Wealth stored in tangible, yet non-physical, format enables personal sovereignty over that wealth. Due to the new reality that greater strength does not overcome greater intelligence, operating a Bitcoin business requires the business owner to work smarter, not harder.
This was not the case until Bitcoin began providing monetary choice to those willing to assume personal responsibility for their asset’s custody, clearance, compliance, and security. Doing so requires the proper tools to manage these concerns. Safely operating these tools requires knowledge of how each one works and the function it fulfills. Understanding how the pieces of the puzzle fit together is necessary to create a private Bitcoin banking arrangement and for many this will be their greatest challenge.
The highest level of play in the cryptocurrency “money game” is that of an owner of a business operating on a Bitcoin standard. To help foster understanding of how pieces of this jigsaw puzzle fit together I’ll describe a snapshot of one possible arrangement. Created to help aspiring Bitcoin bankers see a bigger picture enabling them to craft personalized solutions for themselves. I expect that many of the creators of these pieces of the puzzle have themselves yet to see the possible use-case-scenarios of their own offerings.
One way to strategically use current Bitcoin banking tools to diversify risk
Imagine if you will, that you’ve a successful online business and you’ve begun using BTCPay server as a self-hosted payment processor that eliminates all 3rd party fees. Your wallets are filling up with BTC, and it’s time to diversify the holdings into multiple “vaults”.
It’s now Friday, payday for your employees, and allowance day for your kids. You’ve issued your family tools for managing their Bitcoin in three different forms, designed for short, medium, and long term holding;
–an Opendime USB “bearer stick” as a form of 5-yr crypto-bond, not to be touched until 2025.
–a ColdCard wallet air-gapped SD card reader mimicking the appearance of a simple calculator as a form of savings account, to only be used for large purchases and to receive overflows from the “crypto checking” account.
–and a Tangem reloadable “crypto smart-note” NFC card for managing daily expenses, whether personal, business, or travel expenses.
On a weekly basis, from a Samourai wallet on a Librem 5 privacy-phone, send some BTC to the kids’, wife’s, and employees’ Tangem cards. Also, issue these Tandem smart-notes to your employees as a means of managing payroll and to your family for their “petty cash allowances”. These crypto smart notes are useful for business travel to allocate funds towards transportation, food, and lodging expenses and create a fully transparent record for accounting purposes. Another application of the Tandem cards is to issue them to the business managers for funding weekly operational expenses for the business, as well as to the employees for dispensing their weekly salaries.
It is also now possible to create and program your own NFC cards to access a Lightning Network paylink that instantly and at almost zero cost loads funds into the chosen Lightning Wallet. a few to consider are the Blue wallet, Phoenix wallet, and the Bitcoin Lightning Wallet. I’ve successfully reprogrammed other NFC cards from other companies, making these pre-paid lighting cards obscured by their previously branded use case. ONLY if a phone has the chosen Lightning Wallet App installed will the device read the card at all. At the moment though, using this paylink service does require trusting a 3rd party, and the Lightning Network is not completely trusted as secure, #reckless.
Not your node, not your confirmation…
Confident clearance and settlement of a Bitcoin transaction requires not only knowing how and where to determine your trading price, it requires confirming the transaction has been recorded on the blockchain for yourself. Trusting block confirmations to the wallets and blockchain readers does not provide the same level and security that maintaining a node for oneself does. Doing so not only increase sovereignty over your transaction clearance, it enables additional features such as running your own Samourai Dojo installation in order to use Whirlpool to erase the transaction history of your Bitcoin. Running your own full node on a dedicated device of your own also enables running a Lightning Node that can increase privacy, decrease transaction fees and settlement times, and allow for earning additional Sats by hosting a Lighting Channel used by your clients.
The highest level of security when doing so requires building your own Rasberry Pi device, or securely setting up your own dedicated server. This added security comes at the cost of convenience though. There are multiple turn-key Rasberry Pi nodes now available that increase the convenience but require trusting the provider of the device to have securely installed the node software and to have not installed any malware on it. Some currently trusted brands for this are the Raspiblitz, NODL.it, and Casa Node 2. As with all things in the crypto realm, always do your own research and proceed at your own risk.
Regulatory Compliant Bitcoin Business Operations
Management of Bitcoin business operations requires knowing how to keep the hotwallets functioning securely. It also requires a strategy for managing price volatility in order to enable earning spread fees by Selling BTC over-the-counter for a premium above Spot prices. One way to do this is to use a Samourai wallet installed on the point-of-sale tablet that’s been integrated with BTCPay server. It will also need topping off when the 5% commission has been earned by providing customers with BTC as “crypto cash back” over and above their purchases. When Buying BTC from the customers at a discount below Spot prices the BTC received flows directly into the dedicated banking tablet’s Electrum wallet.
Overflows can be sent to the Ledger Nano connected to the US Binance, Kraken, Coinbase, or Gemini exchange accounts that have been connected with the business bank account. The majority of BTC accepted for sales of goods, services, and OTC trades can IF, as quickly as possible, be moved back into USD in the business bank accounts to avoid the risk of short-term volatility eliminating profit margins. When waiting for BTC needed for short-term operational expenses to be turned back into fiat, a 50X leveraged Long position on Kraken can be created by business Management as soon as the BTC earmarked as long-term positions are sold for a premium. Protecting against a sudden increase in USD valuation of the sold BTC. To protect purchasing power against downside price movement, a leveraged short position can be taken out on a futures contract to defend against sudden drops in USD price. This protects the value of Spot holdings by acquiring enough additional BTC on the futures contract to offset the loss in value of the BTC held in cold wallets.
After company personnel have been compensated, the profits from the week’s business operations can be loaded onto the Ellipal wallet acting as the business savings account. This allows for the accumulation of funds in a perpetually air-gapped hardware wallet that is accessed when making large capital investments to grow the business endeavor. The business Owner can send weekly payments to his personal ColdCard, Digital Bitbox, or Trezor depending on which account needs refilling. Perhaps using the ColdCard for personal savings and the Digital Bitbox for funding international travels. Or maybe using the Trezor that’s integrated with an anonymous Binance exchange account, in order to enable speculative trading on Alt-coins, or for transaction history cleaning by trading them for privacy coins like Monero, Zcash, and/or Dash.
Bitcoin Business structuring
As a Bitcoin business has been operating for a while generating profits along the way, there’s hopefully been an accumulation of capital now needing long term storage, tax minimization, and estate planning. To acquire some regulatory clarity and to diversify jurisdictional authority a Wyoming LLC likely will have been established for retail banking purposes, a Nevada Prime Trust account for investment purposes, and a Puerto Rico Corporation for mitigating tax consequences. Each entity also has its own self-custodial and outsourced custodial solution, using each option as appropriate for the source and ultimate destination of the funds.
Profits from retail operations are sent from the LLC’s bank accounts and its retail crypto wallets into the investment accounts of the Trust (preferably from a Samourai wallet that has used coinjoin transactions to wash the transaction history clean) . Which has opened exchange accounts for trading in addition to the Ellipal for savings. Profits beyond that needed savings and capital investments, that have been earmarked for long-term holding or major capital investments are sent the bank account for the the PR Corp. In addition to its Cobo cold wallet providing military grade security kept in the business safe, or safety deposit box, in Puerto Rico. These are then paid out as dividends to the corporate shareholders, which may be the business owner, partners, or other international entities operating offshore.
Hedging your bets
Once the business owner has met payroll obligations and funded the Queen’s, offspring’s, and business’ vaults, then his own treasury can be topped off. A natural desire arises to begin speculative trading to take on more risk in return for the potential for greater gains, hedging to limit risk as a means of protecting capital purchasing power, and funding of liquidity solutions to enable daily spending. While also segregating assets into multiple liquidity solutions that store the capital until its spent through a debit card. Options exist to fund reload these prepaid debit cards with BTC and have the balance denominated in BTC through Paycent, in USD through Bitpay, in Gold through Goldmoney, and in Silver through Perpetual Assets.
As capital accumulates into larger amounts, store some of it internationally as both Gold and Silver through SilverBullion in Singapore. Enabling liquidity if/when needed through their P2P lending platform. Some of the excess BTC capital (if one believes there can be such a thing), can be liquidated through OTC desks. Then deposited into a Singapore bank for use to earn interest by lending it out through the P2P marketplace with those loans collateralized with twice the USD value in precious metals.
This BTC that has been liquidated for this purpose is protected from FOMO, fear-of-missing-out on long term gains by holding a matching futures position with high leverage on an exchange like Bitmex. When capital is needed for major purchases such as real estate, rather than taking out a fiat loan or over-collateralizing a BTC-backed loan through BlockFi, deposit it as precious metal that collateralizes the self-loan from the cash acquired in the OTC liquidation that’s been deposited into the Singapore bank.
These advanced Bitcoin business operational tactics provide fiat liquidity. Liquidity which is currently needed, but not at the cost of keeping a position on the fast-moving Bitcoin train or of a hedging position to manage the inflationary risks of Fiat by storing some capital in precious metals. The interest charged to oneself, or one’s family, in the P2P loan can be captured for use to increase the family’s estate. Doing so enables a totally sovereign banking arrangement that’s been diversified, and hedged without compromising liquidity or missing out on long term capital gains.
Crypto security requires disciplined use of software, hardware, and platforms
As cryptocurrencies are basically a form of language, protecting it requires securing communication channels, your devices, and your passwords. This can be done by carefully using encrypted email solutions like Protonmail, texting Apps like Telegram and Signal, and physical multi-factor keys as provided by Yubikeys and the Librem Keys. With all the different accounts and devices to be used in managing a Bitcoin Banking arrangement it becomes essential to use a password manager like LastPass, Blur, or OnePassword. It is also advisable to subscribe to a malware protection service like Bitdefender or CryptoDefender, that will protect against keyloggers, screen capturing, and more.
Confidently operating a Bitcoin business requires first, an investment in education, then in the proper hardware, and of attention to steering these many moving parts. Monetary sovereignty doesn’t come cheap, it costs time, mental bandwidth, and money. Sailing the crypto seas as a self-sovereign merchant mariner is not for the fearful, lazy, or dependent. This realm is only accessible to the brave, industrious, and independent business operators. But that’s also why the potential for creation of multigenerational wealth exists right now. These potential rewards will be gone once it is easy and everyone is doing it.
“You cannot discover new oceans, if you are not willing to lose sight of shore”…
Operating a Bitcoin business requires bravery enough to take the risk of leaving known safe harbors in order to discover new possibilities for monetary sovereignty.