Mercator Blog

CEO Steps Down Just as Ripple Labs Is Ready for Liftoff
Date: November 2, 2016
Tim Sloane
Vice President, Payments Innovation
Chris Larsen, CEO of Ripple Labs, has announced that in January 2017 he will pass the CEO title over to Brad Garlinghouse, who is currently the company’s president and chief operating officer. This announcement comes just as Ripple Labs appears to have completed its evolution into a company and product that address most of the issues associated with bringing a blockchain solution to market.

Mercator Advisory Group recently completed a project with CO-OP Financial Services and TMG evaluating three blockchain solutions, one of which was Ripple. Mercator has summarized the results in a research brief titled “Are Blockchain Solutions Ready? Three Blockchain Solutions Put to the Test” which is available at The basis for the analysis is Mercator’s strategic decision framework, which contains 62 key criteria that will help financial institutions evaluate the readiness of a blockchain solution in a regulated market. This is available at The paper identifies the right way and the wrong way to develop blockchain solutions when addressing regulated markets. We describe the example of Ripple Labs, a company that took the long way around to finally arrive at a business structure, use case, and blockchain implementation that is closest to being ready for prime time.

Ripple Labs went through multiple restructuring events in which it had to modify its business plan, organizational structure, and technology to address its bank-to-bank remittance business. Perhaps the biggest restructuring came when the company’s leadership realized that Ripple could not succeed if it offered remittance products directly to consumers. Also critical was its decision in September 2016 to form a steering group of international banks that will further refine the business model and technology for global payments. With Bank of America, Santander, UniCredit, Standard Chartered, Westpac Banking Corporation, and Royal Bank of Canada working to establish the appropriate business structure and technological implementation that addresses regulators’ concerns, Ripple appears well positioned to be one of the first blockchain-based companies to move from a limited pilot implementation to shipping a product once the steering group makes the final tweaks to the business model and technology.

This was a long and torturous journey for Chris Larsen and Ripple Labs, so other blockchain-based companies should study the path of Ripple Labs in order to devise a better, more direct path to shipping a product. In Mercator’s opinion, the most critical learning is this: Don’t build a blockchain platform if you intend to enter regulated markets — build a business. The most critical aspect to achieve success is to know what services you intend to offer, to whom, how those customers are regulated, what business structure is required to address the customer’s and regulator’s needs, and what feature functions are required for all participants in the value chain. Only after all these requirements have been taken into account should the blockchain technology be developed. This suggested course of action is based on the very nature of blockchain technology.

Distributed software is never easy to manage, but distributed software that is tightly coupled to a trust algorithm and ledger data structure is particularly difficult and challenging as the multiple linkages make the technology very resistant to change. When Ripple abandoned its consumer go-to-market model, the implications were huge on both its business structure and its technology, which took years to resolve.

The old adage “Measure twice and cut once” should be rephrased for blockchain businesses: Plan until you know all your value chain participants are in agreement, and then establish your business structure and build your solution.