Strike raises $90 million to expand Bitcoin payment network

The Chicago-based company on Tuesday announced a $90 million raise to advance those ambitions, breaking what brash CEO Jack Mallers calls the “monopolistic, anti-American” dominance of the credit card companies. The funding round was led by Ten31 and was 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 transform the payment experience for both merchants and customers.

While the idea of ​​challenging the credit card giants with Bitcoin may sound far-fetched, Strike has already shown real-world traction by persuading e-commerce giant Shopify as well as global retailer NCR to use its technology.

Strike relies on a technology called the Lightning network, which is known as a Layer 2 solution in crypto 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 a significant fee.

Twitter’s tip and payment services already use Strike and the Lightning network.

Merchants using Strike can choose to have all Bitcoin payments they receive converted instantly to US dollars. Mallers predicts that as many as 50% of US businesses could adopt the technology by the end of 2023, while a report from investment bank Morgan Stanley suggested it could spur the adoption of Bitcoin as a mainstream payment method. Mallers also believes that 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 the largest futures brokerages in Chicago, is a young 28-year-old who prefers ball caps and hoodies and is a controversial figure both inside and outside the crypto world.

He 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 can use other tokens on the network, including stablecoins, he said Fortune“It’s exclusively for Bitcoin. That’s all we need.”

Despite his abrasive persona, Mallers speaks thoughtfully and even persuasively about why Bitcoin is ripe to disrupt traditional payment networks.

He points out that when you use a card to buy something online or in a store, the merchant doesn’t receive money, but instead a promise from Visa or Mastercard to pay for the transaction on your behalf. In contrast, Mallers notes that transactions over the Lightning network constitute the transfer of money in real time without the need for a lengthy settlement process.

Strike’s use of the Bitcoin blockchain, Mallers adds, means fraud is effectively impossible, which in turn means operating costs are much lower, and it can charge well below the 1.5% to 4% merchants are typically billed. Meanwhile, Bitcoin is an open protocol so anyone can use it.

All of this, in Maller’s view, means there’s a huge opportunity for anyone—even a high school student—to develop payment services while offering new types of rewards and incentives to customers and merchants.

For its part, Strike is focusing on partnerships with major payment companies, including Block, whose Cash App tool has millions of users. During the interview, Mallers also mentioned PayPal, but says he cannot yet reveal the full range of companies that Strike works with.

‘No Regrets’

Of course, it remains to be seen whether Mallers can turn his big ambitions into reality in the face of some obvious challenges.

This includes Bitcoin’s ongoing volatility, but as some have noted, the cryptocurrency has been less volatile than the British pound in recent weeks. There’s also the problem of the fact that using Bitcoin triggers tax liabilities — a problem that could be mitigated by proposed legislation in Congress, but is currently very real.

There is also a risk that Mallers himself may prove too controversial for some potential Strike adopters. In addition to his jaw-dropping appearances at Bitcoin conferences, Mallers also helped facilitate El Salvador’s adoption of Bitcoin as legal tender — a development that delighted crypto fans but has angered others in light of the currency’s price decline as well as the autocratic way the country’s president 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 doing so.

“My relationship with El Salvador is to give them advice based on my opinions about Bitcoin. I have no regrets at all,” he said. “I am a very principled and moral man.”