McCaleb spoke at the hack.summit("blockchain") virtual conference today. Below are some of the more interesting quotes from his talk.

On scalability as the biggest challenge facing the ecosystem:

The biggest thing is how do you scale. If any of these systems were turned on today - if a billion people started using them - it would crush them. It won’t scale the way people are hoping. That’s the main technical challenge right now - how to get things to scale. That’s all we are working on right now, and Ethereum is working on a bunch of scalability fixes.

I think you could get to a couple hundred million users before you would start having issues. You can always throw bigger hardware at it, but there’s always limits and you want more than just the largest companies in the world to be able to run this thing.

What we are working on now is this ability to do subnetworks. At some point - to reach scalability - we will have to do things like sharding and subnetworks. It’s possible that some of those will have a Turing complete scripting language, but I don't think the main net will ever have that.

On applications using SCP but not the Stellar network:

I view SCP as this bedrock consensus algorithm, and of course you’d use that in lots of other applications. It doesn’t make sense to throw everything into this one network. There’s lots of different things you’d want to do with this consensus technology. It makes it bloated if you try to shove every feature in there. It makes total sense that something like MobileCoin - which has a totally different use case than what we are doing - will have different tradeoffs that they will want to make and features they want to first class in the protocol. We just like to see it being used.

On why the Stellar network has inflation built-in:

One of the earlier criticisms of Bitcoin is that it is delationary, and economists have a lot of problems with that. It leads to this deflationary spiral that is bad. I think this doesn’t really apply because there’s lots of other currencies in the world, but just to address it is one of the reasons we put in this small inflation. I think the ideal state is that there is this small fixed inflation that people know about. It’s not at the whim of some central bank, but it’s still going up to address the fact that coins are lost and there are new people joining the network. It also corrects the initial distribution of the coins - say we didn’t do it in the most correct or fair way. Over time those effects get reduced because new coins are coming into the system through this inflation mechanism.

On the rumored Chain.com acquisition:

I can’t speak about that. SDF is not acquiring Chain - that’s false. Obviously there’s other entities involved.

On Lightyear's role:

We started the Stellar Development Foundation (SDF) a little over four years ago now. We set it up as a nonprofit. The idea was to eventually be like the Linux Foundation where you are making sure that progress continues on the code and to distribute these lumens. But as the network started to gain traction, we realized there’s this big need for something more like Red Hat - where it is providing services to these companies and financial institutions. There’s very little relation between it and SDF right now. I work at both, but everyone else works at one or the other. It’s sort of like ConsenSys is for Ethereum or like Red Hat for Linux. It’s more of a sales organization and does more of the client facing work for people because inevitably when we talk to a financial institution about using Stellar, they would need somebody to help them with integrating or ongoing support. SDF wasn’t set up to do that, so Lightyear was created to do that.

All core development...lumen distribution...working on Horizon - the REST API for the network….is in SDF. And Lightyear [handles] all the partnership activities, outsourced development, integrations. We just announced this application StellarX, which is a frontend for the Stellar distributed exchange. It will look like Poloniex or Kraken but instead of the backend being a database, the backend is the Stellar network. It’s just a nice way to use the Stellar distributed exchange. And that’s made by Lightyear.

On Western Union and MoneyGram’s role in the future:

There will always be a role for institutions like that. Stellar is just this low-level protocol. Western Union has tons of payout locations where people want to go to pickup or give cash. None of these blockchain projects are going to take that away. People are still going to want to use cash. There needs to be some physical location. There needs to be some wallet that people are interacting with - some nice UI. I hope that Western Union or Moneygram start using the Stellar rail underneath, and they should - it increases the reach of their network. But even if they don’t, someone else will. It’s kind of like the Internet. There were tons of bookstores before the Internet came along. It didn’t kill bookstores. It just made it so there’s one bookstore; the bookstore that chose to use the leverage and scale of the Internet became the one that won. A handful of these financial institutions that use it to its maximum effect will become dominant. What the Internet gives you is leverage and scale and that’s what something like Stellar does - tons of leverage and scale where one financial institution could dominate the market and I think that’s what we will see.

An example of an application built on top of Stellar:

The way coffee is harvested in places around the world now is super inefficient and exploits the farmer. Someone has built a machine where the coffee bean farmer can dump their beans into this machine. It grades the beans right there, and the farmer is given a token inside Stellar - Grade A beans or Grade B beans. Then, later when the beans are sold at the ultimate market, the farm is given some additional credit whether they had Grade A or Grade B beans. And this is different from the way they have it now where the farmer dumps all their beans with this middleman, and they give them one price because the price isn’t determined until some later date. Because you are able to create these easy tokens on Stellar, these tokens represent some future value of these beans depending on what grade they are.