Will Reeves (00:03:45):
And so I’ve worked in things from peer-to-peer marketplaces, how do we bring two strangers together who are exchanging a very expensive good with a lot of money? And how do we remove any sort of middleman from that equation? And that’s a really hard problem to solve. It’s hasn’t been quite solid yet. I have worked in social payments, so in the early days of Stripe, how could we create a platform to collect recurring payments monthly from subscribers, vans, you name it, who could provide an ongoing revenue stream for your businesses, essentially, how to Amazon [inaudible 00:04:21] business.

Will Reeves (00:04:22):
Some of these were just ahead of their time. I love to look back at now at the success, Patreon, and all these. And it’s amazing to see that some of these early products that I’ve worked on were glimmers of what would become and manifest and how to become an essential part of a lot of entrepreneurs’ and creators’ lives now. And so, really my focus is how to introduce new technology, make it relevant in people’s daily lives.

Will Reeves (00:04:47):
But more importantly, how do you create an incentive structure to have people adopt a new behavior or a new technology? And I think that plays a lot into what I’m doing here at Fold and that trick, or that Trojan horse as Satoshi would call it.

Preston Pysh (00:05:03):
Will, talk me through the moment that you got the idea for Fold? Where were you? Who were you with it popped into your mind? Then after you kind of described that, how long did it take for you to act on the idea?

Will Reeves (00:05:18):
Fold has an interesting, long history that’s has evolved with Bitcoin. As the world has tried to grasp what is Bitcoin? What is it for? Why do people need it? Problems to solve around Bitcoin to use it? I met my co-founder Matt Luongo at a project we were working on down at Google. And he was telling me how he was working on this new project, Bitcoin magic internet money days. And the real thing was, okay, a lot of people have this new type of money, Bitcoin, but the problem is there’s no way to use it.

Will Reeves (00:05:50):
How can you have money that you can’t use? And for a lot of people at the time and still, to this day, you’ll see trend line throughout Bitcoin’s history of, if you can’t spend it or if no merchant accepts it, is it actually real money? So we started with that problem. How can we turn this magic internet money that people are now accumulating, curious about and the world is starting to understand, how can we create a public moment that makes it, number one, usable so that you could spend Bitcoin at your local merchant?

Will Reeves (00:06:17):
But also I think equally important, how do you create that moment for others to see, hey, I have Bitcoin and someone is accepting? Someone is valuing this magic internet money and how can we do that in a place that’s in a Starbucks or in a merchant where that moment is a kind of a collective shared reality? We start with that inkling, and it was a simple website. You send Bitcoin on chain, you can get in line, you get your Starbucks coffee, and you turn around to your friend and say, “Look, Bitcoin is real and now I have my coffee.”

Will Reeves (00:06:50):
That was the original part, was a really simple thing to try to solve. It was really just about our own curiosity about this money is. Also, everyone’s journey starts somewhere and for a lot of people, they have certain preconditions about what money should be and how it should be used. And so the first problem we tried to solve was primarily around the medium exchange use case.

Preston Pysh (00:07:15):
When you’re saying that it would make a lot of sense for me that, and I’m assuming this conversation happened before 2017, that when we got into the four cores that a person like yourself, who’s really trying to bring Bitcoin to the transaction level would have become a person who was wanting larger blocks and all that kind of stuff. We know that the code got forked. We know that Bitcoin cash got started in the summer of 2017.

Preston Pysh (00:07:45):
And so walk me through why you did not go with that side of the movement and that you stayed with the smaller blocks. What kind of conversations were you having with Matt at the time? Did he agree with you?

Will Reeves (00:07:58):
When we think about Bitcoin and what it is, we have to think of it, not as just technology, it’s a cultural phenomenon. It is a movement of builders, it is a movement of people. It is an idea, and there are certain parts of what Bitcoin is that you cannot take away without making it into something else. And so that was something that was a shared idea from myself and Matt and the team, is that we are not making Bitcoin and do something for coffee payments.

Will Reeves (00:08:25):
What we’re doing is building infrastructure on top of Bitcoin because it provides such a bedrock foundation that a new monetary system could come up and we’re here to provide the proto rails, the proto payment rails for how this money would come to fruition and how it would touch people in their lives. And so, one thing that we knew and all agreed on is that by changing our forking and the ways that were being proposed was just making it into something that it wasn’t, and it wasn’t going to be viable.

Will Reeves (00:08:53):
We weren’t here to make a faster Visa. We were here to make new money more usable, more value for the holders. And this wasn’t an easy thing. Like you said, it’s kind of hindsight is 2020, but we had this decision. We had supporters on our board who were part of that org that we had to part ways with pretty dramatically and we still have interesting back and forth to this day. A lot of them have created those other forks, splintered coins that are out there and just trying to stay alive and we couldn’t be happier with the decision. This was pre-2017, right?

Preston Pysh (00:09:29):
Yeah.

Will Reeves (00:09:29):
So we saw the Bitcoin winter come through, we’ve seen bear markets and so much so that when these bear markets come, Bitcoin spending drops precipitously. And so when your whole business model is around the spending aspect and the bear market comes, and you know it’s going to be a year or two before the cycle recycles, you have a problem. And a lot of Bitcoin companies were forced to confront some of these issues.

Will Reeves (00:09:54):
Number one, Bitcoin is heavily on your balance sheet. Number two, the usage and the cycles change what behaviors people are using it for. And so we had to make a decision, do we shut this down, put it to bed and say, “Hey, this was a good run. Let’s see what we can do maybe down the line”? Or there are a lot of emails in my inbox of other coins that are showing up like an absolute Cambrian explosion, offering a lot of money that could keep the lights on for a long time. Should we accept those? Should we go there?

Will Reeves (00:10:22):
And we had to make the hard decision of number one, no, we’re not going to. We’re going to shut down Fold. And Fold went through a period where we actually put it to rest, and we had some conditions about what would need to be present for us to revive that.

Preston Pysh (00:10:38):
Talk to us about some of those conditions. That’s amazing. I didn’t know this about the story.

Will Reeves (00:10:44):
Number one, is that me deeply familiar and focus on what product-market fit means and what product-market fit feels like when you create a new service, a new product that touches people’s lives. It’s not something that feels like you’re constantly pushing or having to do the Sisyphean, rolling this rock up the hill. When you’ve achieved product-market fit and you feel it, and it is a jet fuel beneath you, whether you’re ready or you’re not. We just didn’t feel it with that product.

Will Reeves (00:11:10):
We knew that there was a good amount of people, we had a great fan base. A lot of OG Bitcoiners had used us. Great product in that way, but it just didn’t do it. And why? First of all, not many people had Bitcoin, and out of the people that did have it, those that wanted to spend it were even a smaller subset. So we’re looking at an addressable market that is very tiny at that time. And the second part is the technology wasn’t even there yet.

Will Reeves (00:11:35):
So we knew we weren’t going to have anything to do with any of the fork coins, that wasn’t where we are going. Again, we shut down the business in order to not do that, but we did know that layer two work was coming. And we knew that the natural transition and establishment of currencies is a layered process. It is something that needs to start from the most base unit. And so for us, we knew a layer two would come along that would provide an experience that would actually support the use case that we were originally intending.

Will Reeves (00:12:05):
And so for that, we really waited on those two things. Number one, we need to rework the business model. What it is, how it is so that number one, the market is larger and we’re solving a problem that actually will generate a demand that we’re just going to have to keep up. We just weren’t feeling that. And the second part was, is the technology ready? Is it there? Is layer two there? When is it ready? And those two questions weren’t quite figured out yet, though there were glimmers of hope for them both.

Preston Pysh (00:12:30):
So at what point did you start to feel… You’re talking about this feeling of fit and getting the timing right. And for people, I tell you, a lot of the stuff that Will’s talking about right now, there’s a really famous book that was one of Steve Jobs his favorite books. It’s called Inside the Tornado. The book is all about the timing of these emerging fast-moving technologies and being able to get the timing right. The book talks about getting the timing right.

Preston Pysh (00:12:58):
For you, Will, sorry, just from an education standpoint for people listening to the show, I think it’s a great opportunity for them to do some more research if this is an idea that’s something that they have an interest in learning more about. But for you, when did you guys feel that that fit was really firing on all cylinders?

Will Reeves (00:13:17):
I think for me, it started at Thanksgiving in 2017 when suddenly we had the great Bull Run of 2017 and there was something different about this Bull Run. The on-ramps were in a much, much better position. CoinBase as a company was established literally because it was the only one there that had semi-good user experience and it just happened to be there. Speaking of your timing thing. They did a better job at being exchanged. They had good UX for a retail audience, and they just happened to be there at the right time.

Will Reeves (00:13:52):
And so seeing Bitcoin in that time enter the mainstream, it took over all of the headlines. It was something that friends and family knew I was interested in this, but by no means would actively bring us into conversation suddenly were. It was entering the public conscious in a very different way. And I think some of that had to do with Bitcoin as the idea, but also of Bitcoin as actually being accessible to them for the first time.

Will Reeves (00:14:16):
There was actually a place where I could legitimately say, “Hey, dad, you’re interested in Bitcoin, go to this and you can actually get some.” That started a shift in my mindset because for me, I’ve had many different experiences with Bitcoin pre-2017, pre even falling down the rabbit hole. Really magical ones of remittances from migrant workers and the Snow Valley sending them home to Mexico.

Will Reeves (00:14:39):
From Occupy Wall Street accepting donations to… I was living in Argentina and one of the guys I was living with was a sophomore engineer. And he was talking about how he uses Bitcoin to make sure the government could not debase his savings. So these really poignant, very strong examples of some of the most incredible qualities of Bitcoin were thrown in my face. But for me and my personal journey, the actual really powerful moments were all about skin in the game.

Will Reeves (00:15:08):
Was, how can I get my first bit of Bitcoin so that I am aligned with the asset, I’m educating myself increasingly about it, I’m paying attention to the cycles. To me is one of the most powerful mechanisms for educating and for Bitcoin adoption overall, is that we can talk about ideas and that’s important. But at the end of the day, I think exposure to the asset in your portfolio, there’s nothing that will make itself known faster to you than buy that vehicle.

Preston Pysh (00:15:36):
So when did you have the idea for the debit card? Was this back in 2017 you’re like, “Man, we need a debit card with rewards that are paid in Bitcoin”? Was that the timing and then you got it rolled out by this cycle or?

Will Reeves (00:15:51):
We saw these new on-ramps come into place. Coinbase, the exchanges, all of that just… Those were essentially the best business models, the only real business models that were actually available in the Bitcoin space, everyone else was having to get very creative. And so for us, we looked at what, what did we all already do? What infrastructure had do we already built? Merchant relationships that essentially the old infrastructure took Bitcoin payments coming in, converted it into Fiat prepaid cards or open prepaid cards, so you could use at these merchants and get a discount.

Will Reeves (00:16:22):
And so all it really in my mind really was like, okay, what is the real problem to solve right now? What is the most lucrative, the biggest problem to solve? That’s getting Bitcoin in the hands of more people. So how can we use what we have to get Bitcoin in the hands of as many people as possible in the shortest amount of time? And so just flipping that infrastructure we had away from spending Bitcoin, converting it into Fiat. What about spending Fiat and earning Bitcoin rewards?

Will Reeves (00:16:47):
It was just literally reversing the infrastructure that we had built. And in doing so in that small switch, we go from speaking to an audience that has Bitcoin and wants to spend it, which is very small to an audience where 97% of North Americans are part of rewards programs. Now we are talking to everybody, nearly almost everybody in the world is now relevant to this business model. And not only that, it brings up this really great other benefit is it removes every single barrier to entry to getting it.

Will Reeves (00:17:18):
So even what Coinbase did and the other exchanges with KYC, setting up a wallet, setting up your bank account. Now we can give you Bitcoin into a wallet without KYC, without long waiting periods on your bank, and it can happen with the infrastructure we have. And so it was a combination of looking creatively at what is the biggest problem that’s facing Bitcoin today and its adoption cycle? And what do we have right now that we can put together to service that use case?

Preston Pysh (00:17:49):
I’m really curious and I suspect a lot of people listening to this are as well of the rewards card. Why is there a market for this? Talk to us about, and I suspect you’re going to get into the international demand for rewards or for coupon cards. Talk to us about that first phase where you’re receiving Bitcoin, you’re then buying rewards cards, coupon cards for you, name it business, whether it’s Amazon or whatever.

Preston Pysh (00:18:18):
Just walk us through what that looks like and what’s the incentive or what’s the motivation for people to go about this process?

Will Reeves (00:18:28):
Everybody right now, again, this is the timing part. There’s an interesting moment that’s happening with Bitcoin where people know about it. The majority of people know about it, and there’s this deep curiosity about it. Today, we heard around 46 million people in the U.S., I think own Bitcoin, and that number seems to be doubling each year. This fact that the economic context that we’re living in is forcing people to look creatively at their own finances.

Will Reeves (00:18:56):
And the debit card concept is something that fits into the daily lives that doesn’t require you to change your behavior in any way. You’re not putting up any risks with your hard-earned money to speculate into an asset that you might not really understand. And a debit card or credit card that pays you out in Bitcoin, when you start to look at it, at an asset that’s increased 200% average and year over year, it becomes an asset that is a no brainer to earn as a reward.

Will Reeves (00:19:22):
There’s no reason to be earning airline miles or points when you can have access to the upside potential of this new asset. And so we know that rewards were an already existing behavior that’s very widespread. And just offering a better reward is enough to transfer these millions of people who are earning rewards every day into a card like the Fold card that will generate Bitcoin on every single swipe.

Preston Pysh (00:19:48):
Will, talk to us about the rewards cards. On the app, when I log onto the app, if I want to buy a $100-Amazon rewards card, I can do that. I think the rewards I got back were like four or 5% back. I’m using Amazon all the time, so this is a total no-brainer. I just don’t understand why anybody would pass up on this. It’s just free money. Right? So I go onto the rewards on the app, I click Amazon, I buy a hundred or $200 worth of rewards cards. I get that 5% back and it’s just a total win.

Preston Pysh (00:20:24):
So why is Amazon doing this? What is it that Amazon gets? Or is it because they’re just banking the money earlier? I’m pulling my consumption to the left and they’re willing to offer a 5% reward for people to pull their consumption to the left that much?

Will Reeves (00:20:42):
When we talk about merchants and rewards, the only reason that they’re offering rewards is to generate more business, either new customers or more loyalty. And that comes with a cost, right? There’s always a cost of acquisition for a new customer, and there’s a cost to retaining a new customer. And prepaid gift cards are a wonderful way of doing so. Again, I think it’s 90% of Americans will either gift or use a gift card sometime in the given year, so it’s really prevalent medium of exchange.

Will Reeves (00:21:11):
And for them, the fact that that value is booked ahead of time, prepaid cards is another huge benefit. Starbucks, I think the stat is that 10% all Starbucks gift cards purchased go on use, which essentially provides them a interest in the loan, in perpetuity on these unused cards.

Preston Pysh (00:21:30):
Wow. I didn’t realize that that number would be that high. 10%.

Will Reeves (00:21:35):
You start to think about all the drawers that are collecting dust probably in your own home would be gift cards.

Preston Pysh (00:21:40):
I would assume the number’s very similar for other vendors, may be even worse or for the vendor it’s better. But do you think the number is higher for other vendors than Starbucks?

Will Reeves (00:21:53):
Yeah. I think absolutely. It also depends on how much a merchant gives is really a factor of their own margin. Grocery stores, gas stations give less back. Digital services, gaming software give a lot more, and so it really depends on what their business is and what their cost of acquisition and doing business is. So the breakage point is one of the pieces that Fold is actually trying to actively combat is number one.

Will Reeves (00:22:20):
We don’t think it’s a good thing that 10% of these cards go unused. We would rather that you purchase something and you’re able to actually use the full value. And so it’s in that is where we really started to know, and this idea of product-market fit that we saw with this very simple app to let you connect to debit card, a credit card and buy these prepaid cards and earn Bitcoin with that.

Will Reeves (00:22:42):
A little experiment, we were able to see the beginnings of product-market fit. For us, it was a clear path and gave clear confidence that it was now time to build the Fold product, which was allowing you to earn Bitcoin on everything you do. And this is where the partnership with Visa came out where we would launch a debit card and a checking account that would make sure that you earn Bitcoin every time you swipe.

Preston Pysh (00:23:07):
Will, talk me through the mechanics. I would think it’d be extremely difficult to manage the volatility in the Bitcoin price as you’re also managing this percent back. Let’s just say the average percent back is 2% just as a generic number. I spent $100, you now have to procure 2% of that, so $2 worth of Bitcoin for my account at that moment. You have all these people that are using this card throughout the day that are buying Bitcoin within minutes of each other.

Preston Pysh (00:23:40):
And you’ve got on-chain fees that are pretty expensive to this amount that if I go and spend $10 and you’re pulling 20 cents out for the cashback on that, that becomes a really tricky thing to manage with such a volatile underlying asset. How are you guys doing that? I’m just curious mechanically, how you guys would go about that and managing that risk of the volatility in the price.

Will Reeves (00:24:10):
It’s something that’s constantly on my mind and it’s honestly a problem that it just increases with the amount of swipes on that card. You start to look at what Fold is doing and you start to look at Fold and you realize it’s actually an exchange. It’s an indirect exchange. We are now taking… Essentially you’re swiping your card… The order of operations, you’re swiping your card, we are receiving interchanged denominated in Fiat, which then we have to flip into Bitcoin in real-time to convert and give to you and your Bitcoin wallet.

Will Reeves (00:24:40):
Again, it’s just an exchange, but instead of a user directly purchasing, it’s done through the revenues generated from the interchange that is subsidizing these rewards. And so we have to act and we have to prepare and bill just like an exchange does. We need to make sure we’re over collateralized, we need to make sure that we are over covering our bases. But Fold has a secret weapon here that gets back to our roots that have really helped us is that we accept Bitcoin as payments.

Will Reeves (00:25:07):
And because we are operating the Lightning Network, we have generated a lot of people that are transacting in Bitcoin, and we incentivize them to do that so that we are receiving a constant flow of Bitcoin into our treasury every single day. And that inflow is higher than the current outflow of rewards going out. And so you can see this becoming essentially a glimpse into what a circular economy of Bitcoin starts to look like where we have a segment of our users that are purchasing goods and services with Bitcoin.

Will Reeves (00:25:38):
And then that Bitcoin is then redistributed back out as rewards to all of our other users, whether they’re paying with Lightning or they’re paying with their Fiat debit or credit card.

Preston Pysh (00:25:48):
And so those inflows are coming through the rewards card program?

Will Reeves (00:25:53):
The inflows, so on our app, you have three payment options. You have a credit card, debit card that you bring to Fold, your own. You can pay us a Lightning Network and your own wallet and the Fold debit card itself. So we have three different options and each of them have a different level of cashback. And the way that we derive that level of cashback is what do we want to incense bonds?

Will Reeves (00:26:17):
So in the early days when Lightning Network was very small, we actually subsidized nearly gave all of our margin to Lightning Network users so that we can make sure that we would bring more and more Lightning Network users into the Lightning Network ecosystem. Because of Fold offering very generous cashback, we had an outsize effect on bringing new users and the Lightning Network community so much so that at times we’ve been the largest merchant on the Lightning Network.

Will Reeves (00:26:47):
We’ve then had some of the most connected channels and we’ve been at the forefront of building and being a user of the Lightning Network, which just so happens to have a good alignment with our current business of the debit card rewards.

Preston Pysh (00:27:02):
Let me tell you a personal story of something that happened to me on your platform. I had not funded my account and I was low on the amount that was in there for my debit card. And I wanted the buy, I don’t remember what it was. It was some type of rewards card on your platform and I got a higher kickback if I paid with Lightning. I was not at my house where I run my full Node and I have my Lightning set up at the house, but I did have Jack Mallers’ Strike app on my phone.

Preston Pysh (00:27:33):
And so through the Strike app, I was able to scan the QR code that your platform gave me, which was a Lightning address. I scanned it with his Strike app, which there was like, I don’t know, $50 or whatever on my Strike card, which just said, “$50 U.S.” I scanned it and it immediately recognized… His Strike app recognized that it was a Lightning address. And it was just like, “Do you want to pay this?”

Preston Pysh (00:28:02):
And I was like, “Yeah, you know what? Let’s see if this will work just out of curiosity, and it did. His Strike app recognize that that was a Lightning address. He immediately took the USD that was sitting in that app and paid your Lightning invoice. I’ll tell you, man, my mind was blown, not just for your app, but also with Jack Mallers’ app and how he was able to recognize a Lightning QR address versus a regular on-chain Bitcoin address.

Preston Pysh (00:28:33):
And immediately do the conversion into the Lightning Network and make that payment. And then there you are managing this account balance between rewards, people using the debit cards and receiving Bitcoin, which was exactly what happened. And I can just see how everything is becoming.. The user interface is becoming seamless for the person who doesn’t even understand the technology behind what’s even happening. But there’s a lot happening in that.

Will Reeves (00:29:02):
What you got to experience was actually the future of where payments, where finance is all going. Completely decoupled, distributed relationships that do not require any foresight or you don’t need to go and call. I did not need to call up Jack and say, “Jack, I really want you to be able to read Fold invoices.” He didn’t have to do that to me either. What we’re building is a large community. They’re are building all of these services that are completely interoperable without the need of asking for permission for anybody.

Will Reeves (00:29:33):
And again, this is where the network effect of Bitcoin comes in, both from a consumer standpoint, from what you had, the seamlessness of saying, “Oh my God, my debit card is not with me.” And being able to activate and just scan a QR code there too on our end to be able to accept payments from wherever. This is the future of where it’s going. And the network effects are both happening both from a consumer standpoint, but also for builders.

Will Reeves (00:29:59):
This is going back to what we did with the Lightning Network in the very early days, is that we saw that… We knew Lightning layer two would have to be the right solution in order to unlock this medium of exchange concept. And so as to Fold, we knew that if we started in saying, “Hey, everyone, we’re collecting Lightning payments.” Now very few people would do that. There was no infrastructure back then. The wallets were very primitive, let’s say.

Will Reeves (00:30:23):
And so what we did was we made it irresistible to ignore the lighting network. Basically we sh we jacked up and subsidized the rewards rates across all of our cards in order to bring in, number one, consumers who are going to demand access to these cards, which means that that puts pressure on the wallets to build better, and better, and better wallets. And it’s a virtuous cycle, the better the wallet got, the better Fold got, the more business Fold got.

Will Reeves (00:30:50):
And this gets back to why my approach to business and building products is so focused on incentives. It’s not enough to build technology, you need to have the incentives right in order to actually seed the ecosystem, especially because what we’re now talking about are not walled garden, individual centralized products. We’re talking about a network and a network involves a lot of participants independently acting. And in this scenario, this is where incentives become even more interesting.

Will Reeves (00:31:21):
So with Fold, we’ve always tried to go ahead and try to make an on-chain payment on Fold, you can. And we did that, we know we’re leaving money on the table because we want to funnel everyone to the Lightning Network. And with that, it has made our business better, it has increased the quality of wallets and ultimately seated a lot more users who consider the Lightning Network somewhere where they live every day.

Preston Pysh (00:31:44):
So it seems like the real fundamental piece to all of this is that your Lightning deposits are exceeding the rewards that you’re paying out for people that are swiping their debit cards. As I think about that in a graphic, is that accelerating? Are the deposits accelerating and growing faster than the rewards that you’re paying out? Is there convergence? If there is convergence, is that a concern?

Will Reeves (00:32:11):
The thing is, is that again, going back to Fold’s initial quandary. We have a Bitcoin payments app, now is with the Lightning, which involves you having Bitcoin, then being in the mindset to spend Bitcoin, and then being actually set up to spend on the Lightning Network. Those concentric circles get smaller and smaller. On the debit card side, we’re now talking to an audience which debit cards and credit cards touch 97% of everybody. And so that concentric circle goes bigger and bigger.

Will Reeves (00:32:37):
And so to answer your question, the inflows of Bitcoin are quickly going to be outstripped by a rewards liability going out. And that’s going to happen very, very fast. Already happening, where we’re needing to set up different sources to source our Bitcoin. But we do see a lot of activity on the Lightning Network still. It’s still growing, it’s still in its infancy. And this is why I really want and have challenge, and I’ve talked to a lot of builders in the space, not just about access to technology.

Will Reeves (00:33:05):
Not just Fold need to create incentives for people to be there. We need to have more companies like Fold who are actually prioritizing, privileging the incentive to use it, not just the ability to use it. And so we’re doing it in our own way. We’re doing it through a kind of indirect way, the Trojan horse, which I consider Fold a complete charge in our step, but we’ll get into that a little later.

Preston Pysh (00:33:28):
When I’m thinking about traditional just clearing mechanisms, it seems like there’s such a massive incentive for all these credits card companies and anybody who’s conducting clearance type actions to get on Lightning as fast as they possibly can because it’s going to reduce cost, it reduces the whole Rube Goldberg machine of clearing.

Preston Pysh (00:33:51):
To me, it seems like the incentive is there, but it’s almost like Wall Street and all the big banks are just a little behind the power curve, figuring it out. Is that an accurate characterization from where you sit? What are your thoughts on that?

Will Reeves (00:34:06):
This is where we need to look at the incentives for them. They have wonderful business models that are working quite well for them, very profitable, in fact, record profits in the last few years alone. There’s very little incentive for them to go and adopt an open-source technology that makes it very questionable how they can make money in the ways that they used to make money. And so the idea of fees, transaction fees, interchange, all of that starts to get very murky on how they would maintain their market dominance because once they adopt this, everybody has access to it.

Will Reeves (00:34:37):
When Fold let’s say Lightning payment goes, any Lightning wallet can fulfill that. The only thing that competes on is experience at that point. It doesn’t compete on regulatory capture or compliance or anything, but who just has a better experience and treats their customers better? Which has not been the incentive for a long time for business. This is one of the beautiful parts about open source and networks like this, it really drives businesses to a optimal user experience because that’s the only way you’re going to make money.

Will Reeves (00:35:06):
You can’t force people into a closed garden anymore. And so for them to adopt this is essentially their undoing. And unless they have a plan on how they’re going to recover from that and the new business model they’re going to do that, there’s really little incentive. And this is where Fold enters the space. I think the only way that this is ever going to happen is through an indirect means this is the Trojan horse.

Will Reeves (00:35:30):
We would go to merchants back in the day, Starbucks, all they say, “Hey, let’s have you collect, accept Bitcoin payments.” And they said, “No, not a big of a problem. We make a lot of money on the interchange. Anyway, this doesn’t make sense for us.” But then we go to them and talk about rewards, and we talk about new businesses, new customers coming to them, new volume, and then their ears perk up. It’s this same method that we’re going to have the transition over to this more open network.

Will Reeves (00:35:57):
And Fold is doing this by meeting customers where they’re at today, leveraging these networks, letting them go about their daily lives, swiping their cards as they always do, and start amassing this balance of Bitcoin that now can be withdrawn directly to the Lightning Network. So we’re basically changing the balance and flow of capital away from these closed network systems and now releasing it into this new network called the Lightning Network.

Will Reeves (00:36:22):
And every single time you swipe the network gets stronger and stronger and stronger. And people that may not have been in the Lightning Network or had a wallet or anything now do, now they already have them. Now they get that same experience that you do where, hey, I can just pull out my phone and fulfill a Lightning invoice from anywhere in the world at any time, without any permission, without any fees. That suddenly becomes an unstoppable user experience that is very, very hard to compete with.

Preston Pysh (00:36:50):
For me, it sounds like the natural business growth four-Fold is to start just going to all these different credit card or debit card issuers, banks, whatnot. You already have the solution in place, and then you’re just supplying that to them. So like, if you’ve got a USAA account or you have a Bank of America debit card, credit card, there’s an option for them to start receiving rewards in Bitcoin. And then they just come to you as the turnkey solution in order to provide these rewards for them. Is that something that you’re actively working from a business standpoint to grow the company?

Will Reeves (00:37:33):
I’ll give an anecdote that tells you where this is going. When we launched and announced our Fold card, and we did so a little less than a year ago, and we now have over a quarter million people who are signed up for this card. Not only that is that we launched this to a very small beta group of people, closed access, Preston, you’ve been able to enjoy it. Only tens of thousands of people are actively using this card.

Will Reeves (00:37:57):
And we constantly get emails from Visa and the card networks saying, “What is happening on the Fold card? The level of usage that we see is indicative of either a very old incumbent card program or something that we’ve never seen.” One time they call us up and says, “It’s weird, our data says that this program looks like it’s a program in Asia where people are breaking up payments and paying for everything off the debit card.” So-

Preston Pysh (00:38:22):
Yes.

Will Reeves (00:38:23):
… taxes, groceries, bills, copies, everything is going through this. They’re like, “The normal North American behaviors to have multiple credit cards and we’re seeing them consolidate into this one credit is a black hole of these user’s money that are just going into, ‘what is going on?'” And then they inevitably say, “Why did we start working with Fold in the first place?” Well, Bitcoin. And all of these card networks are going to very rapidly realize some are doing it faster than others.

Will Reeves (00:38:50):
Is it just like what’s happening to the existing incumbent banks when they look at the cash app, at Robin hood and they see, they offer Bitcoin and suddenly they’re seeing accounts close on mass at their bank. And now they’re opening up these cash app banks because the demand is so wide. It’s been a latent demand that has not been fulfilled and just opening up access sucks all of that energy, demand and financial power away from them. They now know that this cat is almost out of its bag.

Will Reeves (00:39:19):
If you will see in a year or less, if your credit card or debit card program is not offering the ability to earn Bitcoin rewards, you are going to be out of luck. You are going to see users transfer to other programs like Fold, but what’s been in Folds plans and cards the entire time is that Fold has built our entire stack on a platform and an API that will allow any credit card and debit card company to plug directly into Bitcoin rewards and via the Lightning Network. So this is going to be a massive wave that we’re about to see.

Preston Pysh (00:39:51):
So the answer to what I was saying was yes, you guys are doing that.

Will Reeves (00:39:55):
Resounding yes.

Preston Pysh (00:39:56):
Wow. Holy [crosstalk 00:39:59]-

Will Reeves (00:39:58):
Just think about this. $200 billion is paid out every year in rewards. That $200 billion paid out every single second of every single day. It doesn’t matter of really anything except that people are swiping. And so when you think about what this means for Bitcoin, and even if we’re able to deliver 10%, 20%, 25% of that to Bitcoin, what that means, 24/7 heartbeat of Bitcoin being taken off the table, whether that’s in a bull market, a bear market, it doesn’t matter.

Will Reeves (00:40:30):
And this is one of the only methods of Bitcoin buying that matches this behavior that is regardless of bull or bear market. It just thumps on just like blocks every single day. Bitcoin rewards will take Bitcoin off the table every single day as well, every single swipe.

Preston Pysh (00:40:45):
I think you would have a really good beat on maybe the direction that this would be going. On the Lightning Network when you think about you’re running your full Node, you’re routing all these transactions on the second layer. And you’re probably collecting a very small fee for providing that service today, but in the future, there’s a lot of people that suspect that the fees are going to go up significantly, not significantly, but they’re going to go up significantly from where they’re at now.

Preston Pysh (00:41:17):
And this is going to be a pretty lucrative thing if you run a hot hub of channels between all the different nodes that are out there. So do you see this being a substantial source of income in the future, almost like what you see for on-chain fees? Probably not as high as on-chain fees, but something like that. What do you see this becoming in the future?

Will Reeves (00:41:45):
There’s a lot of speculation, we talk a lot about this internally, we try to model this out and it’s all very interesting. But to be honest, my main focus is creating the best possible user experience right now. And if this leads to a fee market that generates revenue and at the levels that you’re talking about would mean that Lightning Network has succeeded fantastically. That is the native layer for any retail or consumer interacting with Bitcoin would be on Lightning Network in this scenario you outlay.

Will Reeves (00:42:15):
And for us, that comes with a whole host of benefits that didn’t exist before. Number one, it’s much cheaper in terms of operating the business, a lot less overhead, lot less fees coming on our side and a pure interaction with our users that opens up our user base from the current banking jurisdictions to the entire world. And so just that alone, even if we’re not making routing fees is enough incentive for us to pursue this.

Will Reeves (00:42:42):
And so it is exactly something that will probably happen if it does come to fruition, but we’re not banking on it right now, we know that this is stuff it’s still fairly early. But even just the effect, as I just said, of this amount of rewards being paid out every year, now, not going on-chain, but directly into Lightning wallets that now users can interact. You’re going to see a vehicle that allows people to be onboarded to Lightning on mass. That’s the whole genius of rewards overall.

Will Reeves (00:43:12):
This is actually something that Satoshi even talked about in his cryptography mailing list is that he says, “The real trick is to get people to actually value Bitcoin so that they become currency.” And he says, “I think you get started somewhere in a narrow niche like rewards.” Because he understood the distribution mechanism of the rewards space that it captures almost every single person and that it gives them a way to be natively onboarded into the network without having to do it themselves necessarily.

Preston Pysh (00:43:39):
Will, you had talked about previously the potential for providing interest for people on their rewards? Is this something that you’re still pursuing? And if so, or if not, just give us some details on it.

Will Reeves (00:43:51):
I always say we’re 10% done with the Fold experience. We’re building a Bitcoin bank, so what does that mean? That means that there are a lot more services than just the debit card and a checking account. Even if you’re interested in coming to the new world of Bitcoin, you still want some services that the incumbent and traditional services offered. And so right now, we have our debit card and checking account. Users are funneling every single dollar they have through us, whether it’s rent, their tax payments, really everything.

Will Reeves (00:44:18):
And with that comes with, “Hey, I usually do this and I can’t do with Fold now, can you do this?” And so we are very much interacting with our community to see what are those main things that we need to prioritize to build out this Bitcoin bank that we’re building? And one of those critical ones are savings account. I’m already direct depositing my entire paycheck to Fold, I need a place to park it, and I would like to earn a yield on it as well.

Will Reeves (00:44:42):
And so, we are very excited to be rolling out our savings account program later this year that will allow you to earn a yield on your USD savings and pretty lucrative yield. We’ll be announcing that soon, but really what I see this doing is rounding out the bank experience. Really again, Fold meeting you where you are today, providing the services that you enjoy today, not requiring you to change a single thing about your life.

Will Reeves (00:45:06):
Just by adopting Fold now, welcome to the world of Bitcoin. This is an adoption machine we’re building here and we’re taking the lead from our community and our users.

Preston Pysh (00:45:16):
When you say substantial, I suspect you’re not saying like 10-year treasury yields. You’re saying like real yields.

Will Reeves (00:45:23):
We’re saying real yield. So everything that we do… or your grandparents’ yields. This is not the anemic 0.1% that you’re going to be seeing here. This are actual several points that are going to be generated of your USD in your account, all through Bitcoin. And the good thing there is that and what we’ve learned already with our card-

Preston Pysh (00:45:45):
Hold on, Will real fast. So you’re saying the U.S. dollars that are sitting in my account as I’m waiting to spend them and get Bitcoin rewards, that U.S. dollar is going to be getting interest.

Will Reeves (00:45:57):
Yes. And so we made that a conscious decision. We are at the top of the funnel. I think besides exchanges, we are one of the number one funnels of new entrance into the space. We have people who only heard of Bitcoin and now have their first Satoshi through Fold. I don’t think there’s another entity that is quite funneling this new of a user into the Bitcoin ecosystem. And with that, we take very high responsibility for being a good shepherd here.

Will Reeves (00:46:24):
And one of those things is that we want to not only just slap Bitcoin on your experience, but bring the ethos of Bitcoin with it too. And so, one of those tenants is not your keys, not your coins. We’re truly taking ownership of your Bitcoin is fundamental to your Bitcoin journey. And by doing that and not forcing, only viewing yield on Bitcoin means that you’re going to give up custody of your Bitcoin for a while. So we’re going to first start off on your USD balance.

Preston Pysh (00:46:49):
How are you guys going to be able to offer high yields on that? Are you going to tokenize it in that some type of stable coin in the background? How is that achieved?

Will Reeves (00:47:00):
This will be based on stable coins. There’ll be a conversion from your Fiat balance and stable coins. It’ll all be done in the background that you don’t have to take advantage of. There will be an insure, these accounts are going to feel like proper savings accounts and it is going to be a passive yield that you’re going to earn. There are some existing servers out there that are providing yield like this, and it’s going to look a little bit like it or feel like that, but one of the things that we’ve learned about our program is that…

Will Reeves (00:47:28):
I think we have had over $100 million flow through this Fold card since November or so. But if you look back at the total value of the Bitcoin we’ve paid out with the appreciation of Bitcoin over the last six months or so, the cashback rate is 9%. And now you start thinking, okay, if you’re offering a savings account that gets you three, four, or 5% back in Bitcoin, and you’re taking into account the appreciation of that Bitcoin, a funny thing starts to happen.

Will Reeves (00:47:56):
The rewards and interest you’ve earned in Bitcoin start to be bigger and more substantial than your actual savings account that you have that you may have been working on for years. It also means that the amount of money you’ve spent on goods and services to get those rewards is now essentially paid off because of the appreciation of Bitcoin. And this is how we bring you from one world into this new world, this Bitcoin native world, where we turn Bitcoin into your unit of account, because of that very experience.

Preston Pysh (00:48:27):
And you start outperforming many hedge fund managers from Wall Street.

Will Reeves (00:48:31):
That’s a bi-product.

Preston Pysh (00:48:32):
With a better Sharpe Ratio. Oh my Lord.

Will Reeves (00:48:35):
Yes. And this is something, this is not just head… Now this power is in the hands of individuals. One of the things about Fold is, let’s bring down the Gini coefficient of Fold. Let’s make it more equitably distributed. Let’s give it to the people before the billionaires and hedge fund managers take it all. Let’s create a product that is going to efficiently distribute as fast as possible to as many people as possible in the shortest amount of time.

Will Reeves (00:48:59):
And what’s going to happen, we already have users. Today, Matt ODell tweets, “I bought some golf clubs a year ago on Fold. The rewards I earned on those golf clubs are worth double what I paid for those golf clubs.” It surprises me, this was the hypothesis of Bitcoin rewards was that rewards is the Trojan horse for individuals to actually go from a world denominated in Fiat to a world denominated in Bitcoin.

Will Reeves (00:49:23):
The rewards is seeming indirect Trojan horse that gets you from point A to point B in a very indirect way that almost happened subtly right under your nose without you really realizing it.

Preston Pysh (00:49:36):
Boy, oh boy. Hey, let’s talk about something that is a little bit of a gripe that I heard from the questions as I was preparing for this. Some people said, “I don’t like the wheel.” So for people that aren’t familiar with how this works, so you conduct the transaction. After that, your smartphone will ping you the Fold app that’s on your phone. And then there’s like a little wheel and you spin that and you can get, hey, last week I was getting 5% on anything that I purchased. That was a one day kind of thing, but.

Preston Pysh (00:50:07):
And sometimes you get a real small reward, depending on where you land on like this wheel, a fortune wheel. People said, “I don’t like the volatility. I wish it was just a fixed rate or I had the option to select a fixed rate of whatever it is.” Is that something you guys plan on rolling out or making available for people if they would like that?

Will Reeves (00:50:28):
Where Fold is going to be over the next year is that we’re going to arm every single credit card and debit card with the ability to turn on Bitcoin rewards with their existing program. The 99% of other cards operate on this fixed rate program. And so with Fold, when we look at that as a startup, where do we want to be? We know we want to do something different. We’re going to create a different category of rewards, because we already know that the fixed rate opportunities are going to be well covered.

Will Reeves (00:50:54):
We are going to be providing them, we’re going to let you have access. Our upcoming credit card may have a little piece of that in there. And you may be able to get that in Fold eventually. But what we wanted to bring the table is something different in rewards overall too, not just replacing the asset of airline points instead of Bitcoins that have airline miles, but we also want to change the reward experience into something that was a social experience and something that was an engaging experience, and something that happened in public.

Will Reeves (00:51:20):
So that when you see, we have clerks at Whole Foods saying, “Oh, that’s that Bitcoin card.” We have people spinning in line and other people see these wins. We wanted to create something, and again, this is the focus on incentives and creating a new experience that generates a moment, a ritual, kind of a public moment for this to happen, because we know our customers, the best customers are our own users and Bitcoin holders today.

Will Reeves (00:51:48):
They’re already evangelizing Bitcoin and this is just another way to expose them to that. And so with any new experience that you build, you have a lot of kinks to get through. By no means, does the spin is fully perfected yet. There’s a lot of things coming that will give you the option for flat rate. But at the end of the day, we’re not going to deviate from this new thing. Number one, because the vast majority of our users absolutely love it.

Will Reeves (00:52:13):
But also because we know we’re going to be seeding the world with Bitcoin rewards, and you’ll be able to find a card that works for you and it will be provided by Fold. But for the experience to add this, it has already brought an untold amount of new Bitcoiners because of this span, this social kind of moment.

Preston Pysh (00:52:32):
I’m laughing because just personally, when I first started using it, my immediate thought was, God, I wish this didn’t have a wheel and I wish I could just get a fixed rate back. Having used the card for multiple months, I actually enjoy it now. I look forward to it, it’s just funny for me. Sometimes I have an awesome reward. I’ll give you an example. I purchased a meal for my kids at one place and then a meal for myself at the other, and both times I got a significant reward back because I had a big purchase earlier in the week.

Preston Pysh (00:53:08):
It was like an $8-purchase and a $9-purchase and I think I got 30% back on both of them or something ridiculous. You know that’s rare, I know that’s rare, but it just made me smile. It was just a fun experience. Now, the next time I roll it, I might get a pittance for my reward, but I’ve actually started to enjoy it. And I’m not the type of person that would typically… I am a very down to the numbers type of person.

Preston Pysh (00:53:33):
When I first got the card, it was like, hey, if it’s 1%, if it’s 3%, if it’s anything in between, just give that to me on every purchase. I don’t want to open the app, I just want to the reward and not have to think about it. So I hear you on it. I think some people might still want the fixed portion.

Will Reeves (00:53:50):
There’s some market, this credit card market is something that every… There’s never been a different way of earning rewards ever, so changing behaviors is exactly what Fold is all about. And so we’re learning a lot, but what we do know from our users that they love the experience, it draws them in, it’s fun. And there’s something that when you’re thinking about the credit card market and debit card market, it is the most competitive consumer market outside of automobiles and software sales. It is one of the most cutthroat competitive environments.

Will Reeves (00:54:23):
So what’s Fold is trying to do is cut out a new portion, a new experience that delivers you fun every time, but also make sure you have a lot of Bitcoin in your wallet. Now, when you look at the numbers, and again if you’ve been using this card or Fold app for over six months, between the generous rewards we’re giving and paying out, but the appreciation of Bitcoin, you should be up 9%. Number one, no other credit card debit card that’s doing this, especially not a debit card.

Will Reeves (00:54:47):
But also you started to look at all the other things. Today they announced 4% inflation, Fold users don’t feel that inflation. Fold users have been writing the appreciation of Bitcoin that’s almost made that 4% inflation almost not even something that they feel. And so-

Preston Pysh (00:55:02):
Meaningless, yeah.

Will Reeves (00:55:03):
… point heard, and I think you’ll like to see some of the developments that we have coming up around this very thing that provides an experience I think anyone would like to enjoy.

Preston Pysh (00:55:14):
How about a credit card? I think a lot of people have seen that most cards and you’re seeing them come out from a couple of other vendors revolve around it always being a debit card. Why is that? And is there a credit card in the works where you’re going to get rewards back with that?

Will Reeves (00:55:29):
Yeah. With us, how we think about this, there’s a lower barrier to entry for launching a credit card, especially as a team of our size. We’re 10 people, we are not a large conglomerate yet, although we are growing fast, hired five people last week. We launched the debit card to make sure we knew how to operate a card program. It’s not easy, it’s not an easy thing. There are many people involved. There are banks, enablement partners, manufacturers, you name it. There’s a lot of moving pieces to this.

Will Reeves (00:55:58):
And so we launched the debit card first, which by the way, has more volumes spent through debit cards. Although the difference is that people spend on credit cards with higher ticket items and especially most of our users would spend on a credit card too. And so we know it’s important, it fills out your kind of portfolio. We want you to come to Fold and know that whether you’re putting a purchase on credit, purchase on your debit card, or in your savings, you’re earning Bitcoin.

Will Reeves (00:56:24):
And you really need all of those aspects to really round out someone’s financial needs on a daily basis. And so we will be launching our credit card this year, very excited about that. It is going to have elements of this card where it’s fun, but I think we’ll be recognizing some of the things we’re trying to improve and make it even a better experience there. But I will say, one of the unintended consequences of this is that we have seen and have not a small amount of users who have totally abandoned using credit and are not purchasing on credit anymore.

Will Reeves (00:56:57):
They send us photos of their credit cards cut up, they do our DMs and say, “I’m done with this.” They’re living what many would say more within their means, and actually, the data speaks to this. Since the pandemic started, people have been putting far less of their expenses on credit and have been moving to debit cards. Primarily I think a lot of that has to do with uncertainty about maybe where the economy will be, and so extending credit seems to be number one, most people have been in a bad spot in that before.

Will Reeves (00:57:27):
The average millennial is deeply in debt and has very little in savings. And so, you start to see when the economy and the other macro things start to become precarious. People start to pull back and look for things that are more manageable and within their means. And so I think the debit card was perfect timing. I think as a basis for your finances, the ability to direct deposit your paycheck there, pay bills out of there. And then on top of that, being able to use a credit card is ultimately what you’re going to get through Fold as a full package, but that should be launching later this year.

Preston Pysh (00:57:58):
Will, what is a book that has been very influential to you that has shaped just your worldview? And feel free to mention more than one if there are multiple.

Will Reeves (00:58:10):
Oh man, I’m big into biographies. I love reading about people and their lived experiences here. And so I just finished one on Abraham Lincoln. I have one in here, I look at my bookshelf and it is just one of the most motley things ever. We have payment systems in America, we have a game design, we have an Abraham Lincoln biography, and a lot of fiction. I’m a heavy science fiction reader.

Will Reeves (00:58:38):[Ersel Legon 00:58:38] is one of my favorite science fiction writers and I think I draw from just about everywhere. Again, pretty voracious reader, actually more and now listening more and more so I can actually free up my eyes and do things when I’m not listening to your podcasts. I’ll probably pop in an audible or something. I draw inspiration from just about everywhere, so I’d say in there there’s a few good ones.

Preston Pysh (00:59:01):
All right. Will, had a blast chatting with you. I’d really like to do this again in the future and just hear about the progression of what it is you’re building here. This is just amazing. Give people a hand-off to where they can learn more about you and where they can learn more about Fold.

Will Reeves (00:59:17):
Every once in a while, I’ll say something smart or interesting on Twitter, but a lot of updates on what we’re doing with Fold. We build Fold out in the open, so every single thing and feature that you see there has been suggested or asked for by our users. And so we welcome that conversation are useful or not, or just have ideas. So you can get me on Twitter. I’m @wlrvs and you can find Fold app at foldapp.com.

Will Reeves (00:59:42):
I suspect over the coming months, you’re going to want to get your hands on our card. There some pretty massive updates coming, new features coming that just haven’t existed before. And I’ve been wanting to release this to the world for a very long time. And I think will be the beginnings of this kind of bridge for millions of new people into Bitcoin. So whether you like Fold, whether you want to use Fold, this is all good for Bitcoin.

Preston Pysh (01:00:08):
And with that, Will Reeves, thank you for coming to the show. Thank you for your time.

Preston Pysh (01:00:13):
Hey, so thanks for everybody listening in to the show. If you enjoyed the conversation, be sure to subscribe to the show on whatever podcast app you’re using. We really appreciate that. And if you have time, leave us a review. So thanks for joining us this week and we’ll catch you next Wednesday.

Outro (01:00:28):
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