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Strike's Jack Mallers on Fixing the Fiat Problem

Jack Mallers discusses Bitcoin, El Salvador and how Strike can capture the power of open networks to spread further than fintech.

Jul 15, 2021
CoinDesk Insights

Jack Mallers is wearing a hoodie. That’s not so unusual, as the 27-year-old founder of Strike is almost always wearing a hoodie. But this one is different. It’s pink, it’s bright, and it has a cartoon drawing of Mallers and the president of El Salvador, Nayib Bukele, along with the phrase “We Got This.”

The phrase is a callback to a speech Mallers gave at the Bitcoin 2021 conference, where he outlined how his Strike app, using the Lightning Network to speed up bitcoin transactions, would help improve people’s lives in El Salvador. For every problem involving El Salvador’s money, we got this. High remittances fees? We got this. Worries about inflation? We got this. Threats of gangs who want to steal your physical cash? We got this. 

And get this he did. As everyone even remotely curious about crypto knows, on June 9, the El Salvador government voted to officially make bitcoin a legal tender. Mallers was the man of the hour, he became chums with Bukele, and he was now suddenly prominent enough to receive a security detail. Why security guards? As Mallers puts it, for “making a geopolitical statement that's arguably the biggest in the last couple of centuries.”

No one knows what will happen with El Salvador’s embrace of bitcoin. The range of outcomes is wide. It might be a failed experiment, a curious stunt that will be remembered decades from now only by financial historians and the nerd kings of trivia night. 

Or it might, quite literally, change the world if bitcoin is widely adopted. Maybe it happens with the toppling of this domino. The idea isn’t lost on Mallers. “I think it [El Salvador’s vote to accept bitcoin] does more for the world generally than just El Salvador as country,” says Mallers, who breaks down his rationale for launching Strike in El Salvador, shares how (and why) it’s actually being used and predicts that Strike will be “one of the most powerful consumer brands of all time, like an Apple.” 

CoinDesk: Why start with El Salvador?

Jack Mallers: As a country, it's this really interesting remittance problem. And the more you learn, you kinda realize it's very broken in a really unfair way. El Salvador tried to launch a nation-state currency. It didn't work. It's like a failed startup. So they now use the dollar, but because of the lack of financial stability and the civil war they went through, they ended up becoming a very violent country. 

So you kind of end up having two options. You can join a gang and support your family by committing, like, malicious crime, or you leave and you live in South Florida and you're a busboy and you send money home.

You end up having over 20% of their country's GDP (gross domestic product) in remittance. And those people are getting charged up to 50% [in fees]. And then you learn about the fixed costs and the legacy financial system, and you realize the problems that come with dealing with physical cash is tremendously dangerous.

Dangerous how? I mean, I can kind of guess, but what do you mean specifically?

This is a problem I became familiar with in the cannabis industry, because my parents run a dispensary. We operate a massive security budget to protect the six figures in cash that's there all the time. Holding physical currency is extremely dangerous and leaves you vulnerable all the time. So these people are taking six-hour bus rides, getting 20% to 40% taken by Western Union, and then gangs sit outside and take another 10% to 20%. They come home with less than half of what the sender sent. 

Damn.

They’re dealing in the same currency [U.S. dollars], so there’s no forex problem, but there’s this massive bullying and bulls**t with the security problem. It’s really sad. 

So anyways, it was kind of like, if we can fix that problem, well, surely we would do a lot of good in the world. It sounds like we would improve the quality of life, improve the security of the country. 

Do you have a sense of how Strike is being used in El Salvador?

A variety of ways. Obviously, remittance. But then what people don’t understand is that in the U.S., we have Cash App and Venmo, and we are very privileged in our financial experience.

Right, right.

The notion of having a dollar balance on our phone, and being able to pay back a friend for chicken wings, or to pay your landlord rent from your phone … that’s an extreme convenience. And they [in El Salvador] don’t have that.

So, first, the hook is remittance, because you’re saving money and it’s much safer and it saves you time. That's just general convenience. And then they have a dollar balance on their phone and they're like, "Wait a second. So, if I pay for the pupusas [El Salvadoran stuffed corn cakes], then Bob over here can pay me back from his phone." That's a tremendous convenience. There's no cash under the mattress. 

Then we started to see a lot of P2P (peer to peer). And then the most fascinating and important thing, in my opinion, is spending the money on the Lightning Network in an open network. They immediately found a service called BitRefill. They sell mobile top-ups and gift cards over Lightning. 

This is important and fascinating [because] it hammers home the thesis that I hold: Open networks win. We didn't have to build, like, an in-store marketplace to sell gift cards. Someone else did that. But we didn't enter an MSA (master services agreement) with them. There's no commercial agreement. It just works. How does it just work? Because we all integrated the same open-source payment standard.

Interesting.

So all of a sudden, these people found themselves with money on this application that was interoperable with thousands of other services in the world that I've never talked to or spoken to. And then we saw a huge volume uptick. 

People get their remittance. Then they realize, "Hey, I can pay my friends back. Hey, this store has Bitcoin Beach, while this one has a different Bitcoin wallet. This one has Strike. I can spend and buy groceries, I can take Ubers with it, and then all of a sudden, I can top up my phone bill, I can buy Amazon gift cards." People were like, “This is just a more convenient way to live."

We took a country that's in the developing world and we gave them a cash app. And they held it in their hand and they were like, “Holy shit. This is awesome."

If El Salvador is phase One, what do you envision being phases two and three for Strike? 

So, as a business, we think there's a very unique property in Strike, in that we are the Bitcoin brand. Whether you're a president, an NFL player, a musician, you call Jack. 

I don’t deal with Ethereum, I don't meet with Congress about launching a ”colored coin casino” or something. Bitcoin. Bitcoin. I'll die for Bitcoin. That’s a brand that scales globally and very naturally.

Bitcoin is global.

Right. Like, the Cash App tried to launch in the U.K. It didn't work. Revolut tried to launch in the U.S. It didn't work. Strike's wait list globally is massive and it's because that brand scales globally. Everyone resonates with having an awesome experience on this open interoperable network. So we think we have a very unique position in delivering tools to the world, because the world speaks the same language as us [and] holds the same passion. This payment standard is global. It's not like the ACH (automated clearing house) in the U.S. So we plan on launching everywhere.

The best money in the world is open source

What people don't understand about Strike is that we carry the property of an open network where the world is our target audience, but we’re a financial services firm. And us making money acts in the best interest of our users. So in theory, Strike has the mechanics and the DNA to be the biggest company in the world and build one of the most powerful consumer brands of all time, like an Apple. 

From a very high level, that's how we think about it. And we definitely have a different road map for the developed world.

How so?

In Europe, in the U.K. and in the U.S. we have a partnership with Visa, and we have direct deposit products – a lot of these fintech experiences that we know work and that we know people enjoy. 

And in the developing world?

We’re developing a lot of different infrastructure, like local physical cash points, because a lot of this world doesn't bank. So what’s the point of integrating with a bank if no one has a bank account? We’re using different approaches, but very actively in parallel ... We’re trying to address all eight billion people as quick as we can.

What was it like for you when El Salvador officially adopted bitcoin?

From a Bitcoin standpoint, it was a blast. It was really fun. And I'm a huge believer in bitcoin as legal tender in El Salvador. I think it's a fantastic thing and I think it does more for the world generally than just El Salvador as a country. 

How about from a personal standpoint?

It was very overwhelming – the notion that I would need security, that I'm now a making geopolitical statement that's arguably the biggest in the last couple of centuries.

How did you deal with that?

I just kind of begin to associate it as part of the job. And my dad always jokes with me, "If you think it's too overwhelming and you don’t like it, well then just quit. But if you want to continue to contribute to the world in this way, then, like, stop being a p***y." 

Amazing. What’s your biggest takeaway from watching the El Salvador process unfold?

The biggest takeaway for me is the [power of the] free market. I actually advised against the government having a government wallet. We have no commercial agreement with them, and there’s a conspiracy that I have some backdoor wallet ready for them. No. The government can use our API (application programming interface) just like Starbucks can, just like a normal developer in Australia can. 

But I'm a huge proponent that the free market is what's going to drive innovation, and embracing open networks and the free market is the only correct way to do this. And I am of the opinion that as soon as the government does try and step in and mandate something as mandatory, or come out with a commercial version themselves, it really disincentivizes everyone else from diving in and competing and allocating resources. And I think they're learning that on the fly too.

So that's been my biggest takeaway: The best thing to do is to embrace the free market and the openness of the network.

Final question, and it’s a hardball: What’s your obsession with hoodies?

Growing up I never wore jeans in school. I didn't dress up. I never owned a suit. As you get older, you want to look sharper to get girls. But I didn’t. I played chess in a hoodie. I came to school in sweatpants every single day because I was just ... that’s where I was the most comfortable.

I get it.

It's kind of this ethos that, you know, I don't optimize for other people. There are certain classes in school I just didn't go to. I was a terrible student. "Well, why? Like, “Why don't you put on jeans and go do English?" And I’m thinking, “Jeans are uncomfortable, and I don't understand how English is going to help me do what I'm interested in."

Hard to argue with the results.

So I just didn't do it. I try and stay true to myself, and the hoodie does take on a kind of culture and mind of its own, and I do use it intentionally and tactically to kind of polarize against the suit. 

I’m guessing there’s an analogy here about bitcoin …

Because it's an open network, because the best money in the world is open source, anyone can do it. You don't have to go get a degree, you don't have to wear certain things. Like, the guys in hoodies are the ones that really determine human behavior now, as they should. It’s kind of that ethos.

DISCLOSURE

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