Jed McCaleb – Biography of Ripple and Stellar co-founder

Jed McCaleb

Jed McCaleb is one of the most influential people in the blockchain and cryptocurrency industry, who participated in the creation of two major cryptocurrencies and one exchange. However, his name often appears in the media headlines due to negative causes. At the same time, McCaleb is one of the most mysterious personalities in the crypto industry, preferring work to loud statements. So we decided to take apart the biography of Mt.Gox exchange founder and co-founder of fintech companies Ripple and Stellar to see who he really is – a talented developer and crypto-enthusiast, or a dodgy businessman seeking to profit from any situation.

Jed McCaleb – early years and early career

Jed McCaleb was born in 1975 in Fayetteville, Arkansas. He studied at the University of California, Berkeley, but before he finished his studies he moved to New York where he started developing his own projects.

First of them were peer-to-peer network eDonkey and file sharing application eDonkey2000, created in 2000. McCaleb also developed Overnet, a peer-to-peer network primarily for exchanging large files.

Despite the popularity of these projects with users, they eventually ceased to exist due to a conflict with the Recording Industry Association of America (RIAA). The company MetaMachine Inc. whose founder and CEO was McCaleb, was forced to stop distributing its software and pay $30 million in compensation to the RIAA for copyright infringement. Thus MetaMachine Inc. managed to avoid copyright infringement lawsuits. However, the eDonkey server, located in Belgium, was seized by the local police.

Crypto exchange Mtgox.com

In 2007, McCaleb purchased the domain Mtgox.com for his website selling in-game items from Magic:The Gathering. However, due to the popularity of bitcoin, a crypto exchange was created on Mtgox.com a couple of months later. In November 2011 McCaleb decided to sell the exchange despite its great popularity and huge bitcoin trading volume.

Almost every participant of the crypto-market knows about the sad fate of MtGox. At the beginning of 2014, 70% of the world’s bitcoin transactions were conducted through the exchange, but in February of that year it was discovered that 850,000 BTC had been stolen from the company over a long period of time by unidentified individuals due to technical vulnerabilities. Although 200,000 bitcoins were found after some time, Mt.Gox had to launch bankruptcy proceedings. Hundreds of millions (now billions) of dollars in damages were inflicted to exchange clients.

However, McCaleb could not have any legal claims in connection with this, because at the time of Mt.Gox’s collapse, he had long since ceased to be its owner.

Collaboration and conflict with Ripple

In 2011, McCaleb founded OpenCoin (since 2013, Ripple Labs) and became one of the company’s chairman.

The Ripple network has been developed since 2004 by Ryan Fugger as an international decentralized payment system. Based on the Ripple protocol, in May 2011 McCaleb began creating the cryptocurrency XRP, which is radically different from bitcoin in that all transactions in the network were confirmed by consensus of its members. A few months later, McCaleb offered Chris Larens the position of executive director.

However, the fact that XRP was controlled by a small group of people caused McCaleb to disagree with the rest of the founders and, as a result, a break with Ripple in 2013. Next, however, the fun part began. On leaving the company, McCaleb received 9 billion XRP (out of 100 billion issued) as compensation. A year later, he announced his intention to sell all of the coins he owned, which would have instantly caused XRP to plummet.

Amid the general panic, Ripple Labs entered into an agreement with McCaleb that he could only sell coins to the extent that the price would not be affected. However, in 2016, it was revealed that McCaleb was selling much more XRP using, among other things, family members. After discovering this fact, Ripple was forced to go to court. During the proceedings, Jed was offered new terms to limit the maximum amount of sales allowed. However, the Wall Street Journal tracked McCaleb’s activity and concluded that in August-September 2018, he began selling XRP in volumes 10 to 20 times greater than what was allowed under the agreement with Ripple. In one day, he sold 752,076 XRP at once, which at the exchange rate at the time was equal to $351,000.

Thus, McCaleb was a threat to the stability of the Ripple cryptocurrency for as long as he was the largest holder of its tokens. Notably, he had a significant motive for Ripple’s collapse – after leaving Ripple, McCaleb co-founded the cryptocurrency Stellar, which competes with XRP.

In any case, Ripple’s current difficulties are not with McCaleb, but with the U.S. Securities and Exchange Commission lawsuit filed against the company on December 22, 2020. It is possible that in the event of a negative outcome of the case, this payment network will cease to exist altogether. Thus, McCaleb abandoned the ship in advance, which is now probably destined to sink.

As of March 22, 2021, McCaleb, who had been single-mindedly getting rid of XRP all these years, held slightly more than 380 million tokens. At the same sales rate, that balance could be zeroed out in just two to three months.

Stellar (XLM) – McCaleb’s new project

In 2014, Jed McCaleb and Joyce Kim (with whom ) co-founded the Stellar Foundation, the non-profit organization behind the development of the cryptocurrency XLM. The foundation for the Stellar network was the Ripple protocol, but in 2015 it developed its own protocol with an entirely new consensus algorithm. The Stellar platform was probably conceived by McCaleb as a “killer” of Ripple: a complete clone of the system, but without its inherent flaws. Unlike XRP, Stellar (XLM) is a convenient tool for people all over the world, regardless of their financial status or location.

At the time of publication, Stellar is a fast-growing and apparently very promising payment network with partnership agreements with many large companies, such as IBM. XLM is the 14th largest cryptocurrency by capitalization (more than $15 billion).

So who is Jed McCaleb?

It is amazing that while being at the origin of so many scandalous projects, McCaleb has always managed to get away with it, making money and preserving his reputation. Moreover, now his participation in any cryptocurrency project almost instantly attracts the interest of market participants and makes the project popular without any PR-campaigns. What is it – luck, intuition? Or maybe the secret of Jed’s success is in his values after all?

As McCaleb writes on his website http://jedmccaleb.com/, the reason for creating Stellar was the realization that “the world’s financial infrastructure is broken and that too many people are left without resources”. Making financial instruments as accessible as possible to all people is the very idea that prompted him to break with Ripple.

Interestingly enough, McCaleb has always spoken negatively about various cryptocurrencies. He claims that 90% of all current cryptocurrencies are garbage, including TRON. Jed is a supporter of cryptocurrencies such as Bitcoin, Ethereum and Stellar. However, in his opinion, many financial institutions will never use bitcoin because of the low bandwidth of its network.

About Evans Kwesi 7 Articles
Evans is a Kape Town-based tech journalist and crypto enthusiast covering how technology is affecting business. He enjoys writing about Altcoins, blockchain technology, stock market news, fintech and financial news. Evans also writes about tech startups and new technologies.