Operating a Web3 business typically requires the use of crypto in either development, operations, or finance. However, some new entrants into the Web3 space may not want to deal with the accounting, regulatory, or custody issues associated with crypto – or with its volatility.
So, how can Web3 businesses efficiently operate while minimizing their exposure to crypto?
How is crypto typically utilized in Web3?
The two most common ways of utilizing crypto are for gas fees and payments.
Gas is necessary to process transactions for development, operations, and finance-related actions such as the minting of NFTs, NFT transfers to user wallets, the transfer of funds to treasury wallets, or to royalty wallets.
The use of crypto in payments typically occurs in three ways:
- Crypto being used at the time of sale (e.g., a user buying an NFT in ETH or USDC)
- Paying out a creator in crypto (e.g., a creator getting paid royalties in ETH or USDC)
- Making payments to vendors (e.g., paying a contractor in USDC)
Minimizing the use of crypto in Web3
Despite these common use cases for crypto in web3, there are three potential approaches for how a Web3 business can minimize their exposure to crypto.
1. Fully outsource all Web3 and crypto operations
To reduce crypto exposure to absolute zero, a Web3 company can fully outsource development, treasury operations, and custody to a third party. While this approach results in little to no crypto exposure for the company, it can also reduce control over the user experience and introduce substantial counterparty risk.
2. Maintain a small crypto balance to fund operations and payments needs
Crypto will need to be utilized most for transaction fees related to development (e.g., minting NFTs), operations (e.g., transfer of NFTs, funds or royalties), or payments, but it isn’t necessarily required to hold more crypto beyond this. One option is to hold just the estimated minimum amount needed to fund those specific activities.
This minimizes the exposure to crypto for the business, but does maintain a consistent balance for development, operations, and finance related needs.
3. Introduce automation for “just-in-time” crypto
Automation can play a crucial role in reducing crypto exposure, as well as in streamlining operational workflows – such as whitelisting deposit addresses. Utilizing APIs, Web3 companies can create automated workflows that enable them to keep as much money in fiat as possible at all times, only converting to crypto when it is needed for activities such as paying vendors, transaction fees, or royalties to creators.
This approach requires usage of strong transaction policies to ensure that development teams can continue to function appropriately at all times, and that treasury and finance teams have the appropriate level of oversight.
Interested in seeing how your Web3 project can reduce its exposure to crypto? Request a demo today.