PayPal veteran David Marcus has bold ambitions for his $175 million Bitcoin startup Lightspark—but says it might take the rest of his life
10/26/2024 04:50
Marcus's vision of Bitcoin as a large and neutral intermediary at the center of global money transfers is an intriguing one.
David Marcus is used to building great things. In 1996, at age 23, he founded a successful company and went on to sell another one for $240 million to eBay in 2011. Soon after, he became president of PayPal, helping to turn the firm into a payment giant before taking a senior role at Facebook where he oversaw the growth of the wildly-successful Messenger app. Marcus is not the sort of man who accepts failure. Yet, in recent years, this is what he has had to confront.
In his final role at Facebook, Marcus led the ill-starred Libra project—a wildly ambitious attempt to create a global cryptocurrency, pegged to real-world currencies, within WhatsApp and the company's other apps. The project triggered a ferocious blowback from politicians and was ultimately crushed. Undaunted, Marcus went on to launch a company of his own called Lightspark in 2022, raising $175 million to promote the mainstream adoption of Bitcoin. This too has been an uphill struggle.
This week, Marcus took the stage in a chic Los Angeles hotel to announce a suite of new Lightspark products he believes will put Bitcoin at the center of global money transfers. Svelte and handsome with grey hair, Marcus charmed the audience with his vision—but, in a sign of the challenge before him, he declared he will work on it for the rest of his life. It's not clear if that will be enough time.
As anyone who has used Venmo or Zelle can attest, moving money within the U.S. is free and easy. The same is true within other countries. It's a different story sending money across borders, which entails sending wires—a cumbersome process that takes days, typically costs around $40 and is not available outside banking hours. The reasons for this are partly technological, but mostly due to geopolitics.
"All [financial] networks are run by countries or by companies that are perceived as companies," Marcus said, referring to government-run payment networks like FedNow or India's UPI, and to big corporations like MasterCard.
Political leaders are wary of relying on another country's network for something as critical as payments, meaning there is no equivalent of Venmo across borders. The upshot is that it is expensive or impractical to send even small amounts of money between the U.S. and Mexico, or between Singapore and the Philippines—as millions of workers abroad can attest.
The solution to this, says Marcus, is to turn to a money network that is neutral and decentralized: Bitcoin. His company Lightspark is trying to bring that about, building software that can let anyone use the Bitcoin network without incurring its infamous costs and slow processing times. The task has proved a slog since Lightspark has been relying in part on an existing upgrade for Bitcoin called the Lightning Network—a service panned even by crypto devotees as buggy and expensive.
On Thursday, Lightspark touted a series of upgrades it says will overcome the Lightning Network's defects, and accelerate the adoption of Bitcoin in global money transfers. Those upgrades include the ability to connect any wallet to the Lighting Network around the clock and a Layer 2 (a blockchain sits atop a primary blockchain like Bitcoin or Ethereum) network of its own called Spark.
Meanwhile, Marcus said a variety of well-known financial brands—including Stripe, Coinbase and NuBank—are trying out Lightspark's tools.
For Marcus, all of this is part of a future where people easily send money across borders using a Venmo-style interface. In the background, the transaction will occur by converting one currency—say the Brazilian real—into Bitcoin and then converting it again into the transfer recipient's local currency such as the U.S. dollar. He also anticipates that stablecoin transactions, which are rapidly gaining traction, will migrate to Bitcoin's network from blockchains like Ethereum and Tron.
Lightspark is not the only company trying out cryptocurrency as a solution to cross-border payments. San Francisco-based Ripple has long been touting XRP as a "bridge currency" to make these transfers more efficient.
Marcus says Bitcoin is the better solution since it is much bigger and more decentralized than XRP, and because banks can trust the Bitcoin network as durable enough to be here 100 years from now.
Marcus's vision of Bitcoin as a large and neutral intermediary at the center of global money transfers is an intriguing one and, in theory, it could work. The question is whether Lightspark can persuade anyone to use it.
The plan for Bitcoin-based money transfers relies on users having something called a "Universal Money Address" or UMA that, in the same way as email, lets anyone send or receive with that address. On Thursday, Lightspark announced a tool that makes it easy for those who have an UMA to grant permission to third party apps to integrate the address. In practice, this means people will be able to tie their UMA address—a gateway to the Bitcoin network—to their existing bank and personal finance apps.
So far, though, no non-crypto companies in North America appear to have done so, and Lightspark would not provide any details about when they would. The company did, though, say the giant Brazilian neo-bank NuBank is using its services and pointed out that the appetite for payment alternatives in Latin America is thriving.
Lightspark declined to share any figures such as active user numbers that would reflect whether the service is getting any traction. It also offered no specifics about how much revenue it is pulling in, though Marcus told Fortune the company is growing fast and that is charging various companies on a per-transaction basis.
Meanwhile, one person familiar with Lightspark's ambitions, who spoke on the condition of anonymity, said he believes the company is simply too late to the game. He pointed to the rapid adoption of existing stablecoin networks as a sign that Marcus's Bitcoin solution—as elegant as it may be—will struggle to displace what people are using already.
Marcus unfazed by such doubts. He says Lightspark has plenty of money—in part thanks to its purchase of a significant amount of Bitcoin two years ago when prices were slumping. He predicts that, now much of the technical infrastructure is in place, the world will soon be ready to make Bitcoin a backbone of global finance.
This story was originally featured on Fortune.com