5 Reasons Why Companies Should Own Crypto • Letter 119
As the SBF trial continues to uncover appalling corruption, let us turn our thoughts instead to legitimate uses of cryptocurrency. This industry is beset by hucksters, much like early Wall Street, but the underlying value is real and only getting realer.
Crypto is still new, but not as new as it once was: Bitcoin has been around since 2009, and Ethereum since 2015. Countless other cryptocurrencies have been created along the way, and crypto has become a burgeoning sector of finance writ large.
The crypto industry is prone to boom-and-bust volatility, again reminiscent of early Wall Street or the initial innovation of derivatives products. Nonetheless, people across the globe are using digital assets today, for the sake of unique features not available in TradFi products.
Businesses can also benefit from the different affordances of crypto versus fiat currency. Here are five reasons why companies use cryptocurrencies in their operations.
1) Easy cross-border payments.
Even domestic bank transfers take forever, and this drawback is worse when you’re trying to move money from country to country. A major benefit of crypto is the ease of international transactions. All it takes is a few careful clicks, and funds will be available to the counterparty near-instantly. Paying in crypto is particularly convenient when a company employs freelancers or contractors in other countries.
Better yet, transaction costs are low. Using crypto sidesteps currency conversion charges, and the only fee required is the one inherent to the underlying blockchain. This is a huge advantage of the ability to send money without relying on centralized third parties. Instead, the comparatively minimal fee is invested in the security of the cryptocurrency, whether the system is proof-of-work or proof-of-stake.
If you’re sending a significant sum, triple-check the recipient address first. Consider starting with a small test transaction to be extra sure.
2) Hedge against equities and fixed-income assets during low-interest-rate periods.
Nothing you can buy or sell is completely insulated from the broader economy, but cryptocurrencies are a less-correlated asset class. If the stock market is zigging, crypto markets might zag.
When interest rates go down and traditional asset classes lag, investors often search for more rewarding alternatives. Adding cryptocurrency to a company’s portfolio can build resilience through diversification, and while crypto has historically had spurious correlations with broader equity markets, it can correlate more closely during uncertain times.
3) Low-cost services compared to centralized alternatives.
Cryptocurrency eliminates the pricey need for financial institutions to verify transactions. Fewer gatekeepers and middlemen means fewer pipers to pay, leading to reduced costs. For example, hosting data via STORJ is cheaper than AWS.
These cost differences can be built into a company’s business model. In Miami, Florida, Helium Mobile debuted a $5 unlimited plan, which is drastically cheaper than competitors’ offerings. How? By harnessing crypto to create a new supply dynamic:
The beauty of Helium Mobile is that it combines the power of the people-built Helium Mobile Network with the nation’s largest 5G network from our partner. We call this Dynamic Coverage.
By leveraging a network that’s owned and operated by individuals rather than big corporations, Helium Mobile can significantly reduce costs to deliver nationwide service with unprecedented pricing.
Why are people even interested in contributing to build an alternative, decentralized network? In part because they share the vision of affordable and accessible connectivity, but also because by helping build and being a part of the network, they can earn rewards called MOBILE tokens.
Subscribers can contribute to Helium Mobile Network growth as well. By choosing to share their location data, Helium Mobile subscribers can help the Helium Network community identify where to strategically deploy people-built coverage. In exchange, they have the opportunity to earn MOBILE token rewards.
4) Fast response to financial emergencies.
With the recent unrest in Eastern Europe and the Middle East, crypto has played a pivotal role for individuals who may have been cut off by international sanctions, or have been stymied by limited capabilities to acquire necessary supplies, or who have needed to send aid to or remove assets from their distressed home countries. You bet your bottom I keep a small allocation of crypto locked away for such emergencies.
Admittedly, ransomware is a problem that was also exacerbated by the invention of cryptocurrency, because it’s easier for cybercriminals to accept payments from their victims in crypto versus fiat currency. Fewer gatekeepers means more freedom… but also less protection. It’s a tradeoff. One that has affected the cybersecurity landscape, so businesses today need to be prepared to cope.
Companies that store sensitive data on behalf of clients, such as law firms or medical offices, or sometimes critical infrastructure like oil pipelines, must be able to retrieve that data in the event of a successful ransomware attack. Having crypto on-hand makes it possible to respond quickly if there are no other options. We definitely don’t endorse paying criminals or negotiating with terrorists, and you should contact your attorney and law enforcement for options if this happens to you.
5) Revolutionized business processes.
Helium Mobile above is one example, but there are more. Much of DeFi falls into this category. And DAOs have introduced a mechanism for collectives to organize and self-discipline. Consider Friends With Benefits with its bespoke social network:
Inside of the FWB social platform, members can identify, search, and connect with other members, find and RSVP for IRL events all around the world, and stay up to date on governance proposals for the DAO. Members can also get a real-time rundown of what’s most relevant to the community in a collective feed that is optimized for meaningful interactions.
FWB will be the first social platform owned and operated by a DAO where our members will define the future of the platform through participatory governance, shared economics, and our own community currency.
Is Friends With Benefits a “company”? Not exactly, but it’s doing company-like things. This is the most exciting aspect of crypto, the generative experimentation that it enables.
What crypto businesses are you excited about? Hit reply and let me know.
Keep hedging,
— Colton
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