David Schwartz to Crypto and XRP Holders: Watch This Video I Made Six Years Ago

Former Ripple CTO David Schwartz recently reposted a video he made six years ago. He wrote, “If I had one wish, it would be that everyone in crypto would watch this video.”

The video documents a talk he originally delivered at Stanford titled The Best Incentive is No Incentive. He also explains, in considerable detail, why the XRP Ledger was built the way it was.

The Core Problem With Artificial Incentives

Schwartz opens by identifying what blockchains actually need: eventual consistency. Transactions must reach a point of finality. Without it, no system can be relied upon.

Most blockchains answer with incentives. Proof of work pays miners, and proof of stake compensates validators. Schwartz calls these participants “forced stakeholders.” They exist because the system’s design requires them, not because they have a genuine stake in its purpose. “Forced stakeholders extract value from the system and represent remaining friction,” he says.

The natural stakeholders are those who use the system for payments or value storage, and they fund these forced stakeholders. They want fees as low as possible. Forced stakeholders want fees as high as possible, and that tension never resolves.

The Cost Doesn’t Have to Be High

Schwartz argues that the underlying problem blockchains need to solve, ordering transactions to prevent double spends, does not require this level of expense. Everyone operating honestly is already aligned. “Natural stakeholders are aligned. They all want a system that works.”

The expensive apparatus of proof of work exists to solve a coordination problem that could be solved at far lower cost. “It’s expensive because it’s rewarded. It’s not rewarded because it’s expensive.”

What the XRP Ledger Does

This is where the argument connects directly to XRP. Schwartz describes decisions made in 2012, when the XRP Ledger was designed. The goal was to minimize the operational power any single participant could hold.

There are no block reorganizations, and no one selects which transactions enter a block. Valid transactions that meet fee requirements must be included.

The ledger uses what Schwartz calls “stakeholder-chosen scarcity” instead of costly proof of work or proof of stake. The result is a system that offers low fees, fast confirmations, and genuine censorship resistance. By 2013, the XRP Ledger already had a built-in decentralized exchange, pathfinding across multiple assets, account management with key rotation, and more.

The Design Philosophy Behind XRP

The video is a structured argument about where blockchain design went wrong. Schwartz’s point is that high costs are not proof of security. “It doesn’t take millions of dollars and incentives” to resolve double-spends among honest participants. XRP was built on that premise.

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