David Marcus on Lightspark: building a Bitcoin-native global payment network to replace correspondent banking

expertise, and data to enable efficient, seamless ad buying across the globe. And we have our first guest, David Marcus, in the studio. Welcome to the stream, David. How are you doing? Good to see you. Great. Thanks so much for stopping by.

Uh would you mind kicking us off with an introduction on yourself and the company just for those who might not be familiar? Of course. I'm David Marcus, co-founder and CEO of Lightspark.

And basically we're building modern payment infrastructure to replace correspondent banking uh with uh a fast open network built on top of Bitcoin. Can you talk to me about some of the the history of your career and kind of how that ties into bringing you to today?

the decision to build it externally as a new company versus internally at some other company. Sure. Um, so I've been building companies since I was 23 years old. Uh, came to America in '08. Built a company that I ended up selling to PayPal.

Uh, through a series of twists and turns, ended up, uh, running PayPal for a number of years. Uh then Mark Zuckerberg uh convinced me to join him to take a little break from payments and regulated businesses building messaging products at uh at Facebook.

uh and then uh and then started uh the Libra DM project there which uh unfortunately failed because it was the wrong sponsor at the wrong time and too centralized and and the goal of Libra and DM was really to provide an interoperability layer for all of the banks and wallets that is real time that looks like the internet that is open that is low cost uh and that enables anyone to move money like you send a simple text message or an email uh and sadly Janet Yell in the morning of June 2021 pulled the plug on this uh and so I left at the end of December 21 uh and in April of 22 started Lightspark uh with the benefits of all the learnings that uh I had collected uh with my team along uh the journey and uh and the one lesson was if you're trying to build something that truly looks like an internet for money it has to be built on top of something that's unassalable decentralized enough and Bitcoin happens to be the most neutral form of digital money ever invented and So we're building technologies around that to ensure that you can move any currency at any given point in time from anywhere in the world to any other parts of the world uh at a fraction of the cost uh of the current system.

Does it ever make sense? You mentioned like wrong sponsor at the wrong time.

It feels like with all the news around stable coins and the Genius Act and the market structure bill, there's potentially this idea that it's the right time to build new stable coins and stable coin projects and just just building in crypto generally.

Um, but I'm interested to know like is there ever a situation where a co where you know a big tech company or a a bank or Visa or a different network um might be the right sponsor or should it always be from an individual new company or should it always be should there be a particular structure to that where the actual project's decentralized or CC corp like like how do you think about the shape of the sponsor these days?

Well, I think, you know, stable coins are definitely booming right now and uh and everyone's building on it.

Uh I think the real question is do you want something that's fully centralized again like the current payment systems and a current financial infrastructure or do you want something that looks and behaves a lot more like the internet which is an open network that is permissionless that enables developers and builders from all around the world to build applications to move money.

uh and I'm definitely squarely in the latter camp. And I want to make sure that we have an open uh money network, an open money grid.

Uh and we believe that the only way to build that in a in a sufficiently decentralized way is to build it on top of Bitcoin and then build all the services and capabilities so that Bitcoin can actually move fast and cheaply uh but also interconnects with all of the domestic real-time payment systems in the world and support stable coins.

So that's what we're building at Lightspark. Um, and that's why you're seeing now more and more digital banks around the world adopting this new standard that uh we open source that's called universal money address that is basically like email for money.

Um, you would have like dollar sign your name at the bank or wallet and then you can send whatever currency to whomever you want in the world receiving another currency in real time on a weekend after 5:00 p. m. uh on a bank holiday uh anytime you want. And uh and that's one part of the solution we're building.

And then we're also building core infrastructure for Bitcoin to move faster which has sparked this new Bitcoin alto but we we can talk about that later. Yeah. Yeah. I'm I'm definitely interested in that.

Like walk me through some of the history and the current strategies to uh improve Bitcoin, the lightning network and kind of bring us up to modern day in terms of um just getting more out of what is undisputably the most successful crypto project of all time, Bitcoin.

um but has has had uh gaps where people have stepped up and created different L1s uh and different projects that haven't touched Bitcoin for a variety of reasons. Yeah, I mean you're right, Bitcoin is by far the most successful digital asset ever created and network ever created.

U but the problem with Bitcoin for a long time is that it was too slow, not expressive enough in the sense that developers couldn't really build um on it because there were no smart contracts. um and uh and too expensive to move.

So very secure, the most neutral form of digital money ever created, but slow, expensive, not programmable. Um and Lightning was a first attempt to we spent the last three years building on Lightning, making it better, making it enterprisegrade.

This is why Coinbase and many of their large largest exchanges in the world are using our our technology to move Bitcoin faster uh and cheaper on top of Lightning. But then lightning has a bunch of limitations. Like the first limitation is it's a channel-based payment system.

And so with that comes a lot of complexity in terms of liquidity, efficiency, routing, and all kinds of all kinds of fun uh other uh uh setbacks and issues. And so uh we built Spark uh which is a brand new Bitcoin L2 which is taking off like crazy right now.

And it's it's actually backward compatible with lightning, but it enables all kinds of developers uh to build in a permissionless way uh unhosted self-custody wallets like you know issue tokens, issue stable coins, uh create marketplaces and AMMs on top of Bitcoin for the first time.

Um and uh and that's really critical because like we need to make Bitcoin the most efficient settlement layer in the world. uh and and also make it the most decentralized and trustless layer in the world to move value and uh we think Spark is a massive step towards that.

How are you thinking about adoption of Spark and incentivizing adoption? And I'm I'm I'm more interested in kind of like what are the pitfalls and kind of like uh traps or potholes along the road to adoption that you don't want to get caught up in?

Because in in in some kind of counterintuitive way, people always talk about Bitcoin's volatility. been like the least volatile really.

Um, and it feels like there's a lot of other projects that have kind of come out and created like, you know, some viral sensation, some sort of massive incentive where a lot of people are getting making a lot of money very quickly.

So, it skyrockets, but then there's something that's missing fundamentally and then the projects or the or the trend kind of dies off. How are you thinking about uh engineering the incentive structure for long-term adoption? Well, look, the best incentive you can build is build a product that solves real problems.

And I think, you know, unfortunately in crypto uh sometimes that was replaced with uh you know, a coin that some people call shitcoins um that are basically dumped on people to incentivize them to use the underlying technology.

Uh we don't have a shitcoin like our our our coin and our unit of account for the network is Bitcoin that we don't control thankfully. And uh and so we have to work really really hard to build utility that solves real world problems for for many players.

But in Bitcoin there's a lot of liquidity because as you said it's like the most successful digital assets ever created and the most liquidity sits in Bitcoin denominated in Bitcoin.

And so you have a lot of traders out there, you have a lot of platforms um that actually want to tap into that liquidity and they couldn't until now uh because there wasn't a technology that enabled developers to build those marketplaces and platforms on top of Bitcoin to create these self-custody wallets that could move Bitcoin in real time at low cost uh and to do all of these things that Spark enables.

And uh and I think you know that's why we're seeing such a such an amazing uh early adoption and and so much traction with a wide variety of developers whether they're building payment apps, they're issuing stable coins, they're building marketplaces and AMMs and and decentralized trading platforms.

Uh we're seeing all of that happen on on Spark right now. I I have this like kind of funny counterfactual that I like to run in my mind of the the PayPal mafia and the PayPal diaspora is like so dominant in tech everywhere uh and politics and everything and science and just literally everything.

Um and I like to run this counterfactual of like what if the team stayed together forever? Um like what would PayPal as an entity look like? Would it be just the biggest company in the world?

uh if you had Elon and Peter Teal and David Saxs and Keith Roya and you and all these like the larger crew still there just like chopping down problem after problem after problem in the financial system and I'm wondering uh if you've ever played that that that you know mental exercise but more precisely is was there something structural where PayPal was not able to jump headirst into crypto as fast as possible like if If at the time everyone in the company had just been as soon as the white Bitcoin white paper comes out like we are orienting the company around this would it have been possible to to actually lean in and be a leader and and an innovator in that category or was it sort of like an innovator's dilemma problem where I mean PayPal's doing great still but um where there was really no way for the structure of PayPal to play in the new uh in the new paradigm.

Yeah. I mean, look, I think it's an era thing. Uh the the era of all of the people you mentioned was, you know, predating uh all of this and and then the company sold to eBay. Yeah. Uh and um and you know, most uh most of these talents were completely, you know, gone building their own things.

Um and so I think it's an era thing like you know the era of you know the the Peter Teal Elon u uh Max Leftchin PayPal uh was really you know the the the first really big push into you know finte consumerf facing fintech uh I think of like Visa as a fintech that's like basically built technology that enables money to move around like as at an enterprise level serving banks not consumers and PayPal was kind of the first major fintech success, but it it was really uh not the the crypto era at all.

So, I think it's just a time thing. The next time PayPal goes through a leadership change, we need to have an all-star game where we bring back the entire PayPal mafia for one quarter. Peter, Elon, everyone's full-time for a full quarter. Just how hard can we go with PayPal? Let's make it great. Uh it's fascinating.

I'm I'm curious what what your conversations are like with uh people that are maybe just starting to build on crypto rails, excited for the first time or have been building for a long time.

When when uh talking with you and and understanding your vision, it's very easy to see why Bitcoin is an obvious choice for a network to build on top of because it's decentralized. It's very global. But the default until now has been building on Ethereum or Salana or these other um networks.

How how do those conversations go? Are people coming around to the idea that yes, having a a fully, you know, decentralized network that no one individual or group has overt influence on is is a great place to build a business, right? Or or bring your business.

I mean, look, I think the only reason that all of this developer energy went to all of the other platforms is because you just couldn't build on top of Bitcoin. The the tools weren't there, the technology wasn't there.

Uh, and I think, you know, now like I feel like we're going to have a renaissance of developer energy on top of Bitcoin.

uh because not only because of Spark by the way like there are many many others that are building new capabilities on top of Bitcoin that are enabling those new use cases to happen without losing the true north of decentralization and trustlessness of of Bitcoin.

Um and and I think it's very compelling for a lot of developers and a lot of people who want to build very successful companies because the the again like the the depth of liquidity of Bitcoin, the desiraability of Bitcoin in the world has just no parallel in the whole industry.

So it was just a matter of removing the obstacles that were standing in the way of developers building really great products on top of Bitcoin and I think uh I think it's happening right now.

How do you guys solve the um you know the the immediate from from what what you've said obviously you can have stable coins on top of the the Bitcoin network which solves one of the key issues with with Bitcoin as a method of value transfer that that also historically held it back is one why why do I want to buy a c you know any anybody that bought a coffee 10 years ago with Bitcoin or pizza or whatever it was you know uh probably regrets it now.

Um but uh how how are you how do how do transactable is it affect you know how are these how are the let's say I'm transacting with stables on spark what what is the sort of like economic what is that econ full economic exchange look like how what are fees paid in is it is it paid in the stable or is it network level I I'm so glad you asked this question because that's that that's one of the the the killer selling point of spark for stable coins which is like you know if you issue a stable coin on Ethereum or any EVM chain or any other chain you have to pay gas fees for you know basically transaction fees in the asset that you most people don't own like whether it's ETH or soul or whatever it is um in the case of Spark you actually pay uh when you move stable coins in the stable coin so it it's it's very much focused on payments and you know that's one of the advantages so one it's cheaper two you pay with the asset you're transmitting, which is kind of the way that most payment systems uh at scale really work.

Um and uh and then you have the the beauty of the trustlessness of knowing that even if you're transacting with a stable coin, you can always have a unilateral exit to Bitcoin L1 with your stable coin and no one can prevent you from getting your money out.

So, it's the the best of trustlessness, the lowest cost, the most efficient, and you don't have to complicate uh how you actually pay for the fees for most people who actually don't own the underlying asset needed to to pay a fee.

So, it solves a lot of problems to make Bitcoin the absolute best platform for stable coin payments. So, yeah, h how did the actual dollars get custodied in that in that way?

there's always this like hard interface between something that's truly decentralized and then like the US treasury at some point and I feel like that's where a lot of the stable coin companies kind of figured out how to uh you know bridge that gap and they exist as this layer between the US government effectively and the and the crypto community or like the programmable money world.

Um, and so it feels like we're on this trajectory of like let's make this more programmable, but but how close are we to something that's like fully programmable? Well, I think you know here here's the issue, right? So I mean first of all like stable coins are always going to be fully centralized.

And so you know that that's why it's so important for the network not to also be fully centralized because then we're basically replicating the entire payment system that exists today with just new players. Yeah, Circle can is is it true that Circle can just freeze all USDC? Like Yeah, sure. Yeah, of course.

I mean, it's a company running a It's basically fully centralized. So, like all of the stable coins are centralized. Like there are a bunch of people who attempted doing uh algorithmic stable coins that would algorithmically basically absorb like the and it just doesn't work. It just doesn't work. Exactly.

It doesn't work. Um and so stable coins are fully centralized. Uh I think programmability um programmability always comes at the cost of trustlessness.

So like the minute you can establish new conditions for how money can be moved uh with a smart contract, you lose the ability to have a full unilateral exit where no one can actually prevent you from exiting your fund from the network if you really want a trustless exit from the network.

Uh and I think that's the balance. Uh, and I think you know what we're focused on right now with Spark is really providing people with the the right level of trust and and the differentiating factor that Bitcoin can bring with trustlessness.

Um, but I think gradually what you'll see is different levels of trust for different levels of functionality. If you want more programmability, you'll have to actually relinquish a little bit of that expectation of trust uh to get more programmability. But those two things will always be intention.

How are you balancing go to market right now?

I imagine you have this pretty intense uh tension between you know for example like a developing country that's excited or or or you know companies in a developing country that's excited about the potential of potential of spark versus a fortune 500 CEO that's saying David we want to do something in stables like let's let's let's talk where where are you splitting your time and where are you most excited well I mean right now I feel like there there are two parts of our business Right.

It's like one part is like core infrastructure to make Bitcoin better, faster, more programmable, better for developers. That's all Spark.

Um, and then there's the the mission of connecting all of the banks, all of the wallets, all of the payment networks in the world to Bitcoin uh with universal money address or UMA um to enable people to actually move money from their bank or from their wallet, the place they pay their bills from, the place they have a debit card or, you know, all kinds of different instruments attached to u to any other point in the world making basically money flow in a completely open unrestricted way uh 24/7.

seven at a very low cost. Both of these things are basically built on top of Bitcoin and serve different types of constituents that basically extends the reach of the network.

But but these are the two core focuses and it's it's it's a very interesting time for us because on one side we have permissionless building on top of Spark with developers building all kinds of different things like I I turn on my my computer in the morning or my phone and I look at like what people have built the night before.

I have no idea what's going on. I don't onboard the business. I don't have a contract with them. Like it's a wonderful thing. And then on the other side of of things, I'm going through like diligence uh uh processes and compliance stuff with like the largest banks in the world that are coming onto the network.

So it's kind of a little schizophrenic on both sides of the business.

But both of these things acrew to the same thing, which is an open money network that enables both developers on one side of the spectrum and regulated entities like banks and and wallets on the other side to move money in real time uh globally like never before.

So, it's a it's kind of a a fun two-sided uh uh part of the business right now. That makes sense. How are you thinking about uh corporate stable coins? There's been uh some announcements, different PR stuff around companies saying we're going to make our own stable coin.

Uh and we were joking uh on the show a while back, does that just turn into like a Kohl's cash scenario? Uh, do people want every retailer, every big retailer that they interact with to have some native stable coin or or are the the issuers that we have today? It's a classic job. There's too many standards.

We need one we need one standard and then you have one more standard than you had before. I mean, look, uh, when I think about these things, I always come back to one thing, which is what problems are we trying to solve?

And uh I think you know it's very clear that like if you're trying to solve for dollarization in the world like if you're in Argentina or in Venezuela or in Turkey or in parts of Africa you'd much rather have a a dollar denominated account with a US bank. You can't have that.

So a stable coin in this case mostly Tether um is the solution to that. It's like it's the next best thing to having a US dollar denominated bank account in the US. Uh, and it's great and it it it increases the reach of the dollar. It's great for America. It's great for these people. It works.

When it comes to domestic use cases for stable coins, there's a bunch of really good problems to be solved in institutional capital movement. It's like, you know, you can't net settle trades uh on weekends or after hours.

You can't move liquidity between institutions to, you know, make the market more efficient with the current system because it doesn't allow you to do that. Stable coins help do that.

But from a consumer standpoint, I'm kind of at a loss to understand like what an American consumer would actually get from using a stable coin. I I I don't get it. I don't think there's a massive problem to be solved. People can pay one another pretty easily with normal dollars.

They're already digital dollars basically. Like if you look at your Venmo balance or your Chase balance, it's already a kind of stable coin that you're seeing. It's like virtualized dollars that are controlled by the bank. it's like basically a stable coin.

Um, so you know, I think this is a conversation worth having around like what is the consumer application using stable coins in the US that is actually solving uh a problem for the vast majority of Americans and you know I don't know what that is.

Can you talk about uh open source and how that inter like the current meta around open-source in uh in the crypto and and community and in just de the role of decentralization. Was it ever an option not to have an open source project?

Uh it feels like kind of table stakes now, but do I have that kind of correctly in terms of the characterization? Yeah. No, I mean it's super critical and that's why almost everything we build is uh is open sourced. Yeah.

And and the reason for that is like you know people building in this industry are are trying to make it like you know anti-fragile. Uh and one of the ways that you make a technology anti-fragile is you don't concentrate all of the capabilities around one company that wins it all.

Uh and I I often talk to my team here uh at LightSpark and basically tell them look we're we're going to be very successful the day we have a bunch of competitors building on UMA building like all kinds of services to compete with us on the very technologies that we've helped build.

Uh and I think that's the way that we make ourselves kind of redundant and ensure that the network is actually going to exist even if we were to disappear for whatever reason. And I think that's kind of an ethos of the entire industry that uh that we care deeply about. Can you break down a little bit more how UMA works?

I think anybody that's played around with with crypto a little bit may have had the experience at some point of like sending Bitcoin to a USDC address and realizing that it's just gone forever.

Um, so the idea of a universal address that can you receive and send a bunch of different uh currencies makes sense, but um I'm curious how it how it works and how you're enabling other other companies to adopt it as a standard uh even if you guys aren't necessarily sounds like directly benefiting financially from that.

I mean we are for for for the the companies that we serve we we are benefiting financially from that but like it's an open network but but the way it works is that uh an institution like take new bank which is you know one of our our early partners on uh on UMA which has over 100 million bank customers in Latin America.

Uh and so they would assign uh you an address like dollar sign your name at new bank. Uh you your account is denominated in Brazilian riis. Uh let's say I'm here in the US and I'm with a bank. Uh my uh my UMA is going to be dollar sign Davidbank. com. Um I'm sending dollars to uh you in Brazil.

Uh and what happens in the back end is basically UMA is a pre-transaction open uh messaging protocol. So it enables me to go to the new bank server and basically say hey is this address a valid address? What is the currency that the this person wants to receive?

What is the exchange rate that you're going to charge me for this transaction? Then I can present a fee structure to the customer in the US sending dollars. Show them exactly the amount that the recipient is going to get in Brazil and RIIS. Uh they click send.

When they click send, basically the dollar gets converted into Bitcoin, gets pushed on Lightning to Brazil, gets to Brazil a second later, gets converted to Brazilian RI is deposited in the account. works 24/7.

Uh super low cost and super tight spreads between all of these currencies because Bitcoin has so much depth of liquidity with all of these currencies because it's traded so much. Yeah. Um and and so it's like super costefficient real time 24/7 and open.

In some cases like New Bank, they build the the connectivity into Bitcoin themselves into Lightning because they can actually do the conversion on their side.

In some other cases, we built the capabilities uh for for instance US banks and European banks and Mexican banks and others to actually connect onto the network using their domestic payment system. So they would send in this case the dollars to us and we would convert to bitcoin and push as a service to them.

So they don't have to deal with the bitcoin portion of it. Uh but Bitcoin is always the net neutral settlement asset between those currencies and allows to move liquidity across countries across payment systems in real time 247. That's the way it works. Very cool.

Can I get an update from you on what's happening in Washington? Uh break down the different uh legislation that's going through the uh the US government. kind of what your perception has been, your takeaways, status update, but also are you optimistic about where things are going on the regulatory side?

Yeah, I mean, look, it's uh for a guy who's been shut down by the Treasury Department with, you know, the the most uh public uh public shutdown of the crypto industry, one could argue, uh it's quite a change, quite a vibe shift, right? And you know, I I was I was at the the digital asset summit at the White House.

And you know, being welcomed at the White House in a in a in the east wing in a very ceremonial way uh to actually promote the whole industry uh was was a massive massive whiplash uh of of the best kind, right?

And I think u I think you know look there's a lot of credit that goes to this administration to David Saxs Bo Hines u but also uh to people on the hill who've been working on these important pieces of legislation that are going to actually make building the the next set of technologies that will reinvent and rewire the world financial system here in America which I think was absolutely absolutely direly needed.

Uh and so I'm super bullish. I think we we we have gone from an administration government that wants that wanted to like fully kill the entire industry to one that wants to promote it and ensure that American companies actually win at this and we win.

Uh and I think it's a a vital interest for America that we continue to to lead with financial services infrastructure. So I couldn't be more bullish of you know what's happening in DC right now around our industry. Is there anything that you're looking out for in the back half of this year? spirits.

Obviously, you know, we started strong with a with a memecoin out of the White House. We've got the the new stable coin uh regulations uh passed. Uh anything in the back half of the year that you're kind of looking at uh or or anticipating?

I think everyone's really anticipating market structure and like having a a market structure bill that will clarify the rules of the road for that entire industry. I think that that's as important uh in my opinion as uh the the stable coin legislation that is going through now. Yeah, it's great.

Well, thank you so much for stopping by. This is fantastic. Thanks for having me. Great to be on the show. Always welcome. Talk to you soon. Talk soon. Uh and next up we have Ben Thompson from coming into the studio. Very excited to talk to him. The moment we've been waiting for. Yeah. Uh welcome to the stream, Ben.