Company Name: Spark of Light
Founders: David Marcus, Kevin Hurley, Christina Smedley, James Everingham, Christian Catalini, Jai Massari and Tomer Barel
Date of establishment: April 2022; Serie A May 2022
Location of the head office: Los Angeles, CA
Amount of Bitcoin in Treasury: n/a
Number of employees: 45
Website: https://www.lightspark.com/
Public or private? Private
Kevin Hurley and the team at Spark of Light want to make it easier for institutions and ordinary citizens to transfer value via bitcoin.
That’s why they created Lightspark, a Lightning Service Provider (LSP) — and more — that provides an enterprise-grade infrastructure that enables businesses around the world, as well as those businesses’ customers, to make payments globally using Bitcoin Lightning Network.
“We want to continue the vision that we originally had with Diem,” Hurley told Bitcoin Magazine. “And that was to really open up the financial world, to make it something where you can send money as easily as you send packets of data today.”
Hurley also discussed why the Lightspark team chose to build on Bitcoin.
“Some of the lessons we learned from (Diem) are that you really need something that is truly decentralized, something that is a neutral protocol, and something that has a lot of liquidity,” Hurley explained. “These are key aspects of Bitcoin and part of what makes Bitcoin so special.”
How does Lightspark work?
Lightspark considers itself more than just an LSP because it is a Software Development Kit (SDK)liquidity management through routing nodes, cloud-based node architecture, and API services that vendors can use to build certain features or consume certain services.
The Lightspark SDK makes it easy for customers to access the Lightning Network for payments, without the hassle normally associated with using the network.
“We’re trying to abstract away all the complexity of Lightning,” Hurley explains. “We talked to a number of companies that have been in the Bitcoin space for a long time and tried to understand why they weren’t using Lightning or why they had tried it and given up, and we heard a pretty similar refrain from all of them — it was just too complex.”
To use Lightning without an LSP, businesses would normally need employees dedicated to managing and rebalancing liquidity in their Lightning Nodes. With Lightspark, however, businesses 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. Additionally, Lightspark offers other features that institutions may find particularly useful.
“We’ve built compliance capabilities on top of our stack,” Hurley said of how Lightspark can help companies stay compliant with FinCEN Travel Regulations.
“We’ve built AI on top of our stack to make payments extremely successful. We have Predict, which is like Google Maps for Lightning. (It shows us) where traffic is stuck to help us route transactions more successfully. Then we start adding things like UMA or Universal Money Addresses, which allow you to send from any currency to any other currency,” he added.
Universal Money Addresses (UMA)
One of the most notable features that Lightspark has designed and open sourced is UMA.
Using Lightspark, businesses can offer their customers a Universal Money Address, which is a cross between a Cash app $cashtag and a e-mail address (e.g. $yourname@yourwallet/bank/exchange.com).
A UMA allows users to seamlessly send crypto or fiat, but in a secure manner.
Hurley explained how UMA is built on and interoperable with LNURL And Lightning AddressesOne difference between LNURL and UMA is that UMA can be used in a completely unique way to send fiat money.
“You can go from any currency to any other currency with UMA,” Hurley said.
“Let’s say I’m from Brazil and I want to send money to someone in Mexico. Maybe I’m visiting Mexico and I go to 7-Eleven and I want to buy something. I should be able to send money from my own currency to Mexican pesos,” he added.
“With UMA my Brazilian reals are immediately converted into fed up. They are streamed via Lightning and are instantly converted from sats to pesos and paid out to the 7-Eleven.”
One of the reasons why such transfers can take place legally is that UMA facilitates the exchange of compliance data between the various institutions that Lightspark works with, which are located around the world.
The exchanges, neobanks, and other institutions partnering with Lightspark (all of which are regulated bitcoin/crypto custodians) hold the appropriate money transmission licenses in their respective jurisdictions, allowing Lightspark and its partners to comply with the aforementioned Travel Rule.
Lightspark Partner Settings
Lightspark has been in the news lately as it has struck deals with major institutions like Coinbase, Xapo and NowbankAnd as more new partners join, more potential partners become interested.
“They see the growth – especially if we bring Coinbase on board – and a lot of entities have reached out to us and are curious about what happens,” Hurley said.
“They see that big players are getting interested and really seeing 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 very important,” he added.
Right now, the interest is coming from the more tech-forward neobanks, as these institutions look to provide services that differentiate them from traditional banks. However, Hurley noted that the big traditional banks are also paying attention.
“The benefit (of what Lightspark offers) applies to JP Morgan as much as it does to Nubank,” Hurley explains.
“We’ve worked with quite a few of them. Often they have to see others do it first,” he added.
“Once they see real adoption, I think they will accept it quickly.”
Hurley also pointed out that there is a good reason for the larger, traditional financial institutions to get involved.
“Traditional financial companies have huge pain points,” Hurley explains.
“They may have bank accounts in multiple countries and even within their own bank it takes days for them to transfer money because they are transferring money over the internet. FAST. They go from an entity in, say, Argentina to one in Europe, and it takes them three to five days to transfer money. That means they have to set up correspondent banking. It’s a big burden for them and can be quite expensive,” he added.
“I think they’re really excited to see something that can run faster, more efficiently, with better rails. It’s a net positive for everyone.”
Optimistic about Bitcoin, aware of reality
Hurley and the Lightspark team believe that Bitcoin adoption will continue to grow, but they are also aware that many people around the world are still reluctant to use Bitcoin.
Hurley sees Lightspark’s approach as a way to drive Bitcoin adoption while taking customer origins into account.
“To get real adoption and continue to grow adoption, you have to meet consumers where they are, and many consumers are comfortable with fiat right now,” Hurley said.
“Those people probably don’t know anything about Bitcoin, and it’s going to take a while for them to get into it. So if you can abstract that away for them, let them use the currency that they’re comfortable with, that helps get people on board and increase adoption,” he added.
However, Hurley also acknowledged that there are others who prefer to simply use bitcoin and ultimately use it non-custodial. He went on to say that Lightspark and its partners offer users the ability to send their bitcoin to a non-custodial wallet if they choose.
“Users can leave an admin and go to a non-admin at any time,” Hurley said.
He went on to emphasize that neither Bitcoin nor Lightning currently have the potential to drive mass adoption in a non-custodial way, which is why companies like Lightspark and the companies it partners with are important right now.
“You can’t add billions of (non-custodial) users to Bitcoin and Lightning today,” Hurley explains.
“In the long term, that could be possible, and we’re doing a lot of research into how we can make that happen, because we think it’s vital for the ecosystem,” he added.
For now, Hurley sees the custody solutions offered by companies like Cash App, Coinbase and, of course, Lightspark as a way to make it easy for people to use Bitcoin.