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Fringe No More! A New Financial System is Arising!
This blog post is to review a YouTube Video interviewing Jack Mallers, the CEO of Strike. Strike is an app and a company that is aiming to disrupt the financial system in a MAJOR way. This interview blew my mind.
Here are some key points:
- Strike allows you to send money to anyone anywhere in the world for free. (or minimal fee)
- Contrast this also with Western Union – 1 week and 20% fee to send remittances.
- Contrast also with “legacy finance” where banks have large overhead to manage all transactions.
- The promise of Strike (and others) is that of a decentralized, permissionless, free, instant transfer of value anywhere in the world.
- It could profoundly decentralize and democratize the whole financial industry.
Intrigued? So am I! Onward!
What is Wrong with Our Current System?
So as a Bitcoin advocate and proponent, I often get asked the question: “What wrong with our current banks? They are trustworthy, I get great service, I can do whatever I want.”
These are great questions, and the simple answer is for many people, the system “works”. So because it works it doesn’t mean it’s the ideal system.
To analogized, it “worked” to get around in horse and buggy, and cars and trains are much faster. It “worked” to communicate with letters, but emails are much faster.
We are used to what we know that we often don’t think about what it could be.
So the first point is that our current banking / financial system (legacy system) can be made more efficient. We need to think only of a) all the overhead; b) waiting in line at banks to get certain services; c) the days or weeks it takes to make larger transactions, d) the fact that we need third parties to verify and validate; e) the security infrastructure that the banks pay for (cyber and in-person). In short, these are some of the efficiencies that Bitcoin and other digital assets are providing.
To paint a clearer picture, we could have such things as instant mortgages, instant wire transfers of 10,000s of dollars, instant remittance payments, with our apps on our cells phones. So a bit different.
The second thing is that this legacy system is inaccessible to many. Millions are unbanked. The decentralized nature of digital assets combined with the technology means that a lot of people are getting banked for the first time, and are becoming participants in the world economy.
I do not fully understand the impact of this, it could be a good blog post. TBD.
Strike vs Western Union
In the interview, Jack Mallers lays the case for Strike as a better alternative to Western Union. He asks a series of basic questions.
On Western Union, he mentions, it takes them 1 week, and approximately 20% fees to send money around the world. So why is it so expensive?
Because Western Union is a sophisticated large global network.
And as Jack adds “It’s comprised of a lot of brick and mortar physical location in relationships with correspondent banks across the 190 to 200 countries that are here and it facilitates cross-border payments”
This is expensive. So that’s why there’s no alternative… until now
Strike vs Visa
He also compares Strike to Visa. So what is Visa? Jack says:
“Visa is a monetary network that consists of 70 to 80 million merchants and it helps facilitate commerce between the issuing side the one paying and the acquiring side the one receiving the payment”
M. Mallers then points out that Visa is great for buying coffee BUT it does not allow you to remit money (like Western Union).
Jack continues by explaining how Strike will compete with both on speed (Visa) and large amounts across borders (Western Union)
Why Strike Will be 10x Faster, Cheaper, Better, Easier Than Visa or Western Union
Strike currently allows you to send any amount of money to anyone across the world in an instant.
Yes. An instant.
How is this possible? It is the decentralized nature of the technology. First of all, Bitcoin and Blockchain run on a decentralized, trustless infrastructure. What this means, practically speaking, is that the Bitcoin “system” if you will is so safe that you don’t need anyone “guarding it” e.g. security guards watching a vault at a bank, or cyber security monitoring for your bank statements.
Without going into details about Blockchain / Bitcoin technology, the analogy that experts are giving is that to the internet. The internet has a series of protocols that we all use, and trust. It’s the networked system that allows for what is essentially a free flow of information.
This for me is the simplest analogy that makes sense for Bitcoin (and this is probably another blog post in and of itself.)
So basically, with this idea that Bitcoin is the underlying protocol of the whole financial system, companies like Strike (and others) wish to be service providers on this decentralized system. With a system called the “Lightning Network”, this will allow for many more transactions to be made at lightning-fast speeds, and virtually at no cost.
The World Financial Network
Skipping the technical side of things, the relevant thing to me here is that Jack Mallers speaks of a “world ” financial network.
Right now, it’s segmented. Siloed banks. Countries. Different currencies.
The new system that Jack’s proposing? Any currency to any currency. Instant conversions. Crypto to dollars to yen. You name it.
What’s more, is that existing companies can plug into it as well, including Visa.
What’s the Catch?
So basicaly, the catch, as far as I can tell, is that you need to build that network. And that’s M. Maller’s mission.
This cheap, decentralized, open, universal protocol will be unlocked if and when the whole world links up to the network. It may be faster than one thinks. For example, Jack Dorsey, CEO of Block, just announced that Cash App (with 70 million users) will join the network. The network being interoperable will allow these users to send and receive money from anyone in the existing network.
Jack Maller goes on to describe that all banks, existing companies (like Visa), can join into the network.
From what I gathered, he’s saying that it’s a matter of time. We just need to get everyone on board.
Conclusions / Take Aways
He got me convinced too that this system is on it’s way.
One analogy that hit home is this: why does the internet work? it’s an open protocol, we all agree to use HTTP, FTP, and all these protocols that mean that when you type in a website in France or in Argentina, you get the same result.
This the type of thinking for this network.
And why will it work?
Because it’s faster, cheaper,
One last thing I recommend is to see this app in action. Here is a YouTube Video of the Strike App in action. It’s incredible.
He got me convinced too that this system is on its way.
One analogy that hit home is this: who runs the internet? Answer: nobody! It’s an open protocol, we all agree to use HTTP, FTP, SMTP etc. The result? A universal and open system we all can use: the result you get by typing a website URL in France will be the same as in Argentina.
The future is exciting! If you want to know more, check out Jack Mallers on YouTube. His energy and passion are unrivalled. You really get the sense that the Lightning Network and his company Strike will change the world!
Also, please let me know any feedback!
Questions? Comments? Let me know!
Who Am I and Why I’m Doing This?
My name is Mathieu, and I’m from PEI, Canada.
I am looking to live by my passion. I love to learn and to share. In particular, I am fascinated with disruptive technologies and what they could mean for us.
I know from experience that I learn the fastest a) when I share and b) when people ask really good questions.
My goal here is to learn. I do not profess to know the truth. I aim to move towards it as best I can – with enthusiasm and passion!