The early days of blockchain were marked by idealism, experimentation, and a shared vision for a decentralized future. In a recent episode of Block Stars, David Schwartz—widely known by his online alias JoelKatz—and Stefan Thomas, former CTO of Ripple and current CEO of Coil, reunited to reflect on their journey building foundational blockchain technologies like the XRP Ledger, Codius, and the Interledger Protocol (ILP).
Their conversation offers a rare glimpse into the minds of two pioneers who helped shape the evolution of digital payments and decentralized systems.
The Origins: From Bitcoin to XRP Ledger
Before their work on Ripple, both David Schwartz and Stefan Thomas were deeply involved in the Bitcoin ecosystem. Stefan developed BitcoinJS, a JavaScript implementation of Bitcoin, making it easier for web developers to interact with the blockchain. David, a seasoned C++ developer with expertise in applied cryptography and distributed systems, contributed to early discussions on the Bitcoin forum and helped solve technical challenges in Bitcoin Core.
While inspired by Bitcoin’s decentralization, both recognized limitations—especially around scalability and governance—that made rapid innovation difficult.
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Why Evolution Required a New Foundation
One major bottleneck was the difficulty of implementing changes in Bitcoin’s protocol. Unlike traditional software updates, blockchain upgrades require network-wide consensus. Hardforks—upgrades that break backward compatibility—pose significant risks, including chain splits and fund loss if nodes don’t upgrade.
In 2010, developers proposed a “hardfork wishlist” to improve Bitcoin’s functionality, but progress was painfully slow. As Schwartz and Thomas recall, many critical upgrades could take up to 30 years to gain consensus—if they were adopted at all.
This stagnation catalyzed a bold move: instead of waiting for Bitcoin to evolve, they decided to build a better alternative from scratch.
Alongside Jed McCaleb and Arthur Britto, David Schwartz created what would become the XRP Ledger—a high-performance, energy-efficient blockchain designed for fast, low-cost global payments. Unlike Bitcoin’s proof-of-work model, the XRP Ledger uses a unique consensus algorithm that enables instant finality without mining.
Stefan Thomas described joining the original OpenCoin team (later Ripple Labs) as “stepping 30 years into the future.” The XRP Ledger already implemented features that were mere dreams on Bitcoin’s hardfork wishlist—like native support for multi-currency transactions and scalable payment processing.
Building Smarter Systems: The Rise of Codius
As one of the first developers to bring Bitcoin into the browser, Stefan earned the nickname “Bitcoin in the browser” guy. His work on ECDSA in JavaScript and browser-based mining demonstrated early possibilities for mainstream adoption.
At Ripple, he turned his attention to smart contracts—self-executing agreements coded directly into blockchain logic. He prototyped a system using Google’s Native Client (NaCl), a sandboxed environment for running native code securely in browsers.
But challenges quickly emerged.
The Problem with Non-Determinism
In decentralized networks, every node must independently verify transactions and arrive at the same result. This requires deterministic execution—if contract code produces different outcomes on different nodes, consensus breaks down.
Google’s Native Client introduced non-deterministic behavior, making it unsuitable for secure smart contract execution on a public ledger.
David Schwartz emphasized how critical determinism is: “You need honest participants to agree bit-by-bit on what a contract does. If they can’t, you can’t tell who’s honest.”
However, the team made a key insight: while full determinism is essential for consensus-critical operations, some non-deterministic processes could be tolerated off-chain—as long as only the contract author bears the risk of inconsistency.
This led to a strategic shift.
Instead of embedding complex logic directly into the XRP Ledger, they designed a three-tier architecture:
- A secure backend data store with minimal business logic
- A stateless layer for business rules and services
- Applications with architectural flexibility
This modular approach became the foundation of Codius, an open-source platform launched in 2013 for hosting stateless, distributed smart contracts. Codius decoupled computation from consensus, allowing developers to run code anywhere while maintaining trust through verifiable execution.
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Connecting Everything: The Birth of Interledger Protocol (ILP)
With Codius enabling off-chain computation, a new challenge arose: how to pay hosts who run these contracts?
A simple hosting model made sense—pay providers directly—but traditional payment methods like credit cards didn’t scale across a global, decentralized network of hosts and users.
Forcing payments in XRP was an option, but Stefan and his team wanted something broader: a payment-agnostic protocol that could work across any currency—fiat or crypto.
In 2014, Stefan Thomas, Evan Schwartz, and others began designing what would become the Interledger Protocol (ILP).
Core Principles of ILP
ILP was built on three foundational goals:
- Openness: Anyone can participate—no gatekeepers.
- Scalability: Capable of handling microtransactions and global volumes.
- Interoperability: Supports cross-currency payments without intermediaries.
The first whitepaper (ILPv1) was published in 2015. By ILPv4 in 2018, the protocol had matured into a robust standard capable of powering real-world applications—especially when paired with Codius.
Web Monetization: Paying Creators Directly
In 2018, Stefan spun off Coil, a startup built on Codius and ILP—with "Coil" itself standing for Codius + Interledger.
Coil’s mission? To enable web monetization—a system where content creators earn micropayments directly from users’ browsers, bypassing ads and subscriptions.
Using XRP as a settlement layer, Coil processes billions of tiny transactions—over 14 billion to date, with average payments worth fractions of a penny. This proves ILP’s capability to handle high-volume microtransactions at scale.
More importantly, it fulfills a long-held vision: an open internet where value flows as freely as information.
FAQ
Q: What is the XRP Ledger’s main advantage over Bitcoin?
A: The XRP Ledger offers faster transaction finality (3-5 seconds), lower energy consumption, and native support for multi-currency payments—all without mining.
Q: Why did Codius separate smart contracts from the blockchain?
A: To maintain security and performance on the XRP Ledger. Running complex contracts off-chain avoids bloating the ledger while preserving determinism where it matters most.
Q: How does Interledger Protocol enable cross-currency payments?
A: ILP routes payments across different ledgers and networks using connectors. It doesn’t require currency conversion at the protocol level—senders pay in one currency, receivers get paid in another.
Q: Can ILP work without cryptocurrency?
A: Yes. ILP is currency-agnostic and can connect traditional financial systems (like banks) with blockchains or digital wallets.
Q: What role does XRP play in Coil’s system?
A: XRP serves as a bridge currency for fast, low-cost settlements between users and content creators via ILP.
Q: Is Web Monetization widely adopted yet?
A: Adoption is growing steadily among independent publishers and platforms supporting open standards. Coil continues to drive use cases that prove its viability.
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Final Thoughts
David Schwartz and Stefan Thomas didn’t just build technologies—they reimagined what digital value exchange could be. From addressing Bitcoin’s scalability limits to pioneering off-chain computation and universal payment routing, their work laid groundwork for an Internet of Value.
Today, their innovations continue to influence how we think about decentralized identity, micropayments, and interoperable finance.
As blockchain evolves beyond speculative assets toward real utility, the principles they championed—simplicity, security, and openness—remain more relevant than ever.
Core Keywords: XRP Ledger, Interledger Protocol, smart contracts, blockchain scalability, web monetization, Codius, decentralized payments, microtransactions