Bitcoin Wins Because It Is Open

Hi and welcome to Stephan Livera podcast, a show about Bitcoin. Today, for episode two hundred and sixty-nine, I'm speaking with Jack Mallers, and we're talking about what he's doing with Strike, a really great application that allows people to pay with Lightning but using fiat, and we talk about his experience visiting El Salvador, increasing financial access. Yes, Bitcoin for remittances and why Lightning and Bitcoin will win versus fiat fintech and why being open fundamentally matters. Why does it matter that it is interoperable, as well as talking about what's happening with Strike and the expansion plans there?

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Yeah, Stefan, thank you for having me. Big fan of the show, of course. Congratulations on all the success since I've been on the show, a rapid and, avid listener. And, I'm pumped, man. I'm pumped. Good to see you, buddy.

Yeah, dude, you've been up to-- You've been really busy, so we've got to get into what you've been doing lately. I

Okay, one of the big, initiatives that we're most excited about at Strike is our ability to deliver financial tools to emerging and developing markets. we think that Bitcoin as a monetary network, is the most inclusive, accessible monetary network of all time. we view that as just an empirical fact. And so El Salvador is our first non-US market, was, very purposeful, and it was a market that is dollarized, they're exposed to the- Asset inflation that's developing here in the United States, although they're not getting any stimulus checks, right? Yeah. They don't have the financial access to buy a lot of the stocks and bonds. They're just swimming a bit naked. When the US raises rates, they're in a lot of trouble. they're the sixth ranked, inbound remittance destination from the United States, over twenty percent of their GDP, well over twenty percent now, bordering twenty-five percent, i-the country's GDP is, inbound remittance. And so we view it as an awesome place That has already taken a keen interest in Bitcoin, to explore how we can use Bitcoin the asset and Bitcoin the network to just improve the quality of life and financial access and inclusivity, in the country, and then hopefully learn a lot and be able to replicate that to about two and a half to four and a half billion people that lack the financial access that maybe you and I grew up with. And so from a super high level, that was the initiative, and it was a blast, a ton of fun, something I'll never forget, and I'm more than happy to talk about

I mean, so you're saying sixth inbound in terms of, like so essentially the point is there's like a big diaspora, right? So I guess there's a lot of people overseas who are sending money home to their family, let's say back home, and, you know, this is where they're, you know, currently using some more fiat, kind of processing ways of doing that, and you're looking at ways to actually go, hey, we can use Bitcoin and Lightning here, that's what you're seeing, right?

Yeah. So you're talking about a Hours. El Salvador's closer to Miami than New York, and so you're talking about a country that really borders the United States. They're dollarized, they've been dollarized since, I believe, two thousand three. and so you have a lot of family that migrates to the United States and sends money back home. The best way I like to describe it is comparing what Robinhood did for retail brokerage. And, lo-- Give me a sec, this may turn into a rant, but I think it's really important. In the early days of Robinhood, the concept of commission-free trading 'Cause they're talking to really rich investors that are trading, trading five hundred thousand or five million dollars at a time, and they're like, "If you're saving us one to two percent on that, you know, brokerage fee, we don't really care because we're trading millions of dollars. That's not very appealing." But the point of Robinhood is there are actually people that want to trade ten dollar lots or fifteen dollar lots, and because the fixed costs associated with traditional financial brokers, they-- there's no such thing as trading ten dollars at a time because the minimum fee is like thirty You, what Robinhood ended up doing is authoring a new financial market, which allowed retail investors to invest any size, commission free, and that was the novel concept that a lot of early bigger investors totally whiffed on, is that there was a, a market that wanted to exist but couldn't because of the fixed costs associated. And so we like to think of the remittance market to and from El Salvador the same way, is that these are people that are remitting a hundred dollars a week, twenty dollars a week, and- And because of the fixed costs associated with the SWIFT network and with the fiat legacy system, you're talking about fees that are upwards of

thirty-five, forty, forty-five, fifty percent. and so the town I was living in, these people bus about six hours to the local Western Union, they wait in about a four-hour line, it's a full day's worth of chores to pick up your remittance money, and on a hundred-dollar remittance payment, they ended up collecting around like fifty, sixty bucks. And so that is a terrible experience, it's not a way to live These families working capital and income, you realize like, oh my goodness, this surely is a problem that we can solve, and why can we solve it now? It's because we have an, an open monetary network that can achieve cash finality, financial clearance. It's global, it's twenty-four seven, there is no middleman, and there is no fixed associated cost to execute and achieve final clearance. And so we can physically escrow real value in real time from the United States to El Salvador at virtually- No cost, and instantly. And so then it's about learning, in the environment there and crafting and building an amazing user experience to allow for them, to switch over remittances. And so that was the initial use case that we really wanted to learn more about. And, and on my trip, there's a plethora of ways now that we plan on being helpful to El Salvador. But that's kind of the introductory mental model that I came into the country with, is in, if that makes any sense.

Yeah, that's cool. And so obviously, I'm a Bitcoin Promoter myself, right? But I, when I talk to people, sometimes they'll say things like, "Well, why don't you just use TransferWise or why don't you just use one of these?" You know, one of the-- and, you know, maybe they could come back to us and say, "Well, hang on, you guys are big on Bitcoin and Lightning, but why don't we just have more fintech or fin-- you know, some fin UI maybe, and some of these company-- why don't we just have more competition there? And then that's

You have to zoom out a little bit and understand why Lightning is such a monumental advancement for money as a technology. It's because Bitcoin itself is, it is physical value, it's a bearer instrument that's natively digital. We've never had that before. And so, firstly, there's no sense of credit within the Bitcoin or Lightning network. there's no sense of balance sheet float. It's that a transaction actually completes the full vertical length of initiation to finality in one second, and it's usually effectively free when compared to other monetary networks. And so we- When you have that insight, yes, can we use something like TransferWise at a relatively small scale? Sure. But at a tremendous scale, you take on a lot of balance sheet bloat and float, credit risk, counterparty risk, where now you have a monetary network that can move an escrow physical value anywhere in the world, twenty-four seven, three sixty-five, and carries the liquidity profile in any currency that you can just get in and out of it. It's now well over a trillion dollar asset and carries the necessary volumes that other commodities require. To for sufficient liquidity for financial institutions to interact with, and so that is just plain innovation in money as a technology, just plain and simple. And so when you think about our offering in cross border payments, we have no fixed associated costs, we have no counterparty risk with any financial institution that we interface with, there's no sense of credit, and our working capital is tiny. We only need working capital to make and receive lightning payments, we don't need to post euros somewhere, post dollars in El Salvador. Because as soon as the physical value of a Bitcoin gets to these places, we can interface with any financial counterparty that trades Bitcoin and then just swap it in for local currency and dispatch it to the user. And so it's tremendously scalable, it's efficient, there's no fixed costs, it's cheaper, it's faster. And then the last thing with this monetary network is it's open, which is huge. Now, throughout human history, open networks defeat closed networks, and this is exclusive of monetary. This is just generally, the internet beat the Intranet, open networks carry default inherent economies of scale and network effects that just make them absolute monsters and they dematerialize the closed competitors. And the, the way I like to describe this is, Cash App, doesn't like Venmo, and Venmo doesn't like Cash App. In a closed network, a competitor or another participant is subtractive. If they're not using Cash App, they're using Venmo, and so you can't share users. In an open system, that's not true. Every new network Participant is additive to the network, it strengthens the network. And so for example, now these people are receiving remittance payments where they're natively interoperable with this new open system, and there's already merchants that accept Lightning payments for groceries, for your phone bill, I paid my hotel bill, with the Lightning network. And so we also have the added benefit of this open monetary network that gets stronger and stronger and stronger. And so for all of those reasons, Lightning-based cross-border payments, but just, you know, using an Oh, exclusive of Lightning and Bitcoin, if you don't like Bitcoin, I'm not here to convince you that right now. but an open monetary network versus closed monetary networks in theory should r-author a tremendous amount of disruption and innovation, and, and that's really one of the high-level thesis we carry at Strike is there's gonna be a lot of winners in this transition over to open monetary systems, and we think Bitcoin and Lightning is the best monetary network of all time. So there's, end, end my rant there.

Yeah, no, that's really And when we think about, I guess one way to put it is being interoperable is important, right? It's like this idea that I can pay you without worrying, I, I, you know, I can be on, you know, Zap Wallet and you can be on a different wallet and I can still pay you and we don't have to try and be on the same exact wallet and same exact setup. Whereas in the fiat world, there's a little bit more of that where if you try to cross into some, if you try to pay into somebody else's, you know, little walled garden Fees doing that, and I think in some way that's what Lightning is helping us do is we're making this open, interoperable network that anyone can pay anyone, and you don't have to sort of worry about those, those fees that you end up, like 'cause someone in there is clipping the ticket on you. I mean, look, of course, there's lots of things where someone is clipping the ticket, but it just, it dramatically lowers the fee, it's probably the point, right?

That's exactly correct. And the way we think about it at Strike is in an open

9% plus 30 cents a swipe like the Visa network does, because you can't protect an open network. We don't have a safeguard on who gets to transact on Lightning. It's an open system, the specification is public, and you can join the network and leave the network as you please. And so with that level of understanding, you understand it's a race to the bottom, you understand that performing on the network, there's no justifiable cost and revenue stream you can push onto users, it's a commoditized business. And so we believe at Strike that the winners, there That the winners will deliver the best experience and the best brand, and so we constantly are optimizing to the best experience to where we believe that these interoperable QR codes that you're describing are gonna pop up more and more in our lives to pay for coffee, to make a cross border payment, to have a subscription to a podcast, and we want Strike to be one of the many, like, popular ways to scan it, and Strike allows you to not spend the Bitcoin that you hodl to pay it. Strike avoids taxes and accounting, liabilities. Strike avoids any volatility. The issues, strike abstracts, all the technical stuff, and we're con- we overinvest in customer support, we're constantly optimizing for the best experience. and you're, you're exactly correct, and we think that an open system will remove intermediaries, middlemen, unnecessary charges, and that in an open system, it's a race to the bottom, that, it, it'll cost, what it costs to execute, and no one else will have a justification to charge more than that, and, the winners will be those that have the best experience It's in the best brand and the best stewardess of, of, of Bitcoin and the open source software that enables all this stuff.

Yeah, awesome. So let's go back to the El Salvador example. So current world, in the fiat world that is, they're paying thirty-five, forty, fifty percent fees. what's the, you know, what's the opportunity and what's the experience look like when, they're trying to use Strike, for example? Or I guess, can you talk a little bit about what, what's the current model, being used

No, and our numbers are explosive. We're seeing fifty to one hundred percent day over day growth in all the important metrics, it's been tremendously fascinating, and I'm actually going back in three weeks because I have some unfinished business that hopefully I can talk about on the podcast at a later date. But, here's the experience, is that we have a very rapidly growing user base and a large user base now here in the United States, and we use Lightning to connect independent financial institutions, regulatory parties and such, and so- So we have, certain entity that is domiciled outside the US, and we have certain counterparties, trading institutions, regulatory and compliance institutions that we interface with for non-US customers. and we're able to, if someone in the United States wants to send one hundred dollars to El Salvador, what we're doing today is we're debiting the one hundred dollars from their US checking account. So Strike, you link a US checking account, and you can make any Bitcoin and Lightning payment with your dollars, which is a mind-bending experience. And how that happens is we debit the dollars from Your checking account, we live convert it programmatically into Bitcoin on the Lightning Network, we send the Bitcoin over the Lightning Network to another financial institution, to an entity we own elsewhere, to another bank, to another service, and that physical settlement between us in the United States and the non-US entities that are the counterpart to El Salvador users happens instantly and at no cost. And then right now, we're converting that back into a stablecoin for them, although we just established some relationships with some local banking partners in El Salvador. And we'll be able to convert, and that's, we can convert to euros, British pounds, Australian dollars, and for El Salvador, they are now holding this USDT stablecoin, which is the synthetic digital dollar for them. the reason that this is so cool is you'd think, well, that's kind of unfortunate once they get the dollars, that they're effectively US dollars, like it's volatility and it's backed by dollars and such, but they're not spendable over the Visa network, how you go grocery shopping and such. What's amazing is there's already all these ATMs There's all these off and on ramp manual services of people buying and selling Bitcoin in like local meetups and such, and there's already over twenty five merchants, in the town I was staying at that accept for groceries, living, bill payments, and so people are actually receiving their remittances and able to cash out into local currency or able to just spend it and live off of them. And so our remittances to El Salvador users, they're instant and they're free. Not only so, but they're the convenience to your mobile phone, so you don't have to take a It's not a ten hour chore, it's at the convenience of your cell phone, comfort of your home, costs nothing, it's instantaneous, and then it's a more convenient way to spend money. Now, it, it's a balance that lives on your phone for all of us that are really familiar with the experience of linking your bank account to your phone and having a debit card in your pocket, a lot of these people aren't, and, just watching them experience that for the first time was pretty tremendous. And so that's what it is today, and yeah, we

I think, you know, with Bitcoin and Lightning Network, we can give a developing world experience to an emerging market, and that's kind of our ultimate goal.

That's cool. So they are receiving USDT, and so is that into their own, like, they have a-- So, I guess, walk me through the flow here. So as an example, there might be someone from El Salvador who's living in the US, and they wanna send money to their family back in El Salvador. Yeah. And so that person in the US, they link their bank account with Strike, and then they are paying Family member back home in El Salvador, and then that person back in El Salvador, they've got it on a, on the, on, on the Strike app also, or are they taking it to another wallet app, or how are they then paying?

Could be either or. They, like a lot of people now have Strike, but if you have another Lightning wallet that you want, obviously we're natively interoperable with it, right? We're all built on the same open standard. But yeah, we work with a partner. To be clear, we have no interest in doing, having anything

Ethereum nodes, so we outsource that. At the end of the day, we're trying to solve a problem here, and I would love to integrate with, Blockstream and Liquid and do some more innovative things there, but I'm, I'm only one guy and only so much at a time, so we outsource that relationship. So our interfacing and swapping, into USDT is with, a partner of ours, and so that's what happens, they custody on behalf of the user. But, yeah, that's, that's how it works.

The integration is public, the, the specifications are on GitHub, right? But that's how it works. Nice.

Yeah. And then so, in-- for that person in El Salvador now to spend, are they just basically going to an ATM to get cash out or how do they then actually spend that money?

Yeah, so let's say I'm, I remit one hundred dollars from the United States and that becomes one hundred synthetic digital dollars to a user in El Salvador. What's really cool about Strike is those dollars are spendable over the Bitcoin and Lightning network, so I can, I can Pay any Lightning QR code or Bitcoin address with that dollar balance. And so a lot of users will walk up to an ATM or will walk up to a local Bitcoin broker and say, "Hey, I have one hundred dollars on Strike, I'm gonna scan this QR code, can you give me one hundred US dollars in like physical cash?" And they say, "Yeah, of course." And what's happening is Strike's debiting the, the stablecoin, sent-- paying the Lightning invoice or the Bitcoin address, and that's converting to Bitcoin, and then the people then are giving them cash in return. And Like the ATM is like, okay, you wanna give us Bitcoin and we'll puke cash out for you. Here's the address, the user scans the address, we debit the stablecoin, Bitcoin goes to the ATM, the ATM pukes out, local currency. And it's really an amazing, fascinating experience. We're actually in a growing beta in the Philippines as well with the same experience, and that's, they're not dollarized at all, right? They're, they're interfacing with localized currency. And what's amazing there is that we didn't coordinate with the ATM company.

Because it's an open system, because it's an open network, and open networks have these network effects that are so apparent and so powerful. For PayPal to duplicate this experience, they'd have to get the banking relationships local in El Salvador, they'd have to change the law a little bit, they'd have to implement all their own ATMs and get their own merchants. We didn't do any of that. We didn't pitch Bitcoin to anyone, we didn't set up any of these merchants, we didn't set up any of these ATMs, we just showed up with an interoperable service with an,

Yeah, that's very cool. And so in that way, you are leveraging the infrastructure that is already out there, but doing it somewhat- Obviously, there's regulation, and, you know, I'm not a fan of regulation, obviously, but we, you

know,

to some extent, you can sort of interoperate, in a way where you're not having to be as permission-seeking in some sense. So I guess in some sense, you are relying on there being, let's say, Bitcoin ATMs in that local country, and perhaps local Bitcoin traders who are doing, you know, cash local people in that country to be able to then actually, because unless they can spend Bitcoin natively, they will need to get the local cash, and that's where they're relying on these, points, right?

Yeah, and, and so our experience in El Salvador is so powerful because we saw massive uptick in downloads, massive uptick in user volume and just general sign-ups and interest. We were all over the media locally there, and then all of a sudden we got contacted by banks, we found an issuing partner that was willing to issue Visa cards to all of our users, and all of We became potentially one of like the more powerful financial experiences in the entire country. And so that's a very awesome case study of what we plan to replicate all over the place. But one interesting insight quickly is, you'd be surprised, there are on and off ramps everywhere in the world for Bitcoin, and we didn't, again, we didn't do any work for that. that's just part of the network effect where we're built on top of a system in an asset class that's growing in popularity, growing in its ability to impact and change Change lives and improve the quality of people's life. It's the best savings technology of all time, it's the best monetary network of all time, and we benefit greatly from all the work that's continuously poured on day in and day out from others. If you think that we're built on the Bitcoin network and PayPal's built on the PayPal network, we technically have more people working on our network than any other monetary network in the world, and it's not particularly close. So Strike gets materially better every single day, and we don't have to do anything. If I told everyone at Strike to take the rest Strike would be a much better product by the end of the year than it is today. PayPal can't say that, Square can't say that, Visa can't say that, and so that's just the inherent network effect is we can pretty much launch in any country and know that there's local liquidity and local interoperability because the Bitcoin network has reached that level of scale, which is just, it's, it's fascinating.

Yeah, it's really fascinating when you think of all those people out there developing in Bitcoin and Lightning. Let's say some Lightning protocol developer is doing some advancements on the Lightning network and- And then that shows up later in, you know, improvements in the way we route our transactions or the way we use Lightning wallets, it just improves the experience for everybody, and you're just kind of plugging into that network, right?

Absolutely. One of the fun examples is Bitrefill, they traditionally sell mobile top-ups, now a slew of gift cards, but we have users in Florida that are using Bitrefill to remit, and they're using mobile top-ups to do remittance, and someone who's very new to what we're doing, what Bitcoin is, how open- Networks work, and the network effects and economies of scale associated would be like, "Oh, that's a competitor, aren't you upset that they're, they're not using Strike as their full length remittance?" And our answer is absolutely not, absolutely not. In fact, Bitrefill is a new network participant that's natively interoperable to us as additive, as, instead of subtractive. We don't view them as a competitor, nor do we view anyone within the Lightning and Bitcoin ecosystem as a competitor. We're all natively interoperable with each other, and at the end We're confident in our ability to continue to deliver on that. But that's another really fascinating thing is that people are carrying out their own form of remittances with other interoperable services. We don't have an MSA with Bitrefill, I didn't ask them permission, we didn't like spec out our own interoperability within our internal database or anything, just works out of the box, it's crazy.

Yeah, that's really cool. And so what was the experience like when you were down there in terms of people there learning about Bitcoin? Because obviously there's a lot here to learn, but You can chunk it down and put it into an app and make it some parts of the experience a bit easier so that people can use Bitcoin without necessarily, you know, knowing the technical details of how the channel open and close and all that stuff works.

Yeah. there's a few things that are very apparent. one, people understand deeply how valuable Bitcoin is as an asset and as a savings technology, and no one's incentivized to spend it, right? Nobody wants to get rid of their Bitcoin, their UTXOs, their sat- And so Strike providing you a way to be interoperable with this network with a fiat cash collateral, which is a feature we take pride in and that I think is very valuable, was very important. the, another is volatility. I was staying in a, in a town where the average income is three hundred dollars per month, per month. And so if Bitcoin has a bad day, you're talking about wiping months and months and months of living wage away from someone. And so that is very scary to merchants. And so- So a lot of the assumptions that I was making in a privileged chair here in Chicago, being able to experience that and verify them and greatly understand the ideal experience for a user there, it was really valuable. But I can tell you my biggest takeaway is how it's impacting the way they view themselves and think of themselves, and I hope I do this justice and I'm able to articulate. But I built a relationship with this local town and this local community, and there's one gentleman in particular where we sat down over lunch, and he began to describe To me that his grandfather was a fisherman, his dad was a fisherman, and thereby he was gonna be a fisherman. He didn't have access to generate yield on savings and build wealth. He didn't have access to Robinhood account. He didn't have access to the financial tooling that I had, and he didn't view himself similarly to someone like me, and he viewed himself as nothing more or less than a fisherman until Bitcoin. All of a sudden, when Bitcoin rallies ten percent, Michael Sailor makes money, and so does he. When Bitcoin goes a hundred percent year over year average yield and hodlers rejoice, so does he. The QR codes that I scan here in Chicago will strike, he's interoperable and can scan the same ones. The instant cash finality benefits of the Lightning Network, he benefits from as well. And it was the inherent financial inclusivity, how accessible this monetary system really is to giving people a chance to build wealth and protect purchasing power. Wealth and protect themselves against, nation state inflation, asset inflation, and a lot of the nonsense that is authored by the fiat world, but then also the financial inclusivity where these people are now natively interoperable with the United States and with Europe and with a lot of budding services, that they've never had access to before, and it was just the way that they thought about themselves and the way they valued themselves and the way they now value their country, they feel included and, and it's a new sense of hope, and so this person in particular had been hodling Bitcoin And now started their own business. And that just small snapshot was such a powerful concept, and it's one thing for me to sit in Chicago in this like very privileged position that I'm learning, I'm now learning how privileged I was growing up and some of the, you know, having access to Venmo and PayPal and Cash App is something that I took for granted. and it's one thing to, you know, read online how open systems are important and how open protocols and open monetary networks like Lightning are gonna be really valuable and how Bitcoin is a savings technology that's a- accessible to people in El Salvador and people in London and New York is really cool. It's another though to have feet on the ground and shake that guy's hand and look at the emotion in his eyes when he's like, "Now I'm a business owner and before I was a fisherman." And that's just a mindset that Bitcoin enabled and the financial access that it's provided is something that's gonna end up changing my country, my community, my family, and that to me was like, it was a perspective that, I, you know, gathered from YouTube videos and reading Wikipedia, and it experiencing it. So that was the biggest takeaway for me.

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All the above. We actually now employ two people in El Salvador, and I tell you why. Obviously, we want a local presence, obviously their local expertise is very valuable to us, but the other is these people are overqualified to work at Bitcoin companies. They understand what Lightning is, how to scan QR codes, they have all the wallets downloaded, they've been hodling for years, they understand- Understand cold storage versus hot wallets. I mean, they really are very sophisticated bitcoiners, and I can tell you what, they care more than anyone I've ever met, and it should be for obvious reasons. And so, it's really tremendous, it's really tremendous, and it shouldn't be underestimated the impact that Bitcoin can have on the developing world and emerging markets, just how empowered and driven these people are in using Bitcoin to improve the quality of their lives, and they're equally as incentivized To help others because of the impact Bitcoins had on them, and it's amazing, they're as fluent as anyone I've met, and so much so that we've employed them. So I'm not just talking out of my ass here. I mean, I pay these people to be Bitcoiners now, and, so they're that good.

That's awesome, man. so in terms of, the interactions and, you know, like I know, at, at, the Bitcoin Beach Town, there is like, there's actually more of a So is that something you're seeing more and more merchants there in the town who are fully going full Lightning and not even doing like as much of the fiat or, I mean, in the sense that they are, there are people who might be earning in Sats and then buying things for Sats. You're seeing people like that?

Yeah, absolutely. And here's the thing, in an open system, people are gonna be able to elect their user experience. Like if you can imagine walking into a Starbucks soon and there's this natively interoperable open standard QR code People can pay that with Coinbase, people can pay that with Strike, people can pay that from the command line, people can build their own wallet that has their own privacy features and remain interoperable on their own terms. And so of course, there's people that want to earn and spend Sats, and they believe in a circular economy, they don't really believe in hodling as much as supporting, like, using Bitcoin as their unit of account and their transactional currency. There's a lot of people that don't. There's a lot of people that think Bitcoin has a lot of upside left and it's Their savings, and they only interface with the open monetary network that is Bitcoin and Lightning with Strike. and so there's a mix of it all, which I think is foreshadowing to the future world we'll live in, where the power is within the individual, the power is within the consumer, you can remain interoperable with a monetary system on your own terms. You can elect your own privacy tools, your own UI, your own color set, your own project, and that's why at Strike, we are constantly optimizing for the best experience, and, and we think we can help That a lot of people will elect to use to remain in op-interoperable, but we don't think it'll be the only one, and we don't encourage ourselves to be one either. So it was really fascinating. People, some people like Wallet of Satoshi, some people like a Bitcoin Beach wallet that they developed locally, and a lot of people like Strike, but they all talk to each other, and there's, no wrong answer there. So, you know, one of the really cool stats, I'm, I'm out here live pulling up, our internal dashboard, But, only three have been on chain. To give you context, we're like already in thousands, thousands of users and like tons of money transferred, and this market is the only market that is that sophisticated and interoperable with Lightning. That isn't not the case in the United States. In the United States, we see an absolutely massive amount of on-chain volume, and in this market, they're already like predominantly Lightning and, and on-chain transactions, unless, just Fiable so is kind of like a foreign citizen, doesn't make a ton of sense, which is awesome, I couldn't believe it.

Yeah, that's wild. And because if you, if the average income is three hundred USD per month, paying even one on-chain transaction, I mean, if you're paying, you know, four or five bucks for an on-chain transaction, that's, you know, that's a huge percentage of your income. So being able to do it on Lightning is imperative in that context. And so I think that's also an interesting one because at, you know, at Some levels, some people have to go custodial, because just sadly, you're not gonna be able to do, your own open and chan-channel open and channel close, because if each chan-- if each open is, you know, three, four, five bucks, that's very quickly gonna start eating into your income. But I suppose as you rise in income or in wealth, then you can start having accessibility to the more sovereign non-custodial experience, right?

Yeah, and I, I think a lot of the innovation that's been done by some of the Lightning project Products and wallets like Moon, Phoenix, and Breeze has been tremendous, and they're driving a lot of that cost down, and they're driving a lot of the UX up, and these are the, the trends that as Bitcoiners and just fans of all of the work that's going on in this industry, we love to see that. but at the end of the day, trade-offs are gonna be made by the market. It's a free market. There are no rules, there's no one judging or gatekeeping any of this, and so these people are gonna understand the associated costs and risks themselves. And, yeah, there are people there that use non-custodial wallets, but you're very accurate that the majority are using some form of custodial or some custodial service. And when they do wanna take an outsized portion and put it into savings, they do understand what cold storage is, and it works for them. And I think all of our hopes is that the non-custodial, you know, more sovereign experience will be justifiable both economically and from a user experience standpoint at some point in the future. But like I said before, in an open system I mean, I am a Moon user and a Strike user, and I think both of them make sense for me depending on the use case and, what I'm doing. And so I think people will, have the luxury of choice, which is, not typical. That's, that doesn't exist in, the world before Bitcoin.

Yeah. And as over time, as number goes up, as people start saving, they can potentially have, maybe even if they're custodial in a Lightning context, just for spending, day-to-day spending money, but then they could periodically you know, hardware wallet or some kind of non-custodial Bitcoin on-chain, even a phone wallet, right? And so you're custodial, but only for a small percentage of your overall stack, if you will.

One hundred percent, absolutely. Yeah, absolutely. And you're already seeing that locally in El Salvador, and I think you're already seeing that broadly through the Bitcoin community. You've got a lot of people on Cash App that buy Bitcoin and hold some there. They use a lot, or they store majority of their savings and their holdings in cold storage. They have Strike to be able to allow their checking account to be interoperable with this new monetary network, and they enjoy breeze and stream sats to you. And it's totally, it's totally justifiable to have all four, and there's a chance you use all four in a given day or given hour, and so,

Yeah, and, it, it also, I mean, you were touching on this as well, because there's different schools of thought or different philosophies, right? There are some people who, who are literally all in Bitcoin, have zero fiat, only earn Bitcoin, and only spend Bitcoin. And then there are other strategies where, let's say, you're doing more like a, you know, maybe like a Michael Saylor style, you know, you have some Bitcoin, but you borrow against those coins to get some fiat, and then you use fiat rails to just pay fiat.

And And then maybe some other people might do a strategy where they have, you know, they have mostly Bitcoin, but they have like some fiat buffer, right? Just to kind of do the fiat stuff that they can't, you know, they don't wanna do with Bitcoin. but I guess, I guess where, where I'm going with this is sometimes people have this thought in their mind of, "Oh, only hoddle, like never spend at all." But the reality is, in order for you to even get some Bitcoin, somebody else had to either sell or spend some coins, or, People don't mind. So you had to, someone else either had to sell or spend some coins, you know? And I think that's, that's an important point that sometimes we miss in the hodling. Obviously, I'm big, I'm big about hodling, but I think that's one point sometimes we miss in the kind of only huddle conversation.

Yeah, well, I'd be a little careful in that example because if you extend it very literally, there's a lot less people that are spending and selling because if you look at a chart, you'd notice that there's a lot more We understand as like a property of the system and a design of, of the asset itself, and we all were expecting it. But no, you're absolutely correct, and, people can do as they please. You know, one of the things that's apparent for, you know, three hundred dollars a month in income is, it's economically irresponsible to have one hundred percent of your working capital in an asset class that's gone down eighty percent three times in its lifetime, 'cause you just don't wanna expose your family to, you know, not being able to live. and so So, but, like, I keep repeating, it's an open system. You do whatever the fuck you want, and if you wanna do that, you have every right to do that, and that's a very beautiful thing, that's a human right to be able to make that decision on behalf of yourself, and behalf of your family, and whoever else you're solely responsible for. And, and so yeah, we see it, a lot, and I think it's a great and beautiful thing. But as much as, it requires people to sell Bitcoin and to spend Bitcoin for, you Seeing it less and less, which is why Bitcoin's gone from three thousand to sixty thousand plus in

a little over twelve months.

That's right. And so, I guess the other question people might have is, how are you able to do it for no fee? Like, is it that there's some fee elsewhere in the system that you're able to kind of cut through that and then that's where you're kind of getting a margin out of it? I guess, a-a-and I understand obviously there's some things you can say, some things you can't say, I-but I guess it's Like a long term sustainable thing, if there's no like profit for you guys.

Yeah, so we have a lot of different revenue streams. You know, the, it is interesting. There's, you know, a, a lot that I'll definitely be super public about, but a lot of these ideas I authored and, I think they're really interesting and I'd like the chance to execute on them. so here's the thing, and, a-and again, I'll repeat myself, in an open system, it's a race to the bottom and the best experience wins.

Walk into a coffee shop and there's a QR code that thousands of different products can scan, being the best experience is very high, it's a highly competitive field, and if you're charging me one percent to scan that QR code, I'm gonna do the one that's point nine percent or the one that's free. And so I think native interoperability to this open monetary network, which is the core value product that we offer, should be free, period. that there's just no way I ever plan on charging anyone that is the base level service, like what is Strike, why is it cool to remain interoperable with this new open monetary network, in my humble opinion, and I think millions of people will soon share that opinion. And so that's why I'm so hard set on native interoperability being free. how do we do it? Our trading partners right now actually don't charge us, they value the flow, we do enough volume. there will be a day though, like just to be clear, where they have to buffer in or we have to buffer in five basis points, ten basis points, fifteen basis points, but it will never get larger than that, and Only offer a fee that it costs us to execute so that it remains economically feasible. And I've already modeled out, like, hey, if these lines of business continue to go extremely well, we'd subsidize and I'd pay for those fifteen basis points to ensure that interoperability with this system is free. But, I mean, we have relationships with Visa where, you know, we offer-- we're gonna be offering a card where we collect all the interchange. We have big, big plans that are gonna be announced soon on the acquiring and merchant side where we have relationships. So we charge them for certain services. we have a lot of different plans, but I think what's really unique about this is it's the first time we've had an open monetary network, and in traditional monetary networks, you charge by blasting acquirers and merchants with interchange, and Visa makes all their money by just robbing merchants two point nine percent plus thirty cents, or they charge Cash App and Venmo to be interoperable with the Visa Direct Network, and we not only don't have that opportunity, 'cause in an open system, you can't justify that pricing, but we whole That's nonsense, that the world should move on from that and be better than that. And so we've been really innovative in the way we think about generating revenue for a financial vertical service that operates on an open monetary system. And so the reason I'm not like overly transparent and public about it is these are things I plan on coming out with in the next thirty, sixty, ninety days. And, I think it'll be interesting, I think it'll be fun. But no, I mean, everyone knows we're venture capital back, that we've got our start from initial funding and we

Now, but also you can look in our terms, we don't sell user information. I never in a million years would do that, but you can see that I'm legally binded to those words because it's in our terms of service. you can look at the quotes that we stream users, they are market rate, we don't charge anything, and, I will be the utmost transparent once we roll out some of these services and products and how I see the company, being profitable and sustainable for the next hundred years.

Awesome. Yeah, that sounds, well Regulatory burdens, right now. I'm libertarian, I'm anti-regulation, but we still live in this world and there's all this, you know, KYC, AML, sanctions laws, blah, blah, blah, money service license, whatever, MSB licensing, money transmission, whatever laws. There's thousands of them. So, how are you thinking about that stuff? Do you think that makes it more difficult to provide this kind of service, just because of all the AML, KYC, know your customer requirements and things?

Yes. I- I personally am not a fan of existing legal frameworks and regulations. I think it's not scalable either to deliver a global product, you have to comply with the various jurisdictions and independent, opinions on different jurisdictions on what Bitcoin is, how it should be taxed, how it should be treated, different licensing structures, and so on and so forth. I also though think it's not only, you know, on, on behalf of the company, but on the better half of humanity that we go through the process of under- Understanding and you have to understand that in get-acquiring these licenses and establishing relationships with institutions in places like El Salvador, what happens behind the scenes is a tremendous amount of education, and we're actually taking progressive steps forward in allowing people understand what is lightning, what is an HTLC, what is Bitcoin, how should it be treated, how are people thinking about it, and we're making progressive steps forward. You have to start somewhere, and, you know, we don't, as a company, hold the opinion that because we are in general disagreements of the existing frameworks and how- How policymakers and, lawmakers think about Bitcoin, that we just shouldn't innovate financially and do our best to move humanity forward. In fact, we overinvest in legal. I think one of the principles we hold internally as a team is that, you know, great feature can do one thing, a great team can do anything. And so we overinvest in our engineering team and our product team and in our legal team and to enable them to deliver the best experience ever. And, yeah, it sucks, it's really shitty. we also view it though as an opportunity to educate and hopefully push the world forward in forward-thinking progressive laws, especially in emerging markets that have an opportunity, to be a little bit more nimble and forward-thinking where the United States isn't really in an incentivized position to be changing laws and, and, you know, like making Bitcoin legal tender or anything. Like potentially in other places of the world, that's not so much the case. And so it's a lot of education and doing what we can to, deliver a financial service that we believe in. Yeah. Obviously

Yeah, and so I guess the current level of KYC with the app is that it does, you know, obviously there is KYC involved with the app, and I guess once you kind of go b-beyond certain thresholds, you're gonna have to go ask for more info and do all of those typical things, but so long as, you know, people can, are comfortable with that, then they are able to use Bitcoin in a very, tax-efficient way because they're not having to spend their own coins, they're spending somebody else's coins. So I think

Listeners to think about, and probably for many people, that makes sense.

Yeah, and, and we don't, I, I don't want to brand us as some like cypherpunk privacy oriented service. I think there are a lot of privacy benefits, compared to other custodial services. I think that as a company, as an individual, I'm more cypherpunk than other CEOs of exchanges and such. but with all that being said, it's, it's a KYC service, we're highly regulated. we also aren't-- we don't Here as like having non-custodial Strike someday as well, and having a version of Strike where Bitcoin is held on the phone, and that we can greatly lessen the KYC or general relationship we have with the user from a compliance standpoint. We're very open, towards optimizing and working towards the best financial experience possible, and that's just what we do, period. It's what we wake up and, and try and achieve every single day. And so, yeah, right now we think that the service is very valuable. It does require KYC/AML, we hope in the lesson in Time, we hope to do a lot of innovative things, but, yeah, it's just like another exchange, unfortunately, right now, but with some pretty, interesting guy propositions.

Yeah, for sure, for sure. when Australia?

we actually have a few users testing in Australia. the way we think about it, I've been pretty transparent online, our next major fiat currency will be the euro, and then like very tightly followed by, or in conjunction with, the British pound. and then Australia is right up There, Australia, Canada's up there as well, and so we have seen a lot of success within the company, our growth, ability to grow the team, and, I think we will have a lot of major fiat currency support within the next quarter or two, and, that's the dead honest transparent answer. I hate giving dates because the, the real answer is I have no fucking idea, and I don't want you holding me accountable for that. I, you know, my relationship with this community, I've been in Bitcoin for almost a decade now, eight, And, I, I'm an honest guy, a very transparent, organic, authentic dude, and, I'm not gonna try and sellmen anybody or give a date that I don't wholeheartedly believe in. So that's, that's the honest answer is we're actively testing, actively working on it, and, the euro will come first, that's for sure, but, AUD is something that we are very focused on and, intend to deliver as soon as possible.

Yeah, yeah. And I think one other interesting thing with Strike Is part of Bitcoin's adoption story is gonna be people teaching other people right, Bitcoin. And the, the way it often is, or at least historically, has been like, "Oh, do you want some Bitcoin? I'll sell you some." But now it's, it's the other way around. If you're a merchant, you can tell your customer, "Hey, I want you to pay me with Bitcoin." And then if, if, you know, if Strike provides an easy enough way for the total newbie like customer to then learn and then say, "Oh, yeah, I wanna buy this You, and I just have to download this app and pay you with that, then that's like another whole way to start doing, almost merchant adoption the right way, not the, twenty thirteen, fourteen way, hey?

We've seen this a lot. there's a really famed, burger shop in California run by Bitcoiners. They have a BTC Pay server, and they tell everyone to download Strike, and if you pay with Strike, they'll give you a little discount or a re-reward or a large soda or something. And what they're doing is they're taking Coins that Strike is sending and they're hodling them. but the consumer is like, "Oh, this is just a different version of Venmo. This is cool. I just link my checking account, scan the QR code, and my burger's half off. Wow, that's great." And so we're already starting to see that, which is awesome. And, we've been taking a lot of input from users, and again, we wanna deliver the best experience, so we're launching a product that allows you to get paid in Bitcoin, where Strike can act as your bank, you can line your direct deposit, paycheck up to it, and you can divide it into Bitcoin. We'll offer the ability to, our, our, our card is coming out, which, you know, we're more than happy to turn on Bitcoin rewards, even entertaining the idea of offering people, you know, a buy Bitcoin experience within the app The incoming money is split into Bitcoin or dollars, so we're not against or opposed to any of that, and we're already starting to see a lot of it, which is pretty cool.

Yeah, I like this idea of, it's just like how in the earlier days, people of the internet, people were a bit more scared about doing online commerce because, oh, I don't wanna put my credit card details online, I'll, you know, I'm gonna get stolen from, and now every, now almost every day people are doing online transactions, and so I think it's a similar kind Regulated out of existence, and okay, yeah, they're gonna regulate, but that doesn't mean they're gonna regulate it out of existence. And I think services like yours allow a more mainstream level of adoption, for people to start earning Bitcoin, holding Bitcoin, spending Bitcoin, such that it is essentially going to reach a point where it's just too intertwined into the all of society that you just can't shut this thing down.

I believe that's already there, maybe not into the like magnitude in which people like rule it as As binary of being one, but I think it's already at that point, and, you know, the, these announcements will trickle over the coming weeks or months, but there's some huge sports teams or athletes or pop stars or even sports leagues that we're working with that, you know, they have various interests, want to pay their players in it, they want to have their, a record label associated with it, or there's even teams that are like, "We wanna be interoperable, we want Bitcoiners to be able to come and pay us in Bitcoin." But we unfortunately, due to the league's rules, can't touch Bitcoin, can't hold it on our balance sheet, but because of Strike, we can remain natively interoperable with the service just from our bank account. And that's a beautiful thing. And, and that way, we're, you know, to your point, we're inching closer to mainstream having some direct association, some net benefit, some incentive to seeing Bitcoin succeed. And, you know, maybe one day there'll be hodlers, but with our service, they can remain interoperable in a beautiful way that's very

Strike's been like an entry level starting point, and, you know, a-as the founder and CEO of the company, I actually would be very happy if people start with Strike and then end up having a full non-custodial Lightning and Bitcoin node running in their basement that they're connecting to from some open source wallet via LND Connect or something. I, I, you know, I, I guess from the business standpoint, we don't wanna lose users, but as an individual, I would love that, and so, yeah, I view Strike in that way.

Yeah, so it's like

I'm also curious just to get your views on, you know, is there anything you're excited to see in the Bitcoin and Lightning world from a more, you know, technical perspective? Is there anything you're excited about, that you would like to see come in?

Oh man, well Taproot, I obviously am watching closely. I, I think, what's been interesting for me, there, there isn't much debate on the technicals, there isn't like an opposing party or subsector of the industry that, you know, violently is, is opposing things like Taproot or a Base level Lightning protocol enhancements. I think what's been interesting is the political landscape, or I don't, I don't know the correct way to articulate, but just how do we enable and activate and come to general consensus? I can say in the Lightning community, one of the things that I would like to see improve is there's now specifications that live outside of the protocol specification. So there's like some specification to stream money to podcasters, there's some LNURL, you know, an LNURL specification, there's a specification for zero sat invoices that's inherently in secure and that no one should be using. And what you don't wanna see in an open system is independent specs that live separately of each other, and that like in order to be interoperable with everything, you have to implement like twenty five different specs. but what also is deeply frustrating for people building products is that the protocol to getting general consensus and buy in from a developer community and doing things the right way and the responsible way is usually slow, it's usually painful, and it's not the most efficient process of all time. And It doesn't necessarily respect the timeline that you wanna operate on. Bitcoin operates on its own time, we operate on Bitcoin's time, Bitcoin doesn't operate on ours. And so it's been something pretty interesting to watch throughout Bitcoin's entire history. That's arguably why SegWit two x happened and Bitcoin Cash happened, is that people wanted advancements that we're seeing today three, four years ago. And, y-y-you know, that's just kind of part of an open monetary system, an open source money is going to have this property, and I find it pretty interesting. So as far As far as the tech goes, I'm excited about all the tech. I'm excited about Taproot, I'm excited about-- there's various Lightning developments, which are really interesting. You know, Lightning doesn't need this level of consensus, so all the independent implementations can go off and do creative things on their own time. I, I would like to see, like, community consensus and some of the like politics improve, but maybe they never do, and maybe that's just a property of the system. But that's kind of my overall take.

Yeah, that's just how it is Opening technical perspective, like would you be interested to, I don't know, any prevout or trampoline routing or any, any other things like that that you, you're kind of interested in that idea?

That's specific to Strike, I would like to see probing be greatly improved and implemented on the specific implementation or even be like specked out in, in some formal fashion. probing for us is tremendously important and I think it's going to be even more and more important for services to know how much of financial- transaction or activity is gonna cost them upfront, typically, and we've been frustrated a little bit in like, you know, multi-path probing, for example. Like that is something that nobody has sat down, down and specced out and said, "Hey, this is the right way to do it." We've had our own approach, but then our approach leaves us, with interoperability issues with Moon Wallet, with Phoenix, and with Breeze, and, how to probe, how to responsibly, forward along HTLCs that are responsible Responsible for probing, I think is something we would like to see reach, the implementation level or even the protocol level at some point. so maybe that's not the most popular answer, but for someone who's running a business that's growing very fast on top of Lightning, that's something I would love to see and wake up to tomorrow.

Yeah, yeah, no, well, that's, that's, that's precisely what I was interested to, to hear, just to kind of get some ideas around what you're thinking about. And in terms of Lightning growing, are you Lightning, like from a, how are things from a reliability perspective? Are you still able to route things through correctly? I guess also in your case, you've probably got, you know, large private channels and things, but it's just, because there'll be times where you're routing a payment not just inside your private kind of channels network, but out to the broader, you know, because there's some merchant who wants to take Lightning, and then, yeah, how are you finding that kind of thing in terms of payment success and failure and things like that?

Yeah, we keep a lot Keep a pulse on these type of things, the health of the network and our ability to route payments and have payments routed for us, is growing and getting better and better and more stable as time goes on. We have this internal metric called missed opportunities, where a user wants to make a payment and, it's, we, we call it a missed opportunity that we weren't able to fulfill the payment on their behalf, and our missed opportunities are going down very drastically. and it's super interesting, we get to learn user behavior Behaviors, and like the average size payment for us, for example, is a really useful metric that informs how big our channel should be, that informs how we think about HLCs being forwarded, HLCs being stuck. there's a lot of data that, is not accessible, like in the, you know, infancy of Lightning, that now we're starting to be able to understand and informs decisions on how we implement certain features, how we think about channel management and liquidity. But all in all, I have no doubts or fears about the overall health of the network I think, it's more than ready to scale to millions of people. And so, a-a-and the sophistication of other peers has been fantastic. you know, you are reliant on other peers remaining healthy relationships with other peers, right? Like, connectivity and overall health of the network is, is only as good as like its weakest link, not actually, but like I'm sure people can understand what I mean by that. And, I think peers on the network are like acting in good faith and, and, the network's generally healthy, so pretty pleased.

Yeah, that And so in terms of, as obviously as number has gone up, that means capacity in all of our channels has risen too, right? So have you found that it's much easier to route through, you know, multi-, you know, hundred dollar payments or thousand dollar payments or even bigger payments, on Lightning because of that?

Yeah, of course, of course. that's, just logical. but also I think that that metric is, deeply misleading. you've got private channels, all of these non-custodial like threes Phoenix and Moon are all, all great private channels, and so we've never really had an issue routing extremely large payments, but no, of course, like as number goes up, capacity increases, but also, as you're well familiar with Stefan, as number goes up, everything goes up, interest goes up, participants goes up, routing performance goes up, companies that wanna donate and fund developers to build things goes up, and so Bitcoin has this, you know, very vicious self-rewarding cycle Cycle that we're all well familiar with, and so number go up has been great for Lightning, because everything's good for Bitcoin, you know?

That's cool, man. That's awesome. yeah, so probably, probably a good point to, close up here. Where can people find you online and, what, what do you kind of wanna leave the listeners with just as a final message for them?

I, I close out usually the same way on all my media appearances. Jack Mallers is my real name, not John, not Joe, it Yeah, I'd be in a non, but, I can't. And, so you know my name, Jack Mallers on Twitter, Jack Mallers everywhere. And, I, I love interfacing with the community. I greatly and deeply appreciate the support. I was raised on Bitcoin Twitter, got into Bitcoin, and started interfacing with the community when I was eighteen years old. So, I love all of the, the support and I value the relationship I have with everyone and all the listeners like very deeply. So you hit me up at any time, to a scale in which I struggle a little bit, so don't hold me too accountable, but I just appreciate the support. You contact me, ask me any question anytime, and, yeah, thanks for everything, thanks for having me on, man.

Yeah, thank you. I think you're doing a great job. I'm really, excited to see what's coming next from you, and, very excited about the things that you're continuing to build. So thanks for joining me. So what do you think of Strike? I think it's certainly very interesting in that it enables So I think that's a really cool way to grow the Bitcoin adoption story. So let me know what you think about that. And also, I've got a really cool interview coming up next with Bob Murphy, who I have long been a fan of. So make sure you subscribe to the show in your Podcatcher application. You can find the links at stephanelivera dot com. Thanks, and I will see you in the citadels.