This year’s Bitcoin 2022 in Miami came after the legalization of Bitcoin in El Salvador in September last year, and the all-time high of over $61k in October before tumbling to a largely stable plateau of around $40k. Last year’s Bitcoin conference focused on the Lightning Network, a payments platform built on the Bitcoin blockchain which is used in El Salvador by the government in creating the wallet, Chivo, which is Lightning-compatible and designed to enable seamless cross-border payments.
So, it’s appropriate that this year’s event, with the decline in the price of BTC followed up on the original intent of Bitcoin to act as a payments system rather than as a long term investment, with the integration of the Strike Lightning-based wallet with mainstream payment platforms including Shopify.
During the conference, Jack Mallers, CEO of Strike, revealed the company’s plans to collaborate with point-of-sale behemoths Shopify, NCR, and Blackhawk Network to revolutionize the payments industry. As a result, online retailers that support Shopify can now accept payments via the Lightning Network, in turn allowing US merchants to receive payments from customers globally as US dollars. As the integration of the Strike wallet is with major online players in the US economy, this could potentially do a lot for the mainstream adoption of Bitcoin, particularly in the retail industry.
What this means has been perhaps missed by some commentators, who fail to make the distinction between Bitcoin as investment asset and use of the Bitcoin blockchain as a payment network, with the Lightning Network sitting on top of it and processing transactions much faster and cheaper than using Bitcoin itself. In simple terms the Lightning Network (LN) is a "layer 2" payment protocol layered on top of a blockchain-based cryptocurrency such as Bitcoin or Litecoin. Andreas Antonopoulos has referred to the Lightning Network as a ‘second layer routing network’. The payment channels allow participants to transfer money to each other without having to make all their transactions public on the blockchain, according to Wikipedia. So, what did Jack Mallers say about this exciting innovation at Bitcoin 2022 that helps make more sense of this? To understand what Mallers is doing and why it could be so impactful, it’s best to put aside Bitcoin and instead focus on the payment network side of Strike.
After all, that’s how Mallers introduced it to the Bitcoin 2022 audience, giving a quick history lesson about the current payment network used by retailers which began in New York in 1949 with the launch of Diners Club, started by “a bunch of rich plutocrats in New York City that didn’t want to carry cash”. Such was its success that the following year Bank of America announced a mass market payment card, with American Express in 1958. And essentially that same network, with innovations such as the launch of credit cards like Visa, is the same payment network we have today. “And so in reality, payment networks have not innovated in over 50 years. That's insane. That's ridiculous,” Mallers said. Following up later with Yahoo Finance Mallers explained that the current system is one of ‘debt promises’ where because it's based on dollars or whatever fiat currency is involved, the transaction doesn’t involve sending dollars when you spend. Instead, the banks promise each other that the purchaser is good for the transaction, but the merchant pays a fee for this ‘debt promise system’.
Instead, what Mallers unveiled at Bitcoin 2022 is a way to send any currency around the world without needing to use the banks and without needing to charge the merchant. In other words, it allows you to send dollars or to a merchant on the other side of the world, using the Bitcoin blockchain via the Lightning Network, and have it converted into say Euros at the touch of the button and instantly.
As Mallers told the audience, “Okay, so $100 spent $100 received. There's no two to 15 days of settlement. There's no 3%. The point is we can recreate a superior payments experience with a superior payments network. This thing is not issued by a government. It's not a company, Bank of America found it rebranded. No, there's no consortium of banks running this thing. It's open, it lives in the clouds.” It's using the Bitcoin blockchain as the infrastructure for the payments system, just as email uses the internet as the global infrastructure that allows you to email all across the world for free. “Anyone can join it, it’s global, it's uncensorable, it’s cash final,” confirmed Mallers.
“This is not in another country. This is not a test pilot somewhere – no. This is in the United States of America. You’re going to be able to walk into a grocery store, to Whole Foods, to Chipotle… You want to use a Lightning node over Tor? You do that. You want to use the Cash App? You do that… If Chipotle wants Bitcoin, I’ll give them Bitcoin, I’ll settle in Bitcoin,” he added.
What grabbed the headlines of course wasn’t just the theory behind Strike’s payments network, but the partnership with Shopify. With the Strike integration, Shopify merchants can accept payments globally and save costs on processing fees, with cash-final settlement. Strike's integration enables Shopify merchants to diversify their existing payment options and reach untapped global markets and purchasing power. Strike’s integration also allows Shopify merchants to generate savings through low-cost payment processing. By instantly converting bitcoin payments to dollars, Strike removes certain complexities merchants face in holding bitcoin.
Chairman of BigONE Exchange, Anndy Lian, said he was impressed by the use of the layer 2 Bitcoin blockchain technology deployed by Strike, bringing together fiat and crypto in one global easy to use payment network: “While Bitcoin as a store of value is an impressive investment, it’s about time Satoshi’s original vision of Bitcoin as a payment system from people to people was realized. For me the use of the Lightning Network is certainly attractive in delivering on that promise. It will be interesting to see however if this catches on outside the US, or whether the use of such layer 2 payment networks inspires innovation in places such as South Korea with the crypto friendly new President taking office next month.” Certainly, the impact of the war in Ukraine and banking sanctions on Russia may inspire innovative payment systems using the blockchain for effective p2p payment networks that sit outside the current US-controlled SWIFT system which manages payments between banks globally, Lian added.