Speed of acquisition, diversifying exchanges, Blockchain’s changing face [Blockchain & Crypto news CW31]

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This post covers news sentiment for CW31 (05.08.2018 –11.08.2018). It is based on Researchly’s Industry Sentiment tool. It shows how exchanges are diversifying, why the speed of acquisition might be more important than innovation, and Blockchain’s changing face.


Exchanges are diversifying

Early this year, Binance announced that they are working on a decentralized version of their centralized exchange (Binance’s blog). And earlier this week their CEO Changpeng Zhao showed a demo of this DEX on YouTube. One niche such DEX could target are unregistered securities. As Binance’s CEO implies:

“On the decentralized exchange we’ll have less control. More likely anybody can list any coin. That’s the philosophy of the decentralized exchange, it’s freedom of choice, freedom of investments,” Zhao said in an interview over Skype. “But with freedom there will be people who are scammers. That’s not something we can control.” – Bloomberg

Nevertheless, I am unsure how free a DEX will really be as authorities will want to have a say. For instance, recently Coindesk quoted Aaron Wright, associate clinical professor of law:

[…] Conversely, decentralized prediction markets and exchanges that facilitate the trading of binary options would likely be deemed to violate existing laws like the Commodities Exchange Act.” (Coindesk)

Read More: Crypto regulations and decentralized exchanges

Nevertheless, Binance is not the only exchange working on DEX. In fact, 2018 has frequently been named the “year of DEX”. And there has been a lot of activity. For example, about one week ago Radar Relay (another DEX) announced their $10 Million funding.

Read More: Market map: blockchain startups working on decentralized exchanges

However, exchanges have been busy in other activities besides DEX. Coinbase is politically active by forming a PAC or expanding their payment services (e.g. with e-gift cards).

Read More: Why Coinbase and not Bitcoin will replace Mastercard

And several exchanges, among them Coinbase, Binance, and Huobi are launching crypto funds (e.g. Huobi’s ETF), charities (e.g. Coinbase’s GiveCrypto), and incubators (e.g. Binance Labs). Binance is even investing in a bank.

Read More: The Importance And Impact Of Crypto Donations

Although these are only a subset of the side activities of crypto exchanges, it is becoming clear that they are interested in diversifying their offerings. In a later post this week I will share further thoughts on these diversifications.

Find out more: Researchly’s Exchanges Insights

Funding and Investments

Speed of acquisition and startups vs. incumbents

ShapeShift acquired Bitfract. ShapeShift is a crypto exchange for the direct swapping of one coin for another. For example, one can directly trade BTC for ETH without converting BTC to fiat. Bitfract builds upon ShapeShift and allows the conversion of one coin for multiples simultaneously. So, one could trade 1 BTC for BNT, CVC, and DASH at the same time. Combined with Binance’s DEX-demo above, this shows once again how active the exchange space is. (Medium)

Find out more: Researchly’s Exchanges Insights

This acquisition also points at the competition between startups/incumbents and the speed of acquisition. Many crypto startups are operating in spaces – such as banking – which are occupied by incumbents. Although banks are not sleeping (see Everything Commerzbank Is Doing with Blockchains), they are generally slower when it comes to innovation. One strategy for them to stay relevant is acquisition. And for that, they have the required capital. However, many crypto startups have significant capital as well (see CCN on Crypto Exchange Binance is More Profitable than Germany’s Biggest Bank Deutsche). And they use it to acquire startups as well as incumbents. And as it seems pretty fast. The Bitfract example is only one of many cases where a startup is acquiring another startup and Litecoin’s partial acquisition of German WEG Bank is an example of a startup acquiring an incumbent.

Read More: are cryptocurrencies and related companies banks?

Eventually, maybe it won’t be about the speed of innovation, but the speed of acquisitions, i.e. who (startup or incumbent) acquires the companies first. Moreover, especially amongst FinTechs, the dogma is that startups need incumbents to scale. Despite the recent examples, it is still too early to talk about a trend reversal of this dependency, but the early signs are interesting nonetheless.

Cross-chaining

Metronome Raises $12
Metronome is a cryptocurrency focusing on – according to them – self-governance, reliability, and portability. Portability is the feature that stands out the most; it allows Metronome to be traded across chains. Currently, it supports Ethereum and Bitcoin. Qtum is allegedly coming too. (Coindesk).

With this portability, they are tackling the same issue as ShapeShift but from a more fundamental perspective; they are not combating the symptom (token incompatibility) but the core problem (multiple tokens). It will be interesting to see which approach will dominate.

 

Havven is coming to the EOSIO blockchain!
Similar to Metronome’s portability feature, Havven has decided to follow a cross-chain strategy with their stablecoin nUSD. In addition to Ethereum, nUSD will also trade on EOS’s Blockchain. They have done so to prevent ecosystem fragmentation. (Medium)

Read More: Market map Stablecoins – Overview of 19 projects working on stablecoins

More Stablecoins: List of 28 Stablecoins

Other

Audius raises $5.5M
Audius is an open blockchain-based music-sharing protocol and dapp (similar to SoundCloud). Musicians use Audius for attributing, distributing, and monetizing their music. Artists and musicians interact directly without an intermediary. (Medium)

There are many other similar projects in the music industry, such as Opus. Opus is also a music-sharing protocol, built using IPFS & Ethereum and raised around $6 Mio. in their ICO in 2017. However, aspects that make Audius stand out are their backers and advisors. Among others, investors are Pantera and Kleiner Perkins. And some of their advisors are Bing Gordon (Co-Founder EA Games), Tom Schmidt (Product at 0x), and Greg Hazel (Chief Architect at BitTorrent).

More Cryptos in the Music Industry: Researchly’s Industry Search

Blockchain’s changing face

Lilita Infante, a special agent at the U.S. Drug Enforcement Administration, reported that the ratio of legal to illegal activity in Bitcoin fell from 90% in 2013 to 10% in 2018. The actual transaction volumes, however, have grown since 2013. In contrast, speculation has become the dominant application.
(Bloomberg)

The takeaways from these numbers must be treated with caution; they do not reflect the overall (criminal) activity on other, more private solutions such as privacy coins, protocols, or platforms (see also Privacy coins vs. coins with a privacy feature: analyzing privacy coins).

More Privacy Cryptos: List of 29 Privacy Blockchains, Platforms & Currencies

Nevertheless, such reports are useful because they reflect how users change a technology’s face. In the beginning, early adopters saw Blockchain exclusively as electronic cash or FMI (Financial Markets Infrastructure). With Ethereum Blockchains started to be equated to a “decentralized global supercomputer”, Web 3.0 & similar. With institutional money (see Goldman Sachs’ alleged foray into crypto custody below) and corporates joining (e.g. with blockchains for trade finance – see Using blockchains to solve issues in trade finance) Blockchain is more and more equated with an (institutional) investment asset or an enterprise software. Also, recent alleged Ponzis have refurbished Blockchain’s image as a platform for illicit activities. And now such reports add (again) the attribute of speculation to Bitcoin.

Read More: What Ponzis teach us about society’s responsibility and technological progression

Other

Goldman Sachs Is Considering a Custody Offering for Crypto Funds Goldman is allegedly working on a crypto custody solution. They are not the only incumbents working on custodial offerings. Bank of New York Mellon Corp., JPMorgan Chase & Co., and Northern Trust Corp are apparently also active in this space. (Bloomberg).

This shows once again that the crypto custody space is getting more and more crowded. As reported in Blockchain & Crypto news CW30 Coinbase, Ponzis, and Assassinations:

Crypto Security Startup BitGo to Custody Zcash. (Coindesk)
This is an extension to last week’s news when BitGo added 57 Ethereum Tokens to their custody solution. As I have written in last week’s report, the crypto custody space is getting more and more competitive:

BitGo (institutional custody service) added 57 Ethereum Tokens. Especially interesting when considering that Coinbase’s Custody Services added 10 institutional customers since their start around two weeks ago.

Coindesk reported that Ledger plans to add 100 tokens to their custody service by 2020.

Coinbase

Like almost every week, Coinbase. This week we have:

  • Coinbase Taps Amazon Web Services Vet as Engineering VP (Coindesk)
  • Facebook’s Marcus Steps Down From Coinbase Board (Coindesk)
  • Coinbase Is Boosting Its Crypto Buying Limit to $25K a Day (Coindesk)

More on Coinbase:

  • Why Coinbase and not Bitcoin will replace Mastercard (Researchly)
  • How Coinbase is building a crypto empire for users’ crypto lifecycles (Researchly)

Image: Photo by Mathew Schwartz on Unsplash

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