Do Bitcoin and Crypto Have Purpose Beyond Investment? (w/ Maxine Ryan)
MAXINE RYAN: My name is Maxine. And I'm the co-founder of Spark. And we are here at World Crypto Con to talk about Spark and what we've been doing in this cryptocurrency industry. Now, Spark is a ecosystem for money transfers. And essentially, we use stablecoins to facilitate bank list transactions across borders, mostly in Asia and Africa. I first heard about it in 2014. And essentially, my housemate at that time, who is now my business partner and co-founder, was mining Bitcoin. So it started this conversation about what is Bitcoin and all this type of stuff. And I thought that it was really interesting in terms of the application for payments. And then basically, that's kind of where it all started. So essentially, it's like any other kind of startup story that you hear. Two people come together. They have an idea. And we were thinking, were we going to start this company in Australia? And when we're talking about payments, you really have to kind of think about what type of payments that you want to be servicing. So for us, we really saw that the unique proposition of cryptocurrency or Bitcoin at that time was for people who don't have bank accounts. And essentially, coming from Hong Kong myself, I knew that there was a market for remittances there, especially for the Filipino and Indonesian market, which is predominantly what we target now. People have to understand when it comes to money transfers-- and you're dealing with microtransactions that are pretty much in the $200 frame USD-- these people tend to be paid in cash. And they're using something like Western Union. Now, when they're using Western Union-- and the reason why they're using Western Union is because they can pay cash and get it cashed out on the other end. And why aren't they using bank accounts? Well, first of all, they don't have bank accounts. And second of all, you know when you're paying a SWIFT payment, you have to pay $20 for a transaction fee. So it's not very viable if you're paying a $200 transaction. So when we saw this, we were going, OK. Let's compare the rates of Western Union and what this kind of demographic has to pay. And it's still a lot of money. It's not $20, but it's enough for it to make a difference, I think, if it wasn't that expensive. So that made us think, OK, well, sending with cryptocurrency is really fascinating. But how do we make it tangible for our actual customers? We know that cash is extremely important to them. They don't know how to use crypto. A lot of the time they're not going to have a wallet for that either. So we thought, OK, cash in and cash out. That's extremely important. So when I say that we have an ecosystem now, what that means is that we facilitate cash going into cryptocurrency and then cash also going out in the most traditional sense, where the customer really does not have to understand anything about the technology whatsoever. So essentially, how it started was we needed to find real users to understand how they would be doing a transaction. Now, in Hong Kong, there is a place called Worldwide House. And that's the first place that we ever started to do our first test run of using Bitcoin to send money overseas. Now, what people have to understand about Worldwide House is that it's the epicenter of places for people to send money using cash. And what we realized was that they only cared about two things. And that was the rate and also the cash out locations that they have. Now, what we then did was we reflected the rate that they understood, which was the FX rate instead of the Bitcoin rate. And then from there, we just start taking their orders for remittances. And we were cashing it out on the other end. Basically, what we wanted to focus on is creating the on-ramp for customers. And at that time, we actually found a company to partner with that would essentially buy and sell our cryptocurrency. So essentially, we would send Bitcoin. They would then be able to pay peso for that and then also be able to cash it out as well. So essentially, we decided that we really need to have an end-to-end service for customers. And basically, that's how we started to build the company. We absolutely need cryptocurrency for the type of business that we're building because what we're doing is that we're building a completely alternative financial service that is outside of banks. What's happening with the banking industry at the moment is that they are de-risking customers. So they're taking bank accounts away from people. And if you don't have a bank account in this day and age, then it's very hard for you to transact. So what that means is that you have businesses and you also have individuals who are in the spectrum that they deal predominantly in cash. And they don't have bank accounts. And cryptocurrency is an incredible solution for them as long as it's packaged as an actual viable service rather than, hey, you need to learn all this stuff about crypto to be able to get involved. So that's kind of where Spark comes along. So when we first started in 2014, we were actually the world's first cash-in, cash-out blockchain remittance platform. And essentially, it was a differentiator for us, right? Everybody is saying, OK, we're tackling money transfers. But how do you make yourself unique in this entire ecosystem? So when it was in 2014, it was a stage where you're trying to find investment. You're trying to get new customers on board. And it's really interesting because you think that people want to know about the technology just because you're personally very excited about it. So our name when we first started was Bitspark. And it was very popular to put "bit" in front of anything that was crypto related. And I think taking away "bit" from the name is really a evolution of the company to show that we care more about the services. And we're going to be taking the Bitcoin and the cryptocurrency to the back end and the background, where it should belong. Because when people are using mobile phones or anything like this, they're not actually considering the technology that's behind it. That's really how I think cryptocurrency and us as a company positions ourselves. It's really obvious. For us, we can be 2% to 15% better than mid-market rates depending on what corridor it is. So that is really attractive for a customer who a lot of the time is getting 2% to 5% below mid-market rates if they're using a third-party provider. So I think that the ability for us to have these huge percentages above the mid-market rate already shows that the technology itself works. But the thing is, it's just that we pair that with our network. We pair that with our inclusion points that can cash this in and cash it out and make it more tangible for our users. The way that I know that this technology works is in what we can offer. So when our customer is sending money with us, they can save 5% to 15% on their transfers depending on what corridor that they're using. Now, if they're using anything with other competitors, they're usually paying below that and a lot more. So I think that the reason why we're able to have all these cost savings for our customers is because we use cryptocurrency. It's not affected at all. So we're not in the space of speculation. We're in the space of the technology. So when the price goes up and down, it actually doesn't affect us because we use it as a means of transfer only. And there's no point in the transaction that funds are being held in crypto. So we're completely safe from the volatility. I think cryptocurrency currently is seen more as an investment. A lot more people are putting money into Bitcoin as a long-term investment, of course, like the top 50 that we will hear about today. Do I think that they are going to be the currency that everybody is going to be using? I think that it takes infrastructure to be able to do that. A lot of the time, people aren't comfortable with volatility. Whenever we have a dollar bill in our pocket, we know that that's the value that it's going to maintain and hold. Whereas if you're holding Bitcoin, you never really know what the price is. So I think this is a really interesting concept to think about. And it's something that our company is doing-- is that we're looking more and more into stablecoins. And in the next year and a half, we want to create a 180-plus stablecoins to service all the different markets. Now, we made this transition at the end of last year, where we were focusing mostly on Bitcoin transaction. But because of the scalability issues that Bitcoin was experiencing, it became more difficult for us as a business to be able to promise those wonderful, unique value propositions that we originally had, which made us think more and more about alternatives. So the alternative blockchain that we're using right now is BitShares. And BitShares is an entire financial stack that allows us to not only create stable coins, but different types of stable coins. And that's really what we're focusing on at the moment. So to kind of explain a customer journey through our system or our ecosystem, let's just say an individual-- they'll download our app. And then on our app, they have an entire list of currencies of stablecoin. So let's just say it's Sparkdex.HKD, PHP, USD. And the thing is, it's like, how do they actually get their money into the system itself? Well, that's when our inclusion points come in. So when we have inclusion points, these individuals are actually walking up to sari-sari stores or a convenience store. They're putting money into the shop there. And that shop then gives them a balance of Sparkdex HKD, let's say. Now they have Sparkdex HKD, which they can then send over to the other end. And from there, that person that's the receiver-- they can then cash it out at a sari-sari store or a bank account or whoever our third-party providers that are there that they're used to. So we're not using Bitcoin anymore. And the reason why we're transferring from Bitcoin to BitShares is because of Bitcoin's scalability issues. Essentially, there was a bottleneck happening. The more transactions we tried to put through the system itself, the more was getting clogged up, the more expensive it got. So we knew that if we wanted to be a scalable company servicing the customers that we already had on board, we really had to look for an alternative, which is where BitShares came in. Now, when we're talking about stablecoins, you're really removing Bitcoin out of the equation. And you're starting to use stablecoins where you have a exchange, which we have ourselves, where you can buy and sell these stablecoins on its own on a floating market. So this becomes extremely interesting. Because not only do you have stablecoins, which is a reflection of a pegged cryptocurrency-- or pegged to a fiat currency, I should say-- but you also have the actual fiat currency being traded on the open market. So I think that's going to be a very interesting proposition in the future to see where that will bring us. Stablecoins are essentially digital assets which are pegged to a stable asset. So that could be fiat currency. It could be gold. It could be any sort of commodity. But the point is that it is a reflection one on one to something that is stable. So we create our own. And there is actually two types. The first types are trusted stablecoins. So people are very familiar with this already-- something like Tether, right? So Tether is a USD stablecoin. And essentially, you have to trust that that company has that amount of money in the bank. Now, there's two counterparty risks there. There is the company promising you that they have the money that's backing this stablecoin that's being exchanged. But also you have banks, right? And banks are not very crypto friendly. So they may be shutting that bank account down. Now, you have to rely on that company itself to audit themselves, which a lot of them don't. So what I'm saying is that trusted stablecoins are definitely important. But what I find more interesting is trustless stablecoins, which is what Spark is focusing on. Now, trustless stablecoins completely removes the counterparty risk. And the way that it does that is through a smart contract. This smart contract is collateralized. So essentially, what happens is that if I create a Sparkdex HKD, I have to back that with some collateral-- that might be BitShares. It might be Bitcoin, anything-- so that I know that it's real. But it means that everybody else in that network doesn't have to be involved with counterparty risk. You can literally see in a smart contract what gets executed automatically. And I think that just comes with something in a new space. And I'm very happy that the speculation is kind of dying down. We're in a bear market. And I think in bear markets, they're definitely necessary to wash away all the speculation and hype that I really don't think should have a place in this industry. Our customers-- they're not crypto people. They never will be crypto people. So the thing is, they don't really care about the price. They don't care about all the stuff that we hear about these overnight millionaires, all this type of stuff. They care about something that can improve their lives. And I think that's kind of where if we don't show what crypto can do now in a real manner, then it's just going to be a bit of a joke, right? So I think that it's important to be focusing on companies that are actually doing something real in this space and not just some vaporware, which we see a lot of. And I hope that these projects do come through, definitely because I can see a lot of value added. But at the same time, infrastructure takes a lot of time. So I predict that basically in the next 5 to 10 years-- well, probably five years-- you're going to see a lot more infrastructure being built for centralized companies to be utilizing this technology itself. I can't speak on the behalf of other companies. However, I don't foresee a future where we see crypto or blockchain in its original sense being integrated in financial systems that we see today. I do see that it will be completely divorced. And maybe that's OK. Now, that's not to say that blockchain can't be used. But the thing is that there are certain aspects that if you take away from a blockchain it just becomes a database. And what's the point of just improving your database? You can already do that with Amazon, all this type of stuff. I think it's interesting. There's a lot of the times when I've been hearing about all these different ideas, I really do wonder if cryptocurrency is even necessary. But I think one of the first use cases of crypto is definitely in payments. Now, Bitcoin was one of the first-- well, I always say it's the best proof of concept that we've ever seen. And it's the best proof of concept for payments. So I think it's completely logical to be able to take that idea, build it over a couple of times, and actually be using it for payments without reliance on banks. Now, maybe five years from now, we're going to see it in auditing, all this type of stuff, because there is security and transparency that's particularly interesting. And I think that depending on what the company is, they'll be capitalizing on these kind of unique characteristics that the blockchain does provide. But I think really where we're going to be seeing it is in payments. And we should be seeing it in payments. We can never predict what's going to happen in the future. I think that people who are very idealistic will be like, well, everybody will be using Bitcoin. You can go to Starbucks, and you can pay with Bitcoin and all this type of stuff. But there is a learning curve to Bitcoin at the moment. We're waiting for those difficulties to diminish. We've just had the 10-year birthday of Bitcoin, right? And that's really amazing. But how far have we actually seen it be adopted in everyday life outside of long-term investment? It's practically zero. And if you actually look at the price of Bitcoin right now, it's completely flatlined. There is no new money coming in, which is why I'm saying that this is literally the years of infrastructure. Everything that is new, everything that's technology-- you need infrastructure so that people can be on-boarded. And that's really what needs to be happening right now. We only focus on emerging markets. People are saying, well, do you have a stablecoin for USD? Why would I create that if there is already hundreds available? I'm more interested in emerging markets like Philippines, Indonesia, Ghana, Nigeria, Pakistan. All these countries fall under three things, right? First thing is that predominantly, they don't have bank accounts. That means that they deal with cash. They're also looking for options to be able to send money and have more financial freedom. So I think that it's really in emerging markets where it's most interesting. And whenever we're talking about cryptocurrency, we're always talking about it in terms of adoption. So why would we create USD, which has already been widely adopted? You come to a conference like this, everybody's talking about it. But I really see emerging markets being kind of like leapfrog nations that are going to be the next onboarding or should be the ones being onboarded if we're going to be talking about adoption in itself. I want to come to conferences like this because I think that companies like mine give hope to the industry. And I think we give hope to the industry because we've got real users who are actively using this technology. Right now there's a lot of noise in the industry. And it is an exciting industry to be in. But I think that it's good to also share what's happening in Asia. A lot of the time, what we find in crypto is not only are we small communities, but we're also very closed-off communities from what's happening elsewhere. So I'm here basically to tell people what's happening in Asia, what we're doing in Asia, especially about the payment space, which I think is particularly interesting. Because we always hear the spiel about unbanking the banks. And we're doing that every single day. And we have been for the last four years. So I think it's important to talk about these things that we're doing and really showcasing what this technology can do. Yeah. It's really different. I think that in Hong Kong, people are very fascinated by it. But they're a lot more reserved in how it can be used. I find that in the US, there is a bit more entrepreneurism. There's a lot more entrepreneurs in the US that are always trying to find a way to apply this in one way or another, whereas in Asia, it's actually a lot more payment and fintech focused, which I thought was really, really an interesting difference between the US and Asia.