6 Things You Should Know Before Starting A Crypto-Native Company
Cryptocurrency companies often have an air of mystery around them — what do they do? How do they make money? And how can you start your own?
Greymass was founded in 2018 and has been serving the EOS and Antelope communities ever since, so today we’re pulling back the curtain to show you one example of how a crypto-native company functions, and to share the lessons we’ve learned along the way.
Before we start: what’s a crypto-native company?
Being “crypto-native” means that a company works directly within the crypto space (either by providing services to cryptocurrency users, or by building projects directly on the blockchain). Greymass, for instance, was founded to provide software infrastructure for Antelope blockchains. It can also mean that a company runs its finances entirely in cryptocurrency, although this isn’t always the case.
An example of a non-native company, on the other hand, would be a traditional company that then enters the crypto space later (such as Starbucks offering NFTs as loyalty rewards). There’s nothing wrong with this, and there’s no one “right” way to get into crypto — but if you start out as a traditional company, then you’ll have different challenges from a crypto-native company.
1. What’s the biggest upside of being a crypto-native company?
The world of crypto is still very much in its “Wild West” days, since the technology is still evolving, and opportunities are constantly cropping up as a result. There’s huge potential for growth in the industry, so if you have a unique idea, then you have a good chance at being first to market with it and growing a loyal customer base or client base.
If the idea of new technology excites you, then that’s also a huge upside of working in crypto. You can experiment and help to advance the bounds of what’s possible with blockchain technology. For many people, these possibilities help turn cryptocurrency into their passion project — and can eventually become their full-time job.
2. What’s the biggest downside of being a crypto-native company?
There’s a lot of uncertainty about how cryptocurrencies are regulated right now, which can make it more complicated to operate as a company in the industry. Blockchain is revolutionizing how value is traded and stored, and how contracts are enforced, but any crypto-native company also needs to be able to interact with traditional finance and legal structures at the same time.
The challenge is that traditional structures aren’t used to dealing with blockchain companies, and are trying to navigate an uncertain regulatory space. This can lead to complicated discussions with banks, tax accountants, lawyers, you name it. It can be harder to explain your business model, rote business requirements can take a long time to fulfill, and even proving that your company exists can be a big hurdle. It’s not impossible, but it’s certainly more difficult than if you’re running a traditional company.
3. What opportunities are there for a crypto-native company to make money?
This will vary based on your business model, but there are many different sources of revenue available to crypto-native companies. To give you an idea of what’s possible, let’s take a look at the various sources of funding we rely on at Greymass:
Several blockchains have mechanisms that pay tokens to people or companies that are willing to produce blocks. For Bitcoin and Ethereum, these are miners. For Antelope chains like EOS, these are elected block producers. Greymass is a block producer on multiple Antelope chains, and the funding we receive goes directly towards product development and business running costs. For a more detailed explanation of how EOS block production works, you can check out this blog post.
At Greymass, we specialize in creating public goods. A public good is “a commodity or service that is provided without profit to all members of a society.” Within the world of blockchain, an open-source code library, developer resources, or a not-for-profit wallet are all examples of public goods. To create public goods that will benefit the Antelope networks, we apply for and receive grants from the ENF Grant Framework and from Pomelo.
We also make a small amount of revenue off our products. For instance, our product Fuel gives users the option of paying a small fee if they don’t want to manage their own resources on Antelope chains, and our Anchor app sells accounts on Antelope chains. While in our case the funds from these products are not significant, they help to offset the costs of providing these resources to the community. For other crypto-native companies, product revenue can be a much larger part of their funding.
4. How can a crypto-native company get started?
Just like in the world of more traditional companies, crypto-native companies have two choices when they’re just starting out: bootstrapping, and bringing in outside funding from investors.
Greymass is a testament to the ability of crypto-native companies to bootstrap themselves, because we’re completely employee-owned. For the exact details of how our co-founders got the company started, you can check out Behind the Grey Curtain #1: The HIstory of Greymass.
Greymass made very little profit in its first year of operations, but the team chose to turn down offers of investment and seed funding, since it would have locked us into a business model that prioritized profits and returns to investors. By remaining independent, we could choose to focus on public goods instead.
But that being said, there are also benefits to taking outside funding and focusing more on profits. It simply depends on what you want to build, what resources are at your disposal, and how you want your business to operate in the future.
5. How does paying people at a crypto-native company work?
And most importantly: can you pay people in crypto? The answer is that it depends, both on where your company is based and where your employees work from.
There are laws in many countries about how salaried employees and contractors can be paid. For instance, in Canada (where Greymass is based), employees need to be paid in fiat while contractors can be paid in crypto. So it’s important to familiarize yourself with the legal requirements where your company and team members are based.
We can’t speak for every situation, but at Greymass, paying people is a more individualized process than it would be at a traditional company. Our funding comes in the form of both crypto and fiat money, and our team members are spread across the globe, so we pay people in different ways. Some people are paid entirely in crypto, while others are paid entirely in fiat, and one or two are even paid in a mix of both.
But it’s worth mentioning that, in our experience, it’s easier to recruit employees in a bear market if you’re able to pay them in fiat. Very few individuals will be attracted to the idea of being paid in crypto when coin prices are down, but when coin prices are up, being able to pay in crypto can be a great incentive for getting people to join your team. It simply depends on the markets and the financial risk tolerance of the person you want to hire.
6. What are the most important things to keep in mind if you’re starting your own crypto-native company?
There’s nothing worse than starting a company that you’re passionate about, only to have to give it all up because you accidentally ran afoul of the law. If you’re starting your own crypto-native company, then plan on finding an accountant who’s familiar with cryptocurrency and can make sure you’re following the rules required by the traditional finance industry. Make sure that reporting is happening, that you’re paying your taxes, and that you’re leaving a paper trail which shows you’re putting in a good-faith effort to follow the laws.
Depending on your situation, you may also want a lawyer to help you navigate the shifting cryptocurrency regulations. If the cost of paying these professional puts you off, just think about all the money you could lose later if you don’t pay them now. All told, it’s one of the best investments you can make as a business owner.
Talk to other people in the cryptocurrency industry. There are business owners out there who have been where you are now, who had to solve the same problems you’re facing. Finding people who can give you advice is incredibly valuable, and can also give you a support network as you navigate the ups and downs of crypto.
But it’s also worth saying that you should have some healthy skepticism while building your network, because many scammers are unfortunately attracted to this industry. If someone seems shady, then they probably are, and if something seems too good to be true, then it probably is.
Be ready to think on your feet.
This is good advice for anyone starting a new business, but it rings particularly true in crypto, where everything from the technology to the markets to the regulations and communities can shift rapidly. If you can approach learning new skills and adapting to new situations with curiosity and openness, then your company will be much more likely to succeed. So hold all your plans loosely, and enjoy the ride!
This blog post is based off an interview that Aaron Cox, Greymass co-founder, gave on the Coffee With Greymass podcast, so if you want to learn more, you can listen to the full episode here.