The Road to Davos: Building a Payment System in the Spirit of the Internet

mail-top

If we could send value like we send email. Photo: Shutterstock

This week, Ripple CEO and co-founder Chris Larsen is in Davos, Switzerland for the World Economic Forum, an annual meeting of some of today’s most influential people from central bankers and celebrities to leaders of nations and industry titans. There, they’ll discuss big picture topics like the Fourth Industrial Revolution.

Ripple attends as one of the WEF’s Technology Pioneers for 2015Past recipients of this designation include Google, Airbnb and Twitter among countless other companies that have gone on to make a big impact in their respective industries.

The Road to Davos blog series tells the story of Ripple from the big picture perspective of the WEF.

Read also: A Brief History of Value and Payment Systems

See you in Davos.

_____

By the 1980s, first-class mail volume had broken 60 billion letters per year and still surging, increasing at the highest rate in the history of the US Postal Service.

One of the main worries for the USPS at the time was how they would ever be able to manage to keep up with that frantic, breakneck pace.

Back then, there was just one reality—that each year, mail volume would increase, by a higher rate than the year before.

One solution was automation. In 1982, the USPS began installing optical readers that allowed for more efficient machine sorting of mail. Then in 1982, in order to improve delivery accuracy, they implemented the ZIP+4 system, which provided more detailed location information.

By the end of the decade, annual mail volume approached 90 billion letters.

Of course, the turn of the decade also saw the birth of the World Wide Web. Even as we struggled to increase the capacity and efficiency of our existing mail systems by a small percentage each year—a percentage that, at the time, felt quite significant—mail, in general, was being made obsolete by its digital iteration.

A letter from San Francisco to New York took only six hours by air, a significant achievement. But in digital form over the Internet, the same could be achieved in less than a second.

mailvolume

Chart: Heritage.org

The amount of first-class mail we sent would peak in 2001 (which also happens to be the year music album CDs peaked)—just over 100 billion letters per year. Then again, in 2012, we were sending over 144 billion emails per day. That doesn’t even include all the other ways we message each other, such as via chat or text. On just WhatsApp, users exchange 30 billion messages daily.

Once we fully embraced a messaging system built in the spirit of the Internet, everything changed—from how we interacted to each other to our expectations for not only messaging but everything else.

_____

We’re going through a similar transition today with our value and payment systems.

A lot of the focus has been on increasing the efficiency of those systems—which is fair and much needed. We want to increase the amount of payments that our systems can handle. We want to shave off costs by a few percentage points here and there. We want to reduce settlement times from a couple days to instant.

All of that is great.

But to focus on those marginal improvements misses the forest for the trees.

It’s not about increasing the number of payments around the world we can handle by 10% or even 50% or 100%. It’s about increasing that number by 1,000,000%. Or more. It’s impossible to know because everything will have changed.

And the only way to accommodate that level of change—in a manner that’s fully scalable and fully secure—is to be able to send payments like we send email or messages, to be able to move value like we do information today, to build a value and payment system in the spirit of the Internet.

It would never be possible if we relied on one service or system, like the USPS to achieve that reality.

That’s why it’s not necessarily about Bitcoin or the blockchain or distributed ledger technologies. It’s not about either or. In the end, all of these are just tools and technologies, building blocks for achieving this vision of an Internet of Value.