BitFinControls: Financial and Operational Controls for Bitcoin businesses

When we invest in Prosper and Lending Club loans, we are lending overwhelmingly to individuals usually for Debt Consolidation purposes. On the Bitcoin based loan platforms, my loans are mostly to businesses. It's actually a sizable peer to small business lending environment but it just so happens that these businesses are BTC based businesses and operating within the Bitcoin economy/ecosystem.

For example, one of my borrowers is Jose, who is bringing Bitcoin adoption through his exchange to both Mexico and Argentina. I think that's pretty cool. Another is Eric, who is bringing Bitcoin ATMs nationwide and is the only company in this area fully compliant with US money service business and FINCen standards. Also, very cool.  Another two are Ian and David, 2 of the biggest BTC introducers to both merchants and individuals in Australia.  All people with interesting and growing BTC based businesses that are part of the BTC economy.

Companies in this ecosystem need funding and they need help. My new service, BitFinControls, will help them.

Why BTC Businesses Need BitFinControls

Companies and projects in this new economy need to show they are serious about building a business.  In the USD world, when a company is seeking private equity (PE) or venture capital (VC) funding or seeking to go public, they usually have to go through an Audit by a private outside firm that goes through all kinds of things from financial statements to operational controls. When a company goes public, its a requirement. In fact, there is a special type of public company audit they have to go through in order to insure that the information presented to investors is an accurate reflection of the condition of the company.

The BTC world has had nothing equivalent to this for project funding or PE/VC funding, until now. Whether seeking funding from a VC or listing a project on Coinsortium, Havelock or Cryptostocks, you need to show investors that you are serious about building a successful business, not just that you have a cool idea.

My career and interest in finance and the obvious need for this market led to my creation of BitFinControls.

What Is BitFinControls?

BitFinControls is a verified service where projects and companies seeking funding through project platforms or VC/PE companies can show investors that they have various controls in place for their companies and projects. These controls will inspire confidence in investors to invest in the project as well as show investors that the owners are thinking about how to build their product/idea/service into a full fledged continually operating profitable company. Ideas are only part of the puzzle. How you execute on those ideas is the difference between being profitable and not.

The form with all the questions and request for verifications is right here.

My team of assistants, accountants and myself will verify all the project information given on the form as we ask 48 questions.  These questions are divided into 4 categories:

  1. Administrative Controls
  2. Financial Controls
  3. Operational Controls
  4. Marketing Controls

Examples of Controls Important to Investors on BitFinControls

Here are 2 questions that are examples of some of the kinds of controls that investors would want to see.

1. Is the project wallet for this project a multisignature wallet?    This is important as a financial control to limit the possibility of embezzlement. If more than one person has to sign off on withdrawals, then the possibility of one person making off with all the Bitcoin invested goes way way down. No project specific wallet would be a lack of a control and a project specific wallet that was not multisignature would a 'partial' control in place since at least we can track the revenues and expenses for the project in the wallet.

2. Do you have expenses in fiat (USD,EUR,GBP, etc)? and if so, do you have a fiat bank account for this project/company?  This is an important operational control because having accounts where funds match the currency of expenses means that you are eliminating BTC price volatility from the equation of how much your expenses are. Who would want to invest in a project where a $250 expense could overnight become a $350 expense? Not me, and not most investors as that is no way to control risk.

What Does It Cost?

While in the beta stage, the charge for this service is 2.5 BTC (currently ~$950). If you want to pay in USD, you should email me directly at Stu AT to talk about arrangements. The cost is based on the number of manhours we put in to confirm and verify as much of the data as possible that is provided to us.

After all our systems are in place, the price will increase to 3.5 BTC. We will also have an affiliate program (I Hope) for project and company referrals.

Any questions about this program, please email me directly and I look forward to helping more BTC based companies get more funding and be successful

About the author

Stu Stu Lustman, the author of this post, is a Credit Analyst by trade trying to bring Commercial Credit Analysis techniques to the world of Peer to Peer Lending. Check me out on Twitter, LinkedIn and Google+

2 thoughts on “BitFinControls: Financial and Operational Controls for Bitcoin businesses”

  1. Could a flaw in the design be diveosercd that leaves the system open to counterfeiting? It’s very unlikely since it hasn’t been diveosercd yet even as there is a large financial incentive to do so. And if it happens, the system allows for large structural repairs while carrying on using the same coins. Bitcoins are technically blocks . Blocks are created statistically every 10 minutes and the first 210 000 blocks have a value of 50 bitcoins each. The next 210 000 blocks(we’re not there yet!) will have a value of half, rounded down if there are decimals(25 bitcoins).Still with me?The next will have half until one sunny day a block will have a value of 0 bitcoins.What does this have to do with counterfeiting?When a block is created it was created by doing something very difficult. Each block is roughly a number that is sought randomly, that if shown in hexadecimal it will have a certain number of zeroes example: 00000000000005c35a2ce25dc1fa300a74848ee506785672022abaf147ded958.See? Now, if you want to create a Bitcoin you’ll have to calculate a number(that is also based on the previous block’s number) that will create a new number that is with a certain amount of zeroes just as in the above example. You search randomly because luck is your primary weapon . Let’s say the I also search for the number so I can get the block for myself.Surprise! > We are not searching for the same number.If I want to get the amount of bitcoins that the block equals then I have to put my bitcoin account (which is a Public Key, cryptography stuff mates!) which the number I calculate is based on. So I search for a number that is different than your number. So you trying to steal’ my number it won’t work. Or you will just succeed in sending the Bitcoins to me.Right, but what does this have to do with counterfeiting, (asking twice)?It got answered above, although in a rather clumsy manner. If anyone wants to counterfeit Bitcoins, like creating a block that is not based on any previous blocks in Bitcoin, it cannot be accepted by the network. Example my Bitcoin client will find that your block is not valid because it isn’t based on any of the previous existing blocks.That should explain some stuff, but I’m willing to explain more or continue because what I have written is almost like an essay, sort of.

    • hi Dimitri, I am aware that the halving will take place and the underlying cryptography that you mention is beyond my level of knowledge of the underlying technology of Bitcoin. As a result, I don’t know if potential counterfeiting is a real problem or not.

      The idea behind putting in financial controls has less to do with Bitcoin itself and more to do with what a Bitcoin based business (business in the BTC ecosystem) should do to show its investors, employees, and clients that it is thinking about things that can happen to fiat businesses without proper controls like embezzlement and poor management and decision making.


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