Bitcoining your Business

Even if you never buy coffee with bitcoin, that doesn’t have to be a problem.

This is a guest publication for Bitcoin Policy UK, written by Dr. Rupert L. Matthews.

He is a Senior Lecturer in Operations Management at Nottingham Business School with a professional background in engineering. This piece reflects his own personal views and not those of Nottingham Business School or Nottingham Trent University.

Musqet point of sale devices - pay with either Bitcoin or Fiat

I view bitcoin not only as a store of value that I choose to save in, but also as a medium of exchange. Bridge to Bitcoin eloquently articulate the benefits firms can realise if they introduce the option for customers to pay in bitcoin, such as attracting a new demographic of fiercely loyal customers, who will travel great distances just to support adoption of a currency that they would ultimately be better off saving. A side note of this is, it flies in the face of all the Keynesian economists, who stick to the thesis that if a currency keeps, or increases its value over time, people won’t spend it (sorry, but Dad still wants his coffee and if he can get it with a side of bitcoin chat, that part of your inheritance has been well spent). The logical and evidenced progression from the entry point of the introduction of a previously untapped market, is merchants beginning to explore what this magic internet money is all about, and why on earth are all these HODLERS quite so happy when they scan a QR code.

Unfortunately, not all companies interact directly with end users, with a large proportion of companies tending to supply their services or products to other companies. Within the current, highly competitive, high inflation environment, a large portion of companies are also experiencing operational difficulties. If they had spare capacity and the opportunity, introducing a new source of revenue by attracting bitcoiners to buy their products would likely be something they would pursue. However, for a business-to-business company to do this, it would not only be necessary for them to implement the technology to accept bitcoin, but also persuade their supplier or customer to also implement new payment, accounting, and invoicing systems. Given the amount of difficulty many bitcoiners experience when attempting to convince their non-bitcoiner acquaintances to part with $100 to “just try bitcoin”, imaging persuading a general manager or head of dispatch that all their systems had to be changed.

Fortunately, I don’t believe this is a terminal problem, and definitely not a barrier to entry for such a company to begin exploring how their business could benefit from bitcoin. Medium of exchange is only one of the characteristics of money, with the store of value characteristic then being where much of bitcoiners’ attention is focused. There are an increasing number of companies adopting bitcoin as a treasury asset, from the well-known, technology focused Microstrategy to less well known, but equally committed companies, such as Tahini’s in Canada. This use case is providing significant value and peace of mind to those operating and investing in these firms, given they have confidence that the value of their treasury assets cannot be systematically devalued nor are they liable to being seized (unlikely, but not impossible). For those choosing to pursue this approach, there is an added benefit that, in theory, bitcoin can become a treasury asset without it affecting those in the business, well at least until the value of the treasury supports an exceptionally lavish Christmas party.

Credit: Musqet

While I’m absolutely supportive of a small celebration and giving back to those in the company, who deliver value on a daily basis, using bitcoin only as a treasury asset is like buying a flying car and then choosing to keep its wheels firmly on the ground. With its monetary policy characteristics, bitcoin is not only an exceptional store of value (give or take a little volatility), but further accumulation of bitcoin is a very logical organisational goal. From my own experience and research on operational and business development, business performance is a very difficult and complex construct to define. ESG mandates and the triple bottom-line targets have sometimes guided corporations away from their core areas of business, choosing to instead court with large investments funds to accept passive investment into their equities. In comparison, if an organisation was to continue with delivering value to their existing customers, while simultaneously focusing improvements on the accumulation of bitcoin, this could provide everyone within the company a single metric with which to assess company performance.

As someone who has practiced and then researched operational improvement for over 20 years, this is quite a realisation. Operational excellence techniques, such as Total Quality Management, Lean Manufacturing, Six Sigma and Business Process Re-engineering focus upon reducing variation, reducing waste, eliminating costs or transforming how business processes delivery value, respectively. However, much less attention, if any at all, is given to the underlying unit of account of the business, instead choosing to focus upon operational measures of performance that can demonstrate the benefits realised from an improvement project. By overlooking this small, yet fundamental element of business, significant problems arise; did your organisation really reduce operating costs or did you just keep pace with the devaluation of the fiat unit of account?

Figure: Nikkei 225 – 1985-2024 (Yahoo Finance, 2024)

Without the infinite wisdom of a classically trained economists, I wouldn’t begin to suggest that Japan’s economic and manufacturing prowess that arose from meteoric improvements in productivity during the 70’s and 80’s led to stock market highs only recently being breached. However, by relentlessly pursuing operational improvement, that effectively led to price deflation (being able to produce more for less), without being able to maintain a level of growth that outpaced the deflationary effects, Japan has experienced a unique confluence of events. By employing a Keynesian mentality, Japan has since spent years attempting to promote growth through fiscal stimulus that works against their deflationary behaviours, while all the time devaluing the currency companies are attempting the measure their performance in. Compare the above chart with the below chart (Japanese Yen versus USD), and the recent rise in the Nikkei’s performance can be largely explained by the devaluations of the Yen. While absolutely outside my paygrade, as someone who has never formally studied economics (which I am truly thankful for), it does raise questions related to measuring firm performance in an inflationary fiat currency.

Figure 2: Japanese Yen Versus United States Dollar

Again, as a non-economist, the deflation against USD of the Yen up to 2010 provides a second insight, suggesting that purchasing power was increasing for their national currency, so acting as a good store of value. It would then be logical for a Japanese citizen not to feel the need to risk their savings by investing in Japanese equities, so suppressing the value of publicly traded stock. While this is but a single data point, the mechanisms and forces at play raise some important issues, particularly in terms of an organisation’s unit of account and its impact on measuring performance. The Japanese example suggests that being too effective at improving operational efficiency could result in a deflationary cycle that was later counteracted by the deliberate devaluation of a currency via yield curve control (from 2018) and deficit spending. Given the broader need for organisations to continually work towards improvement, this hopefully doesn’t devalue all the work I’ve done on process improvement (fingers crossed), but instead highlights the need to focus upon how we measure improvement. As already stated, “business performance” is a difficult metric to define, is it short term profitability, medium term staff development, longer term new product pipeline or any number of metrics? Instead of attempted to develop some rich, complex and all encompassing “dashboard” of metrics to track an organisation, could a simple metric related to the accumulation of bitcoin over a given period provide a simpler gauge of organisational performance?

For a business wanting to integrate bitcoin into operations, a treasury asset represents a relatively simple starting point, obviously only sell fiat that they are unlikely to need in the short to medium term (to protect against any downside risks). The next step could then be to begin considering how to orient a business towards accumulating more bitcoin. If the business does not sell products or services directly to customers, bitcoin accumulation could instead be the goal of operational improvement activities. Drawing from Goldratt’s book, “The Goal”, if the aim of a business is to make money now and in the future, if bitcoin is the best money, the goal of the best business should be the accumulate bitcoin. While the PhD’s, paid for by funding from the UN may shout about the need to focus upon sustainable development goals, low time preference bitcoiners are unlikely to pursue development that adversely affect the environment (they tend to like fresh air and sunshine). Also, with the need to retain existing, attract new and deliver value to, customers, bitcoiners are also unlikely to deliver products of poor quality, that don’t last or throw sats away due to excessive quantities of internal non-conformance (items in the reject bin).

While I will absolutely support and promote companies that not only accept bitcoin for their products or services, Microstrategy, for one, has shown there are multiple avenues for accumulating more bitcoin without having to persuade anyone to part with their sats for software. However, medium of exchange and store of value sort of represent the extreme ends of the business system, money coming in at one end, and money stored for the long term at the other. They overlook what is going on within the business, the processes that actually transform inputs to outputs, the processes that account for the majority of expenses, whether in terms of raw materials, operational utilities or wage expenses (amongst others). By integrating the aim of accumulating bitcoin into the operational processes, those within the company can begin to appreciate how the changes and improvements they make to the processes contribute to organisational aims. Whether improvements are oriented around Lean, Six Sigma or some form of quality management, they can be measured in terms of accumulated Satoshis, rather than theoretical cost savings or headcount reduction, the metric of choice for Lean and Six Sigma.

Rather than the business owner who has been accepting bitcoin for a number of months being gradually orange pilled from speaking with bitcoiners who have travelled from afar, all those contributing improvements can relate their actions to the company’s bitcoin treasury. While one outcome of this may be the overly extravagant Christmas party, paid for by “treasury dividends”, the bitcoin accumulated through operational improvements could themselves be distributed to operational staff. Aligning individual goals to accumulate bitcoin with the organisation’s aims to add to their bitcoin treasury account has the potential to greatly increase the productivity of staff across the organisation. To draw from John Bessant (a voice in the continuous improvement domain), “with every pair of hands, you get a free brain”. By providing laser focus to those within the firm, their creativity and problem-solving skills can target any improvement opportunity which can then be captured as bitcoin.

This piece of work was informed and inspired by a recent piece I wrote that was published in “The Bitcoin Challenge” special issue of the Challenges peer reviewed journal, thank you Dr Murray Rudd and Dennis Porter for the opportunity. I would also like to thank Green Candle Investments and the Bridge to Bitcoin for their enlightening discussion on promoting merchant adoption. Importantly, the proposed idea does not work against merchant adoption, instead providing another perspective to the whole process. What would be worse than a business owner spending their money on a bitcoin enabled pay terminal, putting a sticker in the window, but when asked by a customer, the person behind the counter politely apologies that they don’t know anything about “the bitcoins”. In comparison, if the pursuit of accumulating and saving in bitcoin was part of everyone in the company’s role, with maybe an incentive for the bitcoin they accept (a percentage bonus?), how might a staff member’s response change? From a position of everyone in the company being incentivised to share their understanding of bitcoin, attract new bitcoin customers and market the benefits for customer who pay in bitcoin (possibly saving the Visa and MasterCard fees by paying via lightning), all parties would be motivated for the transaction to take place in bitcoin.

Finally, given the upcoming changes in FASB, where companies are able to record the fair market value of any bitcoin they hold on their balance sheet, rather than only be able to record loses if the price fall, the adoption of bitcoin as a treasury asset by firms has received a considerable boost. Complimenting this development, supporting policy makers to continue their work in evolving accounting practices, such as the tireless media, policy and education content organisations such as the Bitcoin Policy Institute, Bitcoin Policy UK and Satoshi Action Fund, is then likely to support further adoption. However, while businesses need to submit accounting data in the required format, they are free to choose the best metrics with which to measure their internal operations. As a result, apart from not realising the opportunities they have available to them, there shouldn’t be insurmountable hurdles for company who want to use bitcoin as their unit of account.

I hope this piece provides an idea or opportunity for exploring this middle ground for integrating bitcoin into business operations. For the economists who may be red faced with anger or picking themselves off the floor after my flippant comments on the last 30 years of the Japanese economy, don’t worry, I have no interest in making any changes to monetary policy.