The invention of the Bitcoin protocol has not only revolutionized digital currency but also created an entirely new ecosystem that opens up possibilities and redefines the rules for businesses today.
Recently, at the prestigious Bitcoin 2023 event held in Miami, renowned experts Avthar Sewrathan, Product Marketing Manager at Timescale; and Douglas Bakkum, Co-founder and CEO of BitBoxSwiss took center stage during a captivating discussion hosted by Christian Keroles, General Manager of Bitcoin Magazine.
Together, they unveiled six invaluable secrets that every business owner should be aware of when venturing into building on the robust foundation provided by the Bitcoin protocol.
These insights shed light on how leveraging this groundbreaking technology can propel businesses to unprecedented heights while navigating potential challenges along their transformative journey.
The collective expertise shared between these industry pioneers adds depth to our understanding as we delve into each secret revealed during this momentous occasion.
Self-custody in Bitcoin is different from fiat
Douglas said that business owners, as well as individuals, need to understand that Bitcoin is different from fiat. He noted that custody and security are crucial factors that differentiate Bitcoin-based businesses from fiat-based businesses.
As a leader with a B2C company that provides blockchain security services, he pointed out that businesses should know that their Bitcoin as well as crypto assets are not hosted in a wallet but on the blockchain.
And the only way to access their asset is via a key that works with the wallet. Unlike in the traditional financial system, if you lose your Bitcoin key, your asset is gone and cannot be retrieved as in the case of using a credit card or debit card.
“So business owners have to take a lot of care about this as it can be intimidating,” he added. Furthermore, while there are third-party agencies that he advises new business owners should use, there is still the risk of losing one’s assets as these third-party companies can also make mistakes.
Leverage the power of open source
Avthar added that businesses coming into the Bitcoin protocol can leverage the power of open-source codes. The advantage is that no one needs to build from scratch.
The open standards, open ecosystem, and strong open-source community allow businesses to build on what other projects have created, he noted. He cited an example with the ContractHero software that makes it easier for businesses to utilize smart contracts without creating any.
He cautioned about using third-party tools which cannot always be trusted, so it is important to be “careful about the parties you choose to build on top of”
Follow the Bitcoin on-chain activities
Here, Avthar advised that business owners must acquaint themselves with the on-chain activities going on with the Bitcoin protocol. Since the state of the Bitcoin network becomes the main focus of any business building on it, he noted.
These include the slowness and fastness of the network and transaction speed. “Monitor and keep up to date with what’s going on” in the ecosystem. He emphasized that they shouldn’t only observe but use inferences obtained to make decisions at times.
Transparency drives the ecosystem
Douglas also added that companies that want to build on open-source software like Bitcoin need to be as transparent as possible to avoid a negative backlash of any kind. He cited an example with the Ledger Wallet that got exploited with the assets of users put in jeopardy.
The transparency of Bitcoin makes it important for businesses to be open “because people can find out later what the actual truth” and that can violate the truth between you and your consumers.
Safety for corporate funds
Douglas mentioned that it’s important for businesses in the Bitcoin ecosystem to use a multi-signature method to safeguard their assets so that one person is not given access to control their Bitcoins at any time.
“You’re probably going to want to do a multi-signature setup because you can’t have a single person controlling all the funds,” he said. While it is not 100% safe, if done correctly, it can avert any risk.
These can be broken down into four components: Who are those signing? How many signatures are needed? What recovery process are you implementing? What is the regular maintenance process in situations when one signer leaves the organization?
Avthar added that he recommends businesses use both self-custodian and custodian methods to guard against risk. “I’d recommend having a variety of solutions”.
Don’t be in a hurry
Douglas mentioned that businesses should also be aware of adversaries who would want to exploit their projects once it is launched. “So if you’re making software for decentralized networks you have to be very conservative; that’s why Bitcoin core development takes so much time.”
There will be several reviews “because once you launch, you’re launching it to this whole community but also the community of adversaries” filled with “people trying to figure out how to go through the back door.”
Avthar added that test nets can be used as test grounds for products and use constant audits to find out loopholes before they are exploited.
Additional factors to consider
Don’t ignore your risk appetite if you want to build a business in the Bitcoin ecosystem, Avthar said. The balance sheet is important to help a business owner consider how much risk they can bear.
He added that it’s also important to look at what other businesses have built on Bitcoin before embarking on any project. “Go and look at the open source projects and at the work that other people have done.”
For Douglas, the opportunities and learning process in the Bitcoin space are worth the risk involved in the ecosystem.