Many startups, especially those in the Crypto space, are offering salaries paid in bitcoin. You might be wondering what it's like to get paid in bitcoin, how to handle cashing out into "real" money (or Fiat) and anything else you should expect. I'm here to answer some of your questions!
This is an incredibly important question and it's worth looking into why the potential employer wants to pay in bitcoin. Most of the time there are logical reasons, for example if the company is ICO-funded (as in, its entire holdings or a large part of them is crypto) or they are making payments to international staff cheaper. Both of these are logical and aren't anything to worry about. There might also less legitimate reasons including tax avoidance. That said, it's highly doubtful a licensed company hiring staff would be doing anything under the table... I hope. Make sure you understand the reason why the company wishes to pay in bitcoin, just to be sure.
You reasons may vary. Perhaps you're travelling and want to pay out to domestic banks all over the world. Perhaps there's not a reliable banking infrastructure available to you so P2P bitcoin-to-fiat trading is an advantage. Perhaps you have a nest-egg to live on and just want to lock your bitcoin away and await the prophesied "moon" (skyrocketing price). Maybe you just hate banks and want complete sovereignty over your money? These are all valid reasons to accept bitcoin.
- When you receive bitcoin into a wallet you own, it's absolutely, positively your responsibility to keep it safe and secure. You must use a hardware wallet and privacy software like a good firewall. In fact, I would recommend using a hardware wallet and a bootable installation of Tails OS for all your bitcoin handling.
- To receive bitcoin, you provide your employer a public wallet address. This is kind of like an open deposit box for receiving bitcoin. If your employer deposits your bitcoin and for some reason you lose access to the wallet, your paycheck is as good as gone. Similarly, if you provide the wrong deposit address, say goodbye to your money.
- Bitcoin's price fluctuates an incredible amount in any given day. I'm "lucky" enough to only have lost around $150 in a single paycheck simply because of the time it took between receiving my bitcoin and selling it which was around two hours. On the other hand, sometimes I gained a little extra.
Risk, reward and temptation
- It is far too easy to fall into a trap of holding onto your bitcoin paycheck in hopes of an advantageous market instead of just paying out to fiat right away. This is how you lose money.
- Here's a cold, hard truth from my heart. In the last year I was scammed out of two pay checks equalling around $4000 on LocalBitcoins. One used a Paypal scam, the other a reversed bank deposit. I may never get this money back- bitcoin is too infant for most lawyers to care and too taboo for banks to go near. Without the proper education from your employer and preferably a payroll service, you might find yourself in similar situations. To say that my life and financial situation has changed drastically because of this would be a massive understatement.
- There's another side to this as well- even reputably exchange platforms (such as the infamous Cryptopia) are getting hacked and shutting down left and right. The realistic likelihood of getting any of your money back after a hack or scam is absolutely, positively 0 and if you do, well, you might want to start believing in miracles because you just experienced one!
Banks and financial insitutions will hate you
- Never in my life have I had my bank account frozen, or been banned from a payment platform until I started using bitcoin. I've had two bank accounts frozen, my Paypal completely banned forever and Transferwise issued me a stern warning (immediate, permanent ban) when I simply asked if I could receive a deposit from a licensed bitcoin exchange. Now they freeze my account and investigate every single transaction I make on my account, even a $20 tip I sent to a friend using my TW account. Trust me- banks hate bitcoin. Be absolutely sure your services are okay with bitcoin. I recommend calling anonymously and asking about it. I've been okay with HSBC and Monzo after numerious KYC sessions and phone calls.
- Be prepared to file the most annoying tax assessments in the universe. You'll definitely need a tax accountant to help you with them.
- In my experience (and I apologise in advance for any offense caused) the crypto community is absolutely abysmal. There are a few good eggs and little corners online but overall the space is extraordinarily toxic.
- Ask your employer for educational resources- a course or guide on how bitcoin works and how to receive and pay out your salary. Read various blogs about safely holding and trading bitcoin and make sure you know exactly what you're doing before you start. Encourage your employer to use a bitcoin payroll system such as Bitwage and to provide you with a hardware wallet such as a Trezor.
- Pick a licensed, trustworthy exchange that pays out in Fiat if possible- Coinbase Pro and Binance are two such platforms. Wherever possible, avoid P2P trading because they are rife with scammers, from Paypal reversals to literally getting beat up on the street during face-to-face trades. Ideally you want to stick with the same platform (or if you have to use P2P, a credible, consistent partner for all your trades). Do a few small test withdrawals to make sure you understand the receive > convert > payout flow of your new paycheck.
- Ensure you have records of your paychecks, like invoices, so that you know what you're getting from your employer and can track your income. Remember- there're no banks or paystubs here to help you so you need to keep track of everything yourself!
- Before you provide a wallet address be sure to double, triple and quadruple check that you have access to the wallet in question, the wallet is secure and the deposit address is completely correct, digit-for-digit. Always copy-paste the public wallet address and still read it over several times to ensure it's correct.
- Check bitcoin's going rate at the time your paycheck was sent against your expected amount. As an example, let's say your salary is $3000 a month and you get paid 2.7 bitcoin for your November paycheck. For simplicity's sake let's say one bitcoin was worth $1000 the moment you got paid. Your salary is $3000 a month so you would expect to get exactly 3 bitcoin, so why did you get paid 2.7? It's very important to keep an eye on this and point out any discrepencies to your employer, just like you would with a normal paycheck. The amounts can be trickier to work out and issues like this might fly under the radar.
- Keep your own records of every single transaction ID that flow through your wallets for accounting purposes
- Have a tax accountant who knows bitcoin
- Have a fair amount of savings for a disaster scenario. I'd say three or four paychecks worth in cash and a few different banks just in case one gets frozen.
If you think the offer you've received is worth the trouble and you want to work in the futuristic crypto space with cutting-edge fintech platforms, then give it a try! If you know how to handle bitcoin with confidence, you shouldn't have any issues.
Now for my personal opinion: I will never, ever take a job that pays crypto again. Regardless of the scams that very nearly cost me my life, getting paid in bitcoin simply amounted to colossal pain in the butt. Price fluctuations, long transfer times, bank freezes and endless ID verification turned my paydays into a time of anxiety, worry and stress instead of a joyful occassion to order many pizzas. Whereas I find bitcoin to be very interesting technology in concept, the availability of support and services just isn't mature enough and employers don't seem to be doing enough to facilitate end-to-end crypto payroll. My job itself was great and I enjoyed it very much, but I would not take it again. Perhaps if the pay was absurd, like six figures, I might consider it but for now it's good ol' "trustworthy" numbers-representing-unbacked-currency for me.