This Week in Startups - Bitcoin payments on the Lightning Network with Strike's Jack Mallers | E1462

Episode Date: May 17, 2022

First, we cover the news of Ex-Meta crypto chief David Marcus launching a Bitcoin payments startup backed by a16z & Paradigm (02:05). Then, Jack Mallers, the CEO of Strike joins (8:13) to discuss the lightning network & the history of payment networks (12:10), why companies use the Strike API (24:42), why he thinks Visa and Mastercard can't compete (31:24), Strike unlocking Bitcoin’s potential (34:40) and more! (00:00) Jason and Molly tee up today’s show (02:05) Ex-Meta crypto chief David Marcus launches Bitcoin payments startup backed by a16z & Paradigm (08:13) Molly interviews Jack Mallers, CEO of Strike (10:57) Vanta - Get $1,000 off automating your SOC 2 at https://vanta.com/twist (12:10) The lightning network & the history of payment networks, how Strike disrupts them (23:26) OpenPhone - Get an extra 20% off any plan for your first 6 months at https://openphone.com/twist (24:42) Use cases for Strike’s API (30:070 Reforge - Apply for their next cohort at https://reforge.com/twist (31:24) How do Strike fees compare to merchant fees from Visa, Mastercard, etc? (34:40) Has Strike unlocked Bitcoin’s potential? (41:12) What dominoes will fall before people get off dollars? Check out Strike: https://www.strike.me FOLLOW Jack: https://twitter.com/jackmallers FOLLOW Jason: https://linktr.ee/calacanis FOLLOW Molly: https://twitter.com/mollywood

Hey, everybody, hey everybody. Welcome to Tuesday. We've got a big show for you today. We do. We are chilling in Miami. We're not chilling at all. We are like, we're on the death march of fun, as I've started calling it in Miami. But we have a great show for you today.

Today's guest, this is one to watch. This is Jack Muller's, the CEO of Strike. Okay. Which I just, I can't get over the action of the name. I love it. It's building a payments app like Benmo and an API for payments on the Lightning Network, basically like the currency part of cryptocurrency. Yeah, and we'll break all that down for you first.

We're going to explain what the Lightning Network is and some news about that. So you go into the interview with a little bit of knowledge. Yeah, look at us, Tying up a story arc. Four of our Facebook crypto head, David Marcus, recently launched a new company called LightSpark, which is all about that Lightning Network, not afraid to get in the crypto space in the downturn. Absolutely. That's generally when fortunes are made in the downturn.

We're just collected in the up market. So it's going to be a great show. Stick with us. This week in startups is brought to you by Vanta. Compliance and security shouldn't be a deal breaker for startups to win new business. Vanta makes it easy for companies to get a SOC2 report fast. Twist listeners can get $1,000 off for a limited time at vanta.com slash twist. Open phone.

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Their summer cohort starts July 18th, so apply for membership today at reforge.com slash twist. All right, everybody. Former Facebook crypto head, David Marcus, he was working on the famous Facebook crypto project that was going to, man, it showed so much promise, Molly. They were going to basically build crypto wallets into every Facebook app and allow payments between them. But I think the governments around the world were like, you've done just enough, you've had enough impact on the world, Zuck. let's keep you away from monetary policy. They got the big Heisman from the whole world. The whole world was like, yeah, you know the election stuff?

Maybe if you fix that and then all of the young people with anxiety and eating disorders, let's have you solve those things before we have your unique brand of impact on money. No, thank you. It was a big, no thank you. So David Marcus has moved on to other ideas. The latest is that it's this light spark, which was led. It had a funding round, not surprisingly led by A16Z and Paradigm and is apparently going to be a bit of a deep dive into the Lightning Network. So he says as a first step, the goal is to build and extend the capabilities and utility of Bitcoin.

So no NFT shenanigans here just specifically focused on Bitcoin. He says, as a first step, we're actively assembling a team to dive deeper into the Lightning Network, which is, of course, the network that basically enables Bitcoin payments to happen faster and much cheaper, like get rid of those transaction fees and have a quicker network. And to be clear, the blockchain for Bitcoin is slow and expensive. And so nobody wants to buy a $3 latte and wait five minutes for the latte payment to be recorded on the blockchain, but with the lightning network, my understanding is those things get batched, done quickly at some marked price, and then they get put on the blockchain eventually.

I'm not exactly sure if every latte purchase needs to be on the blockchain for already either. So there's some notion here, and I don't know if you get into this in the interview, Molly, you can tell me, of does every transaction made need to be stored forever in an immutable way if every single cup of coffee bought every day was not on Bitcoin, does that need to be on an inefficient database that's public and immutable to everybody? I think not. Right. I think not.

I think almost the way to think about it is, and we've done this analogy a bunch, but it's really valuable, right? As you've got the internet, you've got your TCPIP, you've got your underground cables, you've got all of the things that connect these computers, and then the layers that were built up on top of that make it, you know, faster and easier, they disaggregate the interaction so that it's like cleaner. You get email. You get search.

You get hyperlinks. All of these things on the Lightning Network and Jack talks about this too are they're layer two. They're the next layer up sedimentarily. And they let you do things more easily and more quickly. And so this is like the perfect pairing these two things, this David Marcus announcement and Jack Mauler Strike, which is sort of all about like, how do we enable the utility of this currency that we know potentially exist in terms of moving money around the world in a frictionless way without banks taking a giant cut the whole time? Yeah. And I think this is where, you know,

crypto has had a 10-year lost decade of grifting and people being more concerned with selling tokens, selling NFTs, you know, scamming people, in some cases, grifting, you know, and pumping and dumping and dumping, when they could have been just fixing the goddamn base protocols and making the technology usable for consumers, a decade wasted of nonsense and grifting. How would people be able to make crap tons of money

and then run away to Puerto Rico where there's no tax on your cryptocurrency exchange? Exactly. That's what people... First, people have to get rich, and then we can figure out how it helps society. Let's just... Except in venture in the real world, it is the exact opposite.

You've got to create value. So crypto people start creating value for customers. That's the way to get out of crypto winter. We're in crypto winter right now. Projects are going to zero like they always have. People are losing a lot of money. There are no more bagholders. Everybody understands now this has been a total grift and a lot of pumping and dumping and

shenanigans. And I think now the only... only way out of a crisis like this and for crypto not to be permanently thought of as tulip mania and a scam is for value that consumers understand molly not a value that's you know theoretical and somebody talks to you about staking and you get 19.5% on your lunas or whatever bull and you ask them well who's paying the 19.5% interest every year and i don't know how that's generated and if you can't explain to me where who willing to pay 20% interest a year when mortgages are still three, four, five percent.

Like, if you can't explain it to me, it's probably a scam. And I encourage everybody in the crypto community to get focused, whoever's left. I think it's like literally one to five percent of the people involved in crypto, maybe it's one percent of the people involved in crypto are actually creating real product. I think it's less than one percent of the people and the energy is actually building real product. Let's make it 99 percent. Let's flip it. Make it 99% about product because that's kind of how the startup community works. It's probably 80, 90% actually building stuff for consumers and companies and maybe 10 or 20% bull hype.

You got to have the right ratio here. Yeah. Well, and then that leads perfectly into our interview. Jack Mullers of Strike is one of those builders talking to us from his super fancy closet. This is a really, this is one to watch. This is one to watch in that 99%. Stick with us. Jack Mallors is the CEO of Strike, which is a super awesome action name. Welcome to the show.

Yo, Molly, thanks for having me. And I only have ever heard anyone compliment our name, Strike, which I came up with that. Yeah. I've built a lot of products in my time with relatively the same team. This is the first one I've named. And probably the last one I'll ever build. So I appreciate it. Dude, thanks for having. Naming a startup is serious business. Naming anything is serious business. So you have strike.me, where, well, now that we're talking about the name, where before we even jump into what the company does, how does the name tie in? What made you call it that? The whole company is predicated on this idea that Bitcoin is the best monetary network of all time. It's the best payments network of all time. It's the best way to escrow fiscal value ever. And the concept of strike was that it was multifaceted. One, I love the concept that when I Google strike, it's like going on strike. political activists or people that are protesting, which I thought this is a very disruptive concept. Then also strike our logos and meteors, the concept of striking something that's been there forever and the velocity at which the meteor moves from A to B. It speaks to the speed of our payments,

how we're crashing into a really old legacy world and blowing the whole thing up and relatively going on strike, in my opinion. So it was an all-encompassing idea. And I also was running out of time because I had to publish the blog post, which led to our seed round, and I just had to do it. So that's the real story. Deadlines create great outcomes, but good metaphor across the board. Well, now give us the basic. So strike is an app that offers, I understand, an easy way to buy, send, and get paid in Bitcoin. Pretty much the thing we all thought when we heard the currency part of cryptocurrency.

Kind of. So you're right. You're not wrong. We have two products. One is a consumer app. You can think of it like a Venmo, a cash app, a chime. It's a modern-day NeoBank. And then we have, on the acquiring side, we have an API.

You can think of it like Stripe with a P. Yeah. The whole concept of the business, though, and why we're so different is we use the Bitcoin network as a payments rail to actually make payments cheaper, faster, global, more inclusive and more innovative. And so it's a very disruptive concept is that we're not a closed network like Venmo. Venmo users can only pay other Venmo users. were openly interoperable with the entire Bitcoin network.

And we can get into why that's such a disruptive concept. But it's the first time anyone has used an alternative payments network outside of Visa, American Express, MasterCard, Discover, or things like ACH Swift in probably 50 years. Listen, when you're a founder, it's fun to trade your craziest stories with other founders. Recently, Balloon CEO Amanda Greenberg, one of my portfolio companies told me how Vantas SOC2 solution helped her save an important deal in the final hours.

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SOC2 reports directly within Vanta. And on average, Vanta customers are SOC2 compliant in just two to four weeks. Compare that to three to five months without VANTA. And guess what? Vanta's going to give you $1,000 off right now for your SOC2 because you listen to this week in startups. Get that $1,000 off right now. Vanta.com slash twist, V-A-N-T-A dot com slash twist. Once again, vanta.com slash twist for $1,000 on. Yeah? Let's go right into why that's so disruptive. I mean, and it's built on the Lightning Network, right?

Just as a technology point. Yeah. So there's a giant misconception that Bitcoin somehow is tremendously slow and expensive, and that's not true. Bitcoin is actually the fastest asset in the world and the cheapest to move with reliable security. And that's because of the Lightning Network. And so our entire payment stack and infrastructure is built on both Bitcoin.

and the lightning hour. Tell me more than about the kind of disruptive nature of this. And why, I guess on some level, is this a product that could not have existed until the Lightning Network? Correct. Yeah, I think it's a really healthy exercise

to revisit a little bit of history and where we are today and why we're at where we are today. So historically, payment networks. So first of all, what is a payment network? It's pretty self-explanatory. very its job is to ask her a value from point A to point B. If I want to remit money from the United States to Europe, a payment network can help facilitate the value transfer

from the United States of America to Paris. If I want to buy a burrito from Chipple, a payment networks facilitates the value transfer from me, the consumer, to the acquirer being Chippo'i. And so payment networks, as we know them today, payment network, arguably Western Union is a payment network to remit money, a Visa MasterCard, American Express, Discover, of the four payment networks that allow us to conduct commerce payments in person primarily. Even something like Stripe, it uses those four payment networks, and it's just a layer that interfaces with the internet predominantly. And so what are they and how do they work?

The main concept that I think... And what's wrong with them? Right. The main concept that I think alludes to why this is such a disruptive concept. It's really exciting is these are all payment networks that we're trying to build digital payment networks for non-digital assets. And so how do you digitally move a dollar or how do you digitally move a bar of gold or how do you digitally move a valuable piece of art like Vincent Van Gogh painting? It's a trick question.

You can't. Right. And so what these payment networks, all payment networks like Visa are promises of future settlement because when I go to Chipotle and I swipe my visa card, the dollars aren't actually hopping out of my pocket and into Chipotle's register in real time. Visa is coordinating with the many banks involved and saying, hey, is Jack good to buy this? Brito, can Chase be in debt to the Bank of America that's banking Chipotle? Can we entrust that Jack's actually going to be good to cover the cost of this? Because we'll promise future settlement to Chipotle now and then actually settle two to 15 days later and tax the merchant for this giant revolving door of credit that we've created, right? And Chipotle will play 3% for us to

future settle paper money because paper can't move digitally. It's the whole concept. And so... Full faith and credit. Full faith and credit. Full faith and credit. and every single payment that we know before Bitcoin Molly is a debt promise, no matter what. It is a promise to settle in the future. And then we build this really sophisticated systems like credit scores. And that's where you get financial inclusion is really complicated because in order to be included in the financial system, you have to be creditworthy. Who defines that? Do they have the bandwidth to define everyone in the world as credit worthy?

Who defines creditworthiness? It's a very complex system and it's just old. And again, it's this concept of building a digital payment network. for non-digital assets. Now, the big aha moment for Bitcoin is it is the first bearer digital instrument. It is the first actual digital asset that carries value. And it moves and settles at the speed of light. And so then if everyone in 1949 had Bitcoin, we would have never built debt promises and payments for future settlement. This would have never been a thing. We just, technology was far outpacing payments and money. And Bitcoin caught us up to the first

physical bare instrument that actually, it's a physical rock that's digital and can move at the speed of light. And so when I go to Chipotle, what can actually now happen is $10 is removed from my pocket, turned to Bitcoin, and there actually can be money that jumps over the counter and into Chololet's register and turn back into dollars. So now if you re-ask yourself the question that Bank of America, when they founded Visa, asked themselves in 1956, well, what's the best way humanly possible to escrow physical value from here to Europe from Jack to Chipotle? It's actually the physical instrument that can move at the speed of light. And that's the whole concept is it's a superior payment network. It's cheaper. It's faster. It's more inclusive because everyone in the

world can use this open payment standard. And it's inherently innovative because everyone has an opportunity to build on it. And so I'll stop there. But that's kind of like this aha moment. And it's just very obviously better than everything we've known before. Right. It is very obviously better in all of those attributes minus the one big one, which is the full faith and credit part. And so I wonder, like, to what extent is your network and the products that you're building the kind of thing that get us there to write, to completing that, closing that

very important loop? Yeah. Well, so I think if consumers have an obsession with 30-day unbacked credit loans from institutions, that's not exclusive. to Chase. In fact, you know who I would rather build that product for me? Jack Dorsey, Elon Musk, Jeff Bezos, right? I think entrepreneurs and innovators, it's just the capital society. People will figure out and serve people the way people want to be served. I think it's this concept that so far we've been trapped in the system that the merchant gets taxed for it, that only those that are

inside the system. I mean, card networks today are, they were founded as bank consortiums, right? Jack Dorsey can build cash app, which is an amazing app, it's an amazing service. But in order to conduct commerce with the real world, he has to issue a visa card. And so what I think is amazing about this is the payment, the ability to achieve finality in the world, whether that's a cross-border payment, whether that's Tripoli, whether it's internet tipping, micro-payments. The standard is open and allows anyone to build. So I don't think that this is counter to consumer credit. I mean, we plan on offering products that rival your Chase Freedom card. I don't see why not.

I think if I'm Chipotle now, traditionally the messaging layer is separate than the settlement layer. When I message Chipotle, I want to pay and the receipt comes out. There's no actual money settling. Money settling later. Now with Bitcoin, because the money is digital, the messaging layer is the settlement layer. And if I'm Chipotle, right, it relieves me of the burden of my relationship with the banks. and so it allows for a way more innovative, inclusive world. And because it's a free market, pricing will be naturally suppressive.

You see like the DOJ and Senator Warren always lobbying against banks, and there's government interference where the Federal Reserve tries to price interchange on debit cards. And none of that matters. If we have an open free market, an open free payment standard for everyone in the world, and then we just let entrepreneurs build. And I think it'll work itself out. Tell me about the gap that strike bills here in, that sort of larger vision because it seems like this was built into the vision in some ways,

but maybe not the white paper. Like how did this become a product that you could create and monetize? Yeah. Well, so alluding to the Bitcoin white paper, you are, yeah. Yeah. Yeah. So I think it's a very important point actually because just stepping back for a second as like Bitcoin and Lightning and why can we achieve this. People sometimes mischaracterize Bitcoin's base layer is like, yeah, but it's a blockchain, but it's slower. Or it's a blockchain, but it's more expensive. And if you want to do fast things, you do it on lightning. If you want to do slow things, you do it on the base. And I think that that's just appeasing to societal norms and people trying to compartmentalize what's happening. What Bitcoin's base layer actually is trying to achieve

and the white paper is allowing a digital bare instrument to exist forever, allowing this Bitcoin thing, which is this magical digital bear instrument that can move and settle at the speed of light now. It has to exist. And in order for it to exist forever, it shouldn't matter who's the president of the United States, what the DOJ has to say, who's over at war in Eastern Europe, what the rate of inflation is. It needs to somehow exist within a distributed network and cannot be controlled if the monetary policy is known, if it has a scarce supply, all of these things. So for people to say Bitcoin was designed to be slow, no, Bitcoin was it designed to exist forever. And I love this is a mind-bending concept. Not only was it designed to... Yeah. I don't think I'm arguing that Bitcoin

was designed to be slow. It just doesn't seem like it was designed to be used the way that you have developed a product in order to use it, which is like, you know, send it back and forth and trade it and create an API and everybody can plug into it. And like, you're enabling the transition from store of value to currency in some ways. Yes. That I always felt like should have been there from the beginning. So I don't know what. It's just a, I think it's a necessary, predecessor to have the sound base of this digital rock that could live forever. And I mean that in that Bitcoin at its base accomplishes two things. It allows you to travel across space, quote unquote, as a scientific term, of like, I can move money now from the U.S. to Japan with Bitcoin.

It also fascinatingly allows you to move money across time, which is I can store a million dollars from now to the year 2140. And it doesn't matter what the rate of inflation is. It doesn't matter if real estate in Miami gets bearish or bullish, is that I have this instrument that lives within a known monetary network and no one can control it, inflate it, make it it less appealing. It's an instrument that allows me to move money across time and space. And then once you have that level infrastructure, there's going to be infinite demand for this thing. It's globally accessible. It's inclusive to everyone. No one can control it. It's never going to go down like a Salona or a Visa. Then the Lightning Network is actually not a blockchain.

And that's why it's going to be faster and superior to any other payment network. It's not a block. It doesn't have a, it's not a blockchain. It's designed to make this digital rock that's going to live forever move at the speed of light and settle for as cheap as possible. And then that's why we spent the last decade building the base layer as secure and robust in allowing digital money to move across space and time. And is it a little inefficient?

Can it get expensive at the base layer? Yeah. But it's required to have the properties that allow it to live forever despite any circumstance. And then on top of it, we can build the Lightning Network, which is just a payment standard, not a blockchain at all, that allows it to move so fast and so quick. And then that was the aha moment I had as a founder. I mean, I've been in Bitcoin 10 years now, just historically hacking in my dad's basement. And once all of this started to come together and I was on the front lines testing the Lightning Network,

I was like, oh my God, I can do things out of my basement that Visa can't even do, that Western Union can't do, that Chase Bank can't do. And it's less about me. I don't consider myself a genius. It's more about this is a superior payment network that humanity's really longed for is an ability to move value at the speed of light digitally. Listen, lots of founders are Lucy Goosey with their personal phone numbers. You know about this problem.

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or that doesn't have this incredible feature set, they'll put it over for you. If you're thinking about phone numbers, I just want you to think openphone.com slash twist. That easy, folks. Just to like TLDR, what you're really saying is that the white paper and the concept of Bitcoin had to be created first, understood, made real, and then entrepreneur. And that that was always the plan, that there would be this foundation built and then people would come along and build on top of that, like an operating system. Yeah. Even Satoshi even alluded to that. That's exactly right. Yeah.

Okay. Now tell me about your product. Like who, because you have, this is a real thing that companies are plug into, right? Twitter is using it. Tell us about some of the other companies that are using your API. Yeah. So we just partnered, I think the most like, whoa example is we just partnered with the biggest point of sale system in the world in NCR.

And we'll be turning on hopefully merchants like Wendy's and, I don't know, I'm looking at the calendar, like very soon. This is such a like, holy cow moment. And, you know, to break it down for the audience, what actually will happen is traditionally when you've walked into called Starbucks. For the last 50 years, you've had four options to check out, which isn't necessarily. fairly intuitive. Those four options are American Express Visa MasterCard Discover. And maybe you use your Apple pay or your Apple card or your cash card or your chime card, but those are all running on

those payment rails. And we're plugging in a fifth one for the first time in 50 years. And that fifth option is Bitcoin's lightning hour. And it doesn't mean you're spending Bitcoin or dealing with the volatility or the tax consequences. What actually now is going to be able to happen is that an app can have you walk into Starbucks and you wave a QR code at the machine. It's going to take dollars out of your app, turn it to Bitcoin, zip it over to Starbucks, turn it back into dollars. There's no delayed settlement. There's no concept of interchange. That's an amazing concept. And to just illustrate how disruptive this is, right now, NCR's market cap, for example, $5 billion, VAS is $500 billion. And, you know, what the market's implying is that NCR is

just a gateway messenger to the inevitable settlement between banks and Visa. And now NCR can actually settle the payment for Starbucks themselves, because in receiving the message that it consumer wants to pay, they also receive the money. And with our API, we help them do it in a compliant way, in a way that auto converts to dollars. We deal with all the programmatic trading, the volatility risk, and actually interfacing with the complex cryptography to where Starbucks just gets the instant dollars. But then in that flow of funds, the money goes from a consumer straight to NTR and Starbucks, and Visa and Chase Bank and Bank and Bank of America are never involved. And so that implies a massive value transfer, where if those businesses are worth $500 billion

and highly predicated on the thesis that in order to spend and use and receive your money, you need them. Well, now all of a sudden you don't. That's being dematerialized by this open distributed payments network. And now the new winners will be those that compete and develop the best experiences on top of it. Right. I feel like I completely understand this when it comes to international money transfer and remittances. Why is it better?

Like, break it down why it's better for Starbucks? Like, why is it better for them to settle money this way other than the delay in debt settlement? I mean, I know credit card processors charge fees. I assume there's a fee here too. Yeah, it's just like unbelievably small. But we can... Yeah, so just to walk through in layman's terms, Walmart, I want to buy $100 of stuff from Walmart. And Walmart banks, Bank of America, I bank at Chase.

I swipe my card. The point of sale at Walmart is going to call Bank of America and say, hey, someone's trying to pay us and give the card info. Bank of America is going to realize that the first numbers of three, that's a Visa card. And they're going to call Visa and say, hey, who issued this? Someone's trying to pay us. Visa is going to realize Chase issued it. They're going to say, hey, Chase, is Jack good for $100? Chase is going to say, yeah, we'll settle that later. I think he's good enough. His credit score is fine. And then tells Visa, Visa tells Bank of America. Bank of America tells Walmart. Out comes the receipt. I sign it like the Declaration of Independence, and we move on.

Now, this future settlement, now Walmart is beholden to the banks and to the card networks, actually get the money. And traditionally, they then take 3% of it. And it's very slow and inefficient. And then the more brutal thing is there's no innovation in there. Like that user story has not innovated for 60 years. And so it's kind of pain society, a lot of people in America, and then obviously around the world, billions of people are not included in the financial system that I have. And it's very expensive to the merchant. The merchant burdens the tax that our economy is run on debt and credit. And that's not fair. And so now if you're Starbucks, I get, when I get the message someone wants to pay me, so the proverbial swipe the card,

in there is also the money, in there is also a physical instrument. It doesn't mean you got to put Bitcoin on your balance sheet. Our software auto converts and just gives you the dollars. We interface with the Bitcoin. But then you never have to be reliant on the banks and the card networks to settle later and take egregious fees and artificially inflate what they're doing. And then so Starbucks can even start driving like flywheel consumer behavior and say like if you use like cash app and strike to check out with us, like we'll give you a free

capcino every third one or whatever, right? But they're saving on fees, their money settles instantly, and they're getting more customers. It's more inclusive because it's a crazy concept that some kid in high school could be taking a programming class and build his own wallet and check himself out at Starbucks himself. No regulatory license, no bank, no sufficient balance sheet. It's because it's an open payment standard.

So it means more business. It means cheaper fees. It means better access to capital, working capital, control. constraints are lessened. Just a better, like, world, really. You know, no big deal. Just a better world. It is. I mean. All right. Listen, Reforge is a career development platform for top tier professionals. People who work in growth, product, marketing, and engineering. These are like the four pillars of your company, aren't they? Growth product marketing engineering? Are you making those four

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You want to apply for membership today, and you have to apply. Reforge.com slash twist. Applications take under three minutes, and if you get in there and you're accepted, you're going to become a super executive. You're going to be a real contributor to your team. Apply at reforge.com slash twist. R-E-F-O-R-E-F-O-R-G-E dot com slash twist. How do the fees compare?

I mean, I'm saying that, you know, for example, like Visa and MasterCard clearly are feeling very comfortable. They just raise those merchant fees. And you're coming along like, thanks, thanks for that big present. Yeah. So, I mean, our personal fees as a business, they vary. But what I think is the really amazing illustrative point and like how powerful of business this could be is our gross margins are 99.9%.

Right. And it's an, it's a concept similar to the internet is that like before distributing movies was very expensive. You had to have relationships with movie theaters or blockbuster and pay employees to run them and you have rent and all of these fixed costs in order to conduct the service. And then all of a sudden Netflix came along. And because of a digital network, all of that was dematerialized onto this open digital network and Netflix distribution for movies was free. Their only fixed cost was electricity. And they won because they had the best experience.

And I think it's very similar where Western Union, they have all these costs and employees all over the world. They're paying rent in 190 countries, right? All of a sudden, I can escrow value anywhere on the planet, and the only cost I have is to run a Bitcoin node because this open digital network is doing the job that they had done previously. And so for a Walmart, I could charge Walmart five basis points. That's 100% gross margin. And Visa can never compete with me, right? We're perfectly counterpositioned in that way.

So it is highly dependent on the scale and size of the merchant and the relationship, but the whole concept is that we'll always win on pricing, will always went on experience because the payment network under the hood is just plain speak superior. What is the risk factor to you from volatility? I mean, I know the transfers happen fast, probably the conversions happen fast, but for a while there, so did the volatility. We don't have any, which is surprising. A little bit about my, my, I actually don't, I was going to say my background. I don't actually have a background, but my family comes from Chicago finance. So my grandfather was chairman of Chicago Board of Trade and helped invent agriculture commodity derivatives.

The whole reason I give that context is because that's risk transfer. That's what a lot of markets in these trading firms, the product they're selling you is soaking up the risk. And so I knew that by the time I was 10. And so that's we take on, assumingly, this risk, but we interface with different liquidity providers and partners that are giving us quotes in real time. Our software is accepting them in real time. we're transferring that risk onto them and executing. So our balance sheet remains flat. And why would a trader take on that level of volatility?

Well, like, that's why Ken Griffin is worth a kajillion dollars is because he sells the ability to transfer the risk onto him and he makes money on it. And so it's actually very simple. It's just how markets work. Yep. I feel like the thing I don't understand, there are two things. One, it feels to me that you have, this is the thing that makes Bitcoin part of society. Like, you've solved this question of like, how do we use this?

So the two things I don't understand about this is, how come no one did it before? And why have you only raised like $18 million? Like, haven't you just unlocked all of the potential of Bitcoin here? I'm not trying to butter you up here. I'm just trying to make sure I understand this correctly. I'd like to think we are. I also, though, want to delegate and pass that along to the Bitcoin as a whole. The way I think about it is it's an open network.

And the thesis of the whole business is the network is going to defeat all these old, segregated, independent closed payment networks onto one giant open one. And so it implies that there will be many, many winners, right? Like how valuable is Google if they're the only website on the internet? Not very valuable. The internet implies there's many participants which allow many winners and many new experiences. So I appreciate the compliment. We're one of though.

What is the hopeful many, like cash app just came on. That's a beautiful thing about the business is it's the network effects. economies of scale are astounding. All of a sudden, with cashab and Robin Hood, I just got a hundred million new customers that could check out at my merchant partners. And I didn't do, I didn't do anything. I was probably sleeping when they announced that. You could say, if you wanted to. Okay. I didn't do shit. And so that's, so I appreciate it. But that's a amazing property of the business. How much of we raised? We've raised more than that. I think, so it was like 15 million and then another 18. Is that right? That's probably what told you that

crunch base. We've raised more and I think probably in a month or two, the world will know how big we actually are. But no, for me, I find, like, I don't know, I just reverse engineer about success and what that looks like for us. And more oftentimes than not telling the world how much we've raised or valuation or employee size and stuff has not actually been additive. So we've been pretty close to chess, not for any other reason than just hasn't been helpful. But we've raised more than that. I think we're a little bit bigger than people may think. Well, then what crunch base thinks, that's for sure.

I mean, honestly, I find that reassuring because I really was like, is there something fundamentally that I'm missing about this? Because it feels like you should be a way bigger deal. So I'm happy to know that you are quietly a way bigger deal. Who knows? I, the beholder. We'll see. We'll see. what do you think about we recently interviewed an investor who is like much like you i think sort of lightning

no pun intended laser focused on the lightning network and the the opportunities that are contained within bitcoin unrelated to dot eth a h in your profile name and the nfti step and i would be remiss if i didn't ask you like what do you think about all that other noise or the board apes drop over the weekend that you know raised 285 million but cost buyers and under extra, you know, $176 million in gas fees. Like, do you just tune all that out or do you worry about it impacting the reputation of the whole space? I don't, I used to think it was damaging the reputation.

At this point, I know it not to be because we've still been able to make these partnerships and articulate the superiority of Bitcoin as a payments network to the people in the world that matter to hear it. What do I think about? I think it's all garbage and nonsense. and it's just an unfortunate distraction that I've matured enough to not let impact my view of the world. But the way I've always thought about alt coins, as they're called, or alternative cryptos or other cryptos, is an arbitrage on the trend.

It's both a regulatory arbitrage and an informational arbitrage. There's a lot of excitement and a lot of demand to invest, especially during today's inflation. I mean, the Federal Reserve has effectively perverted risk tolerance across everything, and whether the consumer knows it or not, they have to get out of dollars. And that's a huge opportunity to, one, create new money and get a big VC round and sell it to dumb people, or uneducated, I should say, not sufficiently educated. And then it also is very helpful that the SEC hasn't gotten around to regulating these as securities, which they are, both by law and just morally.

And so you have a regulatory arbitrage and an informational arbitrage. And so I think this is just an arbitrage trade. and they will have a short lifespan because they don't actually make logical sense. They only make sense given the market structure, which is what an arbitrage trade traditionally is. So I've called them an arbitrage in the trend for quite some time. And I've learned to, again, it's not helpful to what I'm trying to accomplish. So I just kind of ignore it.

Yeah. What are, as you grow your business, what are the other, and as Bitcoin reaches mass adoption through this ease of use that you're enabling, basically. What are the other parts of Bitcoin finance that people are going to have to learner understand? Like, are they going to need to figure out storage? Certainly. Again, I think, like, the best, one of the best qualities of Bitcoin is it's open. And so if you think about our infrastructure is the Bitcoin network, PayPal's infrastructure is the PayPal network. Our infrastructure is getting way better every single day with way more people working on it.

And it's because it's open and we share in the work of the world. And it actually exceeds far more than that intuitive network effect like that. Like we also get way better quality employees. Our turnover is basically zero. Like no one's definitely passionate about the chime network. People are very passionate about Bitcoin and what it represents to humanity. And so there's a lot to resolve of, but I think people are underappreciating the pace where in which this is all happening.

Like I actually, our seed round closed two years ago. This is remarkable. And so, yeah, there's a lot of things to work out. I think what I'm most fascinated by is the various experiences that people are going to develop on this open thing. So we have one very particular one where we let you escrow dollars or what we call cash collateral euros pounds over this payment rail. And we think because Walmart wouldn't be able to accept payments over the Bitcoin network if they weren't received as dollars. They don't have the correct accounting and compliance oversight and stuff to do so. But that doesn't mean it's the only experience.

And I like to think of this is going to be like a renaissance of innovation and payments because we haven't had an ability to have full control over how money is settled. And now we do. And so I actually am just really curious to see entrepreneurs, open source developers, and everyone, like, how would you like to check out at Starbucks given there's an open payment standard that could check you out? I don't know. Maybe there's an app that you can't check out until you do 20 pushups measured by your aura. ring because you want to get in shape.

I don't know, right? But like, that's the type of cool, cool things people can do. So, oh. Yeah. What are the, this I swear, this is my last question. What are the, what are the dominoes that fall in your mind that, you know, like you said, that the ultimate end here is people have to get off dollars even if they don't know it yet. But before that is it, Walmart says, we don't take visa in MasterCard anymore.

We just use strike API. Like, and then, you know, and then what starts to get us there? What are the, like, key milestones in your mind? I think you kind of said it. It's just growing interoperability. An open network is as strong as its participants. Every single new participant is not subtractive, like a competitor. It's actually additive into strengthening the network.

And so I think our mission, since day one, was enabling the world with this network and getting as many people interoperable as possible. So I think the network effects really take care of themselves. And, yeah, the domino effects. not exclusive to Visa and Chase. I think Chase should build a lightning network checkout and convince their consumers. I would bet that myself and Jack Dorsey are going to be better than them at that. But maybe people, maybe if you'll think Jamie Dominic can build software, I don't know.

But I think as we grow in our operability, the economic incentives are there, the societal incentives are there, the inclusion incentives are there. I mean, everything is in place where the network affects economies of skill should really take hear themselves. So yeah. And I think the last thing I'll say is some of the partners we talk to, there is this kind of looming doubt without like official regulatory clarity. I've been very fortunate to work with Senator Lomas and other policymakers on ensuring that, I mean, I think the DOJ is having a hearing with banks now on swipe fees. And, you know, and so I think, you know, The U.S. government, the world should want to empower this payment network to move us all forward, suppress pricing, include more people around the planet to be able to make payments anywhere, cheap and fast.

And so I think maybe the last big milestone would be a bit of regulatory clarity, like, hey, this is not a security. This is a real payment standard that we want to see more Americans using and we want to support merchants and their ability to integrate it because it's better for pricing. It's better for consumers. It's better for inclusion. So I think like that staple would mean a lot, and I think it's coming. but I don't think it's necessary. But if there were to be like a big moment, like, oh man, like floodgates come off. Here comes Jeff Bezos. He's going to build his own thing into Amazon.

It's probably the regulatory clarity that it's worth Amazon's time right now. Action Jack Malley at strike.m.e. I feel like we're going to be hearing a lot more from you. Thank you so much for the time today. Thank you. I appreciate it.