Preston Pysh (01:23):

I’m very humbled. I’m thrilled to have this conversation. So Jack, what I want to do is just start off with the basics of the limitations that kind of inherently exists with Bitcoin at the protocol level. And then I really want to get into how Lightning really operates, all the stuff that you’re building on top of it. But for a person who’s stepping into this conversation, who might not be intimately familiar with Lightning, they first got to understand the issues that existed on that base layer, on the base protocol layer, so that they can have an appreciation for what it is that you’re doing on the second layer on the lightning layer. So talk to us about some of those limitations and why the challenges were there.

Jack Mallers (02:03):

So I think a really important conceptual point for what I’ve been working on for years now and what’s becoming Strike is this inherent difference between Bitcoin, the asset and Bitcoin, the network. The asset, as you’ve described, is accelerating, it’s in flying fashion and flying colors, right? You’ve got it all over mainstream TV, in large public companies allocating their reserves to Bitcoin because it protects against the asset inflation and the Federal Reserve’s desire and need to just infinitely print money.

Jack Mallers (02:38):

However, Bitcoin, the network actually offers extraordinarily fascinating innovation as well. You’re talking about the very first natively digital bear instrument that can achieve settlement globally with no permission. And it’s distributed, it’s censorship-resistant. I mean, there’s a lot of innovation within the network itself. And so the difference there is do away with the monetary policy of the asset, the price of the asset, just what the network itself accomplishes is fascinating. And I think therein lies the real difference between what Strike is trying to accomplish versus a Coinbase or a Kraken.

Jack Mallers (03:15):

People don’t use our applications and our software to speculate. They use it because they’re interoperable with this global monetary network that’s inherently digital and achieves amazing things. So I think that’s the first thing to conceptually understand about going into something like Lightning. So as far as the Bitcoin base layer, Bitcoin achieves what we call consensus around every 10 minutes. So this blockchain gets updated a target time of every 10 minutes. And the way that that is achieved is transactions are broadcasted throughout the network. Everyone sends these new messages around like, hey, Preston wants to send Jack $10, all of this network we pass that information around, we end up coming to consensus and appending it into the blockchain, and that takes an undefined amount of time.

Jack Mallers (04:03):

What Lightning accomplishes, it gives Bitcoin this natively digital bear instrument cash finality, which is an unbelievable achievement. You can have cash finality with an asset that is natively digital, inherently global, and can achieve settlement and clearance at no variable costs anywhere in the world at any given time. The way the Bitcoin protocol in achieving settlement work prior to the Lightning Network is you relied on network consensus, and network consensus took an undefined amount of time, and it was an undefined cost. Bitcoin fees at its base layer, it’s a market, it’s a free market.

Jack Mallers (04:41):

And so if I bid a $5 fee to prioritize what I want to do, and Preston bids a $50 fee, then Preston’s going to budge me, and maybe my transaction gets looked at in 10 minutes, maybe 10 hours, maybe 10 days. And that’s how the protocol works and it’s an incentive for people to bid for priority and compensate those that are securing the network appending to the ledger. What lightning does is it takes a new set of rules, a new protocol on top of the network, and it achieves cash finality, so that these transactions between your peers, they’re not broadcasted throughout the network and competing in a free market, they achieve instant finality at extremely low cost between the peer that you’re conducting with.

Jack Mallers (05:23):

And so the results of this is I can move a physical bear instrument anywhere in the world at no variable cost. It is cheaper, faster, more inclusive, and more global than any other monetary network in the world. And it is achieving that with real physical value. There is no credit in the Lightning Network. The money moves and settles and the value actually transports in real-time at no cost. And that is an immense achievement for money as a technology. It is an innovation and an accomplishment for humanity that we can move physical value in real time for free globally at any point 24/7.

Preston Pysh (06:07):

It’s totally miraculous. I saw you post something on Twitter probably just a couple of weeks ago. You were sending a very small transaction from the US over to, I think it was to the UK or to Europe. Talk to us about this, this small transaction, and just the implications of it, because it’s just fascinating.

Jack Mallers (06:26):

I may go on a bit of a rant here. So what Strike is today, what we offered today is the first of its kind Bitcoin native neotype Bank. And the purpose is it’s allowing a user to be interoperable with this new monetary network with their bank account. A lot of the difficulties in using Bitcoin in payments today is taxes on spending it because it’s tax is property, volatility actually having to go achieve ownership of the asset, then custody of the asset, be in a position to use the asset. What Strike does is it allows you to be interoperable with this network from your Chase Bank account or Harris or whatever US dollar cash balance you need.

Jack Mallers (07:05):

So you can make a Bitcoin and Lightning payment with dollars, and you can receive Bitcoin and Lightning payments as dollars. Or for Russell Okung, process payroll, US dollar payroll. And it’s a first of its kind Bitcoin native neobank. The insight here is very subtle but extremely profound. When you look at traditional monetary networks that have existed to date successfully, let’s review them. You’ve got ACH plus the Visa network, ACH plus the Square network, ACH plus the PayPal network. What these networks do, one, they’re closed and proprietary. They are these bifurcated, segregated networks that exist independently of each other. And they all achieve more or less the same thing.

Jack Mallers (07:49):

Their job is defined identity, define a payment standard. How does one send a payment within this network? How does one receive a payment within this network? How is settlement achieved within this network? How is credit done within this network? And they all do things differently and on their own standard. PayPal user can’t pay a Cash App user. Cash App user can’t pay a Venmo user. What Strike is trying to achieve is enable ACH plus the Bitcoin network, not a closed proprietary network that we invented. The subtle but profound insight is that we now have a global open monetary network that can achieve everything faster, cheaper, more inclusive, and at anytime, anywhere in the world.

Jack Mallers (08:30):

And that is the profound insight there, is that it’s an open network. And we’re able to do everything better than everyone else because of that insight. And so that is sort of what we’re trying to achieve. And so our first MVP when I first had this idea like, oh my god, there’s a monetary network that exists that can achieve instant cash finality anywhere in the world at no variable cost at any time. So we of course, need to use that. I mean, I can do anything cheaper and faster than anyone else. And so the first MVP was, well, can I get this working with my Chase Bank account? Okay, of course. I want to be able to scan a Lightning QR code or a gift card or to my own Lightning node or to feed chickens online.

Jack Mallers (09:13):

Lightning Network to date is a bit of a toy. But Strike as it is today is a beta product that was I just needed to prove to myself that I could do it and that all of my assumptions were correct and all of my ambitions weren’t too far fetched. And then now the second is, I think the first killer app for the Lightning Network is as clear as day, it’s making borderless payments free and instant. If we have an open monetary network that works everywhere in the world at any time and can move physical value in a second and for free, no matter where you are, then why is it cost anything to send money anywhere in the world? The headline at Strike’s website is, making the world a more connected place. And I want to tie the world together through the Lightning Network.

Jack Mallers (09:59):

And so now what I’m announcing on this podcast, and what I’ll be announcing, this is New Year’s Eve this is recording, what we’ll be announcing next week is we’ll be launching in 200+ countries. We’ve partnered with Bittrex, and we’ll be onboarding their 1 million users onto Strike and the Lightning Network. And we’ll be able to perform free and instant remittance payments, any value, at any time. I can send US dollars received as euros in Ireland in the same second and at no cost. And again, we’re using this open monetary network to achieve it. And so I packed a lot in there. But that is kind of the introduction into the inside of what Strike is, its contrast against previous monetary networks, why it’s different.

Jack Mallers (10:40):

And then I think Lightning’s first killer app, the first million users to onboard, and where it’s going to really be disruptive in a certain sub-sector of finance is global payments. You can’t compete with it, and there’s no variable cost to do so. So even if I charge a fee, someone else is going to just do it and charge less. And it’s really amazing. I’m so excited because it’s been years in the making. So I’ll stop there and see where you want to take this.

Preston Pysh (11:04):

So I’m a little speechless. And the thing that kind of comes to my mind immediately when you start talking about some of these technologies and these ideas, when I think about the credit card payment system, it’s the ultimate Rube Goldberg machine of clearing of costs and people in this big, long line of events that have to take place before when a person swipes a credit card to the business receiving the payment, there’s all this friction that has to take place to clear that. And when I think about what you just described, to me, it sounds like it’s just going to decapitate that entire process. Is that a good assumption? Tell me where I’m off the mark. Is that what’s actually taking place?

Jack Mallers (11:46):

It is, yeah. And I think the global remittance is a great place to start. I mean, we have so much ambition here at Strike and it’s really exciting. Let me tell you a really fascinating story that’s going to put this into a lot of context and allow people to relate. So there’s a payment standard in India known as the UPI, the Unified Payments Interface. This was a standard that was mandated by the government itself. So that alone is a really impressive accomplishment. But UPI is now huge, it does like all of the payments within the country. It’s massive. Every merchant just lists this one standard singular QR code, and all of these different apps can remain interoperable with it, and allow consumers and merchants in different services to integrate.

Jack Mallers (12:30):

Now, the story has it there’s a company Paytm in India, one of the biggest fintech companies of all time at one point. They were valued at $10 billion privately, Berkshire Hathaway was an investor, they were absolutely massive. They initially launched in 2010, they have over 100 million active users. To give you context, the cash app has 50 million users, obviously, not all of those are active. They had over 100 million active, 320 million registered. And they’re like the biggest thing since sliced bread. They had created the equivalent of Cash App or Venmo here in the United States. They’d created a private network and created these standards to allow folks of India to perform financial services.

Jack Mallers (13:14):

Now, when the government-mandated a standard, that is the equivalent of what I’m trying to draw of Bitcoin. Now all of a sudden, there was an open standard, there was a singular QR code and the government-mandated you remain interoperable with it. What Paytm did, it was against their best interest to switch from their standard to the open standard, because with the open standard, now I’m sacrificing market share. Now some kid who’s building for his art fair, can build a wallet that integrates with UPI, and they can use his instead of ours. So it’s in our best interest to keep people in our achieved network effect and not let anyone be interoperable with our standard. Like Cash App users can’t pay Venmo users, PayPal would never allow that.

Jack Mallers (13:58):

But now that the government mandated this more open standard, all of a sudden this company, Paytm, went from number one like in the world, but especially in India, to three years later, the third most valuable payments company in India. And the reason was obvious, you cannot compete with an open network, it’s going to absolutely swallow you whole. This company, Paytm, could not possibly put enough engineers on payroll, enough salespeople recruiting merchants to compete with an open standard. I mean, everyone in India was building against this thing that the government had mandated and they were toast.

Jack Mallers (14:32):

And I think the same thing is happening, is going to happen with Bitcoin. Is that this is a open monetary network and the PayPals and the Squares. What PayPal did is they allowed you to speculate on the asset, but God forbid they allow you to withdraw even to Bitcoin address because they would then be interoperable with this open standard. And if a PayPal merchant had a Bitcoin address, who’s to say I would use the PayPal wallet to pay it? Why wouldn’t I use Strike? Why wouldn’t I use Cash App? Why wouldn’t I use Coinbase? Why wouldn’t I use my little cousin who built a Lightning Network wallet in his free time because he looks up to me? I could use millions of different wallets, millions of different services. So it’s against their best interest.

Jack Mallers (15:12):

PayPal is deathly scared of Bitcoin, the network. Bitcoin, the asset, they’re going to let people speculate on and they’re going to charge basis points for. Bitcoin, the network, they are purposefully not allowing. Square has not enabled a Bitcoin QR code at merchants. Who is to say I’m going to use cash app to pay it? And so what I think though is that these companies don’t have a choice. In a two to three years, companies like Strike who are approach is, anyone who remains interoperable, there’s probably people competing and copying me night and day, and that’s a great thing. If someone copies me and launches in Australia, awesome. Now Strike users can send to Australia and Australia can send back.

Jack Mallers (15:49):

There’s so much innovation on this open network and it’s going to absolutely swallow these private monetary systems whole. And I think it’s going to happen much sooner. And so this little snapshot of what happened in India, I think, can be applied to this global scale. Bitcoin QR codes, Lightning QR codes are going to be the unified standard. How long will that take? I’m not sure. But if the efficiencies are there, and the market opportunity is there, someone’s going to do it. And I want to be that guy. I think that that’s a really interesting story. And it really puts it into context and allows people to relate to more or less has happened already, just on a smaller scale.

Preston Pysh (16:28):

So what becomes the business strategy for Squares and PayPals when this is … It’s so disruptive what we’re talking about. But at the same time, it’s not like it’s going to be anything they’re going to be able to stop. Because like you say, people like yourself and many others are going to step in and continue to supply this network to the global population. So where do companies like Square and PayPal go from here?

Jack Mallers (16:52):

I don’t know. That’s a question for them. And let me tell you-

Preston Pysh (16:58):

I love that.

Jack Mallers (16:58):

Let me tell you a user story that we’re now launching in 200+ countries, but this one I think is unbelievably fascinating. So we’re piloting originally in El Salvador. El Salvador is interested in Bitcoin already. Here’s why they’re a great candidate, in my opinion, to pilot our free and instant global payments application. They’re interested in Bitcoin already. Why are they interested in Bitcoin already? And why do I know that there’s already Lightning Network users there? One, their native currency has been inflated to death. In fact, so much so they don’t even price the things around them in their currency, they price in dollars. However, they don’t really have access to dollars, especially a bank account with dollars, it’s very difficult to come by.

Jack Mallers (17:40):

So all of a sudden, you have these people that are relatively unbanked, their currency, their state currency has been inflated to death, they need dollars really badly. They don’t have access to it, but it’s how their life is priced. And even dollars at this point, inflation is getting out of control. And so they’re starting to mess with Lightning Network wallets, they’re starting to save in Bitcoin. Now, they’re also the seventh-ranked country in the world for inbound remittance from the United States. In 2017, there’s 250 billion, I think, is an insane amount of money sent from the United States to El Salvador.

Jack Mallers (18:12):

And so they’re a top numbered inbound remittance from the US, they have no nation-state currency, they love dollars, but don’t have access to them, and they’re in desperate need of a remittance solution. What happens in these countries is Western Union will shave at least 10% off and then you have to go physically pick the money up at Western Union and gangs sit outside Western Union, and just kick your ass for 30% more as you walk out. If you don’t pay them, they’re just going to beat you up. Now, here’s what we’ve done.

Jack Mallers (18:43):

We’ve set up Lightning and Bitcoin infrastructure all over the world. There’s Strike infrastructure that represents Central America or even parts within Central America. We’ve got physical location in Ireland, we’ve got UK, Australia, Canada. We’ve got all these nodes in this monetary network set up and acting on behalf of users in that particular geographic location. Now, if I want to send $100, which is like a week’s worth of living in El Salvador to an El Salvador citizen, what happens is Strike debits my $100 from my chase account live converts on the fly into Bitcoin on the Lightning Network.

Jack Mallers (19:20):

Sends that physical value, that bear instrument over an ocean, across the border, and it lands in a new physical location, a different country in one second, at no cost, it was free to do that. And then we take it and we live trade it and convert it back into a stable coin. And so all of a sudden, from the comfort of their own home on their smartphone, an El Salvador citizen received money from the United States in the form of US dollars into a synthetic digital dollar on their smartphone for free and in real-time. So this is interesting for many reasons. Obviously, the fact that I can send money and have it land anywhere in the world at no cost and in the same second is disruptive to an incredibly large industry.

Jack Mallers (20:06):

Now, let me go back to this whole context in contrast to something like PayPal and why this is even more interesting. PayPal is a monetary network, works great in how many countries? Not 200. The Bitcoin and Lightning Network is the most inclusive monetary network ever. It works everywhere. Does the PayPal network function seamlessly in El Salvador? Nope. No shot? Does the Bitcoin network work in El Salvador? Yeah. The Bitcoin network doesn’t know what time it is, where it is. So this is a more inclusive network. It’s cheaper, it’s faster and it’s global. And that is amazing.

Jack Mallers (20:43):

And so what we’ve effectively done in this particular use case is give the people of El Salvador a version of Cash App. They have synthetic digital dollars that they desperately need. They have financial access and free instant global payments to and from Europe, to and from the UK, to and from the United States, and they have a chance to live and survive. They can even use these synthetic dollars to buy bitcoin and essentially save. And one more point here is when I first told the people of El Salvador, building this product, I think is really going to enhance your quality of life. I gave him this explanation.

Jack Mallers (21:15):

And they said, “Jack, this is unbelievable. We’re so thankful. However, there’s one problem. What if we need to get into local currency? What if for whatever reason my barber doesn’t yet except the Lightning Network or Strike and needs synthetic dollars.” And they’re like, we feel kind of trapped in this application of yours, if we just switched all of our remittance to it. And I said, “But you guys still have a little fundamental misunderstanding of the application. Because what you’re allowed to do is you guys have Bitcoin ATMs, there are Bitcoin tellers all throughout your country on every corner, is that correct?” They said, “Yeah, absolutely. But we’d have this stable coin balance, we wouldn’t have the Bitcoin balance.”

Jack Mallers (21:51):

I said “Yeah, but you can go to a Bitcoin ATM. You can scan the QR code at a Bitcoin ATM as if you’re exchanging Bitcoin for cash, for local currency. And what Strike is going to do is it’s going to debit your Tethers, your stable coins, convert it to Bitcoin, send it to that Bitcoin ATM and the Bitcoin ATM is going to [inaudible 00:22:10] out your local currency. Because it’s the same thing and I can make a Bitcoin payment or a Lightning payment with my US dollar balance on Strike. You guys can make Bitcoin payments with your Tether balance. And so you can go to a local Bitcoin teller and Strike app could scan the QR code, it’s going to convert it to Bitcoin on the fly, send it to the exchange, and the exchange [inaudible 00:22:28] your local currency.”

Jack Mallers (22:29):

And why is that so profound? In order for me to scale this application to 200 countries, I didn’t need to go set up special, proprietary, closed monetary network, tellers and ATMs that are Strike branded. We have access to liquidity in any currency in the world at any time. And there are even local tellers like ATMs that are interoperable with our service. Why? Are they all on the Strike network? There is no Strike network. Strike is on the Bitcoin network. Bitcoin is this open network and it scales miraculously. How many people are working for Strike right now if you think that there’s a Strike network and a PayPal network? Millions. How many developers are building on the Bitcoin network? How many merchants are integrating? How many salespeople are on Twitter?

Jack Mallers (23:09):

So that user story alone of an El Salvador citizen getting inbound remittance from family for free, instantly, in real time, receiving and being able to hold that balance in a synthetic dollar as a stable coin. And then being able to go cash that out at any place at any time, I mean, what’s the market size of that opportunity? 4 billion people, four and a half billion people? Where else does the Bitcoin network operate in a similar fashion? Everywhere in the world.

Jack Mallers (23:34):

So yeah, it’s interesting that I can stream dollars received as euros in the same second. But I think that this app … I mean, we’re going to be able to deliver the Cash App to 4 billion people that don’t have access to traditional financial tools and get absolutely crushed by remittance and inflation. It’s a tremendously exciting opportunity. I’m stoked. And I hope that, that user story that I walked through in El Salvador really hits home for the people listening.

Preston Pysh (24:02):

I don’t know how you could explain it any better, Jack. It’s mind-boggling. You have another big announcement that came out just yesterday with Russell. You’re on a roll right now. So tell the audience who Russell is, talk to us just about what took place. I was watching you on Fox News yesterday or Fox Business yesterday. So talk to us about this.

Jack Mallers (24:22):

Yeah. So Russell Okung is a two-time pro bowler, a Super Bowl champ, is a tremendous human being and a close friend of mine. Russell called me and said, “Hey, I’ve been trying to get paid in Bitcoin. Strike is this in Bitcoin native bank almost. Can I get that done with you?” It was never even a product I considered. But the moral of the story is that the everyday individual right now operates their life at a loss. Is that asset inflation right now is it 15 to 20%. What that means is that life around you is getting 15 to 20% more expensive every single year. Not your Netflix subscription, that’s the classic Michael Sailor.

Jack Mallers (25:01):

But the house that you want to buy, the college tuition that your kid wants to go to, the car that you want, the government bond that you want, it’s all getting 15 to 20% more expensive. And so if you’re not getting a 15 to 20% raise year over year, you are operating your life at a loss. The commute that you take to work, you got to get on the train and it’s cold. And the guy next to you nose is running and he smells bad. And your boss is in a bad mood, and the lunch that they serve you is cold. All of that day-to-day everyday life that you’re doing, you’re operating and suffering through that at a loss. If I was like, my life is deteriorating at 15 to 20% a year, I’m not going to work, I’m not getting on the train when it’s two degrees out. I’m staying home as long as I’m guaranteed to lose.

Jack Mallers (25:51):

And so my point on Fox and my point to the everyday individual is you have to start preserving your wealth and protecting it in something else, or else you’re subject to just be deteriorating at 15 to 20% and Bitcoin is that answer. Now let me tell you why Russ is even a better example in what he’s doing on such a massive stage. Russell is an NFL player. NFL players get contracts over a certain amount of time, and so his compensation is fixed. So ignore the dollar value. We all know that Russell is a wealthy guy and gets paid handsomely in dollar terms. But the point is, he’s not getting a 15 to 20% raise year over year. He got a contract that was four years long, and he got the same amount of money every single year. So he was operating his life at a loss.

Jack Mallers (26:38):

Everything was getting more expensive around him and he wasn’t being compensated because of that. And so the insight that Russell had was I need to get my money, my paycheck in Bitcoin, to operate my life in a profit. Because you’re talking about an individual that sacrifices his health and his body in exchange for his labor. And he’s had teammates that don’t even know the name of their own son because of the brutality that the National Football League and that sport puts on a man’s body. What if Russell tears his ACL next play? The average NFL career is three and a half years. You think three and a half years of any profession can last you 15 to 20% asset inflation of a lifetime? You can’t live on that.

Jack Mallers (27:20):

Your agent wants a cut, your money manager wants a cut. If you tear your ACL or you’re not good anymore, the owners don’t care about you, the NFL treats you like a commodity. And what Russell wants to do is say, hey, the sacrifice that I’m doing for my health, for my family, the absolute pain and suffering and work I put into this craft to get to where I am, I want to preserve that wealth, I want to protect it. I don’t want to give it to my asset manager, I don’t want anyone taking a cut and I don’t want it inflated to death. And God forbid, someone chop blocks me and my ACL goes out. And so he called me and said, “Jack, can you help me do that? I want to come home from practice and I’m sore and I get out of the shower. I want some Bitcoin in my cold storage. I don’t want dollars in my checking account. It does mean nothing.”

Jack Mallers (28:07):

And so that’s what we did. And we help them with that. And I’m so proud of it. We don’t have a direct relationship with the NFL, we don’t have a direct relationship with the Panthers. What we did is we built a product where the consumer can get … It’s a direct deposit product that you can allocate Bitcoin towards. And that’s my message to any of these professional athletes, don’t let this headline get underlined, don’t let the NFL say they had nothing to do with this. I know they had nothing to do with this, they never would. All these professional athletes, they’re all on the free-agent market. They all treat themselves like individual businesses as they should. These guys don’t care about them.

Jack Mallers (28:40):

So we built a product for the consumer where they on their own time and on their own merit can receive their paycheck in Bitcoin, because they should, because they’re doing tremendous things for America. They’re doing tremendous things as athletes, as humans, as individuals, and they have every right to preserve their wealth in something that isn’t going to get taken from them. And so this headline is not about Strike. It’s not about me. Russell knows all of this and he’s setting this example subtly, but so powerfully on a huge stage. And so if you’re a professional athlete, feel free to call me. We didn’t charge Russell a thing. And Russell didn’t pay me. I didn’t pay Russell anything. I did this for the betterment of humanity.

Jack Mallers (29:18):

And I think that this example scales to every individual. Even if you’re a sales guy making 75 grand a year. Money that you’re not using every day to live needs to be preserved in something that protects you. And so there’s my rant. I’m so proud of Russell, I’m so proud of my team, and I think it’s huge. Looks like the NFL is trying to disassociate and it doesn’t surprise me one bit, it actually hammers the point home even more. So, there you go. That rants over.

Preston Pysh (29:47):

I like your point that because you’re talking about the disposable income portion of this so that when we move away from Russell’s scenario and we apply it to your typical person. If a person has 10% of their paycheck in disposable income, they can do what they want with it, and that’s their savings, right? That’s their opportunity to convert that amount into bitcoin. And so with Strike, they’re able to do this. So talk somebody through what that process might be like. Because maybe they’re hearing this, maybe their income for the year is $100,000, they can save 10,000 a year. And maybe they want to start doing exactly what Russell did, but just on a smaller scale. So walk them through what that would look like.

Jack Mallers (30:26):

Yeah, it’s really simple. So we’re coming out with the Strike card, traditional debit card tied to Strike. Strike will be interoperable with the Visa Direct network, and you get an account routing number. So Strike will act as a vertical bank. We actually are the first banking partner Bitcoin associated with our new banking partner. I’ll announce that as well. And it’s really exciting. So we can do anything a traditional bank can do for you. And you just line up your direct deposit to Strike just like anything else. And within your settings, you can say, hey, of every paycheck, I’ll take 15% in Bitcoin, I’ll take 20% in Bitcoin and you treat it like your savings account.

Jack Mallers (31:02):

Because here’s the thing, and I know Preston, you’re twice as smart as me in this realm. But the US government, for example, but everyone is in debt. There’s three options with this debt. One, you can pay it back, right? Not really, that’s not really an option for us. What are you going to do? Tax me 100%, I’m going to leave. Paying it back is not really an option. You could default on it. I could just say, hey, guys, I’m in all this debt and I can’t actually pay it back. My bad. No one’s ever going to loan you money again. Who’s going to buy a government bond again? Disaster.

Jack Mallers (31:32):

And the third is you can just print money. You can print more money, instead of being the lender of last resort, you’re the buyer of last resort. And that’s the world that we’ve been living in, and now at an exaggerated pace. And so for the everyday individual, what that means to you is the government has to print money, it is their only option. They’re not going to raise rates. I mean, Sailor and these guys are now flaunting in their face and just going to print billions of dollars until they raise rates, but that’s a different conversation.

Jack Mallers (32:00):

But the government for the everyday individual, the normal, I’m making 100K going to work, commuting every single day. The government has to print money, they have no choice and buy everything around you, and inflate everything that you’ve ever dreamed of and you’ve ever worked for. They’re going to inflate it away from you, and they don’t have a choice. And so yeah, I think you should have an option. I think you should have a checking account, a normal neobank on your phone that you can download from the App Store and get your direct deposit to. And that app gives you free and instant global payments, it can perform payments to other services cheaper and faster than everyone else.

Jack Mallers (32:33):

And of your paycheck, you can say, hey, of this 15%, this 15%, I treat us savings and I’d like in Bitcoin instead. I would like in an asset that the government is not going to inflate away from me. I want to make sure that my dream home is accurately priced in 20 years instead of out of reach. And the way I accomplish that is by holding my savings in something else. And so what are other options? If you want to go get your paycheck in real estate, you want to go get your paycheck divided into gold bars, have your employer drop off gold bars at your house, you can ask them or you could download a mobile app that’ll just do it for you with Bitcoin, this natively digital global bearer instrument, this new asset class, that is just the best thing ever.

Jack Mallers (33:18):

That’s my answer there. It’s so painfully obvious. And that’s how it would work. You download the app, hey, here’s your routing number, here’s your account number, go give it to your employer. Set in your settings, whatever you want to do with your money, it’s yours.

Preston Pysh (33:30):

Talk to us about the Visa card you mentioned.

Jack Mallers (33:33):

Yeah, so we have a relationship with Visa. It’s really simple, honestly. So the US one will come out in Q1 21. And our European card and our card in the UK will be in Q2. The vision for this is simple. I got a Strike balance of five grand. And let’s say my local grocer doesn’t yet work in an interoperable fashion with the Lightning Network. I should still be able to spend that $5,000 balance. And so it’s our bridge to the rest of the world. And in the remittance thing, it’s even more powerful. So I have an employee that lives in Ireland. And what I can do with Strike in this global payment nature and these cards is unbelievably cool.

Jack Mallers (34:07):

He built a script that pays him by the minute. So dollars fly out of our business bank account, and on the fly get converted to euros, settled in a different physical location and credited to his account every minute in real-time at no cost. And then he’s got a Visa card that he can then go spend at the pub in real-time. And so dollars that exist in my Chase account are now spendable euros at the pub every single minute at no cost. These cards connect us to the rest of the world. And there’s a lot of cool things we could do with it, different rewards or whatever else.

Jack Mallers (34:44):

We want convenience to the consumer. Bitcoin has this brand of, yeah, it accomplishes cool things, but you got to know how to set up a node. And if you want to use it, you got to live through gift cards. No you don’t. No you don’t. Here’s a Bitcoin native checking account. You want to go to a grocery store that doesn’t support these QR codes yet? Go do it. Sure. Do you want to send money anywhere in the world at free and no cost? Do it. We don’t need to make any compromises. There’s nothing about the existing financial system that we can’t do. We can just do a lot of things better.

Jack Mallers (35:14):

So yeah, here take a debit card, it’ll help you out. It’s really convenient. And so if I get my direct deposit and I keep 75% in cash and then 25% in Bitcoin, yeah, take this card. Spend the cash wherever you want. Pay your mortgage, do your thing and keep the rest in Bitcoin. You got to send money to another country? Here, free instant. It’s just a more powerful checking account.

Preston Pysh (35:33):

Are you guys going to try to work rewards into the payments that are being conducted to Fiat?

Jack Mallers (35:41):

We have no concrete plans of Bitcoin rewards. To be clear, people pin us against Fold as competitors all the time. I don’t view them as a competitor. I love Fold. I love Will. I think they’re doing a great job. If we get demand to do rewards in Bitcoin, of course, we can. I think what that is, is you just take the interchange, and instead of delivering it to a consumer in dollars, you just live trade it and deliver to them as Bitcoin. And I think that’s a feature that everyone will request of. Fold’s pioneering it and then BlockFi is doing it, now Square is doing it, everyone’s going to do it. It’s going to be a configurable option. I just treat that as a feature. And if people want that, we can certainly do it. Of course.

Jack Mallers (36:18):

Our main focus, again, is trying to connect the world in all of these different currencies over Lightning. So another amazing user story is like think of Airbnb, for example. How many merchants are in how many different currencies? Let’s look at the Strike thing, but instead of global remittance, let’s do consumer merchant processing. As Airbnb I can say, okay, with Strike processing our merchant services, this one particular host is going to accept in British pounds, this one’s going to do the Swiss franc, this one the Euro, these guys are here with the dollar.

Jack Mallers (36:49):

Let’s say I’m in Australia, and I want to rent a property from someone in the UK, my money goes from Australian dollars over the Lightning Network, and then converted back into British pounds in real time and for no processing costs. There’s no variable cost for me to do that. That’s tremendously amazing. And again, this open network too, if Starbucks starts accepting payments processed by Strike or any other Lightning interoperable service, stand in line at Starbucks, and the guy next to me, I’m like, “Hey, how are you paying for this?” He’d look at me and go, “What type of question is that?” With my visa card. It’s a monopoly. It’s this closed network.

Jack Mallers (37:25):

But if they accept the Lightning Network interoperably, all of a sudden, it’s like, how are you paying for this? Well, I found this guy on Twitter who built a Lightning wallet. Or I’m using Strike, I’m using Coinbase, I’m using this one, I’m using that one. And it puts the power in the consumer so you could build your own wallet and make payments at your own pace, protect your own privacy, can be interoperable on your own. All of it’s possible. Bitcoin rewards is great. I think the key is getting this product in 200 countries and making payments free and instant anywhere in the world. On the consumer and merchant side is our, call it next goal in the 12 months is to really accomplish that, get these 1 million Bittrex users onto our service and give Lightning its first real killer app.

Preston Pysh (38:06):

So Jack, when I’m listening to this, I’m thinking, what’s the timeline for some of this to play out? Because it just doesn’t seem like there’s any way that this is ever going to be stopped. This is only going to accelerate from here. So as a person that has so much knowledge in the area, what is your timeline? I think I heard you say two or three years earlier, before this really starts to force the PayPals and force the Squares to make the conversion over to what you’re already doing.

Jack Mallers (38:35):

Right. So the Squares in the PayPals, it’s not in their best interest. They’re not incentivized to do it. Again, because they’re going to sacrifice market share. To the Starbucks example, if a user can make a payment to a PayPal merchant with a Bitcoin QR code, who’s to say I’m going to use the PayPal wallet to do that? I can use any wallet I want. And that’s not good for PayPal. It degrades the value of the proprietary networks that they’ve worked hard to build. So my speculation on when they’ll have to convert, I have no idea. I can give you guys an honest guess.

Jack Mallers (39:05):

What I can tell you for sure is that Strike will be available in 200 countries. The majority will be able to have access to synthetic dollars in the form of stable coins. In priority order we’ll be launching the Euro, then the British pound, then the Swiss franc, then likely Canadian dollar, Australian dollar. And that is all in Q1 of 2021. And the 200 countries is on January 6th. It comes easy, man. I mean, listen, there’s no cost to doing this stuff. I don’t have a stretched thin balance sheet. I don’t need to go raise a bunch of money. I’ve built this thing out of my bedroom. Again, its power to this open network. And I think people are going to seriously take notes.

Jack Mallers (39:46):

Even if we became just strictly the El Salvador app of the world, we would mobile bank and millions of people and escrow hundreds of millions, if not billions of dollars of volume to and from the United States to Central America. That alone and I mean scaled to how many billions people. People lose track of the scale of the world. Cash App is the biggest finance app in all of America. 50 million users, right? Facebook’s got 5 billion downloads on Android. So Cash App is 1% as big as they are. People lose track how big the world is. This monetary network works everywhere. If we were to get 1% of the world, we’d be way bigger than Cash App.

Jack Mallers (40:31):

So anyway, I think that this is going to play out tremendously fast. And because people are going to size me up to like, this 26-year-old kid can do it, we can do it. And that’s going to be great. The more people interoperable with the network, the better, the more powerful Strike becomes, because people can do cooler things with it, spend to cooler places. So I think it’s a self-fulfilling prophecy. Similar to Bitcoin the asset, I think there’s a network effect associated to it. And I think this happens much quicker than people think.

Jack Mallers (40:55):

I love Strike’s roll here in delivering what I believe will be the first killer app for Lightning is free borderless payments that are done instantly. And it’s not about gift cards, it’s not about feeding chickens, and it’s not a toy anymore. We’re helping lives. We’re enhancing the quality of people’s lives in Central America today. And I think people are going to take note of that. You can’t ignore that.

Preston Pysh (41:19):

So if you were a big business, call it Starbucks, like you had mentioned earlier, their savings to transition to receive payments this way has to be huge, the incentive has to be huge.

Jack Mallers (41:30):

And there are two things so we’re actually talking to huge merchants. My approach to this actually is not let me build a WooCommerce plugin for Strike and try and get people that sell T-shirts download it. It’s like, no. I’m eliminating interchange, I’m allowing you to be interoperable with a monetary network that does everything cheaper and faster, and you don’t need permission or anything, you can just subscribe to it and plug into it whenever you want. I’m just going straight to their head and saying, tell me what merchant tools you need. Tell me Starbucks, what do you want? And we’re having these conversations with these really, really massive merchants.

Jack Mallers (42:05):

It’s extremely fascinating, Secretary Mnuchin rule is getting in our way a little bit and we can talk about that. But there are two things to identify here. One, the savings are absolutely huge. The 2.9% plus 30 cents to your point, Preston, is you can’t ignore that. The other though, is these merchants, what they care about is acquiring customers. And the flexibility it allows you like to Fold, for example, I mean, you can start to gamify these things. And now all of a sudden, you’re unlocking margin. And so a lot of these big merchants are like, hold on a second, we get 2.9% plus 30 cents back, like this is that much cheaper? Well, sure that’s good for a bottom line.

Jack Mallers (42:43):

But let’s use that to incentivize these people to get off of these other proprietary networks that hold everyone hostage as middlemen. Hey, if I’m Starbucks, I’ll take 1.9% of those savings. And every time you come buy a latte with a Lightning Network-enabled wallet or Strike or anything else, we’ll give you a rewards. We’ll take the other dollar and 30 cents, or percent and 30 cents, and we’ll give you extra savings, give you store credits, I mean, the amount of flexibility to achieve the two things merchants really care about, acquire really care about is, one, their margins and two, their ability to acquire customers. And it allows those two on steroids. And so yeah, the conversations we’re having are with big merchants, because again, it enhances their business, it’s so painfully obvious and exciting.

Preston Pysh (43:27):

Talk to us about the Mnuchin piece that you had mentioned.

Jack Mallers (43:31):

So Strike is a registered money service business, we’re highly regulated, as you can imagine, and now especially so we’re regulated all over the world. And so the new proposal from the US Treasury would apply to Strike. These rules are not favorable to the industry. I violently oppose of them as an individual and as the CEO and founder of a money service business here in the United States. But what I told my team is listen, we can cry about it, take the time you need to cry about it, but then it is what it is. And we work for Bitcoin. And we’re going to do the best we can with this and do an amazing job like we always do. And so that’s kind of where we’re at.

Jack Mallers (44:10):

In the form of a Starbucks using Lightning Network service, any merchant that is receiving payments at a clip of $3,000 or higher in a 24-hour period would have to KYC the sender every single time assuming it’s from some wallet, which obviously is a user experience with so much friction, it’s impossible. But I’ve been studying, the rule the proposed rule night and day with our council and our lawyers, and we’ve come up with a super clever solution involving BTC pay server, believe it or not. And I’ll come out with public comment as this proposal gets finalized. But yeah, I mean, the United States getting in everyone’s way and what are you going to do about it?

Preston Pysh (44:52):

That amount sounds really high of $3,000.

Jack Mallers (44:55):

It’s an aggregate total. So I would assume the Starbucks down the block does over $3,000 in volume in 24 hours, not a singular payment, unfortunately.

Preston Pysh (45:06):

I got you.

Jack Mallers (45:07):

Yeah, it’s unfortunate. Like I said, like I told my team, you can cry about it. But what is this community all about? What are we about as a business? What are you all about as individuals is you just persevere through it. And so we have a really clever solution. I don’t want to make any too committal public comments because the proposal hasn’t been finalized. I can say this with confidence, it’s not going to be a blocker. We’re going to get these people on board no matter what, you got my word for that. And yeah, this is a little bit annoying. And I think everyone’s [inaudible 00:45:38]. I wonder what BitPay is going to do. I wonder what these big acquires are going to do? Their business is, I mean, it’s tough. But I don’t have a lack of confidence. I have some solutions. I’m studying the law. So we’ll figure it out.

Preston Pysh (45:51):

All right. So last question for you, Jack, your thoughts on the coming year 2021, what are some of the things that you kind of expect to see play out in the next 12 months?

Jack Mallers (46:04):

For Bitcoin, the asset, I think it becomes a multi-trillion dollar asset class. And I don’t even know if that is a substantial take anymore. Unfortunately, I used to get opposed at the bar when I would say that. Nowadays, I think that’s common knowledge. But I think it continues to prove itself as a place to preserve and store wealth and at every level. At the individual level, at the institutional level, it is a tremendous asset. In fact, the best-engineered asset we’ve ever seen, and you and I both know that.

Jack Mallers (46:34):

The second one I think is Bitcoin the network is going to claim itself a spot on a similar stage. And for Strike, it’s going to be free and instant remittance anywhere in the world, and essentially banking billions of people through a mobile phone using this new open monetary network. And I think Bitcoin, the network and the efficiencies it brings, because of things like the Lightning Network, will begin to take a foothold in massive industries, and it won’t be a toy anymore. I know companies like ours have put in the work to achieve that and I know so many others that are doing the same. And so I think that becomes a more familiar story in 2021.

Jack Mallers (47:15):

It’s unclear the scale we’ll achieve. I mean, for us, our partnership with Bittrex is huge. I mean, getting 1 million users onto the Lightning Network interoperable with the Lightning Network, I mean, that’s no joke. And so we’re certainly going to achieve scales never seen before for Bitcoin as a network and using it in this way. Speculating beyond that it’s unclear. But I think at least that conversation holds a seat where it previously has not before in 2021, for sure.

Preston Pysh (47:42):

Jack, how can our audience help you out? Is there anything that you’re looking for? Is there anything that you could use or you can just provide a handoff to people so they can do more research on Strike? Take it from here.

Jack Mallers (47:57):

I say it all the time in my blogs and on Twitter, the community is already helping. Firstly, were built on an open monetary system, and the amount of effort Bitcoin Core, other companies, the Lightning Network engineers, I mean, people are helping every single day. I mean, we’re able to achieve what we’re able to achieve because we sit on top of tremendously brilliant individuals that do incredible work every single day. And then as far as helping me as a person or helping Strike as a company, the community does that and more. I was raised in this community. I was raised on Bitcoin Twitter. I got into Bitcoin was 18 and I [inaudible 00:48:34] my whole adult life here.

Jack Mallers (48:35):

And the support I get, I get emotional talking about this stuff, the support I get from people all over the world, I don’t take it for granted and it means the absolute world to me. This is my family. These are my people. And so just the encouragement on Twitter and stuff. Preston, we were talking offline, I’ve battled COVID this month, I’ve called my parents every other day crying. I mean, it’s tough. You’re battling Secretary Mnuchin, you’re launching products for professional athletes, you got COVID and sometimes it’s really hard.

Jack Mallers (49:05):

This community has had my back every step of the way. And that alone means the world to me as an individual, pass or fail. Success or failure, I don’t take that for granted. It’s one of the rare things that I hold so close to me. So that alone. So my message to the listeners is just thank you guys so much for supporting me and taking me in as a community member for almost a decade at this point.

Preston Pysh (49:29):

Well, Jack, we’re going to have links in the show notes. I can guarantee you there’s going to be a lot of people check it out Strike. This is beyond fascinating. Beyond exciting to know that you’re going to be able to bring this capability to just anybody in the world with no frictional costs and immediate clearance. I’ve been in the space for five almost going on six years now. And the concern was always just like, well, how are we ever going to get beyond this seven transactions or whatever the number was per second with the base protocol. And now I see you specifically and some others that are the engineers that have enabled this to become unlimited amount of transactions per second, immediately, any size without cost.

Preston Pysh (50:20):

It’s just kind of miraculous to see the transition that has occurred through the years and how much technology has been built and stacked on top of the rudimentary technology that was there from the beginning. Not that it was rudimentary, but relative to everything that’s getting built on top of it now, you can see how it’s just growing, it’s just fascinating. It was just a real pleasure to have this conversation with you and just to know you as a friend. I really look forward to seeing what you do next, because you’re young, and you’ve already done so much. So we’re all behind you, cheering you on, and we’re all fans, Jack.

Jack Mallers (50:58):

I appreciate it, man. I’m humbled to be here. I’m a fan of your work. And this is so exciting for me. So I appreciate the kind words and yeah, in regards to the Bitcoin network, don’t bet against an open network. It’s going to win every time. That’s what I’ll close with.

Outro (51:17):

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