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Ripple CTO: Why Blockchain Can’t Gain Wide Adoption


Over the past few years, the blockchain technology has become the most popular trend in the fintech space due to the devotion of major banks and financial institutions in the development of blockchain-based products. Yet, the financial industry has failed to showcase a working application of the blockchain technology. Ripple CTO Stefan Thomas believes the issue lies behind the fundamentals of the technology itself.

Despite the hype train created by the world’s leading financial organizations, the technology itself has received criticism from financial experts that believe the blockchain technology is not applicable in the realm of traditional finance. It brings little economic and financial benefits compared to the costs involved in the development of the technology.

Based on the blockchain-based technologies and applications created by the banks over the years, the limitations of the blockchain technology are fairly evident. It is an expensive technology to implement and it requires each and every user in the network to agree upon a set of rules and policies. If the established frameworks are broken, then the entire network shuts down.

Ripple CTO Stefan Thomas, who has been long involved with bitcoin and blockchain-based systems since early 2011, explains that the fundamental error of the approach of companies and organization in the financial industry is their vision to replace centralized functions with blockchains. Instead, Thomas believes that the banks must search for ways to avoid dealing with centralized functions in the first place.

“Instead of blindly replacing centralized functions with blockchains, we should be thinking about ways to avoid having those functions be centralized to begin with. We need to build stateless protocols like the Web that can be incrementally improved upon in different corners of the system,” wrote Thomas in a blog post.


In support of this claim, Thomas named the World Wide Web and Xanadu as primary examples. Decades before the web was introduced, Xanadu emerged to become a major network with exciting features and services.

In contempt of the Xanadu network’s sophisticated infrastructure, the web remained dominant over time due to the minimalistic protocol that supported a simpler data format; the web simply gave users more freedom and independence to work with vis-a-vis Xanadu.

A blockchain network operates in the exact same way. Users in the network are given the freedom and independence to create their own transactions, settlement of assets, and record unalterable data. The reason why blockchain networks are difficult to implement in existing systems and infrastructures is because of its arcane political attribute that requires everyone in the network to agree on a certain set of rules.

That means, the entire concept of permissioned blockchain networks should be disintegrated and banks must focus on utilizing the decentralized nature of the blockchain technology.

“Shared state adds tremendous complexity and that has a big impact on developers: Blockchains are a pain to work with. Everyone who has done it knows what I’m talking about. The fact that blockchain has been largely ignored by major tech companies and embraced by the financial industry is partly because that industry has a relatively high tolerance for arcane and complex systems,” added Thomas.

Financial technologies or systems used by banks in the financial industry are designed to handle complex operations and tasks. Thus, these systems are comparably more difficult to build than most platforms and applications developed by technology startups.

The financial industry expects developers to integrate the blockchain network to run parallel with their financial systems. Banks and financial institutions have a common misbelief that the blockchain technology will enable cost-free, cross-border, cross-network, and encrypted transactions for users that they can regulate.

What Thomas and other experts are suggesting is, banks must learn to give up on the idea of regulating a technology or a network that literally runs on decentralization. A blockchain network without harmony or consensus from the community and the network has no value, which is also attributed to a bank’s permissioned blockchain system.