Reuters reported on June 13 that Ripple's chief cryptographer, David Schwartz, acknowledged that difficulty with scalability, along with concerns about privacy, will likely keep distributed ledger-enabled settlement systems from being embraced by the global banking community for cross-border payment processing.
"I will concede, we haven't gotten there yet," Schwartz said. "What we hear from many of our customers is that it's imperative to keep their transactions private, process thousands every second, and accommodate every type of currency and asset imaginable."
Cross-border payments are an area that many in the banking community hope can be improved by blockchains. Banking networks must communicate with each other to ensure safe passage of international payments; delays, miscommunications, and bad actors present challenges for expedient and affordable delivery. Many links in a traditional cross-border payment chain are potential vectors for tampering or failure. Even when a payment is received correctly, most steps require a fee, making cross-border payments expensive.
While Ripple does have a blockchain option, the model promoted by the company for bank use, XCurrent, uses Interledger Protocol (ILP), which is not a distributed ledger.
Though not a blockchain, XCurrent offers similar benefits, such as certainty and auditability of transactions. It also has functionality that distributed ledger technology currently lacks, such as privacy and high processing capacity. Of course, it also lacks key desirable qualities present in most blockchains, such as decentralization.
"We started out with your classic blockchain, which we love," said Marcus Treacher, senior vice president of customer success at Ripple. However, he continued, "The feedback from the banks is you can't put the whole world on a blockchain."