Bitcoin is the most famous crypto currency, with good reason. It was the first to leverage the new concept of a blockchain to enable a distributed, but trusted ledger, which for the first time in history allowed a cryptocurrency where double spending was impossible. Since its founding on 3 January 2009 the system has worked and proven it can scale with extreme accuracy.

Bitcoin’s growth and acceptance has been slow, but has grown to the point where the total value in Bitcoin today is over $701 Billion Dollars. It is the 12th largest store of value in the world (Gold is number one at $11 Trillion Dollars). The store of value in Bitcoin is now larger than all the holdings of Berkshire Hathaway. It has a larger market cap than Visa, Mastercard, JPMorgan Chase and every other bank. Clearly Bitcoin is here to stay.

But what does this mean for your business? Our reporting on cryptocurrencies to date has made it pretty clear that a Cambrian Explosion in innovation in Bitcoin related products and services is underway. This is a very dynamic field. To help make sense of this we attended the recent MicroStrategy World conference, which had a focused track led by CEO Michael Saylor on this very topic.

Saylor himself has helped lead a growing awareness of the potential of Bitcoin as a corporate store of value, deciding to convert $425 million of company cash into Bitcoin is August and September of 2020.

On September 14, 2020, MicroStrategy completed its acquisition of 16,796 additional bitcoins at an aggregate purchase price of $175 million. To date, we have purchased a total of 38,250 bitcoins at an aggregate purchase price of $425 million, inclusive of fees and expenses.

— Michael Saylor⚡️ (@saylor) September 15, 2020

The rationale behind that decision was Saylor’s view that holding cash in USD or any other type of sovereign debt was a losing long term proposition due to the inflationary pressures on all fiat currencies (which he largely blames on unconstrained national banks). He also viewed Bitcoin as 1000x better than gold in that role. Since those first purchases MicroStrategy continued its buys and now holds over $2.1 Billion in Bitcoin. They are big players in this space.

Since then Saylor has been very active on his personal Twitter account and in the media providing very vocal explanations of his views about Bitcoin’s strengths. His support has helped many enterprise leaders understand there is something about Bitcoin that needs to be better understood.

This is a big reason we were so excited about Saylor’s decision to focus on Bitcoin for CEOs at his MicroStrategy World conference.  One of the more insightful sessions included Saylor’s context on new business models CEOs can consider to take advantage of the revolution underway in Bitcoin based finances. As foundation for discussion he reviewed several existing use cases for business in the Bitcoin domain now:

• Paypal has a new model where consumers can use Paypal to buy and hold Bitcoin and use it for some transactions. This model is more closed, the Bitcoin needs to be converted back to fiat for more transactions, but will generate revenue for Paypal and is smart.
• Square also has a new ability to enable users to buy Bitcoin, but has a more open model where custody can be transferred out of Square.
• Coinbase is a first mover in enabling crypto purchases and exchanges and has a more open model.
• Robinhood has a famously closed model for crypto. People can buy and sell it but not transfer it.
• Grayscale offers a closed fund powered by Bitcoin. They own the Bitcoin, shares can be sold, but Bitcoin stays in the Grayscale product.
• Fidelity has a business strategy around digital assets, you can buy Bitcoin on their platform and they custody it for customers. It can be moved off of their platform, so more open of a product.
• NYDIG is an example of a hybrid business, they have invested their balance sheet in Bitcoin and sweep cashflows into bitcoin, they also offer brokerage and custody services for Bitcoin.
• Binance is an example of an exchange for crypto that is transitioning to a full scale services firm offering banking, loans, derivatives.

With these as examples Saylor then provided insights and ideas for new business models:

• Financial services for Bitcoin exist already, some very good ones, but this is a domain where innovation is still needed and new ideas for how to store, exchange, custody, crypto may result in new business models.
• New Bitcoin related funds are appearing and those can be very attractive to potential clients, since they can offer easy ways to purchase and benefit from Bitcoin and if structured properly can offer unique tax benefits.
• The insurance market, which is ripe for disruption, can leverage Bitcoin as a hard investment to hold premiums instead of the weak fiat instruments most currently use.
• Credit cards and other consumer debt, which can have very high interest rates, can use bitcoin to collateralize lending for reduced interest rates.
• New version of consumer apps for finance can be created (new Paypal or new Square) which are Bitcoin first and can have features such as enabling Bitcoin as collateral nad use the Bitcoin network to transfer money. This could reform consumer finance.
• Device companies like Samsung and Apple have many opportunities. For example, if Apple would build Bitcoin protocols into the iPhone and Apple Watch and Mac ecosystem, perhaps leveraging iCloud, they could become the biggest bank and financial services company in the world nad enable secure holding of consumer funds.
• Companies like Microsoft and Google can also build support for the Bitcoin protocols into their operating systems and cloud offerings and back end server offerings.
• Any consumer ecommerce, shopping or social media firm can build Bitcoin protocols into their solutions and enable more secure transactions and enhanced functionality.
• Services and technology firms both can build models around helping facilitate the transition of capital from fiat to Bitcoin. There is a dire need to help smooth the transition of $400T in fiat related capital to a harder currency like the BItcoin network.
• This is a massive business. This requires understanding of compliance issues based on geography and types of money and is complex and it needs well thought out services and products to enable.

Our recommendation: Consider Michael Saylor’s overview list of potential Bitcoin related business models in the context of your existing products and services and initiate a dialog with your senior leadership team on ways to transform what you do to leverage the power of these open, secure, reliable capabilities for store of value and secure transactions.

 

OODA network members can also access these additional resources on Web3 including insights into how to reduce risk and inform business strategies. Research and reporting of interest includes:

The Cryptocurrency Incident Database OODA analysts track every major cybersecurity incident and seek insights into root causes that can inform defenses.

Reducing Risk To Cryptocurrency Projects by Red Teaming We provide insights on prioritizing defenses of cryptocurrency projects based on our years of experience in red teaming.

Is Bitcoin a National Security Risk? How might Bitcoin be framed as a national security risk?  As national security technologists, here is our take on where the government is likely concerned.

The Past Present and Future of DeFi  Here we capture insights from two of our most popular OODAcasts on the cryptocurrency revolution, one with crypto pioneer Bradley Rotter and one with author of “The Infinite Machine” Camila Russo.

Bitcoin and Ethereum and the Metaverse  Jahon Jamali is one of the great explainers of the nature of the crypto revolution and provides insights here into the nature of the coming changes.

What Will The Federal Government Do In Response To The Rise of Cryptocurrencies? All businesses and citizens should understand the importance of improving policy in this domain, but we also need to be cautious about over regulating or passing foolish rules that do more harm than good.

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