Strike, a digital wallet that relies on a speedy version of the Bitcoin network, thinks it can do something no one has done in half a century: challenge credit card giants Visa and Mastercard on relates to daily payments.
The Chicago-based company on Tuesday announced a $90 million raise to pursue those ambitions and break what its brash CEO Jack Mallers calls the “monopolistic and un-American” dominance of credit card companies. The funding round was led by Ten31 and joined by new investors Washington University in St. Louis Endowment, University of Wyoming Endowment and Susquehanna Investment Group.
In an interview with FortuneMallers said Strike will use the money in part to develop partnerships with major retailers such as Wendy’s and Starbucks, and to change the checkout experience for merchants and customers.
While the idea of challenging the credit card giants with Bitcoin may seem like a pie in the sky, Strike has already shown real-world traction by persuading e-commerce giant Shopify as well as global point-of-sale service NCR to employ its technology.
Strike relies on a technology called the Lightning Network, known as a Layer 2 solution in cryptographic parlance. Lightning works by creating batches of Bitcoin transactions and then quickly verifying them – a much cheaper and faster alternative to the basic Bitcoin network where transactions can take up to an hour to clear and incur significant fees.
Twitter’s tipping and payment services already use Strike and the Lightning Network.
Merchants using Strike can choose to immediately convert any Bitcoin payments they receive to US dollars. Mallers predicts that up to 50% of US businesses could adopt the technology by the end of 2023, while a report by investment bank Morgan Stanley suggested it could boost the use of Bitcoin as a method of current payment. Mallers also thinks Strike will come to challenge Western Union as a money transfer service.
“That’s all we need”
Mallers, whose father built and sold one of Chicago’s largest futures brokerages, is a 28-year-old who prefers caps and hoodies and is a controversial figure both in inside and outside the crypto world.
It is known as a “Bitcoin maxi” – crypto slang for those who only favor the original cryptocurrency and despise newer blockchains like Ethereum and Solana. When asked if Strike could use other tokens on his network, including stablecoins, he replied Fortune“It’s purely for bitcoin. That’s all we need.
Despite his abrasive personality, Mallers thoughtfully and even persuasively explains why Bitcoin is ripe to disrupt mainstream payment networks.
He points out that when you use a card to buy something online or in a store, the merchant does not receive money but rather a promise from Visa or Mastercard to pay for the transaction on your behalf. In contrast, Mallers notes that transactions on the Lightning Network are equivalent to transferring money in real time without the need for a lengthy settlement process.
Strike’s use of the Bitcoin blockchain, adds Mallers, means fraud is effectively impossible, meaning its operating costs are much lower and it can charge well below 1.5% to 4% that merchants are usually charged. Meanwhile, Bitcoin is an open protocol, so anyone can use it.
All of this, according to Mallers, means there’s a huge opportunity for anyone, even a high school student, to scale payment services while offering new kinds of rewards and incentives to customers and merchants.
For its part, Strike relies on partnerships with major payment companies, including Block, whose Cash App tool has millions of users. During the interview, Mallers also mentioned PayPal but said he cannot disclose the full range of companies Strike works with at this time.
‘No regrets’
It remains to be seen, of course, whether Mallers can translate his outsized ambitions into reality in the face of some obvious challenges.
This includes Bitcoin’s continued volatility, although as some have noted the cryptocurrency has been less volatile than the British pound in recent weeks. There is also a problem that spending Bitcoin triggers tax liability – a problem that could be alleviated by a proposed law in Congress, but remains very real for now.
There is also a risk that Mallers himself will prove too controversial for some potential Strike adopters. In addition to his swaggering appearances at bitcoin conferences, Mallers also helped facilitate El Salvador’s adoption of bitcoin as legal tender – a development that has pleased crypto fans but angered others in light of the falling prices. currency price as well as the autocratic fashion by which the presiding country implemented the measure.
Mallers says he has no qualms about helping El Salvador embrace Bitcoin, even though the impoverished Central American country has lost large sums of money doing so.
“My relationship with El Salvador advises them based on my views on Bitcoin. I have no regrets at all,” he said. “I am a very moral and moral man.”
