Why does the Strike app use LN or crypto at all? I just can't wrap my head around this.
They're a custodial wallet for your fiat currency, right? You deposit fiat with them. You withdraw fiat from them. You move it between accounts on their service. They, or a designed entity must hold that fiat on deposit on behalf of users.
When you 'send' that money (according to Jack Maller), they buy BTC for you, send it over the LN network, then convert it into a stablecoins. Which ends up, notionally, in one of the Strike custodial accounts.
So this Rube Goldberg machine of crypto is used for internal account transfers within Strike? Am I missing something? They're a centralized, trusted custodian (and a registered money services business). Why are they sending money from a Strike-owned account to another Strike-owned account this way?
Could they not simply record a debit on one account and a credit on another account in any kind of traditional store? One they clearly already have?
Why wouldn't they have one account for each country, a small slush fund and/or debt facility to cover near-term transfers, then just record how much of the pot is attributed to each user account - and if money has to move across borders, send a wire from time to time.
Is this really just the most complicated intra-company account transfer of all time?
It's worth watching the announcement from the Bitcoin conference (the link has been posted several times on this page).
The creator of Strike is a true believer. You can model this in religious terms if that helps.
He believes, intellectually and emotionally, that Bitcoin is better than fiat. That it's sound money, uncensorable, uninflatable, distributed, and that adopting it will make the world a better place.
From that perspective, the collapse of the fiat system is an inevitability. Something like Strike is an onramp; realizing the BTC as fiat on both sides is just a transitional technology, until the market cap of Bitcoin is sufficient to smooth out volatility and allow it to function as a unit of account.
It continues to baffle me that such a substantial fraction of HN users show less understanding of Bitcoin than my average nontechnical friend. I don't mean agreeing with it, to be clear; I'm of at least two minds on the subject myself.
But it doesn't seem to be going away, and at some point understanding how the cult thinks is going to come in handy. I'm not a Mormon but I do know enough about their history and theology to carry on a conversation.
It takes too long, it has significant fees, it can be censored and, as far as I know, requires a bank account, something 70% of the population in El Salvador don't have.
Strike is a fiat custodial wallet. They can also be censored in exactly the same way which is part of my confusion around the offering. In fact, it's not available in New York or Hawaii.
Further, Wise offers their multi-currency account, including in El Salvador (https://wise.com/us/multi-currency-account/) and allows you to store any of 56 currencies without conversion and offers banking details in 9 jurisdictions. It's kind of perfect for remittances because you can have your US parties ACH to your US routing and account number, and it appears in the multi-currency account, free, and very fast. Or $7.50 to receive a wire, instantly.
[edit] I'm not knocking crypto here, I'm trying to understand what they've built and why. I don't know why they're using crypto here at all. I'm seriously confused about their technical payments architecture. They seem to only use LN to move money, and between two of their own custodial accounts at that.
For what it's worth I've listened to over an hour of podcasts with Jack Mallers.
I am not well versed about the Strike wallet specifically, but I believe that it is a fiat wallet from the perspective of the sender and a lightning wallet from the perspective of the receiver.
Ok but why. They have a custodial wallet on both sides, the sender sends dollars, the receiver gets dollars. Why not just use addition and subtraction instead of LN? I can't think of a reason they would do this except to shoehorn LN into the app or avoid regulations in some way. Is there something I'm missing?
They use bitcoin exchanges around the world that are connected through Bitcoin Lightning network. Your dollars are exchanged to bitcoin at your local exchange, transferred via Lightning Network to an exchange in El Salvador, exchanged to dollars, and the dollars are then available at a local bank or ATM (or just kept in the app to pay someone else). Strike itself doesn't provide the liquidity, they use available local exchanges.
If you pay someone in the same country with the same currency, then it works probably like Paypal. You can't do that between countries, because the actual dollars have to be in the local bank.
ACH is roughly free - it costs about $0.0033 to the depository institution in bulk (citation available on request) - which makes sense as Strike also allows you to deposit via ACH in the US.
Their fees are likely dominated by risk, compliance and regulatory.
Obviously Strike's service isn't costless to operate so they're subsidizing their operations via investment.
They're a custodial wallet for your fiat currency, right? You deposit fiat with them. You withdraw fiat from them. You move it between accounts on their service. They, or a designed entity must hold that fiat on deposit on behalf of users.
When you 'send' that money (according to Jack Maller), they buy BTC for you, send it over the LN network, then convert it into a stablecoins. Which ends up, notionally, in one of the Strike custodial accounts.
So this Rube Goldberg machine of crypto is used for internal account transfers within Strike? Am I missing something? They're a centralized, trusted custodian (and a registered money services business). Why are they sending money from a Strike-owned account to another Strike-owned account this way? Could they not simply record a debit on one account and a credit on another account in any kind of traditional store? One they clearly already have?
Why wouldn't they have one account for each country, a small slush fund and/or debt facility to cover near-term transfers, then just record how much of the pot is attributed to each user account - and if money has to move across borders, send a wire from time to time.
Is this really just the most complicated intra-company account transfer of all time?
Or are they just doing it to avoid regulation?