Bitcoin from beyond, Ripple’s CEO speaks, volatility falls

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[header date=”9 October 2018″]Why you should think twice before putting your private key in a will, Ripple’s Brad Garlinghouse addresses xRapid concerns, and market watchers mull bitcoin’s falling volatility.[/header]

Bitcoin beneficiaries

No one knows how long cryptocurrencies will last, but it’s a decent bet they might outlast you. Passing your digital holdings on to loved ones after your death isn’t as simple as bequeathing cash or other property, though, particularly since wills aren’t designed for confidential information.

Because a private key is all that’s necessary to transfer funds from a wallet, including it in your will might be a terrible idea. “I would strongly advise against anyone putting any information they consider private into their will,” says estate planning attorney Gordon Fischer. “Wills, after your death, become court documents and are generally public documents, accessible by anyone.”

Although a will might not enter public records immediately, it’s unwise to risk exposing the keys to your crypto wallets at all. Your family might not recognize the significance of a private key right away, and by the time they do, your digital wealth could be pilfered by crafty crooks or other unsavory characters. Fischer notes that trusts, however, are “generally private documents.”

With conventional assets, there’s an established procedure for claiming assets through probate court, but with cryptocurrencies the process is less certain. Complicating matters is that many cryptocurrency exchanges don’t let their customers name beneficiaries. Coinbase, the largest trading platform, puts the burden on the heirs to claim any assets left by the deceased. Another major exchange, Gemini, declined comment for this story.

Of course, the problem isn’t confined to the cryptocurrency world: Popular stock trading app Robinhood, which recently began offering crypto trading, doesn’t offer basic beneficiary support. Sadly, as a result, proving that heirs are entitled to crypto inheritance could quickly become a protracted legal nightmare.

There’s no perfect solution for delivering crypto from the crypt. On the bitcoin subreddit, some have suggested dividing portions of your private key among trusted advisors and loved ones. After your passing, they can piece them together to access the associated wallet. (Just make sure not to cross them while you’re still alive!)

Although cryptocurrencies are often championed as a tool for financial self-sufficiency, the challenge of bequeathing bitcoin demonstrates how much we must trust one another, in life and death. —Matthew De Silva

[supplemental headline=”Market Chatter: Has bitcoin been tamed?”]

Bitcoin volatility—a measurement of price swings—is the lowest in more than a year. This is a good thing, right? After all, a criticism of bitcoin and its ilk is that price swings are too erratic, making them a poor substitute for fiat currencies like the dollar and euro or assets like stocks and gold.

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Whether lower volatility is good or bad for the crypto world depends on why price swings are subsiding. Smaller swings could be a sign that crypto is maturing. There are now derivatives like futures, which allow traders more ways to hedge their crypto positions. Crypto is still mainly a retail investor market, but more professional trading outfits are posting bids and offers on exchanges and arbitraging prices around the world. Specialized hedge funds and family offices have also crept in, which could bring some stability.

However, lower volatility could also be (and more likely is) a function of declining trading volumes, which by some measures are down by 50% or more in the past six months. This makes it more difficult for trading outfits and exchanges to make money.

[takeaway]If all things were equal—stable prices and volumes—the drop in volatility could be seen as a good thing. But all things are not equal. Instead, this is one more sign that the late 2017 crypto frenzy continues to ebb. Difficult days could be ahead for the traders and exchanges that proliferated during the boom. ↘️[/takeaway]


On the record: Brad Garlinghouse

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Brad Garlinghouse is CEO of Ripple. He reportedly owns 6.3% of the company and has a nine-figure stash of XRP, the digital asset used on Ripple’s crypto-based settlement platform, xRapid. Garlinghouse joined Ripple as COO in April 2015 and before that he served as president of consumer applications at AOL and a senior vice president at Yahoo. On the sidelines of Ripple’s Swell conference in San Francisco, he spoke with Matthew De Silva.

Quartz: In the past few weeks, the XRP price spiked pretty dramatically. What do you attribute that to?

Garlinghouse: Speculating on what drives the crypto markets is a dangerous game. There are times when something happens—and I’m not just saying this about XRP, but about the broader landscape as well—and I’ll think “Oh, that’s not great for X,” but nothing changes. Or, something happens and I’ll think “Oh, that’s really good for X,” but nothing changes. You also have times when prices move and you wonder what’s going on.

In general, the crypto markets have moved in a highly correlated fashion. I’ve made the case before publicly that the long-term value of any digital asset is going to be derived from the utility it’s used for. If 100% of the trading of a digital asset is speculative, that’s not long-term sustainable.

Will XRP be used for anything other than settlement?

I think XRP is extremely efficient for payments. Part of that is how we’re applying that at Ripple around institutional liquidity (for example, with xRapid).

Coil made some announcements about the things they’re doing around XRP micropayments. Another thing that hasn’t gotten a lot of attention is a company called Omni, which is a marketplace for storing and lending your stuff. They’ve talked about their intention to use XRP for payments.

It seems like there’s not enough liquidity in the xRapid system.

But liquidity begets liquidity. If you start pushing more payments from XRP into the Mexican peso, there’s lots of market makers who want to create markets between XRP and the MXN. Honestly, if you watch that number on Bitso [the only exchange listing the peso-XRP pair], that will be an interesting tell over the next year about the health of xRapid into the Mexican peso.

If that’s still $600,000 [in daily volume] next year, we’re not doing a great job. If that’s $6 million next year, arguably a huge percentage of the volume increase is driven by real utility—not speculation, but real utility.

What percentage of Ripple’s employees are accepting salary in XRP?

Employees have the option of doing that. I’d have to ask the finance team how many people. Order of magnitude, I bet it’s 10-25% who are getting a portion of their salary in XRP.

If a large holder of XRP passed away, what would happen to their tokens?

It totally depends. There are a handful of large holders of XRP. It depends where their secret keys are. It could be gone.

If their XRP was frozen or lost, would Ripple take a position on whether to unlock or move those tokens?

We can’t! An important thing to understand is Ripple, the company, cannot control the XRP ledger. It’s mathematically impossible. We can’t control the ledger.

What happens over time as XRP is lost?

It deflates a little bit—the same thing is true of the bitcoin community.

Theoretically, since there could be a much higher frequency of usage of XRP, it seems like the rate at which XRP could contract is higher than that of bitcoin—depending on if it’s custodially owned. Does that sound right?

That’s an interesting question. Nobody’s asked me that before. We have thought about it. Again, I’d point out that this applies to bitcoin, litecoin, ether, and bitcoin cash as well.

Did you know…

  • In 2006, when Garlinghouse was an executive at Yahoo, he authored the now-famous “Peanut Butter Manifesto.” Declaring that he hates peanut butter, Garlinghouse wrote that Yahoo was spreading itself thin rather than focusing on core competencies.
  • When Quartz’s editor in chief, Kevin Delaney, was a reporter for the Wall Street Journal, he covered the rabble-rousing memo. It’s nostalgia-inducing to see Facebook and YouTube—which Yahoo passed on purchasing—described as “high-flying start-up businesses.”
  • In the manifesto, Garlinghouse says he once shaved a “Y” into the back of his head. You can question the man’s taste in sandwich fillings, but nobody can question his commitment.

[mailto filter=”Ripple” subject=”Ripple and XRP”]Do you consider XRP decentralized? Why or why not?[/mailto]

[supplemental headline=”De-jargonizer: Premining”]

Premining is the practice of setting aside a portion of a newly created cryptocurrency, usually for programmers and creators, before making the digital asset available for mining by the public. This strategy has helped make some crypto creators, like Ethereum’s founding team, fabulously wealthy.

Developers claim that premining offers them the financial independence they need to focus on the real work of building revolutionary decentralized systems. However, if a few people hold vast reserves at the outset, new users are effectively beholden to founders’ economic power. These large holders can sell their assets at a moment’s notice, causing price shocks that reverberate throughout the ecosystem.

[mailto filter=”Premining” subject=”My thoughts on premining”]Is premining ethical? What do you think?[/mailto]


Crypto calendar

🗣 Oct. 10-11: Crypto Economics Security Conference. Keep an eye out for MIT’s Silvio Micali, one of the brilliant minds behind ALGORAND, and Dawn Song, CEO of Oasis Labs. The conference in San Francisco features an array of postdoctoral researchers focused on privacy, security, economics, and scalability, so there’s a little something for everyone.

📚 Oct. 12: Quarterly earnings for JPMorgan, Citigroup, PNC, and Wells Fargo. JPMorgan is pushing blockchain-related development through Quorum, which powers the 75-bank Interbank Information Network. PNC’s Treasury Management division recently joined RippleNet and earlier this year, Citigroup was part of a testing for LedgerConnect, a DLT platform for financial services. Wells Fargo might be most notable for its prior banking relationship with Bitfinex.

🗣 Oct. 21-24: Money 20/20. Speakers at the Las Vegas event range from Coinbase president Asiff Hirji and Andreessen Horowitz’s Kathryn Haun to Senegalese singer Akon and Virgin Group founder Richard Branson.

🗣 Oct. 30-Nov. 2: Devcon 4. This year, the premier Ethereum conference takes place in Prague. Talks are aimed at a deeply technical audience.

📚 Nov. 1: Alibaba quarterly earnings. The Chinese conglomerate has filed more than 10% of the world’s blockchain-related patent applications. Earlier this year, Ant Financial—an Alibaba affiliate—launched a blockchain-based remittance service.

[mailto filter=”Calendar” subject=”This is happening”]Tell us about your upcoming events.[/mailto]

Please send news, tips, and peanut butter to If this email was forwarded to you, click here to sign up for your own subscription, which includes a free two-week trial. Today’s Private Key was written by Matthew De Silva and John Detrixhe, and edited by Oliver Staley and Jason Karaian. Decentralize everything.