Ray Marceau is the CEO of Purse, a marketplace enabling anyone to spend Bitcoin to buy products on Amazon, or sell Amazon gift cards to buy Bitcoin.
In our discussion, Ray explained how the Purse platform works, the ups and downs of their 8-year journey in the Bitcoin space, why Purse decided to integrate Lightning payments this summer, and why they’re considering focusing exclusively on Bitcoin on their platform.
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00:00 - Intro
02:38 - Ray Marceau Intro
13:54 - How Does Purse Work?
17:28 - Purse and Amazon Gift Cards
23:55 - Purse’s Lightning Network Integration
36:04 - What Lightning Metrics Is Purse Watching?
38:04 - Why Purse is Focusing on Bitcoin
56:42 - Privacy on Lightning
59:42 - Ray’s Lessons Learned as CEO
1:06:03 - The Lightning Round
Ray Marceau - 00:00:00:
We were one of the first companies that allowed you to actually purchase things with Bitcoin. On a scale of Amazon.com, there weren't many companies back in 2014 that allowed you to do something like that. Everybody was in the hodl mentality, like just acquire Bitcoin or mine Bitcoin or all those different mentalities and improving the protocol, but not necessarily spending it. This is a really viable product for on a global scale. We have users all over the world, and a lot of people depend on us, actually, for their livelihood. Just in the last month, we've seen now 20% of our transactions on our Bitcoin transactions are operating over Lightning. So having Lightning in place and seeing how our users move is going to play a big role into how we or what features are available on our platform. Moving forward, it would be in our best interest to drop Bitcoin Cash, Taproot support and music too, like these technologies that are being implemented, and the tooling on top of those is fascinating. It's really going to make private transactions a thing.
Kevin Rooke - 00:01:16:
Ray Marceau is the CEO of Purse, a platform that enables anyone to spend their Bitcoin to buy products on Amazon or sell their Amazon gift cards to buy Bitcoin. In our discussion, Ray explained exactly how Purse's two sided marketplace works. We explored some of the ups and downs of Purse over their eight year journey. We discussed why Purse decided to integrate the Lightning network this year and why they're now considering focusing exclusively on building on Bitcoin. I've also added Ray to today's show splits. So if you enjoy this episode and if you learn something new, the best way you can support the show is by sending in sats. You can send a little if you learn a little, you can send a lot. If you learn a lot. Totally up to you. You can use any Podcasting 2.0 app, but my favorite one to use is Fountain. Just a quick message before we get into today's show. This show is sponsored by Voltage. Voltage is the industry standard and next generation provider of the Lightning Network infrastructure. Today's show is also sponsored by Stakwork. Stakwork is a Lightning powered platform that takes the best of AI’s and humans to generate better, faster, and less expensive transcripts. We'll have more from Stakwork and Voltage later in the show. Ray. Welcome to the conversation. Today I'm excited to chat about Purse and all the things you're building, especially this new Lightning integration. But before we get into it, why don't we start with your background in Bitcoin. Talk to me about how you got into the space, how you got involved, and then what led you to building on Purse.
Ray Marceau - 00:02:58:
Yeah, well, thanks for having me on the show, Kevin. I am a software engineer by trade. Got into crypto and Bitcoin back in 2016 and 17. I was mining, actually as like a side hobby, actually, primarily like mining Monero and Ethereum. And then in 2018, I joined Purse as their lead software engineer and was working for many years on the Purse platform itself and involved in our Bcoin implementations. In 2021, our former CEO Andrew asked me to step into the CEO role, and I accepted. And I've been running the company since late 2021 and focusing on the marketplace in particular. And we ended up open sourcing our Handshake, or not open sourcing, but like releasing our Handshake implementation that stemmed out of Bcoin into its own little project. And also our Bcoin project came out of the Purse Umbrella. And now we're focusing as per the company, focusing all of our efforts on the marketplace itself.
Kevin Rooke - 00:04:32:
Interesting. So talk to me about the transition from being on boarded as a software engineer to then taking over the reins of CEO. How did that all unfold over the last few years? And is this your first time in that CEO position?
Ray Marceau - 00:04:47:
Yeah, this is the first time I've actually held the title of a CEO. I've been involved in many startups as founding member and been involved in some of the roles of a CEO with my partners, but never actually held that title myself. It's been a lot of learning in the last year. I mean, I just started really taking over the whole company this last year and taking over all the other roles and responsibilities still involved pretty heavy into the development side of things, leading our development efforts. So, like with our Lightning implementation, I was still working as a developer, getting that launched with our development team, which was really fun. So I still get to stay in the technical things and also wrapping my head around, actually product and focus and capital and finances, which is just a lot of different roles, but it's been fun. It's a really cool thing to be responsible for this platform now as a whole.
Kevin Rooke - 00:06:02:
Yeah, and now I believe I was looking at Purse earlier, and I saw you guys were founded, I believe, in 2014. Can you talk about how the product vision has had to evolve over the last eight years? Because the people who were around in Bitcoin space in 2014, that's a different vibe, a different ethos, a different group of people in different use cases than we have today. So how have you managed to consistently evolve the product in the last eight years?
Ray Marceau - 00:06:35:
That's a great question. So Purse, as the marketplace goes, has been a utility company for Bitcoin since 2014. Our motto was making bitcoin useful. We kind of morphed into making crypto useful. And really, we were one of the first companies that allowed you to actually purchase things with Bitcoin. On a scale of Amazon.com, which for anyone who doesn't know Purse IO, we let you buy anything on Amazon using your bitcoin at a discount. And that discount can be anywhere from 5% to 33% off of anything on Amazon. I can go into sort of how that works in a bit. But yeah, there weren't many companies back in 2014 that allowed you to do something like that. Everybody was in the hodl mentality, like just acquire bitcoin or mine bitcoin, or all those different mentalities, and improving the protocol, but not necessarily spending it. And we were really trying to encourage people to spend their bitcoin. So that model actually had stayed and didn't really evolve much since 2014 to even today, we still have very much the same workflow and allowing users to spend their bitcoin that has stayed relatively consistent. And our users are long time we have a lot of long time users who have been part of our platform since 2014, 15, 16, and we can see that they're still power users and still chugging along. Interesting. What did happen was we used the Purse marketplace, like our core, front facing, consumer facing platform, as sort of the building blocks for these other implementations like Bcoin, which is a NodeJS implementation of the bitcoin protocol. We built that in house in order to scale our hot wallet system as an open source method to allow hot wallets to be scalable, as like a paradigm for anybody to do. So back then, all these other companies, exchanges, marketplaces and things like that, were building all their own proprietary hot wallet systems, and they were building it on Bitcoin Core. And it was all sort of like closed source, not sharing a lot of information, a lot of details. And what we tried to do is expand that into an open source model and allow people to build these hot wallet systems on our Bcoin implementation. So that came out of our marketplace just sort of as a need that we had. And we thought that all these other companies would have that same need to scale their hot wallet system. Right? Yeah. And then from that, Handshake, which is a distributed DNS system, came out of Bcoin. It's actually a fork of the Bcoin protocol or implementation, and now is a completely separate project. And so that came out of that as well. It was underneath the first Umbrella. What evolved really was building these really cool products and implementations on top of our core marketplace, which a lot of people don't really see when they go to our website. They don't see like, oh, like, Bcoin came out of this, or Handshake came out of this.
Kevin Rooke - 00:10:33:
Now the focus is like, building on this marketplace rather than Bcoin and Handshake. What was the thought process there for spinning those off or focusing more on the actual core marketplace?
Ray Marceau - 00:10:47:
Yeah, so back in 2020, I'm sure we could go into this later, but we had this sort of crossroads where the regulatory scene was getting a little intense. We weren't really sure how the sort of state of being a crypto company in this ecosystem as a US company was going to pan out. And we were facing these crossroads and not sure whether we should continue operations and either shut down, which is something we actually made. We made an announcement that, hey, we were going to shut down our platform. It doesn't make sense for us to continue operating just because we're of the uncertainty. And we had already decided to spin out the Bcoin and Handshake projects out from the person's Umbrella. And when we made that announcement, we had this uproar of community support, and everybody was reaching out saying, wait, you guys can't just shut down. This is a really viable product for on a global scale. We have users all over the world, and a lot of people depend on us, actually, for their livelihood. And we are having users write us these heartfelt messages and leaving us all these posts on Twitter and on Reddit. That's when I sort of decided, okay, let's actually try to double down. Let's focus on the marketplace. Let's see if we can scale and build out the marketplace to a point where we could see some really good traction and make it really profitable. And so that's sort of been the objective of the last year, was to try to do that. And I guess that's where what led us to today integrating Lightning has been something on our radar for years, and that was something that we thought, hey, let's just push it out to the platform, let's see what happens, let's see if our users really gain traction and sort of garner the Lightning community bitcoin Lightning and see what happens. Right? Yeah, that's sort of what we're feeling out today. We launched it a month ago, the Lightning implementation on Purse. And we've seen a lot of use, actually to give you a statistic, just in the last month, we've seen now 20% of our transactions on our bitcoin transactions are operating over Lightning, which is very cool, pretty good for just launching it. We didn't do a lot of marketing. We just said, hey, here it is, and now we have 20% of our use is operating over Lightning. I thought that was really cool. And it's actually growing every day I see it more and more.
Kevin Rooke - 00:13:53:
Yeah, okay. I to want make sure listeners have a full understanding before we dive into the specifics of Lightning and all the adoption metrics and stuff like that. There's two sides to this marketplace, as I understand it. The one side being if you have Bitcoin, you can buy things on Amazon. And get a discount. And the other side being if you have Amazon gift cards, you can sell those for bitcoin. Is that correct?
Ray Marceau - 00:14:22:
Yeah, sort of more so exchange them for crypto, I guess that's the term. So the earners can exchange their gift cards in exchange for crypto.
Kevin Rooke - 00:14:37:
Okay. And they're getting a little bit of a they're losing a bit on the face value of that gift card, correct? Right.
Ray Marceau - 00:14:43:
So that's sort of like the exchange fee in a way you can think of. Let's go into that. So on the shopper side, they're just regular users, consumers or power shoppers or dropshippers who have crypto, bitcoin and they can spend it on our platform. And what they do is they create an order for an Amazon item or a couple of items and they set a discount. And that discount can be anywhere from 5% to 33%. There's a sliding scale. And what they're doing is it's sort of gamified. So they're looking for the maximum discount to time ratio that they're satisfied with. So obviously a 5% discount or 10% discount is going to be picked up really quick and they're going to get their order fulfilled quicker. Or if they pick a 33% discount, if it's somebody that says, I don't care when I get this, I just want the 33% discount, they choose a large discount. And then when that order finally gets picked up, they would obviously make a lot more savings in return. So that's sort of like our shoppers on the earnings side. Now we have earners who, like you said, they have Amazon Gift cards. They either earn them through some sort of online platform where that pays out Amazon gift cards or they've done some sort of arbitrage using other platforms like Bitrefill or Paxful and all these different ways to acquire gift cards. And what they do is they go in, they look at the order book of all the orders that shoppers have created. They pick an order that is a good discount and price range that they want to purchase. And so they go and it tells them all the items that they need to purchase. We create a wish list for it, an Amazon wishlist. They add all the items to the cart, purchase it to that address, which the address is confidential. They don't actually see the address because it's all built within our system as like the private confidential wishlist address. So they just go and add the items for that wish list, purchase it, it sends it to that wish list address once it's fulfilled, meaning once it's shipped to the shopper, then we release that bitcoin to the earner and then they withdraw it from our platform.
Kevin Rooke - 00:17:29:
The idea of an Amazon Gift Card as the tool that allows this marketplace to function on the surface, I wouldn't think, like, Amazon Gift Cards are this big business where there's a lot of people buying and selling them. Do you have any insight into like how I know you mentioned you can possibly acquire them through Bitrefill and things like that. But any other insight into the ways in which people are getting these gift cards and then the person with the gift card is losing a small amount of the face value of it. What's their reason for giving up 5% or 10% of that gift card value rather than just spending the full amount themselves?
Ray Marceau - 00:18:14:
Yeah, totally the way that our earners acquire the gift cards is there's a ton of ways and we actually don't know all the ways that they acquire gift cards. One of the themes that we've seen is users from other countries who actually make their living by doing some sort of Internet task, say, like in South America or in Africa or in Asia, they're actually doing online tasks and they earn money through Amazon gift cards. They don't actually get paid in their local currency, so they're not actually even able to cash these out or liquidate them because then Amazon doesn't even ship to some of these countries. So we have these workers who are doing these tasks, they're getting paid in Amazon gift cards, and then they go and liquidate them through our platform. It's actually their livelihood to do this. And so they're satisfying these orders by liquidating their Amazon gift cards for crypto and then exchanging it for their currency in their country, which is something that we've seen. And we were very impressed when we saw the amount of people that were actually doing that. And actually when we went to go, when we made that shutdown announcement back in 2020, we saw the need for this as a global product. And we just felt, yeah, we couldn't really shut the platform down unless we really had a solid reason to do it. And at the moment, we do have a good runway. And being in the crypto scene for so long, we've had bitcoin that we've sat on and it appreciated a value. So we got fortunate there and lucky. The marketplace itself has been moderately profitable, but it hasn't really taken off on the scale that we need it to in order to become more profitable. So, yeah, that's kind of what we're focusing on now.
Kevin Rooke - 00:20:29:
Right, tell me more about that strategy to then take that marketplace to the next level. How do you scale it up from here where you got a baseline level of some profitability? You clearly have product market fit from some subset of users. How do you broaden your horizons and reach out to everyone now?
Ray Marceau - 00:20:47:
Yeah, these are good questions. That's sort of things we're exploring now. One of the things that we'd love to get into, which might not even be a profitability thing, but would more so be sort of usability regulatory benefits, is to become a non custodial escrow system. So right now we're custodial. We have the shoppers deposit their bitcoin into our hot wallet system and we automate the release of this escrow to the earners when the order is fulfilled. It's completely automated system. We don't actually make manual withdrawals or deposits. Everything's automated. But what we don't like is that we have to hold that bitcoin for the duration of that order. And ideally, in a perfect world, that would be completely noncustodial. So they would deposit their bitcoin in such a way that the bitcoin would be released via some smart contract or over Lightning or something that we're exploring to release the bitcoin without ever touching it. So we don't have the keys. We're just sort of the arbiters of the situation of the Escrow. So now if there was a dispute, we could step in and resolve dispute whether in favor of the earner or the shopper, but we wouldn't actually be able to touch that bitcoin at all. That's something that we're exploring. We'd love to go down that route, and that's sort of when our key focus is. But as far as profitability goes, that's not really going to increase our profitability. That's just going to make our platform better and more usable and fit into this regulatory space a little bit better.
Kevin Rooke - 00:22:49:
Is it going to unlock any other potential use cases too, like having this non custodial Escrow system? Are you thinking about, like, applying that to something broader than just the marketplace you have today?
Ray Marceau - 00:23:10:
We have some ideas, definitely. When the NFT Craze took off, I had some ideas about that. We sort of dropped those ideas just momentarily, I suppose. The energy space is seeing a lot of sort of downturn, and we're not quite sure we want to enter that market. But, yeah, there are a lot of ideas surrounding that, which direction we go in. We're still sort of feeling it out. We need to get to that point of a noncustodial platform before we can really branch onto those markets. But, yeah, those are ideas and discussions are definitely circulating.
Kevin Rooke - 00:23:54:
Fair enough. Okay, so let's dive into the Lightning integration specifically, I believe. Yeah. June of this year, you guys announced that you were going to launch on Lightning Network. You're going to integrate. Can you talk to me about the lead up to that and how this process unfolded and some of the challenges along the way in getting this integration live from idea to launch?
Ray Marceau - 00:24:21:
Yeah. Okay. So Lightning integration has been a feature request pretty much since the inception of Lightning. We had people posting on our platform like, hey, when Lightning, when Lightning. When do you guys get to do this? The product or I guess the implementation? The Lightning Network was very infant in those early stages. Obviously, there was a lot of uncertainty about potential security concerns, draining hot wallets or losing crypto or losing your entire node. There was a lot of concern over it, and we were hesitant at first to really dive into it. We weren't really at the stage where we were ready to risk our assets and especially our user assets. So we sort of followed it for a while, and then when we saw it maturing enough, we made an announcement a couple of years ago saying, yes, it's on our radar, and then things happen, priorities shift, and we had to sort of deprioritize it for a bit. But then it was really the introduction of Lightning into all these other exchanges. Like Kraken and Bitrefill, and all these companies started integrating it just in the last year, really, it's been exploding. And that's when we really saw, like, okay, cool, now we can actually make this implementation, and it'll be interoperable with these other exchanges, which is really what we need to be doing. Like, the interoperability between exchanges and other marketplaces is really where Lightning shines. It doesn't really work too well when it's just like a consumer wallet and then you got like, one or two exchanges working or actually implementing the Lightning network. It's really when everybody has a Lightning integration, when it's really going to shine, and that's really happening. It's starting to really take off right now. This year, it's just been exploding. And so we saw that opportunity and we said, this is a great time to actually make this implementation happen. So, yeah, we just basically doubled down and went for it.
Kevin Rooke - 00:27:00:
If you think about some of the reasons why Lightning adoption has taken off, you mentioned in the last year, I think a lot of people have opened their eyes, including myself, to Lightning and been like, whoa, this is happening. There's actual activity happening here, and there's a lot more potential use cases being released, it seems like every day now. What's your reasoning or your thought process on why this happened now in just the last year? Why didn't it happen in 2018, 2019, 2020.
Ray Marceau - 00:27:35:
The implementation itself, I think, needed to go through a couple more development cycles. There were quite a few bugs that needed to get resolved particularly, so we chose the LND implementation over the other implementations, sort of, because we do actually have friends at Lightning Labs, and they opened up a clear channel of communication with us and really helped us through. But there were some bugs and sort of features that needed to get worked out in their implementation before we felt ready to actually make the development efforts. It was a six month push, really, to get it deployed, which was a pretty good development effort on our end. And so, yeah, it didn't make sense until we thought that the implementation was ready. And yeah, I think now it's amazing, actually, to be honest, I was a little skeptical of Lightning in general. I had some hesitancy about usability, and the platform in itself, at first, was very difficult to use. There's a lot of complexities that people have to wrap their minds around regarding liquidity and how do I actually receive Lightning if I open up a new wallet and I fund the wallet, well, then your inbound liquidity is zero. Like you can't receive until you actually spend that Lightning. So there's this whole liquidity thing that our consumer users had to understand. And what was really nice is all these wallet implementations who built this unified, like Muun Wallet and Bitfinex, this unified system where you can deposit your bitcoin and spend it as Lightning or Bitcoin or receive it. That sort of mentality. And they're doing all this sort of exchanges for you on chain to off chain and whatnot. So that really opened the door for our consumers going back to what we actually do. We're a marketplace for consumers. We're not really like B2B. We're not doing business with other businesses per se. So it's really like when our consumers are ready for Lightning, that's when we thought we were ready, and our consumers started growing more and more in the need for Lightning. So we said, yeah, this is a natural progression.
Kevin Rooke - 00:30:20:
Yeah. Was there anything you had to do in the process of onboarding these users to Lightning in terms of education and just helping them get an understand how it works? Or did they proactively already aware of how Lightning worked and they just jumped right in? Yeah.
Ray Marceau - 00:30:37:
We're under the assumption that the users who are operating on Purse over the Lightning Network are already Lightning users. So those 20% that statistic I gave you of 20% of the transactions in the last month we're operating over Lightning, I think the minute we deployed it, they were just like, okay, withdraw it to my Lightning wallet. Stop withdrawing to my Bitcoin wallet, or vice versa depositing from Lightning. So I believe we didn't need to do any educating. That being said, we obviously created support documents and how to send when you go to the withdrawal page on Purse, there's a little like Learn more link that obviously is going to educate users about what that new feature is. But I don't think our users are moving to Lightning just because we are. I think they were already Lightning users.
Kevin Rooke - 00:31:41:
Right. And for them, do you think the biggest use cases here are, like when we split it up between Instant Settlement and the potential for lower fees? What do you think users are? Or maybe a more private solution? Like, what are users really gravitating towards? Why are they deciding, I'm going to move to Lightning now?
Ray Marceau - 00:32:03:
I think it's all of them. It's all the above privacy. You got the Instant Settlement and you have the lower fees. Really, it's all those reasons that they're compelled to use Lightning. So some of our users are arbitrage users. They have low margins, but they see an opportunity to exchange a gift card for then crypto and then buy another gift card, come back to Purse, spend that gift card, earn crypto, and they do this arbitrage cycle. Now, Instant Settlement means that they can operate way faster in this sort of arbitrary scenario, even though the Purse part of it is actually pretty drawn out. You purchase the item, you have to wait for it to be delivered. It could be days before you receive your crypto. But still, there is this arbitrage capability, and our users are constantly looking for these opportunities and figuring out ways to cash out on it. And so we definitely a large part of our volume actually is arbitrage between different platforms and trying to find ways to reap profits in those sorts of ways. So, yeah, I think the instant settlement there is very helpful. And then the low fees, or no fees, really. So operating between Purse and bit refill, for instance, is free. You can go to there for free, so you can go between them without any fees. So deposit or withdrawals, then you can taxpay or to crack in if you're trying to exchange it for a different coin or a currency to go back into your local currency, like if you're from another country. Yeah, I think the instance element and the low fees there, it's just a no brainer and our users are stoked about that.
Kevin Rooke - 00:34:09:
How do you get the next 80% onto Lightning?
Ray Marceau - 00:34:14:
A lot of our bigger volume users or power users have automated systems on top of Purse. They use our API. They've built these pretty ingrained systems for creating orders, funding the orders, fulfilling the orders. And those users, I think, are going to take a little bit of time to redo their systems so that they're operating on Lightning and not on the on chain bitcoin protocol. So we do think that there's going to be sort of a longer drawn out migration of those users, but I think that they are looking into it and ready to implement it. It's just we're so new, we literally launched it last month and I think they might also be sort of feeling it out, being like, is it risky? Is there a hot wall that could be trained? I feel like everybody has those questions and that's good. Everybody should be asking those questions because we are a custodial service, but we've been operating since 2014 without a hitch. So, I mean, that says something about our company and our security protocols and what we do to try to protect our assets.
Kevin Rooke - 00:35:33:
I hope you're enjoying the show so far.
Kevin Rooke - 00:35:35:
I just want to give a quick shout out to our sponsor, Voltage. Voltage is the industry standard for Lightning Network infrastructure, creating layer two applications and services on top of bitcoin starts with Voltage, where you can spin up nodes, get access to liquidity, optimize your node and much more. Voltage is leading the way as the next generation provider of Lightning Network infrastructure. And if you want to get a free trial and start using Voltage today, you can do so at Voltage Cloud. Now, are there any metrics you're going to be looking towards as we move forward? Now, you've had this integration live for about a month. Any North Star metrics that will tell you whether or not users like Lightning or whether or not Lightning as an ecosystem is growing at the rate you expect it to? Like, what is your metric that you're kind of like? Or are there metrics that you're looking for to gauge progress?
Ray Marceau - 00:36:33:
The biggest metric that we are looking at now is the percentage of transactions operating via on chain, Lightning or bitcoin cash and where those trends sort of flow is really what we're looking out for. And then also just asking our users. We have some feedback forms that we've been handing out to some of our users who are beta users. And we went through a few weeks of beta testing with some of our top users and asking them, hey, how was your experience? Is this the implementation that you expected from Purse and what you were envisioning and getting some feedback in there? And then in general, just all of our social media Reddit, Twitter, asking our users to give us feedback. We also have a discord that our user base is very active on. They are constantly sending us updates and kudos or like, hey, we need this feature. This is crippling our operations kind of thing. And then we would go and assess it. And so when it came to Lightning and when we launched it, we had a lot of feedback there, which was really insightful for us.
Kevin Rooke - 00:38:02:
Yeah, you mentioned bitcoin cash. And I know this is going to be like a hot topic for a number of people listening. You support bitcoin on chain, you support Lightning and you support bitcoin cash. Why those three? Let's start there.
Ray Marceau - 00:38:20:
Well, when we launched, it was really just bitcoin. I said earlier in this conversation that our business model for the marketplace itself hasn't really changed that much and our utility in it has really stayed pretty consistent. And so bitcoin was all there really was. And so that's what we supported. We're an old company, we've been around the block. But back when the bitcoin cash fork occurred, 2017, that was really a controversial time. A lot of people didn't know what to expect or what to do with the bitcoin and the bitcoin cash that was going to end up in their wallets. So some exchanges, they either told their users, you better cash out or you're going to lose your bitcoin cash, like cash out before the fork. And they actually took their users bitcoin cash. And for all the users who didn't actually withdraw, they just said, okay, we're going to keep that as company funds. We're not going to support bitcoin cash. And then there's other companies who supported it by allowing them to withdraw their bitcoin cash after the Ford, but then they didn't support it after that. And then you had the companies who integrated bitcoin cash as a wallet system and said, okay, we're going to deposit your bitcoin cash after the fork into your wallet and you can do whatever you want with it, spend it, withdraw it, do whatever. And we chose that option because we thought we wanted them to spend it. We thought, hey, why not support bitcoin cash after the fork? We had a lot of bitcoin in our system. Our users were not withdrawing their bitcoin before the fork. And we were like, please withdraw your bitcoin. You're going to get bitcoin cash if you just withdraw it from our platform. And they kept it in our platform. So we were like, okay, well, why don't they just spend it? We'll earn our fee that we charge and they could spend it. And it's like free money, right? So that's the kind of route we chose. And in the end, it was a great route. Our users were able to spend their bitcoin cash after the fork. And then we saw a small community of users who were die hard bitcoin cash users who were like, I'm going to use Purse because we support bitcoin cash. And obviously a company is not going to just not support it if they're getting users from it. So honestly, it can be controversial, especially in the bitcoin community, the bitcoin maxi community that's like, oh, you support bitcoin cash. I don't even want to use you because, you know, they can have it that way. They don't need to use us if they don't want. But we are the bitcoin utility company that lets you spend that bitcoin for amazon products. There's not another company that does that quite as well as us. Yeah, they could be stubborn or they could just use our platform.
Kevin Rooke - 00:41:52:
What was the leading reason for this? You mentioned, like, a small subset of hardcore bitcoin cash users. What was that reason? Like, what were they using bitcoin cash for? Was this like some philosophical reason, some fee reason? What was the mentality there?
Ray Marceau - 00:42:11:
Well, yeah, I think at first it was the philosophical reasons. Like, the debates were huge and people formed sides and it was like, I am not going to use bitcoin or I am not going to use bitcoin cash. Just out of philosophical reasons on which protocols they thought they wanted to see succeed. At this point, bitcoin during the run up the bull markets, the fees became pretty exorbitant to the point where it didn't really make sense to operate over bitcoin. During some periods, the fees were just huge. And I think a lot of those users who had low margins already, who were operating because they were trying to make as much money as possible, realized, hey, I could just withdraw or operate over bitcoin cash. My transaction fees are going to be less, so it makes sense to use bitcoin cash. They didn't really care either way whether it was bitcoin or bitcoin cash. They didn't have a philosophical sort of reasoning for using either or. They were just looking for the best bang for their buck. Those users, I think, operated over whichever protocol earned them the best rates. Every user has their own sort of story and it's really hard to satisfy everybody's story, but really just supporting everything or supporting as much as we can, we felt like it was the best approach. That's kind of where we were. Now we still support bitcoin cash and we're going to monitor how our users move between bitcoin cash and Lightning and maybe reassess that in the next quarter or in 2023, and whether it makes sense for us to continue supporting bitcoin cash. If the fees are so low in Lightning, it's lower than bitcoin cash, it doesn't make sense to use bitcoin cash for those users. So they're going to move to Lightning, obviously, yes.
Kevin Rooke - 00:44:30:
Have you noticed a change in the perspective of that subset of bitcoin cash users where there were a lot of debates in 2017, 2018, those seemed to have died off a little bit. And the market is clearly has priced these two assets differently. And lightning's kind of adoption curve has picked up a lot. Has the mentality shifted in that hardcore kind of bitcoin cash group? I guess.
Ray Marceau - 00:45:05:
Yeah, hard to say. We haven't really interviewed that community too much about their philosophies or thought process there. It is such a small part of our volume, though. I mean, bitcoin is the largest part of our volume. It makes up almost all of it. We haven't really looked into that too much. We're just sort of follow the trend and see how things shift. Right now, in our platform, we have a pretty interesting interoperability between bitcoin and bitcoin cash, meaning I'll try to explain it. So when our shoppers create an order and they fund their order with bitcoin, an earner can pick up that order and receive either bitcoin or bitcoin cash, even though the shopper funded it with one or the other. And so we have a swap mechanism that will actually swap the currency at the exchange rate when they pick up the order. So when the earner accepts that order on the order book, we lock in an exchange rate and say, okay, this is the swap that is going to happen when you fulfill this order. We actually created this interoperability so that the users who wanted to operate in bitcoin cash could still pick up any order for bitcoin and cash it out as bitcoin cash. This like mechanism, though, is actually quite complex and there's some sort of market conditions that we have to look out for and then sometimes it can be very not profitable. We can actually lose money in this swap and then other times we can gain money. But I'll tell you, historically, it hasn't been in our favor. And so that mechanism itself, we would love to get rid of it. I'm going to put that out there now. It would be in our best interest to drop bitcoin cash. Interesting. So having Lightning in place and seeing how our users move is going to play a big role into what features are available on our platform moving forward. So I'll just say that fair enough.
Kevin Rooke - 00:47:35:
Do you think having that focus of being just bitcoin and just maybe bitcoin and Lightning? I think a lot of people in the community recognize bitcoin as this, like, foundational layer that's a very strong foundation to build on and something that you can kind of depend on and something that, you know, you don't have to keep refactoring and keep building new additions and new features for your platform to continue operating. Do you think that idea will help Purse innovate faster and grow the platform? If you can just focus on this one platform and you're not building on multiple systems, you're just using one. And is that going to align incentives, align people at first to build faster, or is that more of a narrative. That doesn't have much substance to it?
Ray Marceau - 00:48:32:
I think I understood you correctly. I'll repeat the question. Just let me know if I got that right. But basically saying, why don't we support other coins, bitcoin?
Kevin Rooke - 00:48:47:
I think that's where a lot of the conversation comes from. It's like, if I supported ten different coins, I may be distracted in ten different directions and I have to all of a sudden make updates ten different times and I have to monitor the interactions between those different currencies. Whereas if I'm just on bitcoin, I can focus. I know bitcoin is stable. It's the foundation that's not going to change where we've seen changes to other protocols recently. I just know that it's stable and I can build I have a long runway there.
Ray Marceau - 00:49:21:
Yeah, you are dead on. I mean, we don't have the bandwidth to really focus on supporting ten or 100 coins and having ten different swap mechanisms on our order book and having to maintain ten wallets, even just maintaining bitcoin cash. They have softforks every six months and we have to then upgrade our wallet system, which I'll go into it. Our hot wallet is built on top of bitcoin, the bitcoin protocol for bitcoin cash. We forked bitcoin or NodeJS implementation into a b cash implementation, and we have to maintain that in order to operate with all of these bitcoin cash forks. It's a pain. It takes a lot of development effort just to support bitcoin cash. So for us to have to support ten coins just doesn't make any sense. And it really doesn't make sense because we're a utility company letting you spend your bitcoin. There are so many companies exchanges and swaps, like fixed float. You can exchange whatever coin you want for bitcoin over Lightning and deposit that directly into your Purse wallet to spend it, or vice versa. As an earner, you could withdraw your bitcoin Lightning into fixed float and it'll pay you out in whatever coin you want. So we don't need to focus on those capabilities if they already exist in the ecosystem. It's not really what we're trying to build. We're trying to build flat out the utility product to spend your bitcoin.
Kevin Rooke - 00:51:17:
Yeah. Now it seems like in the last year there's been a number of other platforms on Lightning that are now allowing you to spend bitcoin to earn bitcoin. There's a lot of different experimentation going on in that space. Are there any products or ideas you're most excited about that we have things like value for value. We have mobile games where you can earn bitcoin. There's micro tasks, there's all sorts of different stuff going on. What has caught your attention lately?
Ray Marceau - 00:51:52:
Just in the Lightning ecosystem.
Kevin Rooke - 00:51:55:
Yeah. In the ability to kind of like spend or earn bitcoin and kind of have that utility aspect you described.
Ray Marceau - 00:52:03:
I mean, there's a ton of development in this space right now. It's pretty cool to see everything popping up in this sort of realm just in the last year. And maybe it's just because in the last year I've been heads down in Lightning that I've been seeing it, but I really feel like it's picking up a lot. But I think what's really amazing just it might sound lame, but just creating the tooling necessary for consumers to operate over Lightning seamlessly, they don't have to worry about the liquidity issues. They don't have to worry about securing their Node or securing their devices, or even just how Lightning works. They can just get a Lightning wallet and spend Lightning. I think that is amazing. And the tooling that existed prior to a year ago wasn't really geared for consumers. It was geared for techies and people who actually understood the protocol and understood liquidity. That's not going to fly with the general public. And I think the companies who are developing the tooling necessary for end users to work in Lightning, those are the coolest implementations happening now. I'm not a gamer, I'm not really into the gaming, so I don't really know what's going on in that space. But obviously there's some really cool stuff with tipping and games, purchasing assets and games and things like that that are really cool. Those are just not what I'm focusing on now. It's really just like consumers how to get consumers into Lightning and how can they spend it seamlessly and securely.
Kevin Rooke - 00:53:57:
Yeah. Are there any particular tools in this infrastructure side that you're using or you're really excited about or impressed with?
Ray Marceau - 00:54:05:
With the consumer and tools?
Kevin Rooke - 00:54:07:
Yeah. Anything that makes it easier for that consumer to get onto Lightning.
Ray Marceau - 00:54:11:
I think it's just really the wallet systems and the exchange systems. I'm not going to call out any in particular. I think there's a lot of players in this space that are doing this. Are there any features that you'd like.
Kevin Rooke - 00:54:26:
To see them add?
Ray Marceau - 00:54:29:
To see them add?
Kevin Rooke - 00:54:31:
Yeah. Anything that you still think we need to work on this? It's not quite ready yet and we'd benefit if it was ten times better.
Ray Marceau - 00:54:40:
Yeah, I mean, at this point now, the fees for these unified wallet systems like on Muun Wallet and such are still a little bit too high. They need to instantly open channels and they have all their pretty cool proprietary systems for being able to operate like that, but I think the fees need to still come down lower. It needs to be like practically free for that user who only operates over Venmo or whatever to say, oh, well, I'm not going to use them. I'll use my Lightning wallet because I actually hold all of it on my device. I'm not giving it to Venmo or giving it to somebody else. And also the privacy concerns there, and privacy is a topic that is gaining more and more traction. And I think a lot of people are being more turned on to the fact that they can operate privately over Lightning or soon to be operating privately. There's still some concerns over privacy, but those sort of holes are being patched, and there's a lot of really cool code coming out that can increase the privacy in operating overlaying. So that kind of stuff is really fascinating. I think that's the focus with a lot of these new additions to the Bitcoin protocol, I mean, Taproot support and music too, like these technologies that are being implemented. And the tooling on top of those is fascinating. It's really going to make private transactions a thing. So we're really close to getting that. And I think it's only a matter of time before we I mean, within the year that we can have ultra secure transactions over Lightning.
Kevin Rooke - 00:56:42:
Now, I have to say, I'm not up to speed on privacy. It's not my forte. But I'm curious about it and definitely seeing a shift towards people respecting privacy more and recognizing its importance. I guess one thing that is top of mind for me.
Kevin Rooke - 00:57:00:
Is there a threshold at which we need to reach for Lightning to be considered private for all. Imagine there's no bulletproof private system, right? There's no system that's perfectly private for everyone, no matter what you do. But we can get closer to that. And I guess how close do we have to get before it's essentially like it's a useless task for someone to try and pick the pieces apart and figure out who made which transaction. It just becomes too big of a task to try and decipher all that.
Ray Marceau - 00:57:39:
Yeah, the fields of privacy and in the field of forensics with companies like Cyber, Trace and Elliptic who are blockchain forensics companies, analyzing transactions and analyzing transactions over Lightning, those two fields kind of grow together as they should. We do need forensics, and we do need analytics and blockchain to prevent money laundering and to prevent fraud on payment ecosystems. So there is a huge need for that. But there's also a huge need for end users and consumers to be able to transact in privacy without anybody being able to trace them. If you transact with somebody in a large quantity and maybe like a bad actor can trace you to your IP address and your location and where you are, you can be targeted. Yeah, I think that privacy should be on the top of mind. For a lot of users, especially users who operate over crypto networks, privacy can be a huge concern, especially if you're a person of high net worth in the privacy realm. We need those privacy tooling, and we also need the forensics and capabilities of government agencies and exchanges to know where their money is coming from and that it's not coming from black market or things like that. On both sides, it really needs some advancement and improvements, and I think it's coming really close.
Kevin Rooke - 00:59:41:
Okay, so now, in the last year you've transitioned to CEO. I want to hear some of the lessons you've learned in that process of as a builder going to the CEO role, anything you can pass on to other builders in the Lightning space, any lessons you've learned in the last year?
Ray Marceau - 01:00:04:
Yeah, there's a lot of things to think about as a CEO that I never really thought I needed to wrap my head around. Lessons being delegating tasks is a really good lesson, like how to delegate, how to sort of decrease your workload so that you could focus on other areas. That was a big hurdle of mine. I think that's one of the bigger lessons is how to delegate efficiently and properly and use the full capacity of your team. That's something I'm trying to wrap my head around. And, yeah, it wasn't really top of mind as a lead developer, when you're focusing on the entire company as a whole, the financial aspects, the marketing aspects, the development aspects, there's a lot of pieces, a lot of moving pieces. And so, yeah, it's a lot to juggle. You definitely need the support of your team and then, yeah, I guess the financial aspects. Really, as a developer, you really don't want to look into the finances of a company. And so, yeah, that's definitely been a big learning curve and hurdles to kind of take over. Luckily, we have a great accounting team with coinsolve. It's been really great.
Kevin Rooke - 01:01:49:
Nice. Also, I want to touch on the fact that you've been around for eight years means you've gone through a lot of ups and downs in the industry. And having made it consistently through the last eight years, what are some of those lessons for people who are building in the space, trying to be more resilient? How do you manage to keep a company alive for straight years in a very Nissan industry? Like, it's just something that is not very stable yet. At least in 2014, it was not. We're seeing a bit more stability now. But what was your framework you're using here at Purse to make sure the company stays alive at all times?
Ray Marceau - 01:02:35:
Well, staying alive obviously means you need to have capital to pay your employees. Fortunately for us, bitcoin has always been going up in the larger scheme of things. So as an early company, that played a big role into how we could continue operating over the years. And then making it through some of these downturns wasn't necessarily a problem because with every downturn, they're short lived in the grand scheme of things. So, yeah, we could just power through them, develop and improve our functionality during those bear markets. And then during the bull markets, we would take off. But actually, to speak more on that, it was actually bear markets where we've seen larger volume increases within our platform. So, yeah, we were actually fortunate there as well. During bear markets, we had more users transacted over Purse. Interesting.
Kevin Rooke - 01:03:53:
So that's more people than selling their bitcoin.
Ray Marceau - 01:03:59:
Both yeah. Earners picking up orders and shoppers selling it or not selling it, but just like spending it.
Kevin Rooke - 01:04:08:
Right. Do you think that's primarily just a function of the price of having it gone down, people are more willing to let it go? Is that the idea?
Ray Marceau - 01:04:18:
So hard to say. I wish we knew. We should just make assumptions on it. When we would see that sort of trend, we're like, oh, wow, okay, cool.
Kevin Rooke - 01:04:31:
Yeah, I see. So it's kind of a bit of a countercyclical trend. Your business, right, like an exchange business, might actually be cyclical, where when prices go up, a lot of people are flipping things and selling assets and buying others, and then when it comes down, they're really down. And you guys have you're maybe more resilient because you can dampen those curves a little bit. Sound the idea?
Ray Marceau - 01:04:58:
Yeah, that's sort of what we've seen.
Kevin Rooke - 01:05:01:
Very cool. All right, I want to finish this off with one last segment I do at the end of every show called The Lightning Round. Are you ready for the Lightning round?
Ray Marceau - 01:05:11:
Kevin Rooke - 01:05:12:
I hope you're enjoying the show so far. I just want to give a quick shout out to our sponsor, Stakwork. Stakwork is a Lightning powered platform that generates high quality transcripts from all of your audio or video content. They combine AI engines and hundreds of human workers all over the world who are paid over the Lightning Network to assemble these transcripts. And that's what lets Stakwork create better, faster, and less expensive transcripts than anyone else. I've used Stakwork to transcribe all of my episodes on my personal website. You can check that out. I just get the Stakwork file, copy, paste and go. No additional editing required. If you want to learn more about Stakwork, you can visit Stakwork.com. That is stakwork.com.
Kevin Rooke - 01:06:03:
Is there any book that has meaningfully changed your view of the world?
Ray Marceau - 01:06:11:
Any book that has changed a lot of books. Let's get that one for now.
Kevin Rooke - 01:06:27:
Okay, if you could only hold one asset for the next ten years and it couldn't be Bitcoin, which asset would it be?
Ray Marceau - 01:06:38:
Well, I'm a privacy geek, so I really love Monero.
Kevin Rooke - 01:06:42:
Okay, fair enough. In the next ten years, if you fast forward to 2030, how many bitcoin will be on the Lightning network?
Ray Marceau - 01:06:57:
Right on the Lightning Network. Let's $250,000.
Kevin Rooke - 01:07:12:
I like that. It's a good prediction.
Ray Marceau - 01:07:14:
Pretty low number, but I think it's like transaction volume.
Kevin Rooke - 01:07:19:
Transaction volume grows, and if the velocity of money goes faster than you can get more volume out of less money.
Ray Marceau - 01:07:27:
No. Just like Lightning Network is only going to be used for transacting bitcoin. The majority of the bitcoin is going to be in vaults and in cold storage, and then your transaction volume is really just how many people are spending it.
Kevin Rooke - 01:07:45:
Right. But I guess if the amount or the velocity of the money can also increase, that could be a force to lower the amount of bitcoin you have to hold on a Lightning Network. I guess if wallets are more seamless, if liquidity issues are solved, but interesting. I'll take that 250k. If you could change one thing about Bitcoin, what would you change?
Ray Marceau - 01:08:19:
Change one thing? That's a hard one. Oh, man. I don't know. It's already getting all the things I've already been sort of seen into it. I don't know. Pass.
Kevin Rooke - 01:08:50:
Okay. Is there anyone in the industry that you look up to, admire the work they've done? Anyone in particular that you want to give a shout out to?
Ray Marceau - 01:09:03:
I really think that the guys at LND, just because they're top of mind right now, are amazing, and they're doing some great work. I think Alex Bosworth was a huge asset in our implementation. It was great to connect with him and talk over our implementation and get his feedback. So, yeah, I think he's been instrumental in recent times.
Kevin Rooke - 01:09:32:
Awesome. All right, where can listeners go to learn more about you and Purse?
Ray Marceau - 01:09:39:
Well, we have a lot of outlets. You can check our Discord, our Twitter, Reddit, post questions there, leave us feedback, and then check out our platform. Purse IO is the website, and if you click how it works on the top, you can see sort of some of the stuff that we were discussing earlier and kind of get more of a fine grained detail about how the whole system works as a whole.
Kevin Rooke - 01:10:13:
Awesome. Thanks so much for taking the time today, and I hope we can do it again soon.
Ray Marceau - 01:10:17:
Sweet. Thanks, Kevin.