Lightspark Enables Institutions to Use the Bitcoin Lightning Network

Company Name: Lightspark

Founders: David Marcus, Kevin Hurley, Christina Smedley, James Everingham, Christian Catalini, Jai Massari and Tomer Barel

Date of establishment: April 2022; Series A May 2022

Headquarters location: Los Angeles, CA

Amount of Bitcoin Held in Treasury: N/A

Number of Employees: 45

Website: https://www.lightspark.com/

Public or Private? What is confidential

Kevin Hurley and the team at Lightspark want to make it easier for institutions and everyday people to transfer value with bitcoin.

That’s why they created Lightspark, a Lightning Service Provider (LSP) – and more – that provides an enterprise-grade infrastructure that enables companies around the world and those companies’ customers to make global payments using the Bitcoin Lightning Network.

“We want to continue the vision we had in the beginning with Diem,” Hurley told Bitcoin Magazine. “And that was to open up the world of finance, to make it something where you could send money as easily as you send packets of data today.”

Hurley also shared why the team at Lightspark chose to build on Bitcoin.

“Some of the things we learned [Diem] that you really need something that is nationalized, something that is law-neutral and something that has a lot of money,” Hurley explained. “These are the key features of Bitcoin and are part of what makes Bitcoin so special.”

How does Lightspark work?

Lightspark sees itself as more than just an LSP because it offers a Software Development Kit (SDK), liquidity management through routing nodes, cloud based node architecture and API services that merchants can use to build certain features or use certain services. .

The Lightspark SDK allows customers to easily access the Lightning Network for payments without dealing with the headaches that often come with using the network.

“We are trying to reveal things [away] all the complexity of Lightning,” Hurley explained. “We talked to a lot of companies that have been in the Bitcoin space for a long time and tried to understand why they didn’t use Lightning or why they tried and stopped, and we heard the same rejection from all of them – it was too complicated.”

To use Lightning without an LSP, companies will typically need dedicated staff to manage and rebalance funds on their Lightning Node. However, with Lightspark, companies only need to use a few lines of code provided by Lightspark to start using the Lightning Network for payments. Lightspark handles all the technical details on the backend. Also, Lightspark offers other features that institutions may find particularly useful.

“We have compliance features built into our stack,” Hurley said of how Lightspark can help companies stay compliant with the FinCEN Travel Act.

“We have AI built into our stack to make payments more efficient. We have Predict, which is similar to Google Maps for Lightning. [It shows us] where traffic is backed up to help us route more efficiently. Then we start dealing with things like UMA or Universal Money Addresses, which allows you to send from any currency to any other currency,” he added.

International Monetary Addresses (UMA)

One of the most notable features is Lightspark developed and open sourced by UMA.

Using Lightspark, companies can give their customers a Global Money Address, which is a cross between the Cash App’s $cashtag and an email address (eg, $yourname@yourwallet/bank/exchange.com).

UMA allows users to send crypto or fiat seamlessly, or in a custodial format.

Hurley explained how UMA is built on top of and works with LNURL and lightning addresses. The difference between LNURL and UMA is that UMA can be used to send fiat in its own unique way.

“You can move from any currency to another currency using UMA,” Hurley shared.

“Let’s say I’m from Brazil, I want to send money to someone in Mexico. Maybe I’m in Mexico visiting and I go to a 7-Eleven and I want to buy something. I should be able to send from my native currency to Mexican pesos,” he added.

“With UMA, what happens is that my Brazilian reals are instantly converted into sats. They stream over lightning and quickly convert from sats to pesos and pay at 7-Eleven.”

Part of the reason that such transfers are legally possible is that the UMA facilitates the exchange of compliance data between the various agencies that Lightspark works with, located around the world.

Exchanges, neobanks, and other institutions partnering with Lightspark – all controlled by bitcoin/crypto custodians – have the appropriate money transfer licenses in their jurisdictions, which keep Lightspark and its partners in compliance with the above-mentioned Travel Law.

Lightspark’s Partner Institutions

Lightspark has made headlines recently, as it has signed deals with major institutions such as Coinbase, Xapo, and Nubank. And as each new partner comes along, more potential partners become interested.

“They see growth – especially when we get on board with Coinbase – and a lot of organizations have come to us and wanted to know what’s going on,” Hurley said.

“They see that the big players are starting to get interested and they’re starting to see the real volume in it, and they want to get involved. They don’t want to be left behind because they understand that this area is growing and becoming more important,” he added.

At the moment, interest is coming from technologically advanced neobanks, as these institutions seek to provide services that differentiate themselves from traditional banks. However, Hurley noted that the big traditional banks are paying attention, too.

“The benefit [of what Lightspark provides] we work at JP Morgan like we work at Nubank,” Hurley explained.

“We have joined a few of them. Many times they will need to see others do it first,” he added.

“Once they start seeing real adoption, I think they’ll be adopted pretty quickly too.”

Hurley also pointed out that there is good reason for some of the big traditional financial institutions to get on board.

“Traditional financial firms have huge pain points,” Hurley explains.

“They may have bank accounts in many countries, and, even with their own banks, transferring money takes days because they transfer using SWIFT. They go from one organization in, say, Argentina to one in Europe, and it takes them three to five days to transfer the money. It means that they should establish social banks. It is a huge burden on them and it can be very expensive,” he added.

“I think they were very excited to see something that could run faster, be more efficient and have better hardware. It’s a good thing for everyone.”

Bullish On Bitcoin, Conscious of Reality

While Hurley and the Lightspark team believe that Bitcoin adoption will continue to grow, they are well aware that many people around the world are still not comfortable using Bitcoin.

Hurley sees Lightspark’s approach as a way to improve Bitcoin adoption, while keeping in mind where the customer is coming from.

“To get real adoption and continue to grow adoption, you need to meet consumers where they are, and many consumers right now are comfortable with fiat,” Hurley said.

“Those people probably don’t know anything about Bitcoin, and it will take time for them to be exposed to it. So, if you can take that out for them, allow them to spend money that they feel comfortable with, which helps get people on board and helps build adoption,” he added.

That said, Hurley also acknowledged that there are others who choose to use bitcoin and ultimately use it without custody before making the point that Lightspark and its partners enable users to send their bitcoin to a non-custodial wallet if they wish.

“Users can at any time go from custodian to non-custodian,” Hurley said.

He then made the point that neither Bitcoin nor Lightning currently have the power to bring the masses to the network in a sustainable way, which is why companies like Lightspark and their affiliates are important right now.

“You can’t ride billions of users on Bitcoin and lightning [non-custodially] today,” Hurley explained.

“It’s been possible for a long time, and we’re doing a lot of research on how to do that, because we feel it’s important to the ecosystem,” he added.

For now, however, Hurley sees the security solutions companies like Cash App, Coinbase, and, of course, Lightspark are providing as a way to make people use Bitcoin in a less complicated way.