“The lightning network is a protocol that sits on top of Bitcoin. If we solve variable time and cost, we give instant and relatively free transaction finality to this monetary network- arguably the biggest step forward in money as a technology in history.”
Jack Mallers is the Founder and CEO of Zap, which created Strike, a bitcoin investment and payments company that transacts over the Lightning Network. Jack is known as one of the earliest Lightning Network developers, and recently has been providing market insights to help build El Salvador’s modern financial infrastructure using Bitcoin technology. This technology delivers powerful advantages over legacy financial rails and incumbent payment systems. “What’s transformative here is that bitcoin is both the greatest reserve asset ever created and a superior monetary network. Holding bitcoin provides a way to protect developing economies from potential shocks of fiat currency inflation,”
Strike is a mobile payments app that allows users to send and receive money anywhere, instantly, for free. Strike is built on top of the Bitcoin network – the largest global, interoperable, and open payments standard. Strike believes that open payment networks enable universal participation in the financial system, ushering in a new digital economy with truly borderless money transfers. Strike leverages Bitcoin’s open payment network to offer users the first global peer-to-peer payments app and a novel bitcoin-native financial experience.
LISTEN AND SUBSCRIBE
SPEAKER
Jack Mallers
Chief Executive Officer
Zap
MODERATOR
Anthony Scaramucci
Founder & Managing Partner
SkyBridge
TIMESTAMPS
0:00 - Intro
3:40 - Strike's remittance trial in El Salvador
12:20 - How Strike is paving the way for the future of remittance payments via Bitcoin’s Lightning Network
17:20 - How layer 2 protocols can improve Bitcoin for remittances
19:06 - Bitcoin & El Salvador: the full story
25:20 - The process of onboarding entire countries
32:40 - Advantages of making Bitcoin legal tender
38:00 - Reasons for phasing out USDT
40:00 - Driving global Bitcoin adoption
45:00 - How is Bitcoin’s volatility changing?
TRANSCRIPT
John Darsie: (00:07)
Hello everyone. And welcome back to Salt Talks. My name is John Darsie, I'm the managing director of Salt, which is a global thought leadership forum and networking platform at the intersection of finance, technology and public policy. Salt Talks are a digital interview series that we started in 2020 with leading investors, creators and thinkers. Our goal on these Salt Talks, the same as our goal at our Salt conferences, which we're excited to resume in New York in September of this year, but that's to provide a window into the mind of subject matter experts, as well as provide a platform for what we think are big ideas that are shaping the future. We're very excited today to bring you the latest episode of our digital assets series with Jack Maulers. If you're in the Bitcoin space, obviously he's a name that needs no introduction. Your name has been everywhere recently Jack, but if you're not in the Bitcoin space, I think you'll hear his name pretty soon with things that are going on around the world.
John Darsie: (01:02)
But Jack is the chief executive officer and founder of Zap, which is a Bitcoin investment and payments company that transacts over the Lightning Network. Zap is perhaps most famous for its Strike app, which the app is being used in El Salvador. El Salvador recently announced that it is making Bitcoin a legal tender, the first country to do so, Jack led that initiative with the president of El Salvador. Now the Strike app is being rolled out across the country to enable Bitcoin payments. He also was the driving force behind the Bitcoin car and the ND 500, he has the Bitcoin racing team hat on there.
John Darsie: (01:38)
The number 21 Chevrolet was branded all Bitcoin Ed Carpenter's racing team. So that was an awesome incident for the Bitcoin community as well. So Jack, it's a pleasure to have you on. Hosting today's talk is Brett Messing, who's the president and chief operating officer of SkyBridge Capital, which is a global alternative investment firm with also a significant stack of Satoshi in our investment funds. And Brett, I'll turn it over to you for the interview.
Brett Messing: (02:06)
Thanks John. Hey Jack, thanks so much, really happy to have you here.
Jack Mallers: (02:11)
Thank you for having me. I'm a huge fan first and foremost. I think you guys did tremendous work and I'm very excited that you're Bitcoiners now, so I'm happy to be here. Let's go baby.
Brett Messing: (02:23)
We are Bitcoiners. So we're going to talk a lot about El Salvador, but I don't want to tell you about my Jack Maller's journey. So everyone is brought into Bitcoin by their own Bitcoin sherpa and I'm a Goldman Sachs alum and there are a bunch of early OG Bitcoiners like [Pip Reagor 00:02:41], Mike Novogratz, Dan Morehead and they helped me as well as Ross Stevens who we were talking about before we got going. But in the fall I think it was, I was listening to you on a podcast with Peter McCormick and you were describing how you and your company were going to address the remittance market, and in a prior life I was actually deputy mayor of LA and remittance is a big issue in LA of course. There's a very little a city can do, but we did whatever we could do to protect the residents from getting fleeced while sending money home.
Brett Messing: (03:17)
But anyway, I listened to you and Peter and I got off and my takeaway was, if this kid, sorry, I'm old enough to be your dad. So I say it, it's with love. If this kid can actually do this, Bitcoin is so much bigger than I imagined it was. And I called up Pip Reagror and Ron Stevenson, basically said that to him, and Ross said to... Pete didn't know, Ross is like, "Yes, he can." So let's start there. I guess we could send people to Peter McCormick's podcasts, but that's his content, this is our content. Can you talk about how you guys use the Lightning Network basically to address the remittance market? Because it really is a massive use case for Bitcoin that I think people don't understand. I didn't.
Jack Mallers: (04:04)
Yeah, 100%. And I think how we're using the lightening network and whether it's cross-border payments or just consumer merchant payments and questioning interchange for example, goes back to visiting monetary networks as a general concept. So Bitcoin is traditionally associated with slow payments, slow transaction times, not a lot of throughput, and that's why it's slow and inefficient and can never be used as a currency. That's the mainstream headline that everyone's familiar with over the last decade. Well, the Lightning Network is a protocol that sits on top of Bitcoin and you don't need to know all the cryptography and all the fanciness. But really smart people, arguably the smartest people in the world, set out to solve two things on the Bitcoin network. It was one, the variable amount of time it takes to achieve finality in a Bitcoin payment and then two, the variable cost that it takes to achieve finality with a Bitcoin payment.
Jack Mallers: (05:02)
And if we were able to solve the variable time and the variable costs, and we were able to give instant and relatively free transaction finality, cash finality to this monetary network, it would be arguably the biggest step forward in money as a technology in human history and the best monetary network of all time in human history. So that's an introduction to the Lightning Network is what it enables. It works, we did it. And what it enables is instant and nearly free and sometimes absolutely free Bitcoin transactions. And so if you encompass that with what Bitcoin is, now you have an open monetary network that operates 24-7, you have a digital barrier instrument that carries the sufficient liquidity profile in every single currency you could ever dream of 365, 24-7, and you can move fiscal value, no sense of credit, no balance sheet float, real hard value anywhere in the world at any time, at any place.
Jack Mallers: (06:02)
So the thesis that we hold at Strike is, well, let's take a look at other monetary networks, monetary networks that exist today to allow us to exist financially. The Square monetary network, the PayPal monetary network, the VISA monetary network. All these monetary networks achieve similar things, right? They define identity. Like what's the difference between my VISA card and your VISA card. They define payment standards. How do I send a payment? How do I receive a payment? They define credit and debt and finality and clearance. So if you think of Bitcoin in the Lightning Network as a monetary network of its own, it does all those things, except way better, except way cheaper, except way faster. Oh, and by the way, it's more inclusive. How well does the PayPal network work in El Salvador? Not very well.
Jack Mallers: (06:48)
How well does the Lightning Network? It works the same in Chicago, works the same in London, works the same in New York and it works the same in the third world. It's more inclusive and then lastly it's open. So the fact that it's open means that there's inherent network effects and economies of scale that are unprecedented. Open networks defeat closed networks throughout human history, exclusives of money. And this is the first time we've ever had an open monetary network. So what that means is that there's millions of people that are working on this network and no close network can ever compete. If you think of Bitcoin as a monetary network and PayPal as a monetary network, who has more employees? Who has more salespeople on Twitter? Who has more merchants subscribing? How many MIT professors are working on cryptography for the PayPal monetary network? Zero.
Jack Mallers: (07:33)
How many are working on Bitcoin? A lot. So for all of those reasons, we subscribe heavily to the concept that this monetary network is going to dematerialize the existing monetary networks that exist today. And the first killer app in my opinion was cross-border payments, because the inefficiencies are just absolutely absurd. It's the most outdated, expired. It's an expired carton of milk. It's two to 10 intermediaries to make a cross-border payment. It takes two to 10 days, and fees are upwards of 50% because there is no open... It isn't a race to the bottom, the market is not efficient and people especially in the third world get relatively abused by financial inclusion and fees and such. So first order of business once we got everything stood up was make cross-border payments free and instant. So that is the end of my rant and we'll go wherever you want from there.
Brett Messing: (08:25)
All right. So here's a thing that you said that blew me away. So maybe you can expound on this. I would love to make it very personal. I want to send money to a friend in Mexico city. He wants pesos. And what I understood you said is I can take my dollars, and they get converted to Bitcoin. And I'm going to use a very highly technical term, zapped on the Lightning Network for Mexico City, where they are converted, there's a Bitcoin to Mexican pesos transaction, and my friend now has... I sent 50 bucks, neither of us wanted really anything to do with Bitcoin, but Bitcoin facilitated this transfer of value. And I think that's incredible. So I don't know if I described that right. If I did, or if you can just speak to that. I think putting into real practical terms, these majestic concepts that you laid out I think will move people.
Jack Mallers: (09:31)
Yeah. So our product Strike, which was referenced in the intro. We divide Bitcoin the asset. So this is the asset that's 21 million coins. It's issuance is known, its monetary policy is defended in a distributed network of cyber hornets as Michael Saylor likes to say. And then there's the monetary network. And the monetary network, you can do a way. What if it's 22 million coins? What if it's 2.1 million coins? The network doesn't necessarily care. What if the monetary policy blocks every 20 minutes instead of every 10 minutes. The monetary network achieves similar things and enhances what existing monetary networks do and so our approach is can we enable people to benefit from this amazing monetary network, this absolute revolution in money as a technology without being encumbered by Bitcoin the assets? Bitcoin the asset is taxes property, Bitcoin the asset carries a lot of volatility. Bitcoin the asset is really accounting, tough accounting pains, people also aren't incentivized to send it.
Brett Messing: (10:33)
I'm wearing a Bitcoin hat. Don't pee all over Bitcoin. Come on man.
Jack Mallers: (10:37)
Well, the point is people aren't even incentivized to spend it. If I just hold the thing, I get wealthier, so why would I actually use it? So there had to have been a way to build an experience for consumers that they're traditionally used to. Link your bank account, scan a QR code, hit send, but use this new novel monetary network under the hood. So to delve into your example, that is exactly correct if I want to send $100 to Ireland received as euros. What the software does is it takes $100 out of my chase debit account, it's going to convert it into Bitcoin. It's going to zap the money on the Lightning Network over an ocean across a border, real fiscal value where it will land in Ireland and interface with counterparties to give it the BTC-EUR liquidity profile, to switch it back into euros and credit the user.
Jack Mallers: (11:27)
So what's happening is we're using the most efficient monetary network on the planet to escrow our fiscal value. We get cash finality on an open system instantly in and at no cost. And then we're using this new digital bare instrument, this new digital property in cyberspace, it's the most hardworking asset on the planet. It works 24-7, no other asset does that and it has liquidity profile of every currency ever. So once we escrow the value on the network and we have this magical asset parked, then we just exchange it for the goods and services with the various counterparties that can. So not only has that enabled amazing things, but also think about working capital costs, what's transfer wise working capital costs versus a Bitcoin infrastructure set. It's the most magical, impressive thing that's happened across border payments long before I was born.
Brett Messing: (12:18)
So is this now operational? How many people are doing what we just described? And I guess let's make it very personal again. Can I do this in other words, is it functional for me to use in some way or are we beta testing it in a more limited way? Give me a state of the union if you will.
Jack Mallers: (12:40)
Yeah. So beta testing in Europe now, we plan to be in over 100 countries within this calendar year. And the first pilot that made the most sense to me was El Salvador, which ended up becoming something much larger than a beta for cross border payments. But the thesis was here you have a country that operates on the dollar, they don't have a nation currency anymore. Over 20% of the country's GDP is in remittance. It's how capital is influxed into the economy. However, fees can be upwards to 50%. And there's a very important insight on that. If I would send a million dollars to El Salvador is Western Union going to take 500 grand? No.
Jack Mallers: (13:19)
Fees aren't 50% on a million dollars, fees are 50% on 10 bucks, on 100 bucks because there are fixed costs associated with the legacy financial system. So not only does this monetary network allow for free and instant, but it also opens a new economy of micro cross-border payments for those that have $300 a month of income and that they don't send a million dollars back home, they send $100 dollars back home a month. So it made all the sense in the world to enable a cross-border micropayment economy that was free and instant, and really how I plan on improving the GDP of the country by launching my product. So that is highly functional. We're onboarding 20,000 Salvadoreans a day, seeing tremendous amount of success and now we're going to launch in Europe.
Brett Messing: (14:10)
But Jack, you need to get people on both ends, right? So there's the Salvadorians, have to sign up. But they're family members or friends or whomever is sending them money in the United States need to do likewise. How does that... If you get the Salvadoreans, do they just tell their family member, you need to get this app. This is a better way to send me the money. Can you just talk about that rollout?
Jack Mallers: (14:38)
Yeah. Well, it's the best customer acquisition tool in the world. The family phones them and says, "Hey, listen, remember how you used to send $100 and I'd bus six hours to Western Union, and Western Union would only give me 70, and then I'd oh, another 30 to the gangs that sit outside and threaten my life. So now I come home with half of it and it's days worth of chores and I have to skip work every single month to go collect the remittance, well, download this app, link your bank account or fund it with cash collateral, and I get the remittance instantly to my cell phone from the comfort of my home. And you send 100, I keep all 100." So that customer acquisition tool, I don't need any marketing. Get out of here. That's just bread and butter right there.
Jack Mallers: (15:19)
But the other important thing about this is it's an open network. So if someone has a Coinbase account, they can interface with our service. If someone has a Square account, if someone has a Kraken account, millions of wallets, the beautiful thing on an open network is there's a singular open source standard and once you implement it, you are plugged into the open monetary network and all the services and nodes and networks that live within it. So yeah, sure. I would love them to be on Strike because I think it's arguably the best service on top of this open system, but they don't have to be, and that's amazing. So initially in the pilot it was how are we going to get these people liquid and exchange in and out? There's no Salvadorean Bitcoin exchange, but there are Bitcoin ATM's everywhere. So people would collect these remittance, we'd store it, and then they'd go to the ATM's and they'd cash out.
Jack Mallers: (16:04)
And the question is what? Did I install Strike ATMs all over El Salvador? No, there's no Strike network. There's no strike ATM. I'm on the Bitcoin network, this is a Bitcoin ATM and that's a power of the open monetary system, is that I benefit from other people's work. And so out the gate the product worked fabulously and then now as more services build and integrate and are interoperable with open network, the network effects and economies of scale, you just can't compete with that, because PayPal tried to compete with that, they'd have to hire thousands of new employees. I didn't hire anybody.
Brett Messing: (16:36)
So the remittance gets sent to El Salvador, but if I'm right, the receiver is receiving USD, right?
Jack Mallers: (16:45)
Correct.
Brett Messing: (16:46)
So they don't have to worry about going to a Bitcoin ATM, they're getting hit with US dollars in their bank account.
Jack Mallers: (16:54)
Yeah. Both the sender and the receiver can just interface with fiat currency and they don't even... A lot of our users, arguably majority having no idea that Bitcoin or any of this cryptography is involved in the efficiencies we're delivering. For a lot of them they just see as like, "Oh, wow. Innovation finally for remittances. Finally I can receive it safely and not get bullied into fees."
Brett Messing: (17:19)
I want to spend a lot more time in El Salvador. One more question though, just and I want to make sure I'm understanding, our audience as well. So in the US we a layered financial system, right? The Federal Reserve is on the bottom, then we have commercial banks that can go to the Fed window, PayPal sits on top of the commercial banks, VISA sits on top of the commercial banks. PayPal sits on top of VISA. The Lightning Network which is how you're making this magic happen is layered too on top of the slower, what we think of traditional but super safe Bitcoin network. Is that accurate? And do you have anything to add to that because I think that's an important concept for people to understand.
Jack Mallers: (18:02)
Yeah, that's absolutely correct. And it's also important to note that this isn't a novel concept and this isn't a concept that Bitcoiners came up with, is that protocols scale and layers traditionally most famously the internet. Is that you've got HTTP, you've got TCPIP and the internet is actually made up of seven layers. So that's absolutely correct. You've got the Bitcoin base layer, which optimizes for censorship resistance, decentralization, ultimate security and robustness and ensuring the consensus rules and monetary policy the asset. And then you've got the Lightning Network which comes comprised of different rule sets of this protocol. And once you subscribe to them, they're optimized for cash finality as cheap as possible and as fast as possible. Then on top of that, we sit, and we plug into both the Lightning and Bitcoin networks and we deliver software to people. And we as a company have the belief we can empower economic freedom for everyone. And we want to do that by making these networks as accessible and easy to use as possible. So we sit on top of them and we build software.
Brett Messing: (19:07)
Cool. All right. Back to my Jack Maller's journey. So importantly Bitcoin is not a security, and why is that important? Because there is no insider trading in Bitcoin. So we can all gossip about Bitcoin and no one's going to [inaudible 00:19:22]. And here's why that's important. There are no secrets in Bitcoin. So if you're plugged into the right text thread or group of people, there's just no secrets. So about a month or two, someone told me that Jack Mallers is down in El Salvador, and he's helping draft legislation that's going to integrate Bitcoin into the government. And I said, "That is the most ridiculous thing I've ever heard." This is a real country. I assume they have some people who went to Harvard and worked at Goldman Sachs or they can get someone who's at Stanford Business School or Kathryn Haun from Andreessen Horowitz, and lo and behold there's a lot of things in Bitcoin where you have to open your mind. It is true. So if you can just tell us the story. How did that happen?
Jack Mallers: (20:13)
Yeah. I'll try and make it quick.
Brett Messing: (20:14)
I'm glad I was wrong by the way, I'm so happy to have been wrong.
Jack Mallers: (20:19)
Yeah. No. I'll make it as fast as I can, but I-
Brett Messing: (20:22)
No, take your time.
Jack Mallers: (20:22)
Okay. So I went down to El Salvador. It's very important to give a shout out to the Bitcoin Beach Project. So not only did this country carry the characteristics that embodied... They needed help. They needed help from a very high level. They needed help reinstilling basic human freedoms and financial inclusion, and that the federal Reserve's monetary expansion, the spill over was drastically impacting the quality of life and has been for a long time there. And that over 70% of the country didn't have a bank account, and there was a serious problem with financial inclusion, which ultimately I associated under the category of basic human freedom. So I needed to go, but there is a project Bitcoin Beach, and they had started what is a circular Bitcoin economy for those that didn't have bank accounts. And they were plugging into this open monitoring network and achieving financial inclusion through the Bitcoin network.
Jack Mallers: (21:16)
And they deserve all the credit in the world, legends of their time, they'll be remembered forever. So I went to El Salvador to visit that town, and I wanted to learn and ultimately launched Strike and improve on the financial inclusion and human freedom problem with the country. So while I was there we launched the product, I learned a lot. I met a lot of amazing people and got to really intimately feel the experience that these people were going through. Then we had a lot of success and I got a message on behalf of the president of the country via Twitter. Was a Twitter DM, and I was at a sushi restaurant and I didn't think twice about it. I thought it was another spammy message. I get a lot of those. And then I double-take and I noticed that it's the brother of the president, and I was like, "Oh God, okay, this is real."
Jack Mallers: (22:06)
And I'm sitting with two employees and I'm like, "Okay. We're either getting arrested or we're going to make history." And it was very unclear which one. Called my dad, I told him the president, I asked for a seven day window to see him, he said he had 24 hours. And I was like, "Oh boy. Okay." So I'm going into fight for human freedom. I believe in what I'm doing. I believe in my truth. So I called my dad, I say, "I'll see you on the other side, wish me luck, but I'm doing this for Bitcoin. I'm doing this for the betterment of humanity." And I went in there. I didn't have a suit. I went in there in a hoodie, it's all I had. And the president's brother came out in a hoodie and we hugged.
Jack Mallers: (22:39)
And we started to talk about rebuilding an inclusive financial infrastructure that embodies free markets and embodies human freedoms. We talked about the design of the country we would want to live in, we would want our kids to live in and we would want the world to eventually adapt towards. And at the United States and the European Union, and a lot of the more developed world was in no position to take such a stride. And that El Salvador felt like the perfect opportunity and to be brave on behalf of humanity and human freedoms and people that needed help, and that we had an opportunity to do something amazing.
Jack Mallers: (23:11)
And it was always about free market. It was always about the one quote that they kept saying was we want people to be themselves, is that by 18 years old, you society enforces almost that you take on six figures worth of debt to pursue a degree in something that you don't know you want to do, and that you end up optimizing your life around paying back debt and then going into more debt by the form of a mortgage and things like that. And that that isn't a great life and that doesn't create a great society because people can't be themselves and can't be free.
Jack Mallers: (23:44)
So they wanted to build a society that enabled freedom and that foundation starts with hard money, with economic opportunity, and with a sound financial system that's ultimately inclusive and doesn't carry any intermediaries that can bully anybody out of anything. That was the very ground level discussion. Then over time we iterated on things and we talked about everything. We talked about anime, talked about cartoons, talked about artwork, talked about music, and then how to use Bitcoin to solve two fundamental things, is protecting developing countries from the Fed spillover and their monetary expansion, and then improving on developing countries' financial inclusion and giving everyone fundamental financial access and human freedoms that they don't necessarily have when they're born today. And that is the start of what ended up becoming what you know of.
Brett Messing: (24:36)
I think that's an amazing story. So where we are today is El Salvador has passed a law to make Bitcoin legal tender, right? And as most probably aren't aware, I wasn't aware until recently about 20 years ago like many emerging nations, we forget how many countries in the world are babies, right? These countries have been around for less than 70 years, the independence movement was in the fifties and the sixties. They launched currencies and the currencies failed. So I think it was in 2003, El Salvador scrap their currency and the US dollar is their currency. So now they're going to have this dual system. How do they see it operating? And I know we have 81 days until we implement, but what does implementation look like? Of the legal tender law in El Salvador?
Jack Mallers: (25:39)
Yeah. The optimization is around the network and the financial inclusion and the openness of the network and embracing the free market. It's very important to know, there's been some confusion. It's not mandated that people hold Bitcoin, that they long Bitcoin, are exposed to volatility and such. The government, and again I'm conversating, I want to make it very clear. There's no commercial agreement between the government and Strike. I'm not beholden to anything. I speak my mind. I speak on behalf of myself and my company and you can think of me as just an advisor to what they're trying to do. And they call me, I give advice and they are reliant on my expertise and how they see fit. So get that out of the way. My perception of conversation with the government was it's important to retain the dollars legal tender for a lot of reasons. One of which is Bitcoin's highly volatile, it's very young. And as an asset you don't want to forcefully impose custody of savings in your general life quality on top of Bitcoin right now. If an individual decides to do so, that's fantastic.
Brett Messing: (26:49)
I just want to say I might have done that already. But anyway, that aside, because put that out there.
Jack Mallers: (26:57)
Me too. It's up to the individual. The point is that the legal tender law is not imposing that that decision is made for you on behalf of the government. That's not it at all. What it's about is treating Bitcoin as equivalent to the dollar. So there's one line in the law that's very important and that you cannot charge premium for things paid in Bitcoin versus a dollar. So if I go and buy pupusa for $5 and I want to pay in Bitcoin, you can't then charge me 10 because you don't like Bitcoin. Instead it's going to be treated equally as a dollar and that there is an... What they wanted to do is expedite interoperability with this open network. Because they have viewed that a large success and empowerment to the country and empowering the free market and empowering this world where people can be themselves and there's ultimate inclusion and there's no intermediaries.
Jack Mallers: (27:46)
And all of these amazing things come by being interoperable with this monetary network that is Bitcoin and the Lightning Network. So the line that everyone's freaking out about is that if you can and have the capabilities to accept Bitcoin, you need to, it's just an encouragement. A pupusa lady that doesn't have a phone. She's not going to jail because she's not accepting Bitcoin, from my understanding. It's encouraging interoperability where you need to plug into this open monetary system and speak the language. So we're working with the biggest banks. And I went to one of the banks and talking to them like, "Okay, how do I send money from this bank to the bank down the block?" And they're like, "You're crazy? You can't do that." I'm like, "Wait, you guys don't have the equivalent of ACH, automated clearing house or anything?" You can walk the cash over if you feel like it.
Jack Mallers: (28:38)
So we're working with the banks on making them interoperable with the system, with the merchants, with the cash points, with everyone. And it's going to flourish in the network, affects how many independent businesses and services are going to be working on the same open monetary network. So the government wanted to place a premium on the network. Is that if everyone plugs into this network, the economies of scale and network effects are going to elevate us to the promised land. And there's no better power than an open system that a government can enforce or an individual or a rap artist or an NBA basketball player. Open networks and the network effects that come with them are the most powerful thing in human history so far. So they understand that and they want to place premium that everyone plugs into this thing. And that is in essence the legal tender law and the direction the government's going to and in 81 days we plug in. We plug in, we start simply and we evolve from there, but we plug in.
Brett Messing: (29:35)
So Jack, as I understand it, the government, and correct me if I'm wrong or expound on it, is setting up $150 million fund so that I own a bar, right in wherever, the capital city. I really don't want to deal with a Bitcoin. I can somehow check a box on something and you come in, you want to buy a beer with Bitcoin, I'm almost instantaneously swapping my Bitcoin to this government fund, they're giving me us dollars. So it's all the same to me. Did I describe that properly? And that sounds like a pretty complex undertaking to implement that. Is it? Or is it not?
Jack Mallers: (30:22)
No, because well, yes, it is complex to implement, but no in the sense that it's already implemented. Because if you take that user story and then we go back to me sending dollars instantly received as euros, it's the same thing. It's allowing cash collateral to make Bitcoin payments, and it's allowing Bitcoin payments to be received as cash. And that's the infrastructure and the insight that we've already developed. So what the government did is hung out with me and talked about comic books and stuff and realized wow, Strike empowers the consumer to gain all the benefit of this open monetary network without giving the burden of Bitcoin the asset. If you want to long Bitcoin the asset, if you want to start a fund, go for it. But from a base minimum we now have technological infrastructure and the insight to give the experience that you show a singular open standard QR code.
Jack Mallers: (31:18)
Millions of apps can scan it. And when they do and the money comes in, you get dollars. That's an amazing experience. That's an irreversible payment, it's an open system. It was free to process. How much was the interchange on that? It's an open network. There's no interchange. There's no VISA sitting over my shoulder charging me for clearance. It was free. It's a beautiful thing. So the government took that concept and said, "Wait, hold on a second." If we want to be long Bitcoin as a government, we can provide the liquidity. We're not going to make Binance come to this country or Jack should stem the liquidity, let's take that concept and infrastructure and plug it into our reserves.
Jack Mallers: (31:57)
And it was novel and fascinating and it was great insight on their part, and that's what it is. But it's the same idea of sending dollars that goes into Bitcoin that comes out as euros. So same thing is I'm selling pupusas, I hit $20 and boom, out comes this Lightning Network QR code. Millions of apps can scan it. If you're super privacy oriented, you could build your own wallet that has a pink privacy logo on it for yourself. You scan it, no matter how the money comes in, it converts, dispatches the dollars to the merchant who's selling pupusas, and then the Bitcoin goes to the reserves of the country. And that's the idea and the concept and the design.
Brett Messing: (32:39)
All right Jack. So I'm going to give you an opportunity to break some news here with us. I've got a couple of questions. So I read somewhere that El Salvador's monetary authority, which by the way I have no idea what they do. If they're on the US dollar and the Bitcoin, they have meetings, I don't know what they talk about. They seem to have no power. But anyway, that they have $3 billion in reserves. Why don't they buy some Bitcoin, right? A $300 million slug of Bitcoin. Are they going to, should we try to convince the president? Can we DM, if you DM him right now and tell him, "Hey man, buy some Bitcoin," you can hook him up with Ross Stevens and you can buy it NYDIG or whatever. Anything to share on that. And before you answer, remember there's no insider trading in Bitcoin.
Jack Mallers: (33:27)
Yeah. Listen, I didn't write the bill. I talked with the government and the president writes and signs the bill. That's how the bill works. I'm not speaking on behalf of the government. If they want to talk about their reserves plans they should. I can say this though, and I would advise this if I were asked. I wouldn't be public about my reserve plans until I was confident I had acquired what I wanted to acquire. I don't want the market pricing and anything. So that would be the advice I would give. I wouldn't make my reserve plans public and known. It's a disadvantage unless it becomes an advantage, which maybe you're Michael Saylor and you buy a billion dollars first and then you announce it. So that would be my advice if I were asked to give advice, but I'm not the president, and so I'm not going to speak on his behalf.
Brett Messing: (34:23)
All right. Well, I guess we'll have to wait and see on that one. So where are you traveling to next? I think I'm going to want to get in touch with Google's location tracker for Jack Maller because I know there'll be something interesting going on there. Obviously there have been a bunch of legislators in various nations in Central and South America who have indicated they want to do likewise. I'm going to date myself, but I think a lot of our audience will remember. When I was a kid there was this thing called schoolhouse rock and it was this tune about, I'm a bill, I'm only a bill. I'm sitting here on Capitol Hill about... The challenges of a bill getting passed to law. There are certain times even in US history like during the John's administration, where you have a democratic president with a super majority in Congress, you can pretty much bang things through, which is what we had in El Salvador. Not the case in most nations, generally not the case in the United States. Any insights? I imagine people were reaching out to you in other countries.
Jack Mallers: (35:26)
Yeah. Listen, I actually told my team the following Monday after the announcement like, "This is no mistake. This is not an accident. This is not a one-off event. This is not something to be celebrated and forgotten about for us as a company. This is what we do." This is our mission statement of enabling economic freedom and economic empowerment and we do that through open monetary networks that are Bitcoin and Lightning providing a tremendous experience on top of them. So we've enabled that for Russell Okung, as an NFL player, we're talking to the NFL, we're talking to NASCAR, we did that with the Indy 500 folks, and we're talking to more countries.
Jack Mallers: (36:03)
It's just what we do, and so we're going to continue to do what we do. We're going to continue to be the best at what we do. So yeah, blanketed answer is absolutely there's more to come because I have an economically empowered all 8 billion people yet, and so this is a tremendous milestone, I'm super proud of everyone that was part of it and the small role I played. But no, we keep going. We keep going. We have a mission statement and it's far from finished.
Brett Messing: (36:28)
So if I was a bookie, I just said, betting odds on what country was going to be next. So I would make the odds around other dollarized nations like Panama, Ecuador, just curious, what nation would you... What would be your favorite?
Jack Mallers: (36:44)
Well, you're a smart guy man. So maybe you should give yourself a little bit more credit. But I don't know. I don't know. Keep in mind this was a tremendously long journey that I was on. Well, I guess both. It was very short, in that the last 90 days felt like it was yesterday. But it was long and like 90 individual days ticked off the calendar. So where are we 90 days from now? I'm not sure. I'm extremely inspired and enthused by the reaction that a lot of the developing world, Central America, Latin America, and just globally, I think this announcement was received fantastically. It wasn't clear at the time, such a geopolitical announcement from a 27 year old in a hoodie. But I'm fired up and I'm ready to get to work. And we'll see. I carry no bias. I'm willing to help anybody, whether you're a pupusa salesman or a president of a country. We've got tools for you.
Brett Messing: (37:41)
Well I have one more question. I'm going to let John ask a few. So you mentioned that you facilitated an NFL player getting paid in Bitcoin. We'd love to pay our employees in Bitcoin. Is that something you could help us with? Where is that from a rollout standpoint? Was that a one-off thing? Or is it ready to be productized or institutionalized? Could we do that in other words? Is that something we could do together?
Jack Mallers: (38:08)
Yeah. So this has been recorded on, what is it? Thursday, June 17th. So this time next week I will have made a big announcement that should inform you more on the answer, but absolutely. And in fact the product is designed to be in the hands of the consumer. It's a direct deposit product where the consumer can actually decide what percentage of their paycheck is automatic converted in store to Bitcoin for them. So I think that if you have capital that isn't working capital, that isn't capital required for your basic functions of living, it is fact that you can't store it in cash. So what are your options? And if you think about the Federal Reserve or anyone in debt, anyone in debt has two options typically, unless you're the federal reserve. Your options are one, pay it back like an honest man, or two, default on it and admit that you made a mistake.
Jack Mallers: (39:03)
The third if you're the Federal Reserve is to just keep printing money and print assets out of reach. So that by definition has to happen. So you should store your wealth in an asset that's designed to appreciate against that environment. And Bitcoin I'm selecting fighters in a video game. It's like a cheat code. So I think every consumer, whether you're an NFL player, whether you work at Salt should be able to go into an application and slide what percentage of their direct deposit and their paycheck and their wage of living is allocated to an asset that acts in their best interest. So we'll wait for the announcement next week.
Brett Messing: (39:40)
All right. If I was in a different mood I'd really hammer you on it and tell you that we'd embargo this and make news together. But given all the good work you've done on we're not going to put that pressure on you. John, you want to ask a few questions to Jack before we let him get back to it?
John Darsie: (39:57)
Yeah. Obviously a country like El Salvador and other countries in LATAM and around the world, the reason they go to a dollar peg or they use the dollar as their currency is because there's a complete loss in confidence in the local currency. So in El Salvador obviously the big challenge is going to be to convince the El Salvadorian people that Bitcoin or using the Bitcoin network or remittance for internal payment network should engender confidence. Something like 70% of El Salvadorians, I think I saw the stat, don't have a bank account. Less than half have access to the internet.
John Darsie: (40:32)
How far along, I know it's very early since you guys made the announcement, but are you and what are the indications are about how the El Salvadorian people are receiving this announcement and how many of them are planning to use it? I know the government has set up some referral programs and things like that to get people on the network. And how much do you think it could incentivize the growth of the El Salvadorian economy and society to more people to have cell phones, more access to the internet, things like that?
Jack Mallers: (40:58)
Yeah. Well, let's say we solve or drastically improve the remittance scenario in El Salvador, we're talking about improving the country's GDP by one to 5%. So that's very material. So I think it's going to do tremendous things almost immediately to the country outside of what it's already done. The amount of jobs created, amount of investment that's coming into the country is fantastic. Reception of the people. Listen, politics is very complicated and I'm no politician, that's the job of the president to manage expectations and the lives of its citizens. I think the only thing that I'm confident in as someone who builds software and someone who builds experiences for consumers is that time cures all and we just have coded right.
Jack Mallers: (41:40)
So I have nothing but confidence in our ability to deliver economic inclusivity and financial freedom to the people of El Salvador, improve on those qualities, and give financial access to the 70 plus percent that don't have it, and to the 30% that do may have it drastically improved in its quality. So there's no doubt in my mind, I have ultimate confidence and I know the president will give access to information and transparency to relieve a lot of the stress and confusion that may be caused by politics or politics and ultimately time is the truth teller.
John Darsie: (42:17)
Yeah. There was a lot written in the wake of El Salvador's announcement and the passage of the bill around what are the global implications from a legal standpoint of a country making Bitcoin legal tender. Does it have to be recognized differently now in countries that El Salvador trades with or conducts business with, what in your view are the implications, both literal implications about how Bitcoin has to be treated now internationally and what it does around the world to encourage other countries to potentially adopt similar types of models.
Jack Mallers: (42:49)
Yeah. So for the legal implications, I've seen some interesting threads around how the World Bank now has to accept Bitcoin as El Salvador's made it legal tender. I'm more curious than a participant to see how that unfolds. The way I view it is we are in unprecedented environment for macro economics right now. The monetary expansion happening at all central banks and then particularly the Federal Reserve should scare everyone, no matter if you're in New York, Chicago, or El Salvador. And you see a country that opts out that plugs into hope, plugs into an open network, plugs into a monetary policy that can not be co-opted by any individual that doesn't have a CEO and that's protected by software that's incorruptible, and that's defended by a distributed network. And that is a very inspiring thing to see and to witness and to understand that there are other options.
Jack Mallers: (43:47)
In fact, there's an option that's engineered to fix this exact problem. So I think now every single country in the world, especially those that are dollarized, especially those that are developing, but no matter who you are, you have to start to entertain the concept that Bitcoin has given financial inclusion, basic human freedoms and hope and solved the long outdated problem of subscribing to a monetary policy that can not be changed, that is fixed, set in stone. An asset that supplies cap and that achieves ultimate scarcity, and a country has done that and plugged into that and sees a better world with that. And I think that's going to kick off what I hope to be a new epoch for humanity. I think we have a better world with Bitcoin [inaudible 00:44:32] and Bitcoin's engineered to solve these problems and a lot of confidence it's going to fix it.
John Darsie: (44:37)
So last question before we let you go. You talked earlier about how you've built technology. The Lightning Network has been built, Strike has been built to be a technology that operates and solves problems irrespective of the price of Bitcoin, or whether somebody embraces Bitcoin as a currency or a store of value or whatever they perceive it as. But you're a fan of Bitcoin, Brett is definitely a fan of Bitcoin. I'm a fan of Bitcoin. But Bitcoin is volatile. If I was getting paid from SkyBridge or Salt two months ago in Bitcoin I would have been a lot happier than I would be today having that money having halved in value.
John Darsie: (45:13)
Do you think Bitcoin as an asset is on a path? And we talk about this a lot, Brett and I about volatility is your friend really with Bitcoin because that's what's created so much price appreciation, is most of the volatility has been to the upside. But do you think Bitcoin is on a path to being less volatile to being perceived as more of a currency that people in El Salvador or elsewhere might be able to have more confidence in it long-term that it will be somewhat more stable?
Jack Mallers: (45:40)
Yes, of course. Bitcoin's volatility metrics are going down by the day. They always have been as it's maturing as an asset and maturing in its participants, maturing in those who subscribe to it and hold it, maturing in its volatility characteristics, and it will continue to do so. However, I still think there's a tremendous amount of volatility to the upside, which then implies some short-term volatility to the downside. Markets act on nobody's behalf, markets are their own beast and their own freak of nature.
Jack Mallers: (46:12)
So I don't think we're near close what is... Bitcoin is around a trillion dollar asset. Considering how the world traditionally stores wealth, there's a lot more to go to the upside. So I still think that we're relatively early. So I wouldn't price out any volatility for these next market cycles. I think it's got to go up a lot, which infers it'll go down a little and then continue. But I mean, you can look at all the metrics you want and these things maturing tremendously fast considering it started a little over a decade ago, it's incredible.
Brett Messing: (46:49)
Jack, [inaudible 00:46:50] One last question before we wrap John. Jack, what do you believe is that the number of people in the world that own Bitcoin and how do you calculate that number? What are your data inputs?
Jack Mallers: (47:05)
Yeah, what's a Bitcoin user. That's the long dated question. Gosh, I wouldn't have any clue for owning Bitcoin. I would associate with being long the asset. I think someone with a Coinbase account that owns Bitcoin on the platform is an owner of the asset. I think yeah, there's a lot of nuance in that question and a lot of context needs to be provided to give an accurate answer. But I guess a lot and if it's people that literally hold [inaudible 00:47:36] and private keys, lesser then, but if it's people that are subscribed to funds and cash-settled derivative products and are on platforms like Coinbase and Robin Hood, then a lot. But I know the number keeps going up into the right, so that's why I'm a fan.
Brett Messing: (47:50)
Right. Well that seems like a good place to end John. I hope you're great.
John Darsie: (47:53)
Yeah, absolutely. Jack, we'd love to have you-
Brett Messing: (47:56)
[crosstalk 00:47:56] got better than up into the right.
John Darsie: (47:57)
Yeah, up into the right is fantastic. But Jack, it's a pleasure to have you on, we'd love to have you at our Salt conference this September in New York, it's going to have all the big players in the world of Bitcoin and digital assets. It's something that this all conference has evolved since it was started 12 years ago and it's going to increasingly have content and participants that are doing great things in this space. So we'd love to have you there and hope to see you down at Bitcoin Beach. That sounds like the place to be.
Jack Mallers: (48:26)
You should definitely visit Bitcoin Beach, shout out to Bitcoin Beach and all the people that have made this a reality and I'd love to come. I appreciate you both. Thanks for having me. I think you do tremendous work for the community and for the asset and let's go Bitcoin.
John Darsie: (48:40)
All right. Let's go Bitcoin. Thank you everybody for tuning into today's Salt Talk as well, and learning more about what's going on with the Lightning Network with Strike, this global evolution of Bitcoin. Just a reminder, if you missed any part of this talk or any of our previous Salt Talks, you can access them on our website. It's salt.org/talks or on our YouTube channel, which is called Salt Tube. And please spread the word about these Salt Talks. We love educating people on topics whether you're deep into Bitcoin and just learning about more in depth what's going on in El Salvador or looking to learn more about the space. Please tell your uncle that's skeptical about crypto, please send him this Salt talk. We're also on Twitter at Salt Conference is where we're most active, but we're also on LinkedIn, Instagram and Facebook as well. And on behalf of Brett and the entire Salt team, this is John Darsie signing off from Salt Talks for today. We hope to see you back here again soon.