Bitcoin thesis

tl;dr

Bitcoin, a decentralized digital currency, and its ecosystem enable secure, low-cost transactions, transforming remittance, gaming, and e-commerce with trustless solutions. Dwarves can co-build infrastructure and application solutions with startups, like Lightning Network integrations and payment gateways, while internally optimizing financial workflows, with experiments targeting scalable payment and custody tools.

Introduction

Bitcoin, the first decentralized digital currency, and the ecosystem built around its blockchain, including Layer-2 solutions like the Lightning Network, enable secure, transparent, and low-cost transactions without intermediaries. By 2025, Bitcoin and building with Bitcoin are poised to revolutionize startup innovation and Dwarves’ operations, offering robust infrastructure and applications for financial and non-financial use cases. Imagine a remittance startup using Bitcoin’s Lightning Network for instant cross-border payments or Dwarves streamlining contractor payouts with a Bitcoin wallet. Bitcoin’s trustless nature aligns with Dwarves’ mission to co-build with startups and enhance internal processes.

Market data underscores its growth: Bitcoin’s market capitalization reached $1.2 trillion in 2024, with over 500,000 daily transactions (CoinMarketCap). The Lightning Network processed $500 million in annual volume (Arcane Research). Venture funding for Bitcoin-focused startups hit $3 billion in 2024 (PitchBook). Bitcoin aligns with Dwarves’ verticals, team/individual productivity, community building, liquidity/fund engineering, and IP, by enabling efficient payments, tokenized incentives, financial transparency, and secure digital assets, while offering opportunities in external industries like remittance, gaming, and e-commerce.

For startups: Bitcoin empowers startups to create secure, low-cost financial services, from instant remittances to in-game economies, competing with centralized systems. A gaming startup, for example, could use Bitcoin for transparent in-game purchases, boosting player trust.

For Dwarves: Internally, Bitcoin can transform operations by enabling fast payments, transparent budgeting, and secure IP transactions, allowing the firm to operate with greater efficiency and decentralization.

1. Understand the technology

Bitcoin is a decentralized digital currency powered by a proof-of-work blockchain, enabling secure, transparent transactions without intermediaries. Building with Bitcoin involves leveraging its blockchain, Layer-2 solutions (e.g., Lightning Network), and tools like wallets and APIs to create innovative applications, from payments to smart contracts.

Origin layer: Bitcoin was introduced by Satoshi Nakamoto in 2009 as a response to centralized financial systems. The Lightning Network (2016) addressed scalability, enabling fast, low-cost transactions. Growing distrust in fiat systems, coupled with adoption by institutions and developers, drove Bitcoin’s growth. By 2024, advancements in Layer-2 solutions and developer tools like Taproot expanded use cases beyond currency.

Technical layer: Bitcoin operates on a proof-of-work blockchain, secured by miners. Smart contracts are enabled via Taproot and Layer-2 solutions like Lightning Network. Tools like Bitcoin Core manage nodes, while wallets (e.g., Electrum) and APIs (e.g., Blockstream) facilitate development. Oracles (e.g., Chainlink) bridge off-chain data for advanced applications.

• Key components:
  • Blockchain: Records transparent, immutable transactions.
  • Lightning Network: Enables fast, low-cost off-chain transactions.
  • Smart contracts: Support advanced logic via Taproot.
  • Wallets: Secure user access to Bitcoin funds.
  • APIs: Integrate Bitcoin with external systems.

Core concept: Bitcoin’s purpose is to provide a decentralized, secure digital currency and platform for trustless transactions, while building with Bitcoin enables innovative applications leveraging its blockchain’s security and infrastructure.

Abilities:

• Secure, low-cost peer-to-peer transactions.
• Fast payments via Lightning Network.
• Tokenized incentives for communities.
• Transparent financial operations via blockchain.
• Smart contract functionality for advanced applications.

What it’s good at: Bitcoin excels in providing secure, decentralized transactions with global reach, ideal for payments, remittances, and tokenized systems. It enables startups to build trustless financial services and Dwarves to streamline operations, with strengths in security and transparency.

• Specific benefits:
  • Low-cost transactions via Layer-2 solutions.
  • Immutable, auditable financial records.
  • Global accessibility without intermediaries.
  • Robust security through proof-of-work.

What it’s bad at: Bitcoin struggles with high on-chain transaction fees during congestion, limited smart contract flexibility compared to Ethereum, and regulatory uncertainty. It may not suit applications requiring high throughput or complex logic without Layer-2 solutions.

• Key drawbacks:
  • High fees for on-chain transactions during peak times.
  • Limited smart contract capabilities on base layer.
  • Regulatory scrutiny in multiple jurisdictions.

Hardest problems:

• Scaling transactions while maintaining decentralization.
• Enhancing smart contract functionality on Bitcoin.
• Navigating global regulatory compliance.
• Improving user onboarding for non-technical audiences.

Limitations: Bitcoin’s constraints include high compute costs for mining and on-chain transactions, integration challenges with legacy systems, and regulatory risks. Its effectiveness depends on Layer-2 solutions and robust developer tools.

• Specific constraints:
  • High energy consumption for proof-of-work.
  • Integration complexity with traditional finance.
  • Regulatory hurdles in finance-heavy markets.
  • Dependency on user-managed wallets.

2. Identify opportunities and solutions

Bitcoin’s ability to enable secure, decentralized transactions, combined with its growing ecosystem of developer tools and Layer-2 solutions, positions it to address inefficiencies across industries, empowering startups to innovate and Dwarves to optimize operations. Tailored to Bitcoin’s strengths, high-impact industries include Dwarves’ core verticals (productivity, community, liquidity, IP) and three external industries (remittance, gaming, e-commerce), where inefficiencies like high fees, slow settlements, and centralized trust can be mitigated through Bitcoin-based infrastructure and applications. By co-building with startups and testing Bitcoin internally, Dwarves can build expertise and predict high-growth partners.

For startups by industry:

• Team/individual productivity: SaaS startups face inefficiencies in cross-border payments and expense tracking due to high fees and delays. Bitcoin enables fast, low-cost payments and scalable infrastructure, enhancing efficiency. Co-building aligns with Dwarves’ staffing model, fostering partnerships with productivity platforms.

  • Lightning Network integration for freelancer payments, ensuring scalability.
  • Instant Bitcoin payment gateway, reducing fees.
  • Smart contract payroll system via Taproot, automating disbursements.
  • Bitcoin wallet API for SaaS integration, enabling seamless payouts.
  • Transparent expense tracker using Bitcoin blockchain, enhancing trust.

• Community building: Community-driven startups struggle with centralized reward systems and high transaction costs, reducing engagement. Bitcoin enables tokenized incentives and decentralized infrastructure, boosting trust. Dwarves can co-build platforms to enhance participation, aligning with its 80% revenue focus.

  • Bitcoin node orchestration tool for community platforms, ensuring reliability.
  • Tokenized reward system using Bitcoin, enhancing engagement.
  • Lightning Network payment system for community payouts, ensuring low fees.
  • Smart contract governance for rewards via Taproot, ensuring transparency.
  • Bitcoin-based loyalty program, automating incentives.

• Liquidity/fund engineering: Fintech startups face inefficiencies in slow settlements and high intermediary fees, increasing costs. Bitcoin enables fast, trustless transactions and secure infrastructure, streamlining operations. Dwarves can partner with these startups to develop scalable tools, building expertise in a high-demand vertical.

  • Lightning Network protocol for DeFi settlements, ensuring fast transactions.
  • Bitcoin payment gateway for trades, reducing costs.
  • Smart contract escrow using Bitcoin, automating trustless deals.
  • Bitcoin oracle system for price feeds, supporting financial applications.
  • Transparent portfolio tracker with Bitcoin integration, optimizing liquidity.

• IP: Startups building IP face inefficiencies in licensing and royalty payments due to intermediaries and delays. Bitcoin enables tokenized IP and automated payment infrastructure, enhancing scalability. Dwarves can co-build solutions to protect assets, aligning with the thesis that IP compounds value.

  • Bitcoin smart contract framework for IP licensing, ensuring automation.
  • Tokenized IP payment system using Bitcoin, streamlining royalties.
  • Lightning Network API for IP transactions, enabling fast payouts.
  • Transparent royalty tracker with Bitcoin blockchain, enhancing trust.
  • Bitcoin-based IP marketplace, automating sales.

For startups in other industries:

• Remittance: Remittance startups face inefficiencies in high fees and slow cross-border transfers, reducing accessibility. Bitcoin enables instant, low-cost transfers and scalable infrastructure, improving efficiency. Co-building positions Dwarves to partner with remittance leaders.

  • Lightning Network integration for remittances, ensuring low-cost transfers.
  • Instant Bitcoin remittance platform, reducing fees.
  • Bitcoin oracle system for exchange rates, supporting transfers.

• Gaming: Gaming startups struggle with opaque in-game economies and payment delays, reducing player trust. Bitcoin enables tokenized rewards and fast transaction infrastructure, boosting engagement. Co-building positions Dwarves to partner with gaming innovators.

  • Bitcoin Layer-2 protocol for in-game economies, ensuring scalability.
  • Tokenized reward system using Bitcoin, enhancing engagement.
  • Smart contract marketplace for in-game assets via Taproot, automating trades.

• E-commerce: E-commerce startups face high payment processing fees and slow settlements, impacting margins. Bitcoin enables low-cost, instant payments and secure infrastructure, boosting profitability. Co-building positions Dwarves to partner with e-commerce innovators.

  • Bitcoin payment protocol for e-commerce, ensuring scalability.
  • Instant checkout gateway using Bitcoin, streamlining purchases.
  • Lightning Network API for refunds, automating returns.

For Dwarves (internal case study): Dwarves faces inefficiencies in contractor payments, budget transparency, and IP transactions, straining operations. Bitcoin enables fast, transparent payments, tokenized incentives, and secure IP infrastructure, improving efficiency across productivity, community, liquidity, and IP verticals. By testing Bitcoin internally, Dwarves builds expertise to support its consulting services.

• Internal personas:
  • Developers: Benefit from instant Bitcoin payouts.
  • Project managers: Use Bitcoin for transparent budgeting.
  • Community managers: Leverage Bitcoin for team rewards.
  • Financial analysts: Utilize Bitcoin for cost tracking.
  • Leadership: Rely on Bitcoin for strategic fund allocation.
• Solutions:
  • Lightning Network integration for internal payments, ensuring scalability.
  • Smart contract contractor payment system via Taproot, automating payouts.
  • Tokenized team incentive platform using Bitcoin, boosting engagement.
  • Bitcoin wallet API for financial operations, enabling seamless workflows.
  • Bitcoin-based IP payment system, securing transactions.
• Solution architecture for Dwarves:
  • Blockchain core: Bitcoin blockchain for secure transactions.
  • Layer-2 layer: Lightning Network for fast payments.
  • Wallet integration: Electrum for secure access.
  • Smart contract module: Taproot for payment logic.
  • APIs: Connect with GitHub, Slack, and financial tools.
• What will this technology benefit Dwarves?: Bitcoin will enable Dwarves to operate with greater efficiency by automating payments, ensuring budget transparency, and securing IP with decentralized infrastructure. It will improve scalability, allowing developers to focus on high-value tasks and leadership to build partnerships, positioning Dwarves as a leader in Bitcoin consulting.

3. Prioritize and plan experiments

From the solutions identified, Dwarves must prioritize experiments that maximize revenue potential, expertise-building, startup partnership opportunities, and internal efficiency, aligning with the priority check: internal ops first, followed by startup ecosystems, strategic assets, and spin-off potential. The following 6 experiments, selected across productivity, community, liquidity, and IP verticals, ensure at least one experiment per vertical and two additional high-impact experiments (from liquidity and remittance). These experiments balance Dwarves’ resource constraints, aiming for execution within 8–12 weeks, and focus on infrastructure and application solutions.

• Lightning Network integration for contractors (Productivity): An integration enables scalable Bitcoin payments for contractors via the Lightning Network, ensuring fast, low-cost payouts.

  • Alignment and Impact: Aligns with internal ops by streamlining payments and supports SaaS partners, enhancing scalability and attracting high-growth collaborations.
  • Resources: 3 developers, moderate compute costs, 8 weeks.

• Tokenized reward platform for communities (Community): A platform uses Bitcoin to distribute tokenized rewards, ensuring transparent incentives for internal teams and communities.

  • Alignment and Impact: Serves internal ops by boosting engagement and aligns with community platforms, increasing trust and scalability for partners.
  • Resources: 2 developers, low compute costs, 8 weeks.

• Bitcoin payment protocol for DeFi (Liquidity): A protocol enables fast Bitcoin settlements for DeFi transactions via Layer-2 solutions, integrating with financial platforms.

  • Alignment and Impact: Optimizes internal financial ops and aligns with fintech startups, building expertise and attracting high-growth partners.
  • Resources: 4 developers, high compute costs, 10 weeks.

• Bitcoin-based IP payment system (IP): A system uses Bitcoin to automate IP licensing payments, securing transactions for Dwarves’ and clients’ assets.

  • Alignment and Impact: Enhances internal IP security and builds strategic assets, aligning with startup IP tools and fostering long-term partnerships.
  • Resources: 3 developers, moderate compute costs, 8 weeks.

• Smart contract escrow with Bitcoin (Liquidity): A smart contract escrow system uses Bitcoin via Taproot for trustless financial deals, integrating with DeFi platforms.

  • Alignment and Impact: Builds strategic assets for fintech startups with spin-off potential, enhancing transaction security and attracting high-growth clients.
  • Resources: 4 developers, high compute costs, 12 weeks.

• Lightning Network for remittances (Remittance): A Lightning Network integration enables instant, low-cost Bitcoin transfers for remittances, enhancing accessibility.

  • Alignment and Impact: Supports remittance startups, improving efficiency and positioning Dwarves as a leader in Bitcoin-driven financial solutions.
  • Resources: 3 developers, moderate compute costs, 10 weeks.

4. Growth hacking and case study strategies

To amplify Dwarves’ expertise in Bitcoin and gather case studies, lightweight strategies leveraging the firm’s network, X platform presence, and resource constraints are essential. These approaches focus on rapid validation, community engagement, and content creation to establish Dwarves as a leader in Bitcoin consulting across core and external industries.

• Publish case studies on Dwarves’ blog showcasing internal Bitcoin implementations, like payment integrations and IP systems.
• Host webinars on X to demonstrate Bitcoin’s impact on startups in remittance, gaming, and e-commerce, featuring co-built solutions.
• Engage Bitcoin communities on X to share insights and attract startup partners.
• Create a weekly X thread series highlighting Bitcoin use cases in payments, DeFi, and gaming.
• Partner with blockchain-focused incubators to co-build with high-growth startups in fintech and remittance.
• Develop open-source Bitcoin tools for communities to gain visibility and attract talent.
• Produce YouTube tutorials on integrating Bitcoin into startup workflows for e-commerce and gaming.
• Leverage Dwarves’ network to offer beta testing for internal Bitcoin tools to startups in external industries.
• Host hackathons to prototype Bitcoin solutions, engaging developers and startups from remittance to gaming.
• Create a newsletter showcasing Dwarves’ Bitcoin expertise and case studies.

Hiring backgrounds for apprentices:

• Engineers:
  • Bitcoin development: Experience with Bitcoin Core, Lightning Network, and Taproot to build scalable solutions.
  • Blockchain security: Proficiency in securing wallets and smart contracts to mitigate vulnerabilities.
  • API development: Knowledge of Bitcoin APIs (e.g., Blockstream) for integration with SaaS platforms.
• Designers:
  • UX design for Bitcoin interfaces: Skills in designing intuitive wallet and payment interfaces, ensuring seamless experiences.
  • Data visualization: Expertise in creating dashboards for transaction and liquidity analytics.
• Consultants:
  • Bitcoin strategy consulting: Background in blockchain and finance to guide startups on Bitcoin integration.
  • Industry-specific expertise: Knowledge of remittance, gaming, or e-commerce to align solutions with sector challenges.