Edge has been paying all of its employees almost exclusively in bitcoin since its inception. Many find this strange and hard to conceptualize. Their perplexion is easy to understand since many have had only the slightest awareness of the digital currency and for only a short amount of time. Utilizing the Bitcoin protocol and its currency, bitcoin (btc), gives companies certain advantages that aren’t available in legacy financial systems.
A significant portion of our seed funding in 2014 was made in bitcoin, most of our revenue since that time has been in bitcoin, and all of our employees and contractors have been paid in bitcoin. The crypto-based origin of Edge and the continued existence of us and many other businesses, projects, and individuals like us are testaments to Bitcoin’s ability to act as a foundation for creating and sustaining economic life without a central administrator.
Benefits of Bitcoin Based Payroll
Employees at Edge get paid every two weeks similar to a lot of organizations. The only difference is, we get paid in bitcoin. This has three huge benefits for our company and employees: privacy, cost, and speed.
Edge doesn’t hold any bank account information on its employees or contractors nor does our payroll company. This affords our employees and contractors a level of privacy that they can’t get in the traditional system. There are also a variety of privacy tools available to everyone that uses bitcoin and other crypto-currencies that allow employees to maintain financial privacy even from their employers. Edge has to know at least an address to send a payroll transaction to an employee or contractor but there are a variety of attributes of Bitcoin, other crypto-assets and services around these assets that would allow an employee to have an incredible amount of privacy. Edge as a company has the same privacy tools at our disposal as well.
In addition, we save precious bits as a company by not using the full payroll services of our payroll company. We instead send bitcoin ourselves to our employees and contractors. The payroll service gives Edge value solely by providing us with tax coverage and by taking on liability for any discrepancies with tax authorities.
Our payroll service is really a tax service for us because their payroll services have been made obsolete by the Bitcoin network for our purposes. If they added a simple interface for addresses and QR codes we could conceivably use their service to make payroll in bitcoin, but they wouldn’t be able to charge much at all for it. Additionally, as we grow as a company the savings will be even greater because many payroll services charge per person, while Bitcoin charges per transaction. The gap between per person costs and per transaction costs are considerably high.
To round it out, typical bank account transfers take 1-3 days to hit bank accounts. Bitcoin is faster. Payroll typically gets to employees anywhere from 10 min to an hour after its been sent and employees are free to do whatever they need to do with it; save it, spend it, exchange it, etc.
How do people that work for bitcoin, eat?
You rarely see places that accept bitcoin, and if you do it’s probably in a big city. In the early days of our company, there were a few places that picked up the bitcoin “fad” and accepted it, but these are exceptions; most businesses didn’t and still don’t. I highlighted some of the benefits of Bitcoin (the currency and protocol) for us from a business perspective but it’s true downside is its sparse acceptance as a currency in physical retail locations. Spending bitcoin directly in a physical retail context has been slim, but gets more common everyday, albeit extremely slowly. Most of the action for commerce for an internet money is naturally found online.
Early on, employees often relied on exchange services or peer to peer markets to flip the bits they earned into Dollars. But every day the Bitcoin protocol kept chugging along, the more services and infrastructure were built on top of or around it making it easier and easier to live on bitcoin as a currency. Eventually debit cards were introduced, more major and small online retailers started accepting bitcoin, and peer to peer markets became more numerous. Many different types of exchange options have flourished over the years. All of our employees and everyone that has held bitcoin for a significant amount of time knows that there are a growing number of options, services, and tools for crypto users, especially in developed countries. And this trend is gaining speed not only in developed economies, but also in the developing. We’ve all survived this long, we must be eating something.
Why rely on legacy systems if you believe in Bitcoin so much?
Some may read the above and think, hey you’re not actually using bitcoin all the time, you are still reliant on a fiat currency and other payment rails for at least some of your goods and services. Hypocrite!
Everyone building a new system relies on the old at its genesis. Electricity had been around for a few decades before it was lighting wealthy people’s homes in the late 18th century. Scientists, entrepreneurs, academics, and early practitioners of all stripes were still using the old infrastructure to live at the same time they were understanding, harnessing, and taming the incredible power of electromagnetic forces. Steam engines, horses, and candles were in full use by everyone including the crazies that thought electricity would actually be a thing regular people used everyday. What a bunch of hypocrites!
Use of older infrastructure by electricity’s early developers didn’t invalidate the present utility of it for them nor the promise and future utility it would provide the world.
Why did so many invest so much time, attention, and capital into the dangerous, volatile, esoteric, and spooky electricity? Because they saw its present utility and believed in its almost unbounded future utility, and indeed brought that future utility to life. It wasn’t until after World War II that the United States had an electric grid that was publicly available to everyone: commercial, industrial, military, and retail use. Did no one use electricity before that? No, only a very small group at first, then more, then more, and then finally everyone.
One of the reasons we hold a money is our affirmative belief in its future utility. There is no difference with bitcoin, gold, and the US dollar in this respect. Some, like the employees that have and continue to work at Edge, know bitcoin has tremendous future utility and has enough present utility to make it a no brainer to accept for wages earned.
Most people have no idea what’s beneath the surface of the Bitcoin “fad”, but when they do actually dive down and investigate, there is a whole economic ecology that is connected to and related to Bitcoin that grows everyday at a face-melting pace.
What about the volatility?
Bitcoin the network is remarkably un-volatile, consistent, reliable, and predictable. About every ten minutes a block of transactions are processed, confirmed, and added to the Bitcoin time-chain according to the rules of the protocol. In my personal experience, I’ve never had an issue sending Bitcoin at any time for any reason to anyone in the world.
But bitcoin, the financial asset, is extremely volatile. Price is a function of supply and demand which includes factors of quantities and frustrating factors of perception. The price is not a scientific fact, there is no formula, there is no committee, nor is the price something that you have to accept or agree with.
Bitcoin’s price is, in its most shallow form, just the last agreed upon price between the last buyer and seller on a public exchange. At a deeper level, the price is a reflection of its current utilization in the market-place intermingled with the perception of its future utilization. Large gaps between current utilization and perceptions of future utility leave a lot of room for speculation and uncertainty thus creating high volatility. When the gap between current utilization and the expectations of future utility is small, prices won’t have as much room to fluctuate.
Ok, but why would someone want to accept such a volatile asset for their labor hours? Isn’t stability what you want and need?
Not necessarily. We’ve been taught to fetishize stability, but the value of volatility depends on the context. Bitcoin is absolutely volatile, but the question is: is it volatile in a beneficial way according to our own goals? All one has to do is look at the Bitcoin price chart and see that it’s been extremely volatile in an extremely positive direction for anyone looking to save for an extended period of time, which I’ll define as over a year. In this context, many people want to expose themselves to that volatility, at least in a small way, to reap some of the rewards of delayed gratification (saving) instead of locking themselves in the stability of a slow decay with no chance of increased future utility. Fiat currencies by design and policy, decay.
To add more color to this, the latin root of volatile is volare which means “to fly”. If you want your assets to get off the ground you’re going to have to accept volatility to varying degrees.
Getting paid in bitcoin isn’t for the faint of heart but at Edge we stand by our decision to pay employees and contractors in bitcoin because we believe in the massive potential of the Bitcoin protocol and bitcoin currency. We’re in the minority today, but changing perceptions of what can happen at the intersection of tech and finance could one day inform the payroll practices of individuals and companies alike.
In the next post we’ll discuss volatility in some more depth and how bitcoin could become less volatile in the future.