BTCS Water Tower Research Virtual Insights Conference

Virtual Insights Conference featuring BTCS. My name is John Roy. I cover technology here at Water Tower Research, and I am very pleased today to have Charles Allen. He's the CEO. Welcome, Charles. How you doing, man? Good.

Thanks for having me. Before proceeding, I should note that BTCS's safe harbor statements are available on their website.

As always, investor questions are encouraged. Please enter them into the chat box, and we will address them as soon as possible, most likely in the management series report that will follow. Those wishing to request a meeting with BTCS can do so through the conference portal. All right. With that, let's get to the questions. Charles, for those that don't really know it, how does BTCS differentiate your dual operational model, considering that you're now running core blockchain infrastructure and looking at higher margin DeFi kind of operations?

I think the question, if we're looking at how we differentiate ourselves versus other public crypto companies, I think it's like night and day. We have an operating business that is kicking off very high margin, high growth. With the way we access capital, if we can borrow at a low rate and deploy that with a very high hurdle rate, it puts us in a solid position. Where we really like to be is, yes, we're directionally long Eth, but if we can outperform Eth in terms of what it may do in terms of a return on an annual basis with gross profit, it's a much better place to be, especially if we can do that in a way that acts like a shock absorber to the price of Eth.

So that if Eth goes down, we're still doing well, if Eth sits where it is, and that's kind of been the focus of our efforts under the Imperium business model versus NodeOps and Builder+.

Now, speaking of Imperium, you recently announced that you were going to go on to Base. That's the L2 stuff. I think it's Coinbase is the one driving that, right? Now, what really advantages are you looking for by going on to the L2 kind of Base stuff?

Well, so our business isn't static, right? That's what I like to kind of tell investors. If you look at an ETF or a dApp, they're just going to buy a crypto, hold it, maybe they'll add some leverage. We actually have an operating business, and so because of that, we're able to generate higher revenue, high margin, high growth is what you're seeing, in Q2. And by moving to Base, it gives us another basically chain, an L2 on Ethereum. It's frankly relatively easy to account for because it's an L2 on Eth, and we can drive additional revenue, and gross profit from doing that.

And we're looking at other chains and strategies so that we can continue to expand the business, and that's really where we want to go, is how do we make this thing hyper scalable so that we can deliver strong fundamental performance so that investors can see how we're really differentiated from our peers.

Right. When you look at your kind of balance between protocol borrowings and debt repayments and other capital allocation approaches, what is the kind of logic behind how you do that? Because certainly that's going to be important long term.

Yeah, I think we're still the only U.S. public company that is using DeFi as a funding mechanism for its business, which is kind of crazy given we're approaching the end of 2026. What that allows us to do is access very cheap, low cost of capital debt, and it's near instant, right? There's no lawyers, there's no underwriters, there's no paperwork, there's no signatures. If you look at our last K, we basically said, "This is ordinary course of business where we're going to lever up and lever down as needed." What that allows us to do is to basically access that facility as part of ordinary operations where we can lever up if we think we can grow revenue. So we're able to actively manage our risk, while looking to maximize our profit.

I don't think you can do that if you did a traditional convert, like you're at least a month or at least a week in negotiation, from kind of term sheet to closing, and you just can't do that. You can't say, "Well, let me repay you a little bit, and if the market changes or we have another opportunity, we're going to shift things around." Because it's all on-chain, it allows us, in the future to even consider things like full automation, right? It really expands our capital stack to be able to drive value to shareholders, to be able to access very cheap capital, instantly repay it, and be able to deploy it in strategies that are working or turn that off on an instant.

So it's really a balance of actively managing risk in near real time and trying to maximize profit by using that.

Yeah. I've seen a lot of very nice business models that when you reduce friction, you can really lever up and do some things that you really just couldn't do before, essentially.

Yeah. Now, the proof is in the numbers, which your numbers, okay, let's just talk about them.