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Chain Inc., a startup that collaborates with
Nasdaq
Inc.
and others to build a blockchain-based trading platform, is merging with another criptovalute startup, a sign that efforts to link the technology behind bitcoins to traditional markets are proving to be more difficult than expected.
Lightyear Corp., a for-profit spin-off of the Stellar Foundation, will acquire Chain, combining the two companies into a new company called Interstellar, according to the Stellar Foundation.
The CEO of the Adam Ludwin chain will lead the new company, while Stellar co-founder Jed McCaleb will be responsible for the company's main technology.
The terms of the agreement were not disclosed, but Mr. Ludwin said that on Friday, investors would be cashed in at a multiple of their initial investment. Chain was valued at around $ 124 million after its last fund-raising round, Ludwin said. It raised about $ 43 million from investors including RRE Ventures, Khosla Ventures, Nasdaq and
Visa
Inc.
Startups like Chain and Stellar are built around variations on the blockchain technology that serves as background for bitcoins and other cryptocurrencies. Bitcoin was designed to allow two people to exchange directly, without intermediaries, much like a digital version of money.
Wall Street startups and gamers have attempted to adapt the technology to a range of uses including raising capital and buying and selling shares.
Wall Street began experimenting more than three years ago with efforts to take blockchain and adapt it to its own uses. Startups like Chain, R3 and Hyperledger have been involved in consolidated companies such as Nasdaq,
JPMorgan Chase
& Co.,
Citigroup
Inc.,
International Business Machines
Corp.
is
Microsoft
Corp.
There are a myriad of pilot programs, but no one has yet managed to launch a mainstream commercial product.
Four-year-old Chain partnered with Nasdaq in 2015 to build blockchain-based trading platforms. Their first effort was a platform for the exchange of securities of private companies, called Linq. But Mr. Ludwin said that customers have never been completely comfortable with the prospect of managing their blockchain networks.
"We hit a wall a little over a year ago compared to our customers' willingness to take the final step, launch and run their own network," Ludwin said in an interview. Customers would prefer to use a decentralized network that they do not have to maintain and operate, he said.
Interstellar will focus on combining Stellar's open platform with the types of services built according to financial services specifications, said Ludwin. Existing Chain customers, including Nasdaq and Visa, have supported the deal, he said.
Stellar, founded three years ago by Mr. McCaleb and Joyce Kim, is also based on the concepts of bitcoin. It is designed primarily to reduce the friction in cross-border and cross-currency trading. Unlike the efforts led by the banks, focused on networks where they would be in charge of those who use it, Stellar is open to the public.
A prime bitcoin investor, Mr. McCaleb is well known in the cryptocurrency circles. He created the Monte. Gox exchange, which later sold Mark Karpelès and co-founder of the Ripple protocol. He launched Stellar shortly after leaving Ripple in a dispute with the other founders.
Write to Paul Vigna a [email protected]
