From Ripples to Waves: Building The Future of Payment Systems - Part 3

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From Ripples to Waves: Building The Future of Payment Systems - Part 3

By Ryan Warner
August 15th, 2018

The Jed McCaleb Saga

Humble Beginnings

The story begins with one of the founders of Ripple Labs, Jed McCaleb, and encompasses not only Ripple and XRP but another currency we've yet to mention called Stellar Lumens (XLM). As stated previously XRP and OneCoin/Ripple Labs was founded in 2011 with one of the leaders being Jed McCaleb. In 2014 Jed created Stellar. Stellar gained popularity against XRP with the involvement of its advisors and rhetoric upon creation.

Looking at the situation between Ripple and Stellar it has all the makings of a great book. Everything from criminal behavior, the intelligence level of the actors involved, money, and sex. 

To understand Jed we have to step back to 2008 when he and one MiSoon Burzlaff started a family. Jed and MiSoon gave birth to first a daughter, and little over a year later a son.

Jed co-founded eDonkey2000 in 2001. For those that don't remember eDonkey2000 was a file-sharing service similar to Napster and Limewire. This all came to an end when copyright infringement lawsuits practically destroyed mainstream file-sharing and eDonkey2000 was forced to cough up $30 Million to the RIAA.

Jed became interested in the idea of cryptocurrency when the mysterious Satoshi Nakamoto launched Bitcoin in 2009. With Jed's experience in peer-to-peer file sharing networks, programming skills, and knowledge of the law Jed began the concept of a place for individuals to trade their new decentralized currency. July 2010 saw the launch of the Mt. Gox exchange (Mt. Gox originally meant Magic: the Gathering Online Exchange with Jed owned the domain name to). This exchange would bring cryptocurrency into the beginnings of the mainstream, and serve as a launching pad for a new era.

Though Mt. Gox was not the only exchange in the space within three years of launch they were handling over 70% of Bitcoin transactions. In 2003 Bitcoin dramatically raised in price from $13 to a peak of $1,100 and had hit mainstream media attention with Mt. Gox the center of the trading arena. This was to be short lived, however, when in Febuary 2014 Mt. Gox suspended trading, filed for bankruptcy and began liquidating assets. This came about from a massive theft of Bitcoin intially at 850,000 BTC. Most of which has yet to be recovered, and Mt. Gox continues it's legal woes with liquidation of assets with approval by the court systems.

The collapse of Mt. Gox and subsequent crushing of the price of Bitcoin gave Jed insight into the flaws of Bitcoin and it's Proof-of-Work system which requires tremendous amounts of processing power and electricity to sustain, as well as being vulnerable to "51%" attacks. So he set out to create a cryptocurrency immune to the shortcomings of Bitcoin. 

Jed came up with the idea of a cryptocurrency based upon a consensus network rather than proof-of-work. Thereafter he met with David Schwartz, and he was brought on as CTO and became and still is Chief Cryptographer. Together they were given an investment of $100,000 by Jesse Powell to begin their start-up Opencoin Inc. Arthur Britto was then brought onboard as Chief Strategist.

Chris Larsen was brought in as CEO to handle the business side of Onecoin. Chris had extensive experience in building business with companies such as E-Loan, and Prosper. These companies gave Chris insight into the traditional banking sectors, as well as the laws and regulations of conducting business in them. With this team assembled Onecoin was set to challenge Bitcoin for cryptocurrency dominance, and replace proof-of-work with a consensus ledger.

Trouble In Paradise

With the stressors of a start-up company, not to mention the unknown of the cryptocurrency space MiSoon and Jed ended their relationship. MiSoon had her own start-up, Bravo Your City, to worry about as well. Combined with this they also had their two children to care for.

The next woman to enter into Jed's life was one Joyce Kim. Joyce has a terrific Linkedin profile including Managing Partner SparkChain Capital, Executive Director Stellar Development Foundation, Co-Founder Simple Honey Inc., and education at Columbia Law, Cornell, and Harvard. It was through Jesse Powell that Jed met Joyce and the two soon started seeing eachother. Her Linkedin Profile is available for viewing here:

Joyce founded SimpleHoney in 2012 as an ecommerce travel company. SimplyHoney would recommend places to stay based upon users personality and detailed profiles, and included a one-time $100 membership fee. In 2013 SimpleHoney changed into a wish-list like application. 

A company like SimpleHoney seems that it would have nearly no value to Ripple, but Jed convinced Ripple to buy SimplyHoney in April 2013. After the acquisition the travel site and the app were no longer there. Joyce decided to start calling herself "Chief Engagement Officer," at Ripple. This "Title," should shock most simply because of the abbreviation: CEO. Joyce's next move at Ripple was to spread the rumor that Jed was actually Satoshi Nakamoto. She also put CTO as the highest ranking member of Ripple on the website, which just happened to be Jed. These actions and others resulted in Joyce and Jed having left Ripple in the summer of 2013.

With no clear direction or place for Joyce at Ripple, Jed began to lose interest in the company. He had a strong relationship with one Patrick Collison of the fintech company Stripe and began to unilaterally negotiate an exit deal. According to the article from  Jed and others held a celebratory dinner at El Tepa Taqueria having nearly finalized the deal for $13 Million. This would have given Ripple Labs a value of $140 Million. 


In the end the deal fell apart. Things at Ripple began to shake within the founders. Once the deal ended Jed attempted to have Chris Larsen removed from the company. This became the rift between Stellar and Ripple that lasts and is hotly debated to this day. Then came the problem of the amount of XRP that Jed and Chris had totaling some 18% of the total that could ever exist. This was a huge PR problem for Ripple with concerns that the founders could dump the coin on investors and run away with the profits. In the end Jed would go to Ripple's board demanding that Chris Larsen be removed.

The board was brought in and Jed presented his case for Larsen's removal. This did not go in his favor. The board voted 5-1 to keep Larsen as CEO. Jed was the single vote against. After the vote Jed left with Joyce to Costa Rica, Brazil, among other destinations.

A New Cryptocurrency Is Born

A year later after leaving Ripple Jed decided to start a new consensus-based cryptocurrency. So similar to XRP that it used XRP's open-source code as the base. Now Ripple had a problem. Jed had control of a massive 9 Billion XRP that he could use for liquidity by dumping on the market, and at the same time hurting Ripple's credibility and value.

On Ripple's message board May 22, 2014 Jed announced “I plan to start selling all of my remaining XRP beginning in two weeks.  …. So just fyi…. xrp sales incoming.” Understandably, this would send any company and investor into panic with one of the founders of the company saying they were going to dump their assets on the market. A month after this announcement Jed launched Stellar. Luckily for Ripple legal action stopped Jed from dumping on the market, and limits the amount that he can sell per year for a set period (

Jed's launch of Stellar saw a $3 Million loan from Stripe. Jed's personality and coder skills helped to attract a following. Patrick Collison is even listed as an Advisor to Stellar on their official website (

Jed again tried to differentiate Stellar from Ripple by promoting it as a non-profit. Again Jed promotes his strong libertarianism often found in coders, and the disgust he has for traditional banking systems.

Where did the first 1.5 Billion XLM from Jed's Stellar Foundation go? The simple answer - Facebook. XLM was distributed among more than 4.5 million Facebook accounts during this airdrop. The question we should be asking is how much of this went to spammers, and hackers creating phony accounts for monetary gain? One such person, Everett Forth detailed on Medium how we acquired 2 Million XLM in a day. Unfortunately, this Medium article has since been deleted and cannot be sourced. What can still be sourced is a youtube user "Aurora The Hot One," who detailed the exploit of Stellar's giveaway on YouTube ( Though occurences like this are common in cryptocurrency one would think that a talented coder such as Jed McCaleb would have had the foresight to avoid such disasters. But with the track record of eDonkey2000, and Mt. Gox his future and that of Stellar are questionable. 

The last questions remaining in the minds of XRP investors and the company itself is - How well are Jed's remaining XRP monitored and what will he do with them? Though the threat is lessened his ability to hurt the price point of XRP remains, and for a man with an axe to grind this is a very important point to consider.