one of the main reasons we wanted the Stellar to be a nonprofit is because we we do want this kind of this open governance uh and we want to kind of model it as close as possible on the Linux Foundation where um basically you know Linux has these same issues where there's lots of different people that have want things

to go certain ways uh and you know they basically all have to get together and kind of there's a large board for the lyx foundation where they all talk about it there's a technical board where they all discuss um and we hope to kind of go the same direction like I you know I mean right now it's pretty much all still development foundation but but we hope that as we grow and other people are invested in the system that that more voices are kind of added to to these decisions so so the the role of the foundation is to basically spearhead uh the development of the protocol and in the future also have the governance piece uh piece in place right right yeah well it's it's got two purposes really it has that where it's um making sure that the

code keeps progressing and and the other big thing it does is because there is no mining uh because because SCP doesn't have mining all all of the digital currency kind of exists in the first place um and so we have to figure out how to get that into the world and what we've done is we've reserved 95% of it that's held by the the foundation as reserved to give away so um so you know we're giving to um essentially when we started we were giving to like anybody who would come to our site we're doing it in a little bit different way we're we're going to start that in a couple months that giveway we're going to start again basically we weren't doing it for a long time because we're rebuilding the network and now that we've kind of got it to where we're comfortable that it'll

it'll work and is solid we're going to going to start to give away again um so so that's pretty exciting a big chunk of that is actually reserved for Bitcoin holders So 20% of that is of these like so 20 billion lumens is reserved for Bitcoin holders um essentially they'll be able to come to us and like verify that they control a certain Bitcoin account and then we'll give them their PR share of these of these lons so the idea being that uh we want to kind of spread this digital currency as widely as possible um because I think it's really important if you want these things to take off so that there's as many participants and you don't want to keep anyone out of the the system so yeah so so basically like uh the Stellar network has its own

native currency like the Bitcoin network has its own native currency the Bitcoin MH the small B the Stellar network has its own native currency which is lumens right yeah and uh there are 100 billion of them of which 5 billion have already been given away and now you're planning to give away 20 billion of them to all of the Bitcoin right yeah that's right yeah yeah so we're going to do that actually in a series of rounds just because we want to make sure it goes smoothly and and there's not some huge hiccup so I think the first the first um the first three billion are going are we're going to give away in July I think July 5th is when people can come to us and like and like prove that they have a Bitcoin account and then we'll give them their their share of elements and you

know based on that then we'll we'll start doing them periodically over the next probably a couple years or something so um yeah yeah and and and do you plan to do more giveaways for other cryptocurrency holders like this is just like 25 billion right 75 billion is still with the foundation do you plan to reward like ether holders xrp holders Etc um well when we when we started Stellar the the main one by far was Bitcoin like ethereum wasn't launched yet so uh we just had reserved them for Bitcoin holders 1% is actually withheld for uh xrp holders as well um and we'll give those at a later time like probably one of the successive uh Bitcoin rounds um but yeah so right now it's just it's

just Bitcoin and xrp like 19 19 billion for Bitcoin holders and 1% for xrp uh the other pools of coins are 50% is just generally to the world so um we'll do um something where people can come and there'll be some way to get you know uh a small amount of lumens and that'll be that that's for 50 billion of them 25% is reserved for other nonprofits uh and and businesses doing um doing stuff in developing world where because it's pretty easy for us to reach anyone on the internet but getting kind of this last mile is um like difficult for us and it's not our wheelhouse so uh the idea is that you know there's like institutions like uh for instance like give directly that give small amounts to people in Kenya like actual like cash

transfers maybe they would would would be able to also give like small amounts of lumens directly to people um but this is this is kind of reserved for like a little bit on down the line when these people have more connectivity and things like that so so there's been this idea like floating around in the cryptocurrency ecosystem of currencies that are distributed really widely right we started with u one of the most famous experiments was Aurora coin which was trying to right give all the citizens of Iceland a particular currency I I've heard people say what if we could have a cryptocurrency that we could give to every person in the world wouldn't that be awesome to as as a bootstrapping mechanism right right and it just seems like a very hard problem because not all of these people have have public keys

right in a sense like if everyone everyone did then it would be easy yeah so um I'd like to ask you about like kind of your previous adventures in this space like your Facebook giveaway program CU that was quite interesting and uh just have some broad ideas of how are you going to distribute this 50% like like you know just method sure so we we can we can start over with the Facebook giveaway program so um so just for the benefit of viewers what happened was um there was a phase uh when Stella began I think it was May or June of 2015 where you could log to your Facebook account post something about the Stellar network and on your wall and

then claim a certain amount of uh lumens right and um and like there was a time when I was like I was getting like a lot of updates on my Facebook feed regarding the seller Network so it was a good way to bootstrap uh and get some public as well but then I then I came to hear of reports that people could game this system using Amazon Mechanical T so what what happened there right yeah so I I totally agree like I in the ideal world we would be able to give a small amount of limits to everybody on the planet right but it the the challenge there is that not only does everyone not have connectivity but everyone doesn't have a public key and then also it's really hard to identify everyone so people like

if I've given it to you once like how do I know I'm not giving it to you 100 times right so like I don't know fortunately or unfortunately Facebook is kind of the closest proxy for that I mean I think they have like 1.5 billion accounts so it's has pretty wide coverage it's you know the largest collection of users in the world um so uh we were kind of using that as as a way to kind of distribute it as widely as possible um so it works it worked really well um in the beginning the the issue is that there are there are people out there that have um lots of stolen Facebook accounts or lots of uh fakely created Facebook accounts so the the fraud like started really actually pretty low and then it's

just kind of grew over time and uh I mean one of the takeaways is that we really just have to stay on top of of the giveaway because um you know anytime you're giving away something free on the internet someone's going to try to uh defraud you like try to like cheat in some way right just the way it goes so um so it is sort of this arms race where you know we have to just like be changing stuff and making the the claim method a little bit different than than people are trying to um you know get around it and exploit it so um you know long term you can't actually you know you'll never be able to solve this problem of this arms race like people always eventually find a way to cheat you but we only have to kind of stay

stay ahead of them for 50 billion limits like what if we can just stay stay ahead until we give away the 50 50 billion then then we're good so um going forward we have like a couple uh we have we have a lot of like better ideas for this next round that when we're going to start it up again um that I think will help things a lot uh and we'll just spend more effort and and making sure that we kind of stay ahead of the people trying to gain the system uh but overall like it was I think extremely good the the first giveaway like it went extremely well um uh you know it it it did give lumens in the hands of lots of people like let people know about the network it it got for most people it was the first time

they ever had digital currency before which I think is super exciting expose people to this whole new world um you know a lot of people went on to get Bitcoin and other things because of that just because once they kind of get their feet wet and understand what this stuff is they get excited about it I think so I think it's just good for the whole ecosystem and the whole like you know cryptocurrency space in general when you can kind of introduce this wide swaps of population to it so so we're pretty excited about starting it up again so I I think um I think the the next ways we're going to do it are going to be a lot better I think so so in terms of the current state of the network um like what what are the kind of usage statistics like in in

stellar and uh who who are the first users so uh basically the we just kind of put it back into production you know a few months ago so so the usage is fairly low um we're kind of we've haven't been talking that much or like focusing that much on um existing cryptocurrency communi so um usage is actually fairly low there the the the people that are most interested are like solving these problems that we've been talking about in Nigeria so like integrating to these mobile money things uh and these Banks there and these other like payment networks in Nigeria to make domestic payments work much better than they do now um and so we kind of it'll kind of I think I anticipate a different

usage pattern than what other cryptocurrencies are seeing because it it's it's going to come from a country that you know hasn't really used this stuff before um but it but like I said it's very new so um we'll see but yeah right now you know usage is low just because these people haven't gone through their integration yet but we hope like in the next couple months things are going to start um being announced and it should get kind of exciting so yeah so like uh why did you pick Nigeria like uh what was the so I I can understand I can understand the logic that uh uh like like you said before that the the reason to Target the developing world is that the pain points in moving money are higher in the

developing world right than than like say the United States of Europe so it's easier to give uh like consumers customers a a great user experience compared to the other things they have right right but like uh I would say like the the candidates for something like this are basically a lot of countries in Eastern Europe Asia Africa South America perhaps um why did you zoom into on on Nigeria uh well I mean a few reasons yeah I mean I think there there many countries in the world we could have picked that would would be equally as good I mean some of the reasons are uh Nigeria is like super isolated from even

more so than a lot of the developing World from from uh the the rest of the world just because of I mean I'm sure everyone when you say Nigeria one of the first people one first things people think about is like the Nigerian scams and they're like oh Nigerian prince this kind of thing and it's actually has a huge like that whole reputation has a huge impact on the country like it's really hard for money be sent into the country like most US Banks won't deal with them directly because they think that you're if you're trying to send money to Nigeria you're probably being scammed in some way and so this is really unfortunate and actually like uh has is a huge detriment to to the Nigerian people and their economy like when we went there uh one of the developers was telling us this story

where he he was he was he was a developer someone had set up a hosting um like a like a you know like a a host like a web host um in in Europe somewhere for him so there was his first way to like have a website on the internet so he had this web host it was in the other guy's name and then eventually the guy changed it to his name and then within like 24 hours they shut it down because he had put his Nigerian address in there and they're like no way if you're in Nigeria we're not going to do business with you right so they're like they're like really isolated from the rest of the world and it's like kind of tragic so um you know for like this was pretty compelling it's the largest economy in Africa which is like really compelling um it's growing

super fast uh like it's just kind of beginning to take off uh uh and so I think it's just really exciting country in general um you know there's like some like practical stuff like they speak English there so like that you know our whole team speaks English so it's much easier for us to to to do deal with them um and you know the people there are like super driven and they they really like to get things done that's that's exciting there's there's there actually is a pretty okay development or developer Community um you know there's just lots of factors but you kind of just have to pick one at some point so um but yeah our experience there has been really positive so far so that's why yeah so what's the approach there like how how are you trying to get um people

to use it are you specifically focused on remittances uh so I think our approach first is actually uh in country payments and domestically because right now in Nigeria if you want to send money from say Legos to the countryside it it literally involves like a 16-hour bus ride like you put money on a boss and it goes and so this is like super broken I mean we're were talking to other people there like there was uh someone who's running um a small shop and anytime she wanted to go send a payment she would have to leave her shop and go on a bus and uh she would have to close her shop because she was the only one that worked there close it and go on a bus and like go to the nearest ATM which was like miles away pay for the bus ride and then

send this transfer so basically cost her a huge amount of money like a day's like a day's wages gone and like the bus fair and all this stuff so it's just really inefficient um so just solving the domestic problem I think is the the first place to start and then once that is kind of solved then it's a pretty clear case for people to send money back to Nigeria using Stellar because if people are on it domestically it's it's much it's a very easy story um so that's kind of the idea and then and then once you're using it for the remittances then it's easy to use it between other countries in Africa and things like this and then um you know Europe things like that so okay so uh so uh so one one of the interesting things that that came up uh during our our conversation was

um lightning networks us using Stell but like lightning networks uh using Stellar fundamentally assume some kind of smart contract capability on Stell in the first place yeah that's right uh what are the what are the moves you're making in in that area uh are you going the ethereum way or are you going the Bitcoin way which is like less capability what's your plan yeah so I mean it's still not completely uh a given yet I mean so far we've we've tried to keep um the operation ations and the transactions very expressive where you can you can do various things like obviously you can build lightning on Sellar now you can build other things on sell like you know bonds you know credit default swaps things like this you can

build pretty complicated things um it's not it's not tur complete inside the network but our kind of our hope is that uh most of the computation can be done outside of the network um so so basically they like the computation is done outside the network but the transactions and the way it accounts are structured can only be manipulated in certain ways that you can set that up beforehand like for example with um one of one of the examples that we use is that is setting up a Kickstarter type thing where everyone pays into this account and if the account reaches a certain threshold then it then it'll pay out to the recipient otherwise it'll go back to the people um and you can do this by setting up the account in a

certain way beforehand where where there's only and you can like kind of pre-sign transactions and publish these and they only work under certain conditions and these conditions are satisfied outside of the system uh and and the logic of whether you submit one transaction or the other is is done outside the system and kind of the benefit of that is that you don't you should be able to be more scalable because the computation doesn't have to be done by the network itself it can be done by people using just this part like people that are just interested in this Kickstarter like thing or just interested in this one lightning Channel they don't have to like put the computation into the network to be done by all these nodes right so so that's kind of the route we're going down now I mean if if it turns out there's like

some fundamental things that we can't express that maybe it'll tend towards getting more TR complete but but at this point it seems like it seems like I haven't found anything that that's compelling enough to want us to go the full ethereum route yet alth although I think ethereum is super exciting so um yeah so that that that's kind of our thought right now so so what I got from that is like uh the way you're approaching it is uh you you you have special account types right like what what you're doing is uh you're creating special account Types on Stellar that have some preprogramed logic sorry yeah they're not really special account types they're just basically there's ways to

there's we we try to keep the we try to make the special cases as as few as possible and make it where there's just like for instance an account can have any number of signers right and the signers can have various weights and this is a general thing right you can have three signers on account and maybe one of them can sign on or it takes all three or things like this and so um this is a general thing but based with these like kind of building blocks you can compose them in different ways to make interesting things like the transactions themselves can have multiple operations so you can have a transaction that sends to account a and sends to account B uh and it and it sends it from two different accounts and these two different accounts have to sign the transaction as well so um you know you

can do kind of you you can start to do interesting things just just by the way the building blocks are set up in the first place so okay so so would it be right to say that you have things like multi signature and like time blcks and maybe something else and using these building blocks uh people can combine them together to make interesting things right exactly yeah so has there been any interest uh or activities in terms of kind of taking stellar and and taking some of the technology you've developed and then using it for example in the financial context for any of the many permission Ledger projects that are going on uh yeah I think a few people are working on

this actually uh the Stellar development foundation is not working on it directly but um you know we would be excited for anyone else to do products based on this I mean it's very easy to set up your private Stellar Network you just change one line in the config file and then you basically have started a new network so it's easy for people to make these permission networks if they want to or you know and the code is obviously all open source so you can Fork it and do things that you want I think there's a couple projects that have like forked it and are are doing a more permissioned like thing tailored specifically for banks and other financial institutions but yeah so you can definitely use it for this and and are there other use cases people are pursuing like when I was reading the paper on seller consensus

protocol one of the things that the author David Mazer is seem really interested in is uh having a stellar like Network to manage all the certificate that we use for website so whenever there's a website it has an SSL certificate what if you had a giant registry of SSL certificates maintain on a network like Stellar um what do you think of that idea and are you pursuing other are there other directions using this consensus protocol like that yeah I mean there there are I think that's a good idea and there are a ton of things that you could do with Stellar uh us as I mean one of the things that kills uh small companies is that those lack of focus so us we just have to focus we're

just focusing focusing on the payments use case but I think there are tons of stuff that could be built on stellar and I really hope other people do because to me it's like pretty exciting and this this idea of SCP could be even just using that and you can build other stuff on top maybe not the Stellar Network itself but you know you could build some other like more generic database or or other things that are using this consensus algorithm I think would be pretty exciting or things like the certificate Authority thing um yeah so we hope that other people do but but we can't focus on it just yet I mean hopefully in a few years but yeah cool well um Jed thanks so much for coming on it was it was great talking to you and I think one of the things I I

find particularly exciting here is that if you know if you used to go to bitcoin conferences or be in the space it's always that people would talk about well how great it would be for like developing countries and how uh but of course being completely dissociated in terms that like hardly any projects actually focus on that area and hardly any people talking about it actually had any clue of of those worlds so it's exciting that there is now you know that you guys are pursuing that and and sort of sticking with it I think at the time when I'm not sure who else is doing that very few maybe a few Bitcoin startups are doing something like that and and it at least in my view doesn't look like

Bitcoin is going to be the one winning that game so so I think that's extremely exciting and I'm certainly look forward to seeing um how sell going to develop and how those further kind of rollouts and distributions of lumens are going to go as well yeah yeah thanks so much yeah it's really great talking to you guys um yeah I we're we're really excited about what's going to happen in Nigeria and other places I think it could be really beneficial for people and and make a lot of lives better so we're definitely psyched so yeah okay thanks so much and of course our listeners we're going to have links to to the white paper and to their website and their blog Etc so if people want to learn more about Stellar there will be lots of resources to turn

to and uh and sort of become part of the Stellar community and yeah so thanks so much we we are part of the leso Bitcoin Network so you can find our show and lots of other shows on lalk bitcoin.com um we put out episodes every Monday usually well Tuesday this time uh and you can subscribe to the show using any podcast app or you can watch the videos on youtube.com/ Bitcoin and uh if you uh if you want to leave us an iTunes review then we're going to send you one of those t-shirts now I I do owe some T-shirts to some people but they they'll come with stickers though as as a sort of bonus so so thanks so much and we look forward to being back next week

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