Written in front: Generally speaking, cryptocurrencies such as Bitcoin are not suitable as a payment method because they have high volatility and tax issues. The proposal and application of Lightning Network solves the scalability and transaction of Bitcoin Efficiency issues, so the idea of spending Bitcoin through the Lightning Network in exchange for goods is actually a dead end.
The Lightning Network client development team, Zap, has developed an application called Strike through continuous exploration, which allows users to directly use a debit card or bank account for Lightning Network transactions, which eliminates various user experiences. At the same time, users can benefit from Lightning Network and Bitcoin without having to know the existence of Lightning Network and Bitcoin.
The original author is Jack Mallers, the founder of Zap.
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Today, we announced the Strike app, which allows you to use your bank account or debit card to make Lightning Network payments. The following are required to use Strike: a debit card or bank account.
Yes, just that, this does not require a wallet, nor a node, no channel, no exchange, no liquidity management, nothing. It is an application built on our Olympus infrastructure. In order to usher in the era of Bitcoin, we believe that this is the best choice to realize our vision and hope.
Three major problems facing Lightning Network
When describing Zap's design and product decisions, I often use "responsive" answers.
In September 2019, I announced the Olympus project, which was originally designed as a support channel between the Lightning Network and fiat currencies, which allows users to buy Bitcoin in their Zap wallet. This is the answer we first thought of how to scale the Lightning Network on a large scale.
However, as we continue to test and modify, and encounter failures, we can't wait to reflect, which has led to the product undergoing evolution. A lot of research and learning in the past four months has inspired the hackathon within the team and eventually led to the birth of Strike.
The idea and assumptions are very simple, if we allow users to buy BTC immediately and then make a lightning network payment by using a debit card connected to their lightning network wallet, we can solve this problem.
Is this the correct answer? It was not that simple, and as we continued our experiments, we quickly learned what we were facing. In my Olympus announcement, I propose that Olympus solve the following questions: How to let users use Lightning Network with minimal friction? However, the problem Olympus solves is "how to link Bitcoin with the Lightning Network with minimal friction." We completely ignore users.
So in this blog post, I want to introduce our new products and future plans through our journey and learning.
Let ’s take a deeper look at the huge friction that comes from exposing users to the Lightning Network, and the important issues I ’ve overlooked.
Question 1: Volatility
The first problem is very obvious, which is the inherent volatility of Bitcoin. Generally speaking, Bitcoin's volatility is considered a feature. In the market, volatility means opportunity, and Bitcoin's volatility has attracted many existing users and market participants. Bitcoin's most popular value proposition in its first 11 years was wealth creation. Buy bitcoin, hold bitcoin, and then expect its value and purchasing power to rise over time.
However, when people use Bitcoin in a business environment, volatility is an uncontrollable factor. Usually during testing, the price of bitcoin purchased by users will change in the near future. We encountered a scenario where the price of bitcoin fluctuated by 5% after the user first bought Bitcoin, which resulted in the following:
- Don't choose to spend bitcoin because it is increasing in value;
- Because Bitcoin is falling, users do not want to spend it, but expect it to appreciate (rejection of loss);
The existence of volatility makes it extremely difficult to accept Bitcoin. A typical businessman is more willing to use fiat currency to price his business, and the high volatility of Bitcoin may waste months of profit for merchants.
Question 2: taxes
In the United States, bitcoin is taxable as a property, and spending bitcoin in exchange for any goods, services, or currency is a taxable event that everyone knows. But what many people don't know is that taxes have also been extended to Lightning Network payments. Yes, purchases of Fold and Bitrefill gift cards, Yalls items, and Satoshis Place artwork are all taxable events and therefore need to be reported to IRS.
This is the main problem we encountered in the process of designing Olympus. All activities were a taxable event, which caused huge expenses for each user and myself. Do we need a headache for this? In our user research and testing, the answer is yes, users like micropayments, cross-border payments, social rewards, etc., but when considering tax issues, no one thinks it is worth it.
For merchants, this is undoubtedly a bigger problem. Merchants accept Bitcoin through the Lightning Network, which needs to be converted into fiat currency from time to time to pay for operating expenses. The headache of taxation has made accepting bitcoin unworthy, and almost all merchants choose not to accept bitcoin.
It can be said that the regulatory and tax environment in the United States is a huge obstacle to the application of Lightning Network in mainstream business. Imagine a world where millions of users use the Lightning Network for business activities and it will die out with the introduction of current regulatory and tax scenarios. We stumbled upon this as a devastating truth, but it was a very real fact.
Question 3: create a wallet, hold and hold Bitcoin
Many of our testers are less familiar with Bitcoin than readers who read this article. If we want millions of mainstream consumers to benefit from Bitcoin and Lightning Network, we should consider these audiences.
When asked if a particular user is willing to pay a few pennies for an article, the answer is almost always yes. But if they were told to install a Lightning Web Wallet, their answer would be no.
"I have about a few cents. If it's not enough to pay for this article, then I don't want to buy it."
This is the answer directly quoted.
First, you need to set up a wallet and wait for something you do n’t understand to finish syncing, and something called “capacity” will limit your ability. You have to buy bitcoin, and then perform operations such as backup. And they are burdensome for most users. We have a lot of testers who won't even buy bitcoin. All of this is overwhelming. They hit me a lot.
Well, I see. Volatility and tax issues are difficult. But you said you don't want to hold Bitcoin? For the sake of sex, how can I get these people to benefit from this technology?
Looking at my Olympus demo, we can see that the Bitcoin in my wallet is zero and my goal is to pay for a Bitrefill QR code:
I really need to download a Lightning Network Wallet, write down my mnemonic phrase, back up my channel, and expose it to tax consequences and volatility issues to pay for Bitrefill Lightning Network invoice?
I did not use Bitcoin for speculation, nor did I use Bitcoin to resist censorship or privacy (because my ID card and debit card are connected to my node).
So what does it mean if my debit card can pay for Lightning Invoice? If I can scan any Lightning Network invoice by connecting to my bank account, and then make a payment, will it work? No wallets, no backups, no channels, no capacity, no hosting issues, no volatility, and no tax issues. What if this is not a "spend and replace" service, but a service that is used immediately and without attention? What if the "a few cents balance purchase article" mentioned above could be achieved? What would it look like?
That's what Strike is going to do, and it will do it.
To achieve this, a debit card or bank account will need to interoperate with the Bitcoin and Lightning networks, thereby lowering the barriers to entry into this new economy. Users don't have to deal with volatility and tax issues, set up a wallet and interact with the protocol, they don't even need to own Bitcoin. What if everyone's bank account represented Bitcoin directly?
The change from Olympus to Strike is quite small, we just added something and deleted something. They are simple, ordinary, and harmless.
However, because we are able to integrate them into the environment, they have a decisive impact and become extremely powerful. We have to change not only the appearance of Bitcoin, but also the way people feel about it. We are changing the consumer relationship with Bitcoin and the Lightning Network, how people use Bitcoin, and how they view Bitcoin.
We have developed Strike's IOS version, Android version, desktop version and browser extension application. You can view my demo video on YouTube channel.
what does this mean
You can use bank accounts and debit cards to connect to nodes around the world, and nodes can now also connect to bank accounts and debit cards. The possibilities will be endless.
Can you use Strike to buy Bitcoin? Of course, create an invoice from your existing wallet, then pay. After you finish, you will have less fiat currency in Strike and more bitcoin in your wallet.
Can you use it to sell Bitcoin? Of course, you can create a request in Strike and send it to you from your wallet. When you are done, you will have more fiat currency in Strike and less Bitcoin in your wallet.
Can you use Strike to send money? Yes, this is ok. All you need to do is scan the QR code and click pay.
Can you use Strike for internet rewards? No problem at all, just scan the QR code and click pay.
Is Strike a hosted wallet? No, it is not. It does not own anyone's coins and private keys. If my bitcoin is stolen by hackers, only me will be affected, and it will not affect others. This is how it works. It looks like a beautiful and innovative hybrid electric vehicle.
When to use Strike
Today, it is true that someone is using Strike, and I can talk about things that I have experienced.
My family has XX business in Colorado (Note: XX business is legal in Colorado, but illegal in most places). In Colorado, there are only a few banks in the state who are willing to provide banks for people in the XX industry. Service, and our bank waiting list is now over two years old. Our family business is struggling for banking services, and we have put in a lot of effort to win payment processors. In the XX industry, the processing fee is generally between 5% and 15%, and in many cases it is unreliable and unstable. For example, we recently discontinued production for two months, which prevented us from processing any credit / debit card payments.
When I went to Colorado for Christmas, I showed Strike to my parents. We ran to the store and demonstrated it to all of our senior managers and employees. My parents run a BTCPay server and offer a 10% discount to anyone paying Bitcoin. The problem is that no customer can build a lightning web wallet. With Strike, things changed immediately.
All you need is an application and a debit card.
We gave Strike Amway to some customers and friends who frequented the store, and then told them that if you use this app, you can get a 10% discount. The result was very successful, both young and old, they are using Strike to shop in our store and then get discounts.
Do they know what Bitcoin is? I'm not very sure.
Do they know that it is using Bitcoin as a payment tool to transfer and settle the value? I don't know!
As a behind-the-scenes worker, Bitcoin has benefited personal life and businesses without anyone's attention.
The possibilities are endless. For example, content creators can set up a Strike donation page, and whenever someone donates BTC, they will get fiat money in their bank account (or any custom legal currency to BTC ratio they want). This is magic.
The smallest change can be transformative, but it must be the correct change. Finding these changes requires patience, you must pay attention, and then respond at any time.
Lightning Network provides real-time, inexpensive global settlement and automatic clearing capabilities for the world's first native digital asset class. We are already working to lower the barriers to entry and increase flexibility and ease of use.
There are many real-time and automated risk management, trading, compliance and legal policy, application and protocol developments that need to be tested. As I said before, this is not a game and we will move at our own pace.
However, we are indeed ready to expand Strike's testing.
Speaking of plans, we will expand our BETA testing weekly, starting with US users and gradually releasing it globally. Our goal is to make the BETA public and bring Strike to the App Store in the coming months, and this will require community effort.