Sept. 1, 2022
BitBlockBoom 2022: Jack Mallers and Grant Gilliam
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Amazon Music I was joined by Jack Mallers of Strike and Grant Gilliam of Ten31 on stage at BitBlockBoom 2022 in Dallas. Apologies for the sound quality, they had some technical issues on their side.
Video: https://youtu.be/qHjgYsZfHDQ
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00:01 - Introduction and thanks to the event organizers
00:29 - Overview of the time allocation for the session
00:47 - Introduction of Grant Gilliam
01:23 - Discussion about the upcoming debit card launch and the big announcement at Bitcoin 2022
02:37 - Explanation of the significance of having an app that can operate on ACH, lightning, and the card network
04:34 - Discussion about the transparency of the CEO and the plan for driving adoption of lightning
08:07 - Explanation of how to drive adoption and the role of merchants and payment processors
10:06 - Discussion about the role of banks and the potential for collaboration
13:45 - Question and answer session
19:20 - Discussion about the limitations of current payment systems and the benefits of lightning
25:17 - Explanation of how merchants pay for payment processing and the potential for lightning to disrupt the current system
28:02 - Discussion about the potential impact of lightning on financial inclusion and the role of banks
30:06 - Summary and conclusion
WEBVTT
NOTE
Transcription provided by Podhome.fm
Created: 3/17/2024 4:23:10 PM
Duration: 1909.499
Channels: 1
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Good
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morning.
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We only have 2 mics, so we're gonna get a little bit intimate here.
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We have a half an hour. First of all, a huge thanks to Gary and his lovely wife, Kathy, and the rest of the team here at Big Black. What a great event.
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So we have, a half an hour with you guys. We're gonna do we're gonna try and do a tight 15 minutes,
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and then you guys will get 15 minutes q and a. Ask whatever questions you want. Check out the links for them.
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That's true.
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What's up, by the way? Yo. Yo. I need you. It's fucking good.
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We have, Grant Gilliam on stage here with us. How's it going, Grant?
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Good. Good morning.
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Good morning. I think, you know, we have a little hard pull with, 2 of us on stage. I think it was Kevin. I wanted to do yet another event. I thought it was cool.
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I think it was a personal request for Jess.
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I'm excited to be here.
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I mean, if it was up to me, I would be asleep right now, to be honest.
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So, Jack, I don't know where we should start.
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You guys are about to launch this debit card,
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but I think the more
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the more pressing thing on people's heads is is is the big announcement you made at Bitcoin 2022. Raise your hand if you're at Bitcoin 2022
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for for Jackson.
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Awesome. I thought I was supposed to be able to spend Bitcoin at Whole Foods by now.
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What's going on?
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I made it.
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I tried the other day. They looked at me like I was crazy.
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Yeah. So
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Blackhawk,
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our our first big retailer
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in the Blackhawk integration
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is slated to go live
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within this quarter, so you guys do the math. This is all the show I'm I'm allowed to say, by the way. So you guys do the math.
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It's it's 2 months into this quarter, so you guys do the math there.
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And,
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yeah, we're we're working through it. We're working on it. I mean,
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there's, I don't know what to say other than that. The Shopify stuff is live, so we're ramping up those merchants, and we'll be putting together rewards pages and places to find all the Shopify Fi, like, new merchants that are interoperable. And
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we'll I mean
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yeah. I mean, I don't know what else to say outside of that. And and, I mean, I like, I got a Twitter account just like the rest of you guys. I I see all the stuff. And what do you want me to say? Like, when I have something to say, I'll say it.
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And,
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that's my that's my update. So, yeah, it it's coming and,
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I don't I don't know what else to say outside of that. It's a big it's a
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a really big,
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project.
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I I
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think the best thing that we could do
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is, get lightning interoperable
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with all of the payment infrastructure that already exists instead of trying to
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tell these big businesses
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to adopt new point of sale systems that's much more difficult, probably, like, a 25 year project
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versus, like,
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a 3 to 6 month project. And so but it's a big one. I mean, these guys are big. They got
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a lot of money. They're all their stocks are down 88%.
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Some of them are getting acquired. Some of the executives are quitting. So,
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but it's coming.
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But the key is it's not vaporware. You weren't bullshitting us. No. I was not. No. That's good. No. Also, like, being, like, I'm, like
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no. But but it also,
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2, 3 years ago, no one gave a shit about what I had to say ever. I've always been the same kid.
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I made the announcement because those companies, we all agreed that we're gonna fucking do this. And I said, you know, Shopify was live. The other ones are coming. That's still true.
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I mean, it's a hard fucking thing. Shit happens and it's coming, but I'm a man of my word. I've always have and I always will be. When I got stuff to say to the crowd, I'll say it. And,
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if anything
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goes against what I said, I'll say it. I don't know. And
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I log in to my Twitter account and I see all the stuff. But I don't know. Wait a minute. Like, always been always been never I'm never
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mislead a lot. None of that. No. So
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Well, you asked what do I want to do? I wanted to basically say what you just said, so thank you. There you go, buddy.
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So yeah. Hit us hit us, Graham. Well, speaking of Twitter, you were just on Twitter and announced debit card, obviously. Mhmm.
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You explained the significance of that of having
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an app that can now
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operate
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on ACH, lightning,
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and,
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the card network. Yeah. Maybe explain more of the significance
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having been in one place.
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Then, like so the thesis of Stripe 2,
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is
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that lightning is the best value transfer protocol
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in the world.
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Here's what I mean by that. This might take me a second.
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Let's say,
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Cash App user walks into a Wendy's, let's say. And let's say, in theory,
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Wendy's were accepting lightning payments and it was a customer strike in theory,
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and
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Cash App obviously is a customer of Square. And so we have this age old problem where
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Jack Dorsey has to transfer value from his balance sheet to my balance sheet. Right? Are we following so far? So his balance sheet is representative of John Doe,
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who's trying to buy a burger at Wendy's. And my balance sheet is representative of the merchant that's my customer who I'm acquiring for. And so what I mean by value transfers protocol is how do we actually transfer the value
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between Square's balance sheet and strikes balance sheet? It's a good question. So for a $1 cheeseburger, we could both integrate the Western Union value transfer protocol.
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Probably not the best for a cheeseburger,
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but we could
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we could use swift and correspondent banking to move
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a dollar between each other. We could in theory if we wanted, probably not the best.
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Visa is the existing value transfer protocol
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to transfer value from Jack Dorsey's balance sheet to Wendy's balance sheet today. My whole thesis
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is lightning is a way better one,
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because the value is for the first time,
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bare and digital. And so that when you send a message
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that you wanna transfer value inside of the message is actually the money because the money could be representative of bytes as data. So my whole thesis and concept is Dorsey could debit a Cash App user a dollar, should be the equivalent of that in Bitcoin over lightning, and I can receive it to convert it back to a dollar for one lease. And that's a way more inclusive, innovative,
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cheaper, faster,
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free market competitive world than the one we have today.
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And so I think people misunderstand
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strike is not competing
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with Breeze.
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I'm a Breeze Wallet user and a Stripe user.
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I want Stripe to put pressure on Chase
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and Chime
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and Robinhood
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because these are all
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typical
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banking type experiences that don't use this new value transfer protocol.
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And so for example, if Barclays were to integrate this value transfer protocol so you're following how I'm using this term value transfer protocol. So Barclays has swift plus correspondent banking value transfer protocol integrated. They've gotten Visa probably integrated.
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If they had lightning integrated and they were able to
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move money like Stripe does, I as a strike user would be able to send
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a lightning payment from my dollars and a Barclay customer would be able to receive it as pounds. Boom. It sits free remittance of any size at any time of the day. So Stretch is trying to put pressure
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on
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legacy
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payment experiences and legacy financial institutions to integrate this new value transfer protocol. I think it'll be better for their business. I also think it'll be better for the world because then, like I explained at the
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Bitcoin conference, you'll be able to walk into the supermarket.
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You could use Moon. You could use Bank of America. You could use any anyone that integrates this thing. It's a lot more inclusive, highly competitive, freer world to transact and transfer value through this open protocol.
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That's the whole thing. So all the way to why we launched the debit card.
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We have customers
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that use debit cards. Again, if you want privacy, you want non k y c, I don't know how else to tell Twitter. Don't use my fucking app. I didn't build it for that. So I I don't know what to say. I'm a Moon Wallet user because I also like I'm a samurai user because I like CoinJoy,
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but not at Strike.
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Strike, we were having customers that were deposited, direct deposited, but then when they had to use a debit card, they were withdrawing to Chase.
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And so he said, okay. Fine. I'll meet Chase on their ground, and I'll give my customers a debit card. So kinda my customers could do everything that a checking account gives you at Chase, that it gives you at Chime, that it gives you at Bank of America so you'll never have to leave. But Chase cannot serve my customers in the same ways I'm serving them because they can also scan lightning QR codes. And as we roll out our merchants and as we roll out our remitting partners, that's gonna be more and more powerful. So it was a way for us to better serve customers. And so that you didn't come to Stripe, we weren't this niche Bitcoin community crowd that you only use
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our little, like, apps. We're like the kids in the corner with the cones on our head where it's a geeky lightning network. Like, no. We're not. We mean real fucking business, and we could build a better mainstream consumer experience with all the shit you guys do. Launch your debit card is not hard, so we'll build it, but I dare you to build lightning and I'll force you to build lightning because my customers are gonna have better experiences at Wendy's than you. So
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that's why I did
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it.
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Hey. Hey, Peter.
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Just to be clear, you're not a bank. Is that correct? Not a bank.
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Not allowed to say that. So we're not a bank. We wanna put pressure on banks. So,
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people don't like that word bank.
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So it's not part of my vocabulary, unfortunately.
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So so what's your thesis on how we could actually
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drive adoption? If
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the thesis is Lightning is a superior payments
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protocol,
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how do we actually get there? We know from your presentation in Miami
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that you're a student of history of card networks. You spend a lot of time explaining the evolution of how the card networks came to be.
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What in that
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study did you kind of take out is
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what are the key points to actually try to drive adoption because the network effects right now, the car networks are quite strong. Yeah. Well, so it like,
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going back to all the value transfer protocol options we have, we've got
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Visa, Mastercard, there's Western Union. There's Swift Plus correspondent banking. These are all payment networks that escrow value. And so lightning's another one in my opinion. It escrows value.
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So what makes it better? It's instant,
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cheap,
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cash
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cash final, cash finale payments.
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What industries and markets and experiences does that benefit? In theory, all of them, but practically probably the most pressing is remittance.
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Remittance is a huge, that's a very big no brainer.
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That one, there are no real network effects to disrupt. If you can send a dollar from your checking account instantly received as euros in your step by account, I mean, that's a no brainer. Right? And so getting that rolled up and stood up and having international folks integrating our API is a big deal.
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And I think what you're alluding to is how card networks actually work.
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So
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I I think,
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I'll keep it really brief, but,
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people that issue Visa cards and people that spend out of Visa cards, they get paid
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to do it. So every time
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every time a Stripe user uses their Stripe card to make a payment, we get paid. We make money. Visa pays us to do that. And so what you actually have to do is build the unit economics
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similar to how Visa actually works. And so every time you spend out of a Chase Visa card or a Square Visa card or a Stripe Visa card, Visa's paying you to do that. These come we're we don't use Visa out of a because we're fans of them. They make it economically viable for us to use it because they pay us to use it. And they pay us to use it because they're they're taking the money they make from the merchant,
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and they're giving it to the people that is making the payment on what's known as the issuing side. So if they charge Wendy's 3%,
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they're taking some of that 3%,
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they're giving it to Chase for making the payment to Wendy's. That's how they have incentives on both sides of this of the sphere. And so I won't give too much away, but we'll be doing the same thing Where all Stripe merchants will be making a certain amount of money and any lightning wallet that checks out at our merchants will pay you because that's how it should work.
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And that's how you that's how you overcome the economics. So it's a blog post. It's in draft mode, so I'll leave it at that. But it's really, really exciting. And again, I do think, like, this open network, this is gonna be a really big deal. Like, you're a Moonwall user, a user with a a note in your basement,
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or a Cash App user, if you check out at a merchant with Success Deck Lightning and you give them cash final payments that's cheaper than Visa, you get paid.
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And, it's gonna be a big deal. So I don't know if the crowd is able to file that because I'm not allowed to share it too much, but,
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it's gonna be fun. I think you you say a lot for a CEO. You're pretty you're relatively transparent. You're a wild guy. Yeah. This is for whatever reason, a lot of people think you're like a hype man or a bullshirt, but I feel like it's the exact opposite. There's very few CEOs that are so transparent with the plan. All I wanna say is I just I just really want
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to spend Bitcoin at stores. So Yeah. No. I forward to that. I get it. And I love,
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I love people holding
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us accountable
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and,
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it's no foul play on my end. I mean, none of this shit upsets me. So, no, I get it. And I love it. And,
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and, yeah. It's one open network. We're all on the same team.
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Thanks, Jack. You're welcome, man. Quick quick show of hands. Let me use a strike.
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Oh, man. My heart's warm. Is that breaking the hate on Twitter? Yeah. And I again, the hate on Twitter is not hate. I love it. I appreciate that. Thank you, guys. So we have 15 minutes left. I would really like to rip q and a. You wanna rip some q and a? What's up?
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Anyone got questions out there?
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He said his his daughter just moved to Canada. He's having trouble sending her money. He wants her to be able to integrate Stripe with her TD Bank.
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Yeah. So I think this is a good opportunity to make a really important point. The thesis of Stripe
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is that the lightning network
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will grow
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and
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enable better experiences for payments over time. But it's it's a network. Like Stripe isn't the lightning network and us launching in every country should imply the success as a thing because then we wouldn't need to use lightning all the time really.
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So hopefully,
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someone in Canada builds an experience that's able to accept a lightning payment and give your daughter Canadian dollars. We're also launching,
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so one of the big initiatives at the company, again, maybe should I shouldn't say but whatever bucket, is, we're adding a bunch of currencies to our API
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so that we are talking to Canadian businesses. We are talking to European businesses
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where the experience Stripe wants to enable is you can enter
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your daughter's date,
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the amount you wanna send, and a Canadian bank account that she should receive the funds into, you you click enter. It creates a lightning QR code, and you pay it. She's got, like, Canadian dollars in that bank account in, like, 10 seconds. And so we're we're trying, and that's the role we're playing. But the whole thesis is that, like, others also, like, build shit too. Right? Like, if if everyone that walks into Wendy's is a Stripe customer,
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then, like, I'm just p2p in value. Right? But so so,
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so I do wanna emphasize that people shouldn't just be waiting for me to launch in every country. People should be understanding the opportunity
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in building things all over the world, which already did does exist, by the way. There's a lot of businesses and a lot of users and Cash App now brought, what is it, 80,000,000.
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So it is a network. And and the thesis is that the network has to grow, and we're a participant within the network. But in the same token, I do,
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we're gonna be rolling out with a lot of different currencies on our API so that businesses could enable experiences that are super cool.
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He's asking if you if you'll raise his account limits. Yeah. Account limits. I can raise your account limits, buddy.
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The,
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yeah, my head my head of, CS is waving his hand back there. He's gotcha.
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But, more seriously,
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this is a cool point to to bring
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up. The limits are more or less imposed
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by
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old value transfer protocols. So let's go back to the value transfer protocol concept.
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You could deposit
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money from any lightning wallet into Stripe, and Stripe will receive it, credit your dollar balance. So it's effectively like depositing dollars
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unlimited
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anytime of the day. How why? How's that possible?
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Well, because those are cash final payments. There's no fraud. There's no charge backs. I don't have to report that shit anywhere. And so you could do it all day. If you've got money in Cash App. We don't have it. Let's say you got 20 grand in Cash App. You can turn that into Bitcoin and send it to strike over lightning, and you could deposit 20 grand whenever the fuck you want.
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It's because of that value transfer protocol's better. For us as a business, we get instant cash final. I receive a bearer instrument from Cash App, and I'm allowed to credit you dollars against that instantly, and I'm holding that. It's on my balance sheet. I don't have an impaired balance sheet. I'm not getting a credit liability. Cash App is not promising me future payment so that I credit you the balance, and then 2 weeks later, they're like, ah, I'm just getting fucking with you. I'm taking the money back. I'm getting the Bitcoin. Right? And so
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the ACH value transfer protocol,
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ACH has promised a future settlement.
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So I have to put, like, everyone, the cash apps limits are, what, $2,000 a week for
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not for Bitcoin, but they don't let you withdraw right away. Right? So it's just a value transfer protocol thing. You could get your direct deposit to strike, no limits. Direct deposit is a different form of ACH. It's a cash fund.
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So it's another alluding to these value transfer protocols.
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And so we are working on net raising limits,
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but hopefully, everyone's using lightning in 2 to 3 to 4 years if your limits are unlimited because
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like, it we're done with ACH. It's just this dumb value transfer protocol. It's just old.
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Awesome. Thanks, Jack. Next question.
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So the question is,
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credit card
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transactions can be charged back and companies like Apple that are really good at delivering experiences for customers made it super, super easy. So it's trivial to just claw your money back that you've already pledged to a merchant. And so does lightning,
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like,
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is is Lightning an attractive option for merchants that isn't consumers can't just claw back capital because it's not how it works. The answer to that, yes.
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And so,
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these are the ones you see, but it
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a business that sells cheeseburgers
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loves it
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because,
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so first oh, man. I'm looking at the clock. I'm running out of time, but the don't look at the clock. Okay. Okay. No clock.
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Yeah. So going back, I don't know if everyone in the room, is familiar with the Dodd Frank reform.
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Right? It says 2,008 happens
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and
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the federal government
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reacted,
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you know, you have whiskey after this and debate whether they overreacted,
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but they've reacted
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and they've got frank reform and there's a thing called the Durbin Amendment. There's a bunch of consumer protection acts that had to protect the people from Wall Street and say that people can take their money back if they need to, and we need to protect the consumer. Consumer Protection Act and the Durbin Amendment's gonna price interchange.
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There are all these changes. So now you have this reality
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where, unfortunately, someone could buy a cheeseburger on DoorDash, eat the burger, and then get their money back. And so a lot of these people that sell cheeseburgers are like, well, isn't this a load of bullshit?
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What the hell? And, like and, you know, cheeseburgers are not like clothing or like furniture
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where there's you know, I talked to the, I talked to Wayfair and Wayfair is like, we do have to offer that because we ship couches. And sometimes shipping a couch, the leg chips. And so I do have to have a relationship with the customer, and so lightning's interesting in that way where maybe they do. I do need to give them their money back until I get them a good couch. Right? That's totally different than a fast food chain being like, now our orders went from less than 1%
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of DoorDash to now 10% of our orders are DoorDash because of COVID. And everyone fell in love with ordering food for delivery,
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and our fraud is through the roof.
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All DoorDash orders just get reversed on us, and it's bullshit.
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And this is ridiculous,
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so we love lightning. There shouldn't be consumer protection in ordering a cheese burger for $4.
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It's ridiculous, and it kills our bottom line.
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So, yes, I think having consumer protection and payments,
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it's too broad and vague to say for everything.
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There are parts of commerce
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that should not have the ability for people to just claw back their money.
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And
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so Wayfair example, shipping furniture is more merchants refunding and merchants initiating the charge back. But no one that sells things wants customers to be able to get their money back after you give them the good. And so, yeah, A 100%. It's a good insight on your If I remember correctly,
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one of the times we've told you previously, you said, like, everyone
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locks in on the 2 to 4 percent
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credit card fees or the real fee at the end of the day is the chargebacks. Right? It's like that's, like, negligible in comparison. Yeah. So the federal government
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goes to war with companies like Visa and Mastercard.
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Oh, senator Dick Durbin of Illinois. But
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the the the point being is they're constantly fighting over
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interchange and how much you're charging merchants and they put out a study. They said online merchants,
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the cost to settle a payment, over 50% of it is fraud and chargebacks.
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Because the Internet, it's so easy to take a stolen card or just do it yourself with
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100 basis points. That's 4% for the kids at home. And that's
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that like, that's a lot. That's more than Visa. But what are they paying for? They're paying for cash penalty. Like, I'll pay 4% and mark it into my bottom line if I know that the money's not gonna be reversed on me and taken out of my account in 2 weeks. And so, yes, the finality part is arguably
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more important in some commerce settings
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than just the interchange part. And to my previous point, this is gonna be super confusing potentially, so rewind the tapes when you get home. But if a business is gonna need 400 basis points
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to process for them, why don't I tell the whole Lightning Network community, hey. This guy wants cash final global payments for selling his t shirts. Any lightning wallet that checks out of this guy, I'll give you 200 of the basis points.
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And so now if you're a Bank of America, if you get your dollars to this guy over Visa,
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you're making 60 basis points. If you get into this guy over Lightning, you're making 200. And so now if you're Bank of America,
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it's not about being a Bitcoiner, being a libertarian anarchist throwover of the state. It's about making fucking money, and you're making more money because it's a better value transfer protocol. So I think all these guys are actually bit pointers without knowing it because it's just a better way to deliver value to your customers and the unit economics are better because
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there's no intermediaries of the thing. Right? Like, I can afford to do that. I can afford to have a commission Visa
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because I'm not paying all the intermediate banks in the cost of capital to settle the transaction.
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So, Jack, I mean, it goes to follow with what you just said. I mean,
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cut Bank of America into the fee structures so they have an incentive to actually
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adopt lightning and encourage their customers to step lightning at stores. But personally, I mean, I think Bank of America can go fuck themselves. It goes for reason that it's a
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to get non custodial Bitcoin wallet so they can actually have a sustainable business model. Yeah. So okay.
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Rewind back a little bit.
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What are merchants actually paying for? Merchants are paying for
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if someone builds a service that's able to collect customer deposits
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and then gives them a good enough experience that allows them to shop and buy my shit, whether I'm selling shirts, whether I'm selling TVs, whether I'm selling cheeseburgers,
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whoever is able to collect consumer deposits,
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handle the experience, and allow them to give me money, I'll pay them for that. That's the whole concept of interchange, of merchants paying processors to escrow them the value. Because it is really complicated for people to have to try and build that on by themselves.
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Okay. That's fine. The problem is Visa and Mastercard
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are accused of colluding and monopolistically
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setting prices too high because it's a monopoly.
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So that but that doesn't dismay or,
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issue against the actual service merchants are paying for. Merchants are paying for some business
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like the Moon Wallet to get people to deposit to it and make payments to it. And so, yeah, what I'm saying is if merchants are paying me
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to help them get cash final instant payments,
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I will
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pay anybody that builds a lightning network service that gets them the money,
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but share it in the pie. That's how Visa works. That's how payment processing works. We just need to build it on an open network. So and I know if you make the payment because it's cryptographic.
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You have the preimage.
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So if you whether you're running a node in your basement or whether it's Bank of America,
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give me a preimage that I can map to a lightning invoice, I know for a fact you made that payment, and I will pay you out for it.
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And it's super simple. So then you have this open network effect where it's just a bounty.
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Like, anybody
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that could use Lightning to get cash final value to these people that want to accept it gets paid.
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In fact, in a lot of scenarios, get paid more than any other network
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because the unit economics are better because it's cheaper and faster for everybody. Right? And so that's the whole point. So, yeah, in theory,
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you know, as I've published these blog posts and talked about this more publicly, if you're running a note in your basement, you could upload the preimage of you just going into a supermarket in the Midwest. Like, I just bought $40 worth of groceries. Here's my preimage. I'll commission that back to you. But then if you're also Bank of America
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you've got tens of millions of customers shopping, I'll pay that back to you too. Right? Does that make sense? It's like
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so we hold no bias against who checks out,
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and
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the whole point of that part of our business is we're helping merchants get cheaper, faster, cash final settlements.
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So you're holding up a stop today? Well, I think we're running out of time. I'm pretty sure, I mean, that's absolutely massive. Like, that is that could
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be an absolute game changer for for self custody or civil wallets. One more thing too. Like I can say whatever you want. So so in in
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in 2008,
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when the financial crisis happened in the Dodd Frank reform and the Durban Amendment, they basically took the ability for these big banks to
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monetize their checking accounts. For those unfamiliar,
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these big banks make money when their customers use Visa or Mastercard to buy shit. Right? And the federal government took that away from them, and they said, we're pricing the interchange now. That's ours. And when did the credit card boom in the United States happen? Why is the United States of America the only fucking country with a credit card market for consumers?
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Is because this. It's because the federal government took away
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these banks' ability to monetize checking accounts. All of a sudden, it's 2008, 2009. I'm on Bank of America. I cannot
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make money on mortgage loans anymore because well, like, we fucked that up. And
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I can't I can't make money on check bank accounts anymore. So when did financial inclusion problems start happening in America? When did you have to be credit worthy to have a Chase account? When the federal government kind of made it that way because they couldn't make money on a checking account anymore. So now all of a sudden, if you weren't credit worthy, you couldn't get a fucking Chase account. When did Chime start? When did Square start? When did Robinhood start? All these businesses that were serving the underserved in America,
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America has an inclusion problem. Go get the fuck out of here. How's that possible?
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It's because of this story.
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Right? Is that and so all of these businesses,
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these big banks, they're doing shit that we could never do. Their whole business is building an experience and a brand to collect customer deposits and help them spend and live financially. To me, that sounds exactly like what the blue wallet does and what the moon wallet does. And so giving these companies also
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revenue
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for what they're doing
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for the commerce setting
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is like how it should work. There's no difference between blue BlueWallet and Bank of America. They do the same shit. They accept the customer deposits, and they give you an experience that encourages you to live your life and spend it. And so if you spend it at a merchant, they should be getting fucking
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paid. And so that's kind of like the makeup of this whole environment is you have Chime, which basically
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picked up where Bank of America couldn't anymore after 2008 and now serves these checking accounts. All these big banks are hyper competitive in the credit market. These merchants got fucked no matter what. I do think that the Lightning Network is the most American way to solve this. I don't think federal overreached
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in deciding who gets to do what, solve anything. In fact, it made it worse. It gave us a consumer credit boom. It it divided the country. It caused financial exclusion problems. Merchant pickets are up 75%
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since, so it didn't solve that problem at all. I think if everyone had access to Lightning and it was whoever built the best experience to collect deposits and make payments over Lightning,
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gets paid,
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then like Blue Ball and Bank of America are competing for the same people, and that's that's very American and fair and honest and it's a free market. So pricing isn't set by 2 companies and that that's that's the whole story. I'll do it.
NOTE
Transcription provided by Podhome.fm
Created: 3/17/2024 4:23:10 PM
Duration: 1909.499
Channels: 1
1
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2
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morning.
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We only have 2 mics, so we're gonna get a little bit intimate here.
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We have a half an hour. First of all, a huge thanks to Gary and his lovely wife, Kathy, and the rest of the team here at Big Black. What a great event.
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So we have, a half an hour with you guys. We're gonna do we're gonna try and do a tight 15 minutes,
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and then you guys will get 15 minutes q and a. Ask whatever questions you want. Check out the links for them.
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What's up, by the way? Yo. Yo. I need you. It's fucking good.
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10
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Good. Good morning.
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I'm excited to be here.
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I mean, if it was up to me, I would be asleep right now, to be honest.
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So, Jack, I don't know where we should start.
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You guys are about to launch this debit card,
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but I think the more
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the more pressing thing on people's heads is is is the big announcement you made at Bitcoin 2022. Raise your hand if you're at Bitcoin 2022
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for for Jackson.
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Awesome. I thought I was supposed to be able to spend Bitcoin at Whole Foods by now.
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What's going on?
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I made it.
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I tried the other day. They looked at me like I was crazy.
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Blackhawk,
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our our first big retailer
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in the Blackhawk integration
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is slated to go live
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within this quarter, so you guys do the math. This is all the show I'm I'm allowed to say, by the way. So you guys do the math.
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It's it's 2 months into this quarter, so you guys do the math there.
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And,
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yeah, we're we're working through it. We're working on it. I mean,
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there's, I don't know what to say other than that. The Shopify stuff is live, so we're ramping up those merchants, and we'll be putting together rewards pages and places to find all the Shopify Fi, like, new merchants that are interoperable. And
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we'll I mean
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yeah. I mean, I don't know what else to say outside of that. And and, I mean, I like, I got a Twitter account just like the rest of you guys. I I see all the stuff. And what do you want me to say? Like, when I have something to say, I'll say it.
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And,
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that's my that's my update. So, yeah, it it's coming and,
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I don't I don't know what else to say outside of that. It's a big it's a
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a really big,
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project.
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I I
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think the best thing that we could do
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is, get lightning interoperable
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with all of the payment infrastructure that already exists instead of trying to
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tell these big businesses
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to adopt new point of sale systems that's much more difficult, probably, like, a 25 year project
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versus, like,
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a 3 to 6 month project. And so but it's a big one. I mean, these guys are big. They got
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a lot of money. They're all their stocks are down 88%.
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Some of them are getting acquired. Some of the executives are quitting. So,
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but it's coming.
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But the key is it's not vaporware. You weren't bullshitting us. No. I was not. No. That's good. No. Also, like, being, like, I'm, like
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no. But but it also,
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2, 3 years ago, no one gave a shit about what I had to say ever. I've always been the same kid.
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I made the announcement because those companies, we all agreed that we're gonna fucking do this. And I said, you know, Shopify was live. The other ones are coming. That's still true.
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I mean, it's a hard fucking thing. Shit happens and it's coming, but I'm a man of my word. I've always have and I always will be. When I got stuff to say to the crowd, I'll say it. And,
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if anything
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goes against what I said, I'll say it. I don't know. And
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I log in to my Twitter account and I see all the stuff. But I don't know. Wait a minute. Like, always been always been never I'm never
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mislead a lot. None of that. No. So
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You explained the significance of that of having
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an app that can now
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operate
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on ACH, lightning,
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and,
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the card network. Yeah. Maybe explain more of the significance
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having been in one place.
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is
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that lightning is the best value transfer protocol
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in the world.
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Here's what I mean by that. This might take me a second.
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Let's say,
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Cash App user walks into a Wendy's, let's say. And let's say, in theory,
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Wendy's were accepting lightning payments and it was a customer strike in theory,
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and
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Cash App obviously is a customer of Square. And so we have this age old problem where
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Jack Dorsey has to transfer value from his balance sheet to my balance sheet. Right? Are we following so far? So his balance sheet is representative of John Doe,
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who's trying to buy a burger at Wendy's. And my balance sheet is representative of the merchant that's my customer who I'm acquiring for. And so what I mean by value transfers protocol is how do we actually transfer the value
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between Square's balance sheet and strikes balance sheet? It's a good question. So for a $1 cheeseburger, we could both integrate the Western Union value transfer protocol.
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Probably not the best for a cheeseburger,
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but we could
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we could use swift and correspondent banking to move
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a dollar between each other. We could in theory if we wanted, probably not the best.
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Visa is the existing value transfer protocol
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to transfer value from Jack Dorsey's balance sheet to Wendy's balance sheet today. My whole thesis
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is lightning is a way better one,
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because the value is for the first time,
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bare and digital. And so that when you send a message
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that you wanna transfer value inside of the message is actually the money because the money could be representative of bytes as data. So my whole thesis and concept is Dorsey could debit a Cash App user a dollar, should be the equivalent of that in Bitcoin over lightning, and I can receive it to convert it back to a dollar for one lease. And that's a way more inclusive, innovative,
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cheaper, faster,
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free market competitive world than the one we have today.
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And so I think people misunderstand
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strike is not competing
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with Breeze.
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I'm a Breeze Wallet user and a Stripe user.
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I want Stripe to put pressure on Chase
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and Chime
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and Robinhood
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because these are all
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typical
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banking type experiences that don't use this new value transfer protocol.
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And so for example, if Barclays were to integrate this value transfer protocol so you're following how I'm using this term value transfer protocol. So Barclays has swift plus correspondent banking value transfer protocol integrated. They've gotten Visa probably integrated.
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If they had lightning integrated and they were able to
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move money like Stripe does, I as a strike user would be able to send
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a lightning payment from my dollars and a Barclay customer would be able to receive it as pounds. Boom. It sits free remittance of any size at any time of the day. So Stretch is trying to put pressure
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on
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legacy
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payment experiences and legacy financial institutions to integrate this new value transfer protocol. I think it'll be better for their business. I also think it'll be better for the world because then, like I explained at the
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Bitcoin conference, you'll be able to walk into the supermarket.
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You could use Moon. You could use Bank of America. You could use any anyone that integrates this thing. It's a lot more inclusive, highly competitive, freer world to transact and transfer value through this open protocol.
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That's the whole thing. So all the way to why we launched the debit card.
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We have customers
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that use debit cards. Again, if you want privacy, you want non k y c, I don't know how else to tell Twitter. Don't use my fucking app. I didn't build it for that. So I I don't know what to say. I'm a Moon Wallet user because I also like I'm a samurai user because I like CoinJoy,
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but not at Strike.
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Strike, we were having customers that were deposited, direct deposited, but then when they had to use a debit card, they were withdrawing to Chase.
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And so he said, okay. Fine. I'll meet Chase on their ground, and I'll give my customers a debit card. So kinda my customers could do everything that a checking account gives you at Chase, that it gives you at Chime, that it gives you at Bank of America so you'll never have to leave. But Chase cannot serve my customers in the same ways I'm serving them because they can also scan lightning QR codes. And as we roll out our merchants and as we roll out our remitting partners, that's gonna be more and more powerful. So it was a way for us to better serve customers. And so that you didn't come to Stripe, we weren't this niche Bitcoin community crowd that you only use
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our little, like, apps. We're like the kids in the corner with the cones on our head where it's a geeky lightning network. Like, no. We're not. We mean real fucking business, and we could build a better mainstream consumer experience with all the shit you guys do. Launch your debit card is not hard, so we'll build it, but I dare you to build lightning and I'll force you to build lightning because my customers are gonna have better experiences at Wendy's than you. So
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that's why I did
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it.
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Hey. Hey, Peter.
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people don't like that word bank.
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So it's not part of my vocabulary, unfortunately.
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drive adoption? If
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the thesis is Lightning is a superior payments
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protocol,
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how do we actually get there? We know from your presentation in Miami
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that you're a student of history of card networks. You spend a lot of time explaining the evolution of how the card networks came to be.
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What in that
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study did you kind of take out is
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what are the key points to actually try to drive adoption because the network effects right now, the car networks are quite strong. Yeah. Well, so it like,
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Visa, Mastercard, there's Western Union. There's Swift Plus correspondent banking. These are all payment networks that escrow value. And so lightning's another one in my opinion. It escrows value.
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So what makes it better? It's instant,
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cheap,
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cash
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cash final, cash finale payments.
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What industries and markets and experiences does that benefit? In theory, all of them, but practically probably the most pressing is remittance.
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Remittance is a huge, that's a very big no brainer.
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That one, there are no real network effects to disrupt. If you can send a dollar from your checking account instantly received as euros in your step by account, I mean, that's a no brainer. Right? And so getting that rolled up and stood up and having international folks integrating our API is a big deal.
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And I think what you're alluding to is how card networks actually work.
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So
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I I think,
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I'll keep it really brief, but,
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people that issue Visa cards and people that spend out of Visa cards, they get paid
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to do it. So every time
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every time a Stripe user uses their Stripe card to make a payment, we get paid. We make money. Visa pays us to do that. And so what you actually have to do is build the unit economics
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similar to how Visa actually works. And so every time you spend out of a Chase Visa card or a Square Visa card or a Stripe Visa card, Visa's paying you to do that. These come we're we don't use Visa out of a because we're fans of them. They make it economically viable for us to use it because they pay us to use it. And they pay us to use it because they're they're taking the money they make from the merchant,
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and they're giving it to the people that is making the payment on what's known as the issuing side. So if they charge Wendy's 3%,
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they're taking some of that 3%,
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they're giving it to Chase for making the payment to Wendy's. That's how they have incentives on both sides of this of the sphere. And so I won't give too much away, but we'll be doing the same thing Where all Stripe merchants will be making a certain amount of money and any lightning wallet that checks out at our merchants will pay you because that's how it should work.
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And that's how you that's how you overcome the economics. So it's a blog post. It's in draft mode, so I'll leave it at that. But it's really, really exciting. And again, I do think, like, this open network, this is gonna be a really big deal. Like, you're a Moonwall user, a user with a a note in your basement,
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or a Cash App user, if you check out at a merchant with Success Deck Lightning and you give them cash final payments that's cheaper than Visa, you get paid.
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And, it's gonna be a big deal. So I don't know if the crowd is able to file that because I'm not allowed to share it too much, but,
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I love people holding
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us accountable
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and,
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it's no foul play on my end. I mean, none of this shit upsets me. So, no, I get it. And I love it. And,
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and, yeah. It's one open network. We're all on the same team.
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Oh, man. My heart's warm. Is that breaking the hate on Twitter? Yeah. And I again, the hate on Twitter is not hate. I love it. I appreciate that. Thank you, guys. So we have 15 minutes left. I would really like to rip q and a. You wanna rip some q and a? What's up?
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Anyone got questions out there?
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He said his his daughter just moved to Canada. He's having trouble sending her money. He wants her to be able to integrate Stripe with her TD Bank.
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is that the lightning network
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will grow
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and
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enable better experiences for payments over time. But it's it's a network. Like Stripe isn't the lightning network and us launching in every country should imply the success as a thing because then we wouldn't need to use lightning all the time really.
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So hopefully,
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someone in Canada builds an experience that's able to accept a lightning payment and give your daughter Canadian dollars. We're also launching,
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so one of the big initiatives at the company, again, maybe should I shouldn't say but whatever bucket, is, we're adding a bunch of currencies to our API
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so that we are talking to Canadian businesses. We are talking to European businesses
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where the experience Stripe wants to enable is you can enter
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your daughter's date,
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the amount you wanna send, and a Canadian bank account that she should receive the funds into, you you click enter. It creates a lightning QR code, and you pay it. She's got, like, Canadian dollars in that bank account in, like, 10 seconds. And so we're we're trying, and that's the role we're playing. But the whole thesis is that, like, others also, like, build shit too. Right? Like, if if everyone that walks into Wendy's is a Stripe customer,
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then, like, I'm just p2p in value. Right? But so so,
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so I do wanna emphasize that people shouldn't just be waiting for me to launch in every country. People should be understanding the opportunity
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in building things all over the world, which already did does exist, by the way. There's a lot of businesses and a lot of users and Cash App now brought, what is it, 80,000,000.
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So it is a network. And and the thesis is that the network has to grow, and we're a participant within the network. But in the same token, I do,
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we're gonna be rolling out with a lot of different currencies on our API so that businesses could enable experiences that are super cool.
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He's asking if you if you'll raise his account limits. Yeah. Account limits. I can raise your account limits, buddy.
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The,
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yeah, my head my head of, CS is waving his hand back there. He's gotcha.
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But, more seriously,
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this is a cool point to to bring
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up. The limits are more or less imposed
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by
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old value transfer protocols. So let's go back to the value transfer protocol concept.
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You could deposit
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money from any lightning wallet into Stripe, and Stripe will receive it, credit your dollar balance. So it's effectively like depositing dollars
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unlimited
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anytime of the day. How why? How's that possible?
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Well, because those are cash final payments. There's no fraud. There's no charge backs. I don't have to report that shit anywhere. And so you could do it all day. If you've got money in Cash App. We don't have it. Let's say you got 20 grand in Cash App. You can turn that into Bitcoin and send it to strike over lightning, and you could deposit 20 grand whenever the fuck you want.
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It's because of that value transfer protocol's better. For us as a business, we get instant cash final. I receive a bearer instrument from Cash App, and I'm allowed to credit you dollars against that instantly, and I'm holding that. It's on my balance sheet. I don't have an impaired balance sheet. I'm not getting a credit liability. Cash App is not promising me future payment so that I credit you the balance, and then 2 weeks later, they're like, ah, I'm just getting fucking with you. I'm taking the money back. I'm getting the Bitcoin. Right? And so
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the ACH value transfer protocol,
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ACH has promised a future settlement.
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So I have to put, like, everyone, the cash apps limits are, what, $2,000 a week for
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not for Bitcoin, but they don't let you withdraw right away. Right? So it's just a value transfer protocol thing. You could get your direct deposit to strike, no limits. Direct deposit is a different form of ACH. It's a cash fund.
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So it's another alluding to these value transfer protocols.
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And so we are working on net raising limits,
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but hopefully, everyone's using lightning in 2 to 3 to 4 years if your limits are unlimited because
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like, it we're done with ACH. It's just this dumb value transfer protocol. It's just old.
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Awesome. Thanks, Jack. Next question.
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So the question is,
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credit card
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transactions can be charged back and companies like Apple that are really good at delivering experiences for customers made it super, super easy. So it's trivial to just claw your money back that you've already pledged to a merchant. And so does lightning,
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like,
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is is Lightning an attractive option for merchants that isn't consumers can't just claw back capital because it's not how it works. The answer to that, yes.
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And so,
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these are the ones you see, but it
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a business that sells cheeseburgers
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loves it
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because,
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so first oh, man. I'm looking at the clock. I'm running out of time, but the don't look at the clock. Okay. Okay. No clock.
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Yeah. So going back, I don't know if everyone in the room, is familiar with the Dodd Frank reform.
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Right? It says 2,008 happens
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and
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the federal government
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reacted,
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you know, you have whiskey after this and debate whether they overreacted,
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but they've reacted
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and they've got frank reform and there's a thing called the Durbin Amendment. There's a bunch of consumer protection acts that had to protect the people from Wall Street and say that people can take their money back if they need to, and we need to protect the consumer. Consumer Protection Act and the Durbin Amendment's gonna price interchange.
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There are all these changes. So now you have this reality
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where, unfortunately, someone could buy a cheeseburger on DoorDash, eat the burger, and then get their money back. And so a lot of these people that sell cheeseburgers are like, well, isn't this a load of bullshit?
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What the hell? And, like and, you know, cheeseburgers are not like clothing or like furniture
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where there's you know, I talked to the, I talked to Wayfair and Wayfair is like, we do have to offer that because we ship couches. And sometimes shipping a couch, the leg chips. And so I do have to have a relationship with the customer, and so lightning's interesting in that way where maybe they do. I do need to give them their money back until I get them a good couch. Right? That's totally different than a fast food chain being like, now our orders went from less than 1%
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of DoorDash to now 10% of our orders are DoorDash because of COVID. And everyone fell in love with ordering food for delivery,
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and our fraud is through the roof.
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All DoorDash orders just get reversed on us, and it's bullshit.
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And this is ridiculous,
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so we love lightning. There shouldn't be consumer protection in ordering a cheese burger for $4.
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It's ridiculous, and it kills our bottom line.
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So, yes, I think having consumer protection and payments,
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it's too broad and vague to say for everything.
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There are parts of commerce
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that should not have the ability for people to just claw back their money.
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And
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so Wayfair example, shipping furniture is more merchants refunding and merchants initiating the charge back. But no one that sells things wants customers to be able to get their money back after you give them the good. And so, yeah, A 100%. It's a good insight on your If I remember correctly,
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locks in on the 2 to 4 percent
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credit card fees or the real fee at the end of the day is the chargebacks. Right? It's like that's, like, negligible in comparison. Yeah. So the federal government
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Oh, senator Dick Durbin of Illinois. But
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the the the point being is they're constantly fighting over
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interchange and how much you're charging merchants and they put out a study. They said online merchants,
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the cost to settle a payment, over 50% of it is fraud and chargebacks.
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Because the Internet, it's so easy to take a stolen card or just do it yourself with
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100 basis points. That's 4% for the kids at home. And that's
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that like, that's a lot. That's more than Visa. But what are they paying for? They're paying for cash penalty. Like, I'll pay 4% and mark it into my bottom line if I know that the money's not gonna be reversed on me and taken out of my account in 2 weeks. And so, yes, the finality part is arguably
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more important in some commerce settings
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than just the interchange part. And to my previous point, this is gonna be super confusing potentially, so rewind the tapes when you get home. But if a business is gonna need 400 basis points
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to process for them, why don't I tell the whole Lightning Network community, hey. This guy wants cash final global payments for selling his t shirts. Any lightning wallet that checks out of this guy, I'll give you 200 of the basis points.
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And so now if you're a Bank of America, if you get your dollars to this guy over Visa,
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you're making 60 basis points. If you get into this guy over Lightning, you're making 200. And so now if you're Bank of America,
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it's not about being a Bitcoiner, being a libertarian anarchist throwover of the state. It's about making fucking money, and you're making more money because it's a better value transfer protocol. So I think all these guys are actually bit pointers without knowing it because it's just a better way to deliver value to your customers and the unit economics are better because
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there's no intermediaries of the thing. Right? Like, I can afford to do that. I can afford to have a commission Visa
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because I'm not paying all the intermediate banks in the cost of capital to settle the transaction.
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cut Bank of America into the fee structures so they have an incentive to actually
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adopt lightning and encourage their customers to step lightning at stores. But personally, I mean, I think Bank of America can go fuck themselves. It goes for reason that it's a
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to get non custodial Bitcoin wallet so they can actually have a sustainable business model. Yeah. So okay.
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What are merchants actually paying for? Merchants are paying for
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if someone builds a service that's able to collect customer deposits
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and then gives them a good enough experience that allows them to shop and buy my shit, whether I'm selling shirts, whether I'm selling TVs, whether I'm selling cheeseburgers,
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whoever is able to collect consumer deposits,
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handle the experience, and allow them to give me money, I'll pay them for that. That's the whole concept of interchange, of merchants paying processors to escrow them the value. Because it is really complicated for people to have to try and build that on by themselves.
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Okay. That's fine. The problem is Visa and Mastercard
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are accused of colluding and monopolistically
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setting prices too high because it's a monopoly.
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So that but that doesn't dismay or,
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issue against the actual service merchants are paying for. Merchants are paying for some business
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like the Moon Wallet to get people to deposit to it and make payments to it. And so, yeah, what I'm saying is if merchants are paying me
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to help them get cash final instant payments,
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I will
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pay anybody that builds a lightning network service that gets them the money,
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but share it in the pie. That's how Visa works. That's how payment processing works. We just need to build it on an open network. So and I know if you make the payment because it's cryptographic.
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You have the preimage.
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So if you whether you're running a node in your basement or whether it's Bank of America,
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give me a preimage that I can map to a lightning invoice, I know for a fact you made that payment, and I will pay you out for it.
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And it's super simple. So then you have this open network effect where it's just a bounty.
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Like, anybody
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that could use Lightning to get cash final value to these people that want to accept it gets paid.
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In fact, in a lot of scenarios, get paid more than any other network
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because the unit economics are better because it's cheaper and faster for everybody. Right? And so that's the whole point. So, yeah, in theory,
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you know, as I've published these blog posts and talked about this more publicly, if you're running a note in your basement, you could upload the preimage of you just going into a supermarket in the Midwest. Like, I just bought $40 worth of groceries. Here's my preimage. I'll commission that back to you. But then if you're also Bank of America
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you've got tens of millions of customers shopping, I'll pay that back to you too. Right? Does that make sense? It's like
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so we hold no bias against who checks out,
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and
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the whole point of that part of our business is we're helping merchants get cheaper, faster, cash final settlements.
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in 2008,
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when the financial crisis happened in the Dodd Frank reform and the Durban Amendment, they basically took the ability for these big banks to
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monetize their checking accounts. For those unfamiliar,
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these big banks make money when their customers use Visa or Mastercard to buy shit. Right? And the federal government took that away from them, and they said, we're pricing the interchange now. That's ours. And when did the credit card boom in the United States happen? Why is the United States of America the only fucking country with a credit card market for consumers?
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Is because this. It's because the federal government took away
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these banks' ability to monetize checking accounts. All of a sudden, it's 2008, 2009. I'm on Bank of America. I cannot
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make money on mortgage loans anymore because well, like, we fucked that up. And
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I can't I can't make money on check bank accounts anymore. So when did financial inclusion problems start happening in America? When did you have to be credit worthy to have a Chase account? When the federal government kind of made it that way because they couldn't make money on a checking account anymore. So now all of a sudden, if you weren't credit worthy, you couldn't get a fucking Chase account. When did Chime start? When did Square start? When did Robinhood start? All these businesses that were serving the underserved in America,
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America has an inclusion problem. Go get the fuck out of here. How's that possible?
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It's because of this story.
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Right? Is that and so all of these businesses,
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these big banks, they're doing shit that we could never do. Their whole business is building an experience and a brand to collect customer deposits and help them spend and live financially. To me, that sounds exactly like what the blue wallet does and what the moon wallet does. And so giving these companies also
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revenue
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for what they're doing
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for the commerce setting
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is like how it should work. There's no difference between blue BlueWallet and Bank of America. They do the same shit. They accept the customer deposits, and they give you an experience that encourages you to live your life and spend it. And so if you spend it at a merchant, they should be getting fucking
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paid. And so that's kind of like the makeup of this whole environment is you have Chime, which basically
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picked up where Bank of America couldn't anymore after 2008 and now serves these checking accounts. All these big banks are hyper competitive in the credit market. These merchants got fucked no matter what. I do think that the Lightning Network is the most American way to solve this. I don't think federal overreached
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in deciding who gets to do what, solve anything. In fact, it made it worse. It gave us a consumer credit boom. It it divided the country. It caused financial exclusion problems. Merchant pickets are up 75%
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since, so it didn't solve that problem at all. I think if everyone had access to Lightning and it was whoever built the best experience to collect deposits and make payments over Lightning,
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gets paid,
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then like Blue Ball and Bank of America are competing for the same people, and that's that's very American and fair and honest and it's a free market. So pricing isn't set by 2 companies and that that's that's the whole story. I'll do it.