Smart Contracts & Programmability: Next Wave! | David Schwartz - Ripple | Camila Russo - The Defiant

hi welcome back to our next talk we have David Schwarz from Ripple and Camila from the defiant defiant play thank you so much all right um thank you so much and please enjoy your talk thank you uh to be here at e Denver with David from Ripple I'm Camila the founder of the defiant the best source of defi information um and this panel is all about how Ripple is uh increasing programmability and smart contracts uh capabilities so um David let's start by uh if you could introduce how uh Riel is developing xrp Ledger and um the um xrpl evm um and how these two will improve programmability on Ripple sure so I'm David Schwarz I'm CTO at Ripple uh we're one of the main Developers for the xrpl um xrp Ledger it's a blockchain you know started in what gosh long second the first blockchain that wasn't a clone a Bitcoin thank thank you um so The xrp Ledger is a little bit different it's sitting somewhere sort of between in functionality between what Bitcoin does and what ethereum does it has more function ity than Bitcoin Bitcoin really all you can do with Bitcoin is move Bitcoin around ethereum is a full Turing complete smart contract platform where you can do almost literally anything and there's advantages and disadvantages of both approaches The xrp Ledger kind of sketches out a middle path between those two so it has fixed function transactors that perform functions like a decentralized exchange tokenized real world assets automated market makers we're working on technology for things like lending pools um and so on um the difference is if you have a smart contract you have the problem of having to develop the smart contract you have the risk associated with bugs and the smart contract and users don't necessarily know what they're agreeing to when they use a Smart contract I'm sure you've all familiar with all my apes are gone where someone wanted to do something that they needed to agree to a Smart contract to do and they couldn't audit the functionality of that smart contract The xrp Ledger doesn't Implement its functionality through smart contracts and so doesn't have those risks but doesn't get those benefits either so we're doing two things to try to sort of ease that tradeoff one of them is the evm side chain which is an evm chain that supports you know the same smart contracts as ethereum does so if you want to do something that's easy to do in a smart contract you could just deploy it on the side chain and get all that functionality um but you have the downsides of that too you have the divided liquidity there'll be multiple dexes that will each have their own liquidity there'll be cost transaction speed and the need to agree to Smart contracts use it on the XR P leder side to get some of the benefits of smart contracts without some of the costs we're looking to add programmability sort of at the margin so if the automated Market maker almost but not quite does what you want or you want to issue tokenized real world assets which The xlp Ledger supports but you have some unusual way that Dividends are distributed you'll be able to use Smart contracts to provide additional functionality where you need it without having to have yet another chain that has a full-blown smart contract implementation with all the disadvantages of that is the idea that xrp L and xrpl evm will run in parallel or is is the sighting is that coming first and then and then the the long-term um goal is to have everything move to xrp uh ledger so today The xrp Ledger is fully operational it's been operational since the end of 2012 the beginning of 2013 it originally had features like aex and issued assets and then the feature set has grown over time to support things like nfts and automated market makers and better support for tokenized real world assets the evm side chain is new um it's currently still in testing it's going to go live pretty soon um but there will be two separate chains there'll be asset portability between them with the Axel Bridge as for how the future goes I think what will happen is they'll complement each other so asset portability will be pretty good so you won't you won't have to feel like if you pick one you're cut off from the other you'll be able to uh if you have an application that really needs a smart contract because you have very specific functionality that's unique to your use case you'll be able to launch it on the side chain and if you have a use case that's sort of more in the 80 85% of mainstream use cases like everybody wants a DEX everybody wants automated market makers everybody wants to issue nfts everybody wants loans that functionality will be on The xrp Ledger and then the market will decide you know where the value and the activity is but developers will have both options and will choose whatever is a better fit for their use case what what use cases do you at at markets do you envision increased programmability will unlock for xrpl I think there's a lot of Enterprise use cases where it's it's just almost a one-size fits-all but it's not quite so a good example would be a tokenized real world asset let's say you're tokenizing treasuries or equities or you know or something like that or real estate basically what you're doing is the same thing everybody else is doing you're issuing tokens you're redeeming tokens people are buying them they're using them as collateral it's the same functionality that everybody else needs and The xrp Ledger will support that type of functionality but you might have some weird compliance rule at the margin or some weird identity checks you have to do or maybe there's something unusual about the way you do votes maybe they come with voting shares or when you distribute dividends there's something complicated about the way you need to do that I think in the short term the programmability on The xop Ledger will solve those almost fit use cases I don't see The xrp Ledger evolving into yet another smart contracts platform that has the same advantages and disadvantages in Target gets the same use case as everything else I think the xrp Ledger is going to stay focused in the short term on Enterprise Defi and then over the next couple of years on all the retail use cases that Enterprise def5 will enable it's kind of like what happened with stable coins stable coins are an Enterprise product for Enterprise customers directly like most people here who anybody here who used usdc you probably didn't get it from Circle right you got it from an exchange or you got it from a decentralized exchange or something so I think those same things will happen these Enterprise use cases will enable defi consumer use cases and I think that's why you're going to see The xrp Ledger focusing um so rwaa is a probably a big piece of of this so how are you integrating this uh sector well so The xrp Ledger has support for tokenized Real Worlds assets today um Ripple has lined up a number of companies like archex and Aberdine who are going to be launching tokenized rail World assets things like treasuries and things like private equity on The xrp Ledger with the existing functionality um we're looking to make that functionality better to enable some you know greater functionality based on what we're hearing the partners would like one of the big things is better support for decentralized identity especially for a smaller issuer it's kind of tedious if you have to check everybody's identity yourself and you have to retain those identity documents so we're looking at support for decentralized identity we're looking at better support for things like well I have this tokenized treasury I want to use it as collateral and so we're looking at sort of adding more functionality to supplement those Enterprise use cases perfect um one of the I I think biggest milestones at least recently for um Ripple has been the launch of RL USC the stable coin recently in December it already has 120 million around market cap um and you launched it on xrpl and ethereum uh so why did you decide on this dual chain approach I think part of the value proposition for a stable coin you know to some extent all stable coins that are pegged to the dollar work the same in the short term right they represent a dollar and you can use them to move or hold a dollar in value where they distinguish them themselves is the quality of the collateral like nobody really knows where tether's funds are or what jurisdiction they respond to usdc is you know better tied to a US jurisdiction RUSD is launched through a through a new through a uh trust by the state of New York and so there's that regulatory difference which doesn't change the way the token functions but it changes like its usability but but another important thing is the the ability to use it sort of as a portable asset if if if liquidity is just completely isolated in a small place that makes that asset less useful so we chose The xrp Ledger and ethereum ethereum obviously because of its Market success it's a very big place where people are using stable coins as um as a defi enabler not just as a store of value but as a as a defi enabler if you look at like the value the growth of defi on ethereum it's come as stable coins like you know tether and um and circle usdc have been locked up so I I think like those are the those are the platforms where people are using stable coins The xrp Ledger has had a bit of a problem of sort of a lack of a high quality USD stable coin so having RL USD on there I think is is important to have sort of like a long tail of other assets one of the problems with only having cryptocurrencies as sort of counter currencies is they're very volatile so imagine if you want to launch a Euro based stable coin and the only way you can make liquidity is to bitcoin well Bitcoin can change 5% in a day so you need active Market making to sort of Peg it and if it's a sort of a longtail project where there's a whole bunch of of assets that you want to provide liquidity you need a really high quality stable coin to be the sort of anchor for that long tail so that you don't have a situation where the price of Bitcoin goes up a couple percent and every token just gets dragged up with it or I mean I guess it's okay when they get dragged up the holders won't mind but you know they'll they'll get drag down too and it will mean that effectively when you're trying to hold a Euro stable coin you're sub you're subject to the volatility of the cryptocurrencies that liquidity is made to and so having a high quality stable coin on The xrp Ledger will kind of help balance that out but you you really don't want just one I think there's room in the market for a number of stable coins like it makes no sense to build a defi ecosystem on a decentralized sensorship layer censorship resistant layer one when one company is holding all of the collateral that makes all the value work right so M chain yeah so uh rlus will enable uh more defi use cases on xrpl uh but I I imagine you'd also want to integrate with the like ethereum defi ecosystem how do you see that um you know just integration with like broader defi for rlus I hope Enterprises will come to appreciate the fact that it's launched through a New York state trust which I think is about the gold standard for you know anchoring a currency to the US dollar it's you know Ripple's been in the blockchain space for a very long time now we have a solid balance sheet that facts the things that we do so I hope that people will see it as a solid you know as a solid option and you know find that it's competitive to things like tether and usdc it's early days the market is growing I don't think I don't think we necessarily need to try to compete to take market share away from other stable coins I think like the you know the space is growing I think as long as there's good availability and people are confident that it's pegged I think it will gain market share again because I think diversity is you know extremely important in building something that really is you know a decentralized uh experience definitely um you recently shared an update on um xr's institutional D5 road map can you expand on that yeah so we've been doing two things Ripple sort of philosophy is that the next growth phase for blockchains is around Enterprise Defi and by which I mean thing like stable coins are an Enterprise product tokenized real world assets are an Enterprise product but they're growing on on layer one blockchains for two reasons one of them is is very stupid but it's true it's actually cheaper to launch a tokenized real world asset on a blockchain then through the traditional like you would have to get a provider to hold the database for you you would have to have regular audits well blockchains are very easy to audit they are very transparent they're very cheap believe it or not a major driver for Enterprise adoption for tokenized re assets is that the transaction fees are smaller and it sounds ridiculous because the amounts of money that they're dealing with seem very large it's like well it's a you know it's $5 million it's a $5 million position how does a transaction Fe make a difference but if you're holding $5 million in tokenized treasuries the amount of margin that the issuer is making is microscopic your yield is microscopic the margins are microscopic so they're going to we're going to bring Enterprises in for dumb reasons like it saves them money it's more transparent they're not going to understand that it's going to do the same thing that stable coins do people use stable coins for use cases that they could never use any other asset for like there's you can't use a non- onchain asset as collateral for some defi application and they what's going to happen is they're going to learn that by tokenizing these real world assets all of a sudden they're going to realize that like they have they can Target brand new use cases you know brand new applications brand new user base so the strategy is to add the features necessary to get that Enterprise adoption that paves the way for Mass retail adoption we're not going to see Mass retail adoption of defi in the next year or year and a half because all of the defi applications are basically gambling I mean they're either recreational applications or gambling applications if we want to like take over Finance we need the really boring we I need a checking account I need a savings account I need a retirement account I need a stock portfolio I need sensible Investments I need the equivalent of certificates of deposit we have to build all the boring stuff and Enterprises are what's going to make that possible so the strategy is over the next year and a half to two years bringing the Enterprises with these features around tokenizer they're going to do it for dumb reasons many some of them will be Visionaries some of them will see this vision and they'll come to blockchains because they understand that it's like revolutionizing Finance but a lot of them will be here just because it's cheaper and faster and it works on weekends and it has these tiny little advantages that are better is better right if I go to you and I say I have something better you don't have to believe me that it's going to change the world it's enough for you that it's better and then hopefully in a year and a half to two years we can really turn that corner it's a sort of mass retail adoption because we'll have more than just you know porn and gambling and gaming and collectibles not that those things are not nice they're great I mean I understand the path to where you want to go is not always a straight line right like the internet grew on well porn and gambling was a significant fraction of the growth of the internet but today we use it for everything and so the path is not always a straight line and I I don't think it's as indirect as that but I think like that the the boring Enterprise adop option is what we're going to need if we're going to get that retail adoption and to wrap up I'd love your long-term view or or Vision on how that onchain future looks like and what role xrpl plays in it so I think longterm The xrp Ledger is going to um it's going to be something specific it is not going to try to be everything to everyone I think ethereum to some extent tried to be everything to everyone and by many metrics was more successful than the xrp Leer I'm not not in it I mean that's a great model but The xrp Ledger is kind of more is a little bit more focused around specific use cases and in exchange it's faster it's cheap it's cheaper it scales you know it scales better and um you don't have that risk of agreeing to a Smart contract where you don't necessarily know what it's going to do and I think it's going to retain its identity and I think it's going to Target the sort of mass real world use cases that are going to drive volume so for example nfts happen first on fully program able chains because someone could write a smart contract to implement nft and they can get an implementation very very quickly The xrp Ledger tends to be a little bit slower because there's a curation process by which it has to be adopted as a as a function but when those functions are adopted they're best in class so I think you're going to continue to see best in-class functionality for things like tokenized real world assets portfolios of loans collateral and all the boring Financial products like you know savings accounts checking accounts asset portability and I'm hoping that that's going to give it a significant position in this sort of um as Tech comes to eat finance and builds new versions of all the trafi products I'm hoping The xrp Ledger can sketch out a big position you know first in the Enterprise side and then in the retail side as we get retail adoption of like usable real world you know practical defi solutions to like real world problems awesome thanks so much David exciting to see more programmability come to H Ripple and xrpl thanks for doing this I really appreciate [Applause]