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Rafael: Welcome to Crypto with accountants powered by Betway, where we talk with technologists and crypto enthusiasts as we discuss current events in economy, politics, technology and digital assets with thought leaders from around the world.

Pat: Welcome back to the pod, everyone. So excited to be here today. I am thrilled to welcome longtime Betway friend, good personal friend and head of finance and accounting at lightspark Mary Kaufman to the show. Mary, welcome. Thank you so much for coming on.

Mary: Thanks for having me. This is going to be fun, guys.

Pat: Yeah, well, you know, Mary is I don't know how else to say it. So first and foremost, what I'll say about Mary is when I have hard technical accounting questions, I go to Mary like when we are dealing with really sticky things at bit wave that like, you know, no one's ever had to deal with before because crypto is all novel accounting. Mary is like on my speed dial to get feedback and bounce ideas off of. She's on our she's on our the bit wave partner, the advisory board, Advisory council, all that kind of stuff. Mary is a treasure trove and deep, vast wealth of knowledge in all things accounting. But beyond that, she's also a crypto OG in a lot of ways. I mean, Mary, you've worked for a lot of different projects over the years, including Facebook, Open, Opensea, DM You know, everything up and down the entire stack here. So tell us a little bit about your history. Tell us, you know, and one thing I'd love to hear, which I've never gotten the story of, which is like, how did you get into accounting and then how did you end up going deep on the technical accounting part? Like, why did you love the the the hardest part of accounting that everyone tries to stay far away from? Like what sort of jumped out to you about that?

Mary: Yeah, Thanks for having me again, guys. So like you said, I started in public accounting. I was between Atlanta, New York and then three years in London. And so that was great. Then I moved on to Facebook and then Opensea. I'm now at Lightspark. And so as you can see, I have we're going to talk about kind of these this variety of projects that I've worked on from from Stablecoins to Nfts to, you know, all things Ethereum. And now we're kind of in the world of Bitcoin and the Lightning Network. I got involved with the CPA's Digital Asset Working Group on their industry review committee a few years ago, So that's really exciting. Thinking about in the absence of having authoritative literature, how do we how do we interpret it, how do we think about it? And a lot of that's led by, you know, the brains at the big four, their national offices, and then they come in, probe, you know, industry players and say, you know, is this is this how it's happening? Is this how you're thinking about it? Is this meet the economic reality of what you're doing? And so then also fast forward, I've been pretty involved in the new the new ASU that's coming out that we we hope that comes out by the end of the year.

Mary: So yeah, I've been staying pretty close to it. So how did I get from the Big Four to working on one of the OG Stablecoin projects, as you call it? So I think it's important to really understand, like how I got involved in the in the payment space because it's so different than, than a widget or, you know, any other industry. I had a little fintech client that was in the traditional payment space. Think like 2012 early days of square competitor. And I remember learning about the industry being so intrigued by how complex the ecosystem was, how many intermediaries there are, how long final settlement takes. I go buy my burrito from the taco truck and he doesn't get paid for three days. I mean, I've had at least seven burritos since that transaction. And and so, you know, they don't really have a lot of options. And so that was kind of like what piqued my interest in payments in general. So then after spending a ten year sentence in public accounting, actually through my network of folks that I met while I was working in London, I had this opportunity to join Meta, kind of right when they were starting, you know, a lot of their fintech initiatives and that sort of thing.

Pat: Yeah, it's so interesting because, you know, it's funny, different. I think people do have a tendency to think about crypto is very homogeneous. Like if you're not in crypto, you think of crypto as very homogeneous. You're like, Hey, it's people with monkey pictures and Bitcoin doing crazy stuff over there. I'm not going to worry about it. But, but very realistically speaking, when you when you are deep in crypto, like, like we all are, you know, it actually is an incredibly varied industry that goes from incredibly conservative companies like Facebook working on Stablecoins where they would never imagine doing something like Bitcoin, something that like maybe smells like a security or anything like that where they're really, really, really just hyper focused on this this payments and remittance and like friend to friend payments or money transfer kind of problem because they saw it as this like, you know, this this this nudge towards like higher efficiency, quicker settlement, all that sorts of things which is then completely different than than people working on NFT projects and things like that. So it's interesting to me that it was the payment side that really got you into it because honestly, you know, five years ago or whatever it was, payments were still very nascent in the in the crypto world like. And they still are to some extent. But like especially five years ago, it was still this very nascent part of crypto of like, hey, really paying people, especially because like, you know, the stablecoins are just starting to come out at that point.

Mary: Yeah. So I mean, essentially what we were trying to do is build an open, real time settlement protocol for money on the Internet. And you know, fast forward to today. What we're doing is is not too dissimilar to that. And we'll talk about it in a little bit. But we're doing it in a much different way because we do have this conviction around Bitcoin and and its decentralization and its ability to scale in a certain way across the Lightning Network.

Trevor: Yeah.

Pat: So can you give us give us like two minutes on, on the project like what it was what they were trying to do. You sort of said, you know, open settlement for the Internet. But it was I mean, this was it was a pretty big project funded by, you know, you know, with Facebook behind it.

Mary: Yeah. So I think one of the most interesting differentiators is at Facebook, we're building from the ground up. So we're building the infrastructure to then eventually build the plane. Whereas when I went to Opensea, I just jumped on a rocket ship that was already halfway to space. And, you know, it really already set sail. When I joined in early 2022, they had a ton of users. Crazy GMV collections were going wild. There was so much hype at that time around Web3 there was land grabs in the sandbox. Decentraland Every other news article was, you know, this company's Metaverse strategy, that company's Metaverse strategy, how we're all. Changing names in. You know, Opensea had a core product with a core market fit. And so I think that was one of the most exciting things about joining at that time. And then.

Pat: You know, for people that don't remember 20, 22 a year ago, you know, the summer, the summer of Nfts was a it was unlike anything else. It was 21 to 22, really. It was the like almost like the most surreal part of a of an industry that's already pretty surreal. It was one of the most surreal parts of that industry where suddenly overnight, like everyone got into Nfts, everyone needed an NFT Nfts were selling for thousands, hundreds of thousands, millions of dollars. And honestly, Opensea was the the heart and soul of it. I mean, it was the the absolute core of the NFT buy and selling background backbone was opensea. Now at this point, there's there's more competitors out there, but like back then it was opensea or bust. And so there was billions of dollars moving around the the the marketplace there right?

Trevor: Yeah.

Mary: I mean, it was incredibly exciting. We were thinking a lot about the ecosystem in general. There was new chains were supporting Nfts all the time. And so then we were constantly researching and investigating chain expansion, understanding the different tokens. And I was able to talk theoretically all day long, like maybe I'm the brains of the operation. But as you know, the Stevens are definitely the brawn of all things opensea revenue recognition.

Pat: Yeah. And and it was such.

Mary: A hard of transactions and.

Pat: Yeah. Well and it was such a hard problem too, because basically the way Opensea works is someone can put something for sale with pretty much any ERC token as the sale price like you can or you can bid any ERC token. So you're in this situation and then you guys are taking a percentage of that of that fee. So you're basically in a situation where you're getting paid in anything that someone wants, like I imagine like, you know, a landowner in like medieval times, like they're the peasant shows up and gives them a goat for their rent. Like that's kind of what you guys were doing is like, someone.

Trevor: Will take.

Mary: 2.5% of that goat, please.

Trevor: Yeah.

Pat: I'm going to need I'm going to need the best two and a half of this goat here. And so you, you not only have this, like, hard problem of like, dealing with incredibly long tail tokens, of which you then quickly became like some of the biggest holders of, but then also, you know, accounting for it, dealing with it, reconciling it back to the blockchain, all of that kind of stuff. It was tough. It was tough work.

Trevor: It was.

Mary: Tough. And, you know, you're a block explorer. You have to be able to answer, why me? And I think we said it like Opensea is a household name. And it's it's a testament to what they're building. But of course, there's been competition, you know, pseudo swap X to Y to blur Magic Eden. You know, they're supporting different chains, different collections, different fee structures. So all of that definitely kept you on the toes all the time.

Trevor: Yeah.

Pat: Yeah. Anything fun that you remember from the Opensea days that were hard technical accounting problems that, you know, people we have we have accountants interested in crypto listening here. So any like really hard technical accounting problems you you are that would be fun to talk about.

Mary: I mean I think redneck in general. So all things riverrock when you're getting paid in any one of. X amount of ERC 20s. And can you follow this intangible model which then subsequently follows this fair value model when you think about impairments? And so you're going through a constant iterative exercise of what is your principal market, what are, what's the fair value of this token, how am I doing my lot tracking? Is this a fight? Is it on a Fifo basis or LIFO or Fifo or whatnot, tying it all the way back to that original transaction? And when you're when you're doing it, when you're operationalizing that at scale over millions and millions of transactions, it gets complicated fast.

Trevor: It's definitely.

Mary: That. Definitely. That's where you guys come in.

Pat: Yeah. And I remember like because we a lot of conversations we had were all about how to actually implement impairment. And it was fun being at the, the, the bleeding edge of this stuff, which is to say like no one really had, you know, impairment was not designed for assets that had high liquidity. So you have this asset that has, you know, 24 hours a day, seven days a week, 2000 exchanges trading it. And that's like literally the exact opposite of every other intangible asset out there. And you're being asked to sort of apply rules to it. So, I mean, we had a lot of knock down, drag out conversations about, you know, do you do end of day closing price? Do you do daily, weekly, monthly? Like what are the different impacts for all this kind of stuff? I assume you guys probably also had some hard did you have any any interesting questions that came up at Opensea around deferred revenue or anything like that? Or were you able to basically just track all of the marketplace fees as immediate recognized?

Trevor: Yeah, I.

Mary: Mean, it's been a while, so I'm a little bit past that. But I think that's one of the things about having these transactions settle atomically through through a smart contract into your wallet. I mean, you are you are being able to recognize the event as it happens.

Pat: Yeah, it's kind of like for all the downsides to crypto in terms of accounting, in terms of like, you know, impairment and all those, you have this great piece that like the money just hits your bank account that second that it happens. So it saves you a lot of problems on that side of it.

Mary: I mean, nine out of ten crypto accounting is about the data. Like do you understand the data? Does does your engineering team understand the data? Does your auditors understand the data? So it's all about data. I mean, we can we can ultimately debate an hourly impairment versus a daily impairment to the nth degree. But if we don't have complete data and we don't have accurate data and we don't know how to read the data, we don't have anything.

Pat: Yeah, Yeah. So one.

Rafael: Thing that.

Trevor: Comes to my mind. So as a former auditor, I'm thinking like, how did the audit go there? And obviously we can't get into like specifics, but could you speak a little bit to just what are some of the challenges from an audit perspective when you're dealing with accounting for digital assets?

Mary: Yeah, I mean, first and foremost, I think it goes back to data. So does everyone do all the stakeholders understand the data that we're working with and do we have all of it? You know, most accounting firms, I'd say most law firms, you guys are running nodes on chain. So this gets a little, you know, a little bit more simple when you think about having the ability to track all of your data because you'd think in a traditional audit, I don't remember, but it was some pretty low percentage of coverage and you gave that stamp of approval. But with no additional effort, you're able to get substantial coverage when you're talking about blockchain transactions. And so a lot of it is less about kind of the technical accounting and more about the operational and internal controls of wallet hygiene. Do you have all of your wallets? Do you know what your wallets are being used for? Are you categorizing them in a homogeneous way or a specific or specific way? Like this is only for X token or this is only for your Y type of transaction. And so I think it's also spending early time educating everybody what's the funds flow, who are the different parties in the ecosystem and then writing it all down, writing it all down for internal internal folks and external.

Trevor: Yeah.

Pat: And that was my that was sort of my as I've now we've now been through, I don't know, 50, 100 audits at this point with different customers, probably more. Um, there is this aspect of education, no matter how many times you've worked with a Big Four or whoever it is, there's something new. There's always something new happening in crypto. And oftentimes you are dealing with a group that is maybe not their hardcore crypto accounting group, like maybe you are. Just maybe this was a buddy who's an audit partner of the CFO and they bring it in and they're not they're not crypto experts. So you're literally it's not just that you're training them how to do accounting on this stuff like. You're teaching them what block explorers are. You're teaching them what a crypto transaction is. And so suddenly you're you're what might have been a simple audit, I don't know, turns into a very complex training exercise with lots and lots of questions. And then also on top of it, you're talking about, you know, millions of transactions, which is already a complicated audit to do. So Tricky, don't you think?

Mary: There's a little bit of a blessing there that we have things like block explorers where you can go in and you can go look at the transaction versus think about me asking you how many t shirts did you sell at The Gap last year?

Pat: Yeah, no, it's a great point. So there are actually the auditability goes up, but then of course there still is that data problem. You need to be able to give them all of your addresses, give them all of your contracts. And even that itself is is sometimes tricky for businesses in the in the space that we happen to all be in here.

Trevor: I know obviously at bit wave we're super bullish on Nfts we're talking about Opensea the major NFT exchange. We deal with a couple other clients in the space in 30s or less, just giving your experience at Opensea. What's interesting in Nfts right now and what's it going to take to get us there?

Mary: So interesting. So things I think that are cool in this space that are actually the coolest things are going to have the hardest accounting challenges are things like redeemable or phygital items. So that hybrid of physical and digital where you have this community, but there's also a physical component to it. So whether that be like a physical experience, a physical good, and then how do you track what are your for accounting purposes, what are your performance obligations? It's to send how many hoodies or how many tickets, When is this event? Does it cross over a certain period? Is there value in the community or that the digital component to it? So I think that's going to I think that's super interesting. I think it's a way for more traditional companies to definitely get into this space in a meaningful way. I mean, you can already see it with, you know, Nike's artifact or swoosh. Starbucks Odyssey is a super cool project to me because it already in of itself has its own community and following. Yeah. And so taking that, taking that a step further, I mean, I know people that collect Starbucks mugs from around the world.

Pat: I collect Starbucks mugs.

Trevor: Like Starbucks mugs. Yes.

Pat: So it's so it's really fun for me because it's funny. There's actually this deep irony around it which gets into this whole like NFT mentality in general is like, I don't drink Starbucks anymore. Like, it's been a long ass time since I actually drink Starbucks, but I do love me some Starbucks mugs because it's I love to travel and it's like a way to it's like a super easy, fungible way to remember where you've been. So that's why I love The Odyssey.

Trevor: So are you doing Odyssey?

Pat: I haven't yet, because the thing is, I don't buy drinks. And so it's one of those funny things. It's like I think for Odyssey you have to buy the drink and then you get the points on that side. So I don't know, maybe I'll get into it.

Trevor: I think an interesting thing, to your point, Mary, like I just went to Gary V's v con, right? And I went with bit wave, but I also am a veefriends holder. So it's like what? What does that NFT represent? Because it is a collectible, but it's also your ticket to get into the event. It's also, you know, he could tie any number of things to this. Nft And so it creates some interesting challenges just around like how do we account for this? And from a tax perspective too, right? Like, is that a taxed as a collectible? Yeah.

Mary: When I send you the hoodie, do I need to be charging you sales tax for that?

Trevor: Yeah, it's interesting.

Pat: Well, yeah, we won't spend too much time on sales tax, but of course that's another that's a third rail of nfts in general right now then no one talks about is just, you know, and I don't think it's at all clear. I think over the next year we're we have a couple of different conferences and summits planned with Big Four tax folks and and regulatory authorities and stuff to talk about how to how to even begin to think about about this taxation of digital assets where there's really no, you know, no asset going anywhere per se. And how that all works, it's going to be going to be fun to figure that out over the next couple of years here.

Mary: So maybe I'll swap out my frustrating and make it sales tax. Yeah, but no, I mean, sitting on my soapbox a minute, I think about I've experienced firsthand onboarding new wallets is extremely clunky process. You have the seed phrases, you have all these new decisions to make, whether you're going to use a custodian or self custody. So I still think that there's improvements to make before we onboard the next 100 million to crypto. I mean, me personally, I have my Solana Nfts and my Fantom wallets. I have my eath and my pudgy penguin and my Metamask wallet. I have my very small personal corporate treasury in a Coinbase account. And so, I mean, that's extremely hard to. Unwind. And then where do I put all this? Where do I put all this information? And so I think of a lot of cool ways that traditional companies can get into this space and even like, okay, well, my mom would probably join a James Patterson NFT Club, but there's no.

Trevor: Chance.

Mary: That she can figure out how to how to get a wallet up and going and not lose that seed phrase.

Pat: We know who's the group That's been the by far most successful there has been Reddit like Reddit has on board more people, the crypto and Nfts and anybody with the caveat being that a lot of people have no idea that they've been on board to crypto and nfts as part of buying the Reddit avatars. So it's sort of this I mean, for me, when I think about this, this problem space in general, it's like we have to get away from the technology as a feature and just get to the the features as a feature because blockchain and crypto, they're not features themselves like they're just really cool technology to build, you know, digital ownership of, of different things. And so that's a really important part of, of growing as an industry is, is stopping to talk about like the nuance of the industry and more just talk about the cool things we can do on top of it. So Mary, I think we want to kind of like talk sort of step back a little bit and talk a little bit about the traditional payment system and like and this sort of even probably ties back to like why you got into crypto because it certainly ties back to why I got into crypto in some ways. So I think the direct question is like, you know what? What is kind of wrong with today's payment infrastructure and, and how does maybe crypto solve some of those things.

Trevor: Yeah.

Mary: And so it all on the face seems fairly straightforward to maybe you and me, but as we talked about earlier, it's a really complex process with an insane amount of intermediaries that are kind of glued together by these legacy practices and old technology, because fundamentally, commercial banks weren't set up to facilitate payments. Their main purpose was to lend. However, through convenience, they developed rules and methods. But the fact that we're in 2023 and that money moves the same way that it moved in the late 60s and 70s on top of archaic, outdated systems like ACH and Swift, which are either really slow and sort of cheap or slow and not cheap, it's just kind of inadequate. And so we believe that money should move the same way that anything else on the Internet moves. And it should be super cheap with near instantaneous settlement. And essentially you should be able to move money like you send an email or a text message. I mean, PayPal owns Venmo and you can't send money between the two. You can't send money between Cash App and Revolut's. So this lack of interoperability starts to.

Trevor: Well.

Pat: It's a feature, right? So like, because the thing is, all of those companies are trying to capture you, you are the product because they then want to turn around and they want to lend you money, they want to sell you, you know, brokerage services like, you know, it's this the trend of the late 2000, early 20, 21st century was all about you are the product. And so all of these guys were it was it was a feature of a of the of the cash app and all these guys to lock you into their ecosystem. Yeah. And I'll I'll add one thing which hopefully we can add into the show notes. If anyone's ever interested in the ACH stuff, there's a phenomenal podcast on Planet Money did an episode all about ACH. It was Episode I just looked up. Episode 49 The Invisible Plumbing of our Economy. And like they talk about, you know, ACH was up until a few years ago, I think up until maybe like ten years ago, five years ago, they still so up until about 20 years ago, they still shipped physical tapes around. So they would they had computers that had tape. You know, tape drives on them. And that's not a misnomer like like physical tapes. And they would ship those back and forth. I think they moved like, you know, at some point they moved to shipping hard disks, like hard drives around. And then only in the last like few years, they actually moved over to doing this over the Internet. So, I mean, that just shows, you know, the insanity that is the traditional plumbing that goes into the payments network. So yeah, just wanted to give a little shout out. I love Planet Money. Yeah.

Mary: And look, not everyone is going to feel this equally. So most of us in the US do have Cash app or Venmo and Zelle. And so when people ask, Well, how am I going to use crypto to buy my coffee at Starbucks one day, the answer may be you may not like it. That is not that's not what we're trying to disrupt here. You know, most of us in the US have Cashapp or Venmo and Zelle, so it won't necessarily make sense for us to start buying our Starbucks with crypto. You know, we have we have a product that works for us, but for things like Cross.

Trevor: I will say.

Pat: Well, I will say where I've always been so curious and I'd love to get because now, now where you're working today is you're very, very Bitcoin centric. And that's always been it's always been one of the rallying cries for Bitcoin folks has been like, Hey, I want to buy coffee with Bitcoin. Or like, when do I buy my coffee with Bitcoin? At the end of the day, like I always had, I always took a little bit of an exception to that. And maybe it is because I love Planet Money so much that I, you know, they've done a few episodes that it's all about deflation. And I you know, I studied economics in college, obviously, like with most everyone else. And they had, you know, they have a whole course about they have a whole part of the course about deflation. And, you know, Bitcoin is a deflationary asset has always struck me as that. Like it's not going to be the thing that you're going to be spending to buy coffee because deflationary assets are terrible to spend for for things like coffee. What do you think about that? I mean, because but but now we are in a world where you do have so many different stablecoins and all these different options out there. Like do you tend to think about Bitcoin as a as a means of commerce? Uh, especially in like your, your new job. I mean, not to, not to jump ahead of the gun here, but yeah.

Mary: I mean, we're very bullish on lightning. We're building on the Lightning network, given it's built on top of Bitcoin because it has the battle tested infrastructure, the lack of central control. And so Bitcoin can offer a truly decentralized solution for digital money. And so if you believe our conviction that an open payment network can only be built on top of Bitcoin, lightning is the only way to make it scalable and enable those fast, cheap, real time settlement payments. And so one of the places that it's going to be hugely important is for things like cross-border remittances, where there's historically been a huge disparity in people of low incomes, access to the financial systems, and they're sending money home and they face really high fees, sometimes really long settlement times, you know, or it can be even physically dangerous. And so having a truly open protocol for money that makes it easy to use real time, low cost final settlement to move value around the world in a seamless way is important.

Trevor: Yeah, I, I think you hit on something really key there. I, uh, I lived in Nicaragua for a couple of years and I, like, I have a friend there that reached out and was like, Hey, I'm really in a tough spot. Like, is there anything you could send? And I was like, Yeah, sure, I can send her 100 bucks. Like, that goes a long way in Nicaragua. And she had just lost her ID and like, there was literally I was like, okay, well, how am I going to get you money? So I was like, maybe Western Union. Uh, but that would have required like, she's like, okay, I'm going to have to get on a bus, two hour bus ride to the bank, hope that they can give me or to Western Union, hope that I can get the the funds that you sent without an ID, Chances are there's going to be guys standing outside of Western Union with machetes, like waiting to rob me because that's like everyone knows. Like what Western Union is. Uh, and it's a whole day she spent not working, not providing for her livelihood. And I literally thought, like if she was one country away in El Salvador and had like a chivo wallet, I could have just sent her some Bitcoin. Um, but it was this huge, huge ordeal. So, I mean, that's just anecdotal, right? But it's, it's something we don't think about in the US. But a real problem.

Pat: Oh, yeah, 100%.

Mary: Yeah. So if the Internet, you know what the internet did for communication where we're not sending snail mail every time we need to make a communication, blockchain has the power to do for moving value to your point. So we can take take some of these steps out.

Trevor: Yeah.

Pat: Okay. So, all right, we, we covered your time at Facebook. We covered your time at opensea. So Facebook was was focused on the project, was really focused on on a payments network built from the ground up, especially looking at like the broader world Opensea was this like rocket ship to the moon of, of people trading? Uh nfts And then the rev wreck that went along with that, which was an incredibly complicated and now you're at you're at Lightspark, who is a, it's a company that is very much focused on the Lightning Network. So maybe we start here with just like, you know, what is the Lightning Network and then go into like what Lightspark does.

Mary: Yeah. And so and so this takes me off of the rocket ship and back to construction. So, so now we're back in construction worker mode. So the Lightning Network is powerful, but it's also incredibly complex and presents a very low barrier to entry for many users. I knew very, very little about the Lightning Network before I joined. And so for me, over the last few months, it's been this massive education process. And that being said, we start with some good news and work backwards. What we're trying to do at Lightspark is to de complicate everything that I'm about to attempt to explain. And so that being said, you know, the Lightning Network, it's not new. The original white paper came out in, I think, 2016. But my guess is there's been more development on the on the network in the last 12 months than in the rest of its existence. There's actually a report this past week that the Lightning Network hit a record high capacity of almost 6000 Bitcoin and the network's growing.

Trevor: Is that right? Wow. Oh, I've got that.

Mary: That's awesome. It's got, you know, upwards of 6000 bitcoin and locked up liquidity. It's grown 42% and Bitcoin capacity over the last year. So there's a lot to be done for adoption. But moving in the right, moving in the right direction. So lightning is a layer two payment protocol built on top of Bitcoin. And the concept is basically one of a channel based payment network that provides scalability and nearly instantaneous Bitcoin settlements at its core. The Lightning Network relies on these payment channels, which lets two parties securely transact off chain, where you're essentially moving back and forth Satoshis, which is the smallest amount, the smallest denomination of Bitcoin equivalent to 100,000,000th of a Bitcoin back and forth within the channel. So that lessens the strain on the Bitcoin blockchain because that settlement is not actually taking place on the L one. And so then lightning then extends the payment channels by creating this network. And so there's some cool graphs online of the topography of the Lightning Network based on the liquidity that's in the nodes. And so that allows users to send SATs to to anyone on the network, even those where you don't have a direct payment channel. And then one of the other key tenants of the Lightning Network is privacy. So it was built with privacy in mind, and it's similar to that of existing payment networks. So there's an added benefit to merchants and consumers or anyone running a node who may not want their transaction history publicly accessible.

Pat: Yeah. And so what I'll, I'll add just a little bit to that, just to give it a little, a bit of for people that are interested in it, the way it works is you, you create this graph of channels between people. So let's say I want to send Mary some Bitcoin. What happens is at some point I have to open a channel. So I have to pay some Bitcoin fees to basically move my Bitcoin from the L one to the L two. And that's called opening a channel. But like let's say I don't really want to open a channel with Mary directly because I'm only going to pay her one time. So I might have already had a channel open with Trevor, and Trevor might have already had a channel open with Mary. So what Lightning lets you do is it actually lets you say, Hey, Trev, like I'm going to pay you a very, very, very small amount of SATs to to use your relay to move funds from basically me to Mary. And so in that way you can go across these, you know, globe spanning channels, thousands of Bitcoin all over to move things essentially instantaneously. That's one of the big parts of of it is that you are the way it works is your cryptography building up this history within the channels that represents the movement of of satoshis between folks.

Pat: And if anyone is then a bad actor, you can actually close your channel by just taking this this transaction that's been built up and committing it down to the blockchain. You have to pay fees for that. But it's a there's actually a lot of security built into it. So you have like high confidence, good amounts of of privacy and then high speed to actually be able to move Bitcoin very, very, very quickly. The biggest issue, of course, is just that it's not always easy to find huge channels to move. If you need to move like ten Bitcoin, you might not be able to find a channel that has ten bitcoin to move because I have to have a channel that Trevor Trevor has to have a channel to marry. It creates this this requirement that you have ten bitcoin to kind of you can think of it as like those those Newton I think they call it the Newton bouncy balls, the Newton balls or whatever. You have to like kind of like move it all the way up and down the chain like that.

Trevor: We always talk about.

Mary: Alice and Bob and Charlie moving beads around.

Trevor: Alice and Bob.

Pat: And Charlie.

Trevor: I mean, I think.

Mary: I think you hit the nail on the head and what we've seen historically on the Lightning Network is it's been extremely complicated to understand and to get up and running. And there hasn't been a lot of liquidity within the nodes. And so you have a lot of payment failures, especially when you're talking about large amounts. And so I guess it gets into the heart of what we're trying to do at Lightspark, what we're trying to build software and development tools that are meant to make accessing the Lightning Network easier. So our goal is to complicate this by taking out the complexity of opening and closing channels, locking up liquidity, rebalancing those channels because you have to have a certain amount of inbound and outbound liquidity to actually send payments, decide which minimum or maximum fee you're going to set. And so basically all the things that are very complicated to understand, manage and implement, we are taking that away from from enterprises so they can just get up and running.

Pat: So it's one of the tricky parts of Lightning is if you do have a a natural sync. So let's say, let's say Amazon spins up on the Lightning Network. You suddenly have this really interesting problem where everyone in the world is sending their money to Amazon, like there's all this money in the world flowing to Amazon. So all of the channels that are going to Amazon tend to get one sided because you have to think about like like if you're when you move across one of the nodes is I send Trevor money and then Trevor sends Mary money, but the money is now on the the channel to me and Trevor. So unless me and Trevor are sending money back and forth, this has become kind of an unbalanced channel. And so at that point you have to sweep away, potentially open up new channels and things like that. But it's it's some of the complexity comes into this is that like if you do have these really big mega sinks like Amazon or or like cable companies getting paid or cell phone companies, you'll end up in these kind of like really bad balancing situations that you then have to have infrastructure to handle.

Mary: Yeah, exactly. And so by lowering the barrier to entry for those that want to engage in the Lightning Network, we aim to make these Bitcoin based transactions more accessible for a huge range of applications. So we launched our first couple of offerings just a couple of months ago, mid mid April, and we have a really busy roadmap ahead. But to start, we have Lightspark Connect, which is our enterprise grade node management software that we were talking about. So the complication we have Lightspark predict. So that ties a lot of AI and predictive capabilities of trying to have that map of the network where the liquidity is and try and predict ahead of time whether or not that transaction will actually be successful in a given route or if you need to split it up and deploy it dynamically across a number of routes. And then we have SDKs and wallet SDKs so that people can build experiences in their apps.

Trevor: Yeah, Yeah.

Pat: So really interesting pieces there. That's really exciting. How? How's the launch gone. How's it. How's. How's the first few months of all these things been out there? Been.

Trevor: It's been.

Mary: Good. I mean, we are working with the smartest minds on this that have been thinking about the definition of money and how to move value for years. And so, I mean, I love it every day. We're a scrappy team. One of my favorite things that I get to do is just talk to everybody every day. So it's engineering, product design, legal data, science marketing. Like what are we trying to do here? What's going to define success? How are we thinking about it? Who's our customer? And then inevitably, how are we going to track this stuff.

Trevor: So well.

Pat: You know, it's funny because that speaks to your career also going from, you know, Big Four and just sort of progressively getting to smaller and smaller accounting, you know, from the big four to Facebook to to Opensea and now Lightspark, you've gone from incredibly large groups of accountants to a very small accounting department now. And so it sounds like one of the one of the perks of that is getting to deal directly with engineers, although, I don't know, I, I deal with engineers all day and I am one. So I'm not sure that's a perk. But let's, let's say that it is. That's fine.

Trevor: Yeah. I'd like to.

Mary: Say that a lot of that was pretty deliberate on my side. I have always been someone that loves to touch a product and help develop its, you know, its iterations. And so being able to to go from where I started my career, which was kind of looking at history to living in the present and thinking about the future, I'm exactly where I want to be.

Trevor: So yeah.

Pat: Any, any like, like this is, this is stepping away from our, our other line of questioning. But any any downsides as you've gone from like huge accounting departments and teams down to kind of a one man shop, one woman shop.

Mary: I wouldn't say any downside. I think that there's been some some opportunities in especially around when you work at a big four accounting firm, you're around 100,000 of the smartest minds and you have access to unlimited resources. And so, you know, the smaller and smaller you get the scrappier and scrappier you have to get. But I think for me, that's opened up a huge amount of opportunities of talking with folks in the crypto and the crypto accounting worlds being part of certain conferences like Edas meeting the people there. I mean, I can tell you I used to never have a receiving line of people at a CPA event, and now I feel like, you know, I can't keep up with my LinkedIn requests.

Trevor: So yeah, that's that's awesome.

Pat: That's really cool.

Trevor: You're a celebrity in the crypto accounting world now.

Trevor: Well, I wish.

Mary: I was in the triathlon world or the world world, but I'll take I'll take I'll take what I can.

Trevor: Get. I don't know.

Pat: I don't think I want to be a celebrity in the real world. I like I like a modest amount of notoriety in a very narrow slice of life. I think that's the right balancing act to to pick up. I think being a celeb in the real world just probably makes you hate. I don't know. It probably makes your life a lot more difficult than more fun, to be honest. That's my opinion. Yeah.

Mary: I'll take it. I'll take it. So, Pat, I know you're over there chomping at the bit, pins and needles.

Trevor: When is Mary going? I was. I was going to ask.

Mary: When is Mary going to talk about streaming payments? Because I've sent you. I sent you to our website a few months ago or maybe a month ago to check out our demo because I know that you love it. And it's another area that we think is incredibly interesting is, you know, there's been this idea of micropayments for a long time, but know legacy payment rails kind of made it too expensive to send these really small micro payments in an efficient or effective way. So, you know, streaming money essentially, for those who don't know, it involves sending super small amounts of money, maybe fractions of a cent, you know, a number of satoshis in real time across the network for us, you know, especially when we were talking earlier about the creator economy, I think this opens up a ton of opportunities for creators and new innovative payment models, subscription models. And so when you combine that with the low transaction cost and the global accessibility of the Lightning Network, I think streaming money can potentially revolutionize how people transact online.

Pat: So this was, you know, it was one of my favorite sessions that we had at at E! Das this year was we did a we did a payments panel, which Mary was was kind enough to be on. And we had two people from companies that do a lot with streaming and two people that hated streaming payments. And it's it's honestly it's the most like I mean, hey, I love I love panels when there's not agreement like you don't want a panel where everyone just like looks at everyone else and nods like I remember back in the even like a lot of the current ones, a lot of the current stuff we do, it's it's like asking like, hey, should the government, should there be clearer regulation around crypto? It's like, yeah, yeah, like no one's going to take the other side of that. Streaming is one of those things that's really interesting because it fundamentally there's two parts of how I sort of think about. One is it is a. Fundamentally different modality of payment that was unavailable in previous financial rails. So you mentioned that, but it's worth noting, like it is the existence of crypto that's programable money is the only thing that then makes it possible to do these crazy kind of streaming payment models.

Pat: But there's, there's a couple of headwinds that streaming has. One of it is accounting. It's it's it's it's a it's a dastardly devilishly difficult to account for streaming because you can either kind of like let's say you're doing a streaming payroll. So I'm going to pay, you know, my salary in in streaming where every day I get a little bit of my salary. Well, payroll is not set up for that. Like, there's not a world where you can do that. And so you're stuck with like, well, do I do a draw that gets like every day gets slowly decreased? Do I do a daily recognition of the payroll? Like there's there's tricks to it that are not particularly simple and that that impact it. But the other part is just like, is it a is it a use case that we really need? And that's I think that was what a lot of people were talking about. The payments panel was like, do people care about this notion of streaming payments or is it all just kind of a fever dream that it was like a solution? I think that my dad always has a solution looking for a problem.

Trevor: Yeah, I think there's like I've seen some really cool things. For example, when you're talking about empowering creators, right, and maybe just changing different revenue models, I'm not sure what happened to this app. I'm sure they're still around. But Fountain, which it's a, it's a podcast app that basically it's built on the Lightning Network. And you it pays creators and listeners as you listen to the podcast in real time. And if I remember right, it was something like you could choose to listen to ads or and if you listen to an ad, then you get like a very small amount of stats, right? So I think there's really cool applications to this where it's like removing the extra layer of like, for example, tipping someone on Twitter with Bitcoin. Like it just happens automatically. Um, you know, if someone's providing a service rather than having to wait, that's the common one we hear about, right? Like rather than getting paid every two weeks, you're getting paid in real time. So I think there's definitely like cool ideas. But even during that panel at Edas, I was like, Is it just like a solution looking for a problem? Right? Like.

Trevor: Yeah, there's also a it's a hard coaster.

Mary: Which is for lack of a better term, like a lightning based Twitter. And you can send these, these apps which are effectively little micropayments, you know. So it's an interesting concept of it's like a quasi tip for making a smart point.

Trevor: Aw yeah.

Pat: No, I love. And it's been a part of like, like Reddit since the very beginning with in their crypto Subreddits has had ways of tipping small amounts like that. That was actually one of the early use cases for crypto in general. There was a, there was a bitcoin tipping bot, someone built for the Bitcoin sub in, in, in Reddit, which was incredible. And so moving that to a newer world where like whether it's streaming or it's just small micro micro transactions is one thing. I mean when I, when I think about this stuff, I tend to think, I tend to think of it a bit societally about it, which is like we're going through a lot of different upheavals in society right now, and it's it's only going to kind of speed up with the advent of like, true, true AI that we're kind of slowly nudging to here. But like one of the world's I do, I think a lot about like what journalism and you know CNN like the media media in terms of news media and that kind of stuff. Talking head media looks like over the next few years, it's obviously gone through this enormous transformation over the last ten, 20 years with between Fox News and the way we monetize it and network cable news even now with like how CNN got got bought and then just overnight completely changed and it's it's really interesting to watch it. And so I think the overlay in my mind of I know this might be kind of a little bit heavy, but like the overlay in my mind of of what's happening in in the media in general with what's happening in AI also means we're going to have to find a lot different business models behind this because again, like someone like Fox News, like you are the product, right? Like Fox News exists to sell you pillows from that that pillow guy.

Pat: So it doesn't exist. It doesn't exist to do anything else. Like that's why they're there is to sell you pillows. And so in a world where you start to move away from that because you don't trust the various forces that come into play there and you want more kind of like more control over your media, more control over your news cycles that will require a necessitate more direct, direct monetary engagement. So there's a great graph that went out the other day of the New York Times that they're up to something like 25% digital subscription fees now, which is incredible because I think No. One, if you'd asked people ten years ago if they thought they'd ever get, I think no one thought that they were going to get there. And they actually have gotten up to to a very high percentage. So that's my where I come in on streaming is like one of the really killer use cases for streaming payments is, you know, one killer use case is, is in in countries like Nicaragua where you need to where people want to have really, really quick access to their payroll. I think that's a great use case for it. And then for for media, for media entities where you want to basically, you know, pay as you are watching on a permanent basis or per hour basis, even if it's like really cheap, it still lets you subsidize the cost of producing this cable network stuff.

Mary: Yeah, or I don't need the whole I don't need the whole Netflix subscription. I just want to watch an episode.

Pat: Yeah, right. Just gotta get my my love is blind fix you know when is whenever I can.

Trevor: Which I think.

Pat: I should never.

Trevor: Think that goes back to like just this bigger picture idea of like we kind of messed up web2 and making the revenue model all based off this idea of like, we are the product, it's all advertising revenue. And I think, yeah, streaming payments is interesting because it introduces a possibility where we're kind of going back to like you're voting with your money like you, you have the power as the user.

Pat: The the product is the product. Yes, the.

Trevor: Product is the product. You choose what you pay for. It's not your data. It's not something else.

Trevor: So it's interesting. It's an important.

Pat: Part of web3. I mean, I think it gets lost in a lot of the noise, but it really is an important part of Web3 if you, if you like, hopefully ten years from now when we look on Web3 like we looked on Web2, one of the defining things is we'll have digitization of ownership and and electronic money programable money. But hopefully one of the other things will be this like movement back to paying for products rather than being the product. And I don't know if that truly will be it, but but hopefully everyone is so aware of like how they are themselves monetized anymore that that we we, we can start to actually like kind of win that back a little bit. That's my my hope.

Trevor: So to wrap things up here, Mary, you've dropped a lot of knowledge bombs on us here and to close have two questions for you. So the first one is just for giving your experience. You've seen a lot of different crypto projects through like the enterprise lens. If you could share one message with enterprises that are exploring the use of blockchain and digital assets, what would it be?

Mary: Yeah, and I think, I mean, I think recent acknowledgment that crypto has staying power and it's going to change the financial landscape as we know it today is huge. I think it means it can't be ignored. And we've talked a little bit about education across there is no one. Single crypto asset or digital asset. So being educated on what's out there, what are your use cases and how you should be thinking about it is extremely important. And then if you do decide to get into it, it's about understanding the data. So it's about being enthusiastic, interested and understanding really what you're doing. Because as an enterprise, your finance team will need to evolve. They'll need to evolve from bookworms to chat bots that are constantly keeping their ears open with the product teams and the business because that is where these these core products are being developed. And understanding them is, is at the core of how you ultimately account for them.

Trevor: Well said. So and then maybe on just more of like a personal career development note, I have a lot of friends and as a former Big Four auditor that would love like they would love to follow your path and work on some of the things that you've worked on. And I think a lot of them feel stuck or think, you know how they hear your experiences and it's like, How does Mary get to do all of these cool things? So for the people that are maybe interested in working on some of these crypto projects or feel stuck kind of in their traditional accounting role, what advice do you have for people listening?

Mary: I think general enthusiasm. So, I mean, if you have a background in crypto accounting, that's a plus. But crypto enthusiasm is a must. Like you need to believe in what you're doing and you need to go out there and learn about the tools. So understand how a block explorer works, be conversational in how to read the data and don't. It's not necessarily about applying GAAP or being able to talk the talk. It's being able to walk the walk. Okay. We're moving from the intangible model to a fair value model. What does that mean? How am I going to do that in a company that has either a Bitcoin corporate treasury or all the way to 100% of your revenue is in one of a number of erc20 tokens to a company that. You know, is thinking about being in the NFT space. So it's really being, you know, being conversational about everything that goes into to operationalizing being part of that business.

Pat: I love that answer because that's sort of like how I think about it too, is like the people whose careers I love the most are just like, they're curious, they're interested, they work on different things. They look at different problems Like it's it's such a good and they're like always open to be talking about stuff and learning new things. It's good. Good answer.

Trevor: You nailed it. That's a great note to end on. Mary, thanks so much for joining us today. Really quick, before we hop off, where can people find you and Light Spark?

Mary: Yeah. So lightspark is lightspark.com. We have some great demo videos. We have a really cool streaming payments demo under the demo tab and then we have a ton of educational resources on the Lightning Network developer tools. So it's a great place if you're interested in this to, to go educate yourself. And then for me, kind of the only social media is Strava, but you can find me on LinkedIn.

Trevor: Awesome.

Pat: I'm like, Wait.

Trevor: Wait, wait. Is that good? Well, that's great. You're not on the problem.

Pat: You know what? I'm not a big bike rider, so I use I only I run, so I use my RunKeeper. That's there's like no social on there. I don't want anyone seeing that I'm sending.

Mary: I'm, I'm sending kudos every day.

Trevor: This is the.

Trevor: Beginning of your triathlon celebrity path. Right. Sending people to Strava.

Pat: Well well Mary, thank you so very much for being on. Of course you can find us at Big Wave IO. This has been incredibly fun. Thank you so much. And we hope hopefully we'll have you on again sometime in the future here. This is when we maybe as as life spark develops and as new rules come out, we'll bring you back on to to get even deeper into all this stuff. So thank you so much.

Mary: Thank you.