Ripple CTO: Bitcoin mining rewards drive value extraction

David Schwartz, Ripple’s chief technology officer emeritus, posted a Stanford lecture on X and urged crypto participants to watch it. The talk outlines why block production rewards can create incentives that harm users rather than secure networks.

At Stanford, the lecture argued that paying operators to produce blocks creates incentives that run counter to user interests and network fairness. Schwartz described proof-of-work’s security model as “possibly the worst imaginable,” saying it can force honest participants to spend more than attackers are willing to pay.

The presentation detailed how competitive mining and staking push operators to cut costs and seek extra revenue. It described behaviors on some networks where validators and miners test and reorder transactions to capture profits before finalizing blocks, a practice often called miner or validator extractable value. Schwartz warned, “You have to be evil or you lose.”

Schwartz summarized his core thesis as “the best incentive is no incentive.” He said the XRP Ledger, created in 2012, was designed without block production rewards and instead relies on validators who already gain from a reliable ledger, including banks and payment providers that need dependable settlement.

On the XRP Ledger, validators choose between equally valid transaction orderings and receive no protocol payments for producing blocks. Schwartz argued that absence of pay-for-play removes a financial reason to manipulate transaction order or collude with other validators.

He said that design, in practice, leads to lower fees, faster confirmations and reduced opportunity for extractive behavior on decentralized exchanges. Schwartz also described Bitcoin miners and Ethereum validators as participants who exist because the protocols pay them, not because they share users’ interest in low fees or fair ordering.

The critique comes as Ethereum uses proof-of-stake and Bitcoin prepares for a future in which block subsidies decline and transaction fees must make up more miner revenue. Schwartz suggested the debate over reward-driven security could become more urgent if decentralized finance protocols keep suffering losses to extractable value.

Schwartz presented a normative case for systems without direct pay incentives for validators but did not outline a clear path for networks that depend on rewards to transition without affecting security or decentralization. The lecture provides a theoretical and design rationale tied to the choices behind the XRP Ledger and aims to prompt developers and operators to consider alternatives.

Background: the XRP Ledger runs without block rewards and uses a consensus process in which a set of validators agree on transaction orderings. Supporters say the model reduces financial opportunities to manipulate transactions. Critics say reward-free systems must still attract enough independent validators to preserve decentralization, a challenge networks are addressing as they adjust economic models.