One of cryptos longest-running exchanges has been sold

One of the longest-standing crypto exchanges has new owners after Europe-based Bitstamp was sold to South Korea’s Nexon, marking the gaming firm’s second such acquisition.

The acquirer is NXMH, a Belgium-based PE and investment firm owned by NXC — the parent of Nexon — and it will take a majority 80 percent stake in the business for an unknown fee. The New York Times’ Nathaniel Popper suggested earlier this year that Bitstamp was in the process of being sold “to South Korean investors” for $400 million, but NXC declined to comment on the price when asked by TechCrunch.

NXC acquired 65 percent of Korea-based exchange Korbit one year ago for 91.3 billion KRW, or approximately $79.5 million at the time.

Bitstamp was founded in 2011 by Slovenian entrepreneur Nejc Kodrič with an initial €1,000 and it survived the heady early days of crypto, unlike a certain peer named Mt. Gox. Today, Bitstamp is ranked inside the world’s top 30 exchanges based on trading volume with more than 100 staff. Bitcoin and XRP are among its most traded tokens, according to data from Coinmarketcap.com.

The company has a license to do business across the EU but it also works with customers worldwide.

Bitstamp has been profitable since its early life, but Kodrič revealed the sale is down to the potential to work with NXC, which he sees as a like-minded partner.

Bitstamp has been regularly approached by suitors for quite some time. The reason why we finally decided to sell the company is a combination of the quality of the buyer, the quality of the offer and the fact that the industry is at a point where consolidation makes sense. A major factor in agreeing to the sale is that the mission, leadership and vision of the company remains the same.

We believe this acquisition is the logical next step in Bitstamp’s growth as a company and I look forward to the future with this team.

The Bitstamp CEO said business will continue as normal — he’ll retain his position as CEO and keep 10 percent of the company.

Interestingly, he told Fortune that regulatory compliance meant the deal took some ten months to close after first being agreed in December 2017 when crypto market valuations hit a peak — with Bitcoin, in particular, getting close to a record $20,000 valuation.

Bitstamp raised around $14 million in capital from investors along its journey, with U.S-based Pantera capital one of its major backers.

Note: The author owns a small amount of cryptocurrency. Enough to gain an understanding, not enough to change a life.

Coinbase is now worth more than all but three cryptocurrencies

With its shiny new $8 billion valuation, Coinbase is now worth more than all but the top three cryptocurrencies that trade on the platform.

That’s right, the only cryptocurrency assets that are worth more than the platform that trades them are Bitcoin, Ethereum and Ripple. Bitcoin Cash, the currency forked from Bitcoin, is a distant fourth in valuation at $7.3 billion.

Coinbase’s Series E is nearly three times as much as the company raised in its Series D, and the fresh cash brings Coinbase’s total-capital-raised-to-date to over $520 million.

That’s a lot of money. Indeed, if Coinbase’s capital raised figured is compared to the market cap of the world’s various cryptocurrencies and other similar assets, it would rank around 20th.

But the bet for investors is, and should be, that if cryptocurrencies are indeed the next big idea in the ways that humans determine value, then Coinbase should be worth far more than any of the assets that trade on its exchange.

The fact that it’s neither indicates how much farther the company has to grow, or the limits of the thesis that cryptocurrencies will take over the world.

It shows that the wager on a particular crypto company is looking like a better investment than putting money to work in nearly any of the other crypto assets that are for sale. During the last few crypto booms, some investors said that it was probably simpler to just invest in various tokens instead of companies working on blockchains — faster returns and your money would be more liquid, to boot.

However, at least in the case of Coinbase, that wager likely wouldn’t have worked. Coinbase is also the company that every investor has wanted to invest in; it’s been a known winner for a while now, so its performance isn’t a huge surprise.

And now with $300 million, Coinbase is well-capitalized to survive either a market downturn (one will come eventually), and the current Crypto Interregnum.

Coinbase’s chief executive certainly thinks the market will grow. As we noted, Coinbase currently allows trading to just a handful of cryptocurrencies, but it has long harbored ambitions to expand beyond that.

Speaking at TechCrunch Disrupt SF in September, CEO Brian Armstrong revealed that he sees a future in which every cap table will have its own token. Based on that, he said he believes that Coinbase could host hundreds of tokens within “years” and even potentially “millions” in the future.

Crypto exchange Kraken trolls NY attorney general after claim it may be acting unlawfully

Decentralized GFYS.

Image: MADROLLY/GETTY IMAGES

It probably wasn’t the smartest move.

Roughly 24 hours after a major report from the New York state attorney general’s office led officials to declare that the cryptocurrency exchange Kraken is “possibly operating unlawfully in New York,” the exchange apparently decided the best response was to thumb its nose at state officials.

In a series of tweets from both the official Kraken Twitter account and the company’s co-founder and CEO, Jesse Powell, the San Francisco-based exchange made it clear that it’s not taking this report seriously — at all.

“NY is that abusive, controlling ex you broke up with 3 years ago but they keep stalking you, throwing shade on your new relationships, unable to accept that you have happily moved on and are better off without them,” tweeted Powell. “#getoverit,” he added.

And in case you thought that the CEO was just venting about New York the state (as he bizarrely later implied), the exchange chimed in as well.

“Thanks to the NY taxpayer for funding this research — saved our Product team a lot of time, and we got some interesting non-public info on our competitors,” tweeted the Kraken account. “Excellent overview of issues, and a nice list of ‘Questions Customers Should Ask’ on pg 32.”

We reached out to Kraken directly to try and better understand what appears to be the company’s flippant response to a rather serious allegation, but received no response as of press time.

But just because we didn’t hear back from Kraken, doesn’t mean Kraken hasn’t been talking. In a series of follow up tweets, the company claimed that it doesn’t operate in the state of New York at all, and thus the AG’s claims are unfounded.

“We must, however, object to the highly unprofessional/malicious implication that because we did not respond to the voluntary information request, we *might* be operating illegally,” tweeted the company. “We told you we don’t operate in NY. AG trying cases in court of public opinion now?”

This, of course, is not the first thing Kraken said about the report.

“In announcing the company’s decision not to participate in the Initiative,” the attorney general’s report explained, “Kraken declared that market manipulation ‘doesn’t matter to most crypto traders,’ even while admitting that ‘scams are rampant’ in the industry.”

Which, yeah, doesn’t exactly inspire confidence.

According to CoinMarketCap, at the time of this writing Kraken is doing around $127,091,377 in 24-hour trade volume.

Maybe with the help of all that “interesting non-public info on our competitors” it claims to have gained from the published report, Kraken can find some time to issue a real response to the NY attorney general’s claims. But maybe Powell and his team are too busy enjoying the highs of those “new relationships” they’ve so publicly moved on to.

The second blockchain bubble is now complete whats next?

The last few months haven’t been easy for crypto investors. Following the dizzying highs of crypto trading late last year, which saw Bitcoin reach a peak of $19,276 and a market cap of $323 billion and Ether reach $1,152 with a market cap of more than $112 billion, prices have crashed. Today, Bitcoin trades at around $6,500, and Ether at $204. Their combined market caps have shed about $300 billion in value.

That’s basically five Bernie Madoffs worth of losses.

The situation has put crypto investors in quite the bind. As one indicative example, The Wall Street Journal profiled wunderkind crypto investor Olaf Carlson-Wee, who founded Polychain Capital. The fund, which has seen dizzying growth over the past few years turning a few thousand dollars into tens of millions in returns, has lost about 40 percent of its $800 million in capital through investment losses and investor withdrawals.

It’s clear the second blockchain bubble is now complete (the first was the run-up in Bitcoin prices in 2013). The question is: What’s next for blockchain?

Blockchain’s two narratives’ problem

I have previously argued that blockchain’s rise is a dual parallel to that of the internet. On one side that I dubbed the 1960s narrative, the technology is extraordinarily nascent, with limited use cases and almost no ability to scale. The other side is the 1990s narrative — that this is a groundbreaking new technology that should be invested in immediately for maximum returns.

Blockchain’s story so far is the freakish combination of these two narratives. The enthusiasm of the “1990s” crypto investors on valuation never matched the enthusiasm of the “1960s” crowd of crypto researchers and core blockchain designers, who focused on the potential of these technologies over the vagaries of price. As conversations with leaders like Vitalik Buterin can attest, many of the core engineers are hyper-aware of just how much work remains to be done to see blockchain become a foundational technology.

Indeed, the interaction between these two groups explains much of the kerfuffle this week over Buterin’s comments around the lack of “1000x” potential with blockchain. While the media has painted his comments in a deeply negative light, and he has been criticized by crypto acolytes, I think it is clear that his pragmatism stems from his engineering background rather than his investment focus.

The simple answer is that the 1960s crowd is right, and the 1990s crowd is just too early. Much more development is needed to get blockchain where it needs to be, and much more analysis is going to have to be done to figure out where the investment returns are going to be. Search and social ended up being the killer apps for the internet, but the winners in those categories hardly emerged instantly.

Real innovation is slower than we always expect

The pace of innovation may have accelerated over the past two centuries, but there is still a ceiling on how fast things can change. The cell phone took almost two decades from its original launch in the 1980s to the launch of the iPhone in 2007. The internet took roughly three decades from its conception at ARPA to what we now understand as the world wide web.

Blockchain is almost certainly on a similar timeline. While the tech has antecedents going back to the digital gold of the 1990s, we can start the clock with the launch of Bitcoin in 2009. That means we aren’t even finished with the first decade of understanding this technology, building up a theory of how it works, or thinking through its use cases in a scalable way. In short, there is so much more work to be done to harness this tech for our own purposes.

The good news is that the massive infusion of investment from crypto traders over the past few years should help to rapidly accelerate blockchain’s development. Some of these projects, which wouldn’t have gotten funding even from a university laboratory, are sitting on a ridiculous level of seed funding. They could create a lot of progress in this space, assuming that these projects use their funds effectively.

The downside to the onrush of capital is that morale has certainly been shaken for many participants, and morale is critical to seeing through complex new projects to completion. There are going to be ups and downs with the design of any new technology on the frontier of engineering — but morale and stubbornness can do a lot to keep the momentum up.

Where should we focus?

To me, several veins of research and development around blockchain remain deeply exciting, if we have the patience to see them through. They are:

  1. Identity: I’ve written about projects like Element and Learning Machines before. There are incredible challenges around how to offer portable and secure identities to every human on earth, to say nothing of every animal and physical object. Blockchain seems like technology that might be able to help here, if we are able to figure how to connect the digital world to the analog one. Facebook was once considered to be the identity layer of the internet — a claim that it has failed to live up to. Blockchain may ultimately arrive to complete that mission.
  2. Decentralized web: I was fortunate to catch up with Jutta Steiner of Parity Technologies last week at TechCrunch Disrupt and also host her at our event in Zug this past July. She and others like Gavin Wood have done a lot of work to start thinking through how chains can interact, as well as how to rebuild our modern web infrastructure in a decentralized way. Their ideas — like everything in this new world — are very early and inchoate, but they are inspiring in their potential. While centralized servers have huge performance advantages over decentralized technologies today, there’s no reason why that gap has to be permanent. Web3 and other projects could lead the way to pushing this model forward.
  3. Security Tokens: Can blockchain technologies help us build a safer, more efficient financial system? I am reminded of the piece by Matt Levine of Bloomberg on the shareholder votes to take Dell private and the massive level of indirection and complication it illuminated when it comes to ownership in our modern economy. Security tokens could provide a means to manage that complexity in a much more fluid way, particularly in a world where sharing is increasingly the norm around fixed assets (autos and Uber, homes and Airbnb, etc.)

I use “may” and “could” for each of these examples because we have no idea what we are going to discover on the frontier of blockchain. The good news is that these are rich directions to investigate, and even if we don’t discover something specifically in these areas, we are likely to discover something that moves the technologies forward along the way.

All this is to say that we need to stop reading the latest token prices every 10 minutes, and get back to the real work of building up this new technology and turning it into the revolution it one day could be.

SparkLabs is launching a cybersecurity and blockchain accelerator program in the US

Investment firm SparkLabs has run accelerator programs across APAC, now it has announced its first that’ll be based on U.S. soil and it’s a cybersecurity and blockchain program that’ll be located in Washington, D.C. from next year.

The program will be led by former Startup Grind COO Brian Park and Mike Bott, who is ex-managing director of The Brandery accelerator. Advisors signed on to work with the batch of companies includes top names like Microsoft’s former chief software architect Ray Ozzie, Litecoin creator Charlie Lee, LinkedIn co-founder Eric Ly and Rich DeMillo, who was the first CTO of HP.

Named “SparkLabs Cybersecurity + Blockchain,” the program will kick off with an inaugural batch of companies in March next year, with applications opening accepted from January. SparkLabs co-founder and partner Bernard Moon told TechCrunch in an interview that the plan is to run the program for four months with two intakes per year.

It’ll use SparkLabs’ standard investment approach that sees selected companies offered $50,000 for up to six percent equity. That’s variable on a case-by-case basis — for example for those that have raised significant early funding at a large valuation — but Moon said that the priority for the security and blockchain program is to seek out companies that are bootstrapped or at least have not raised much.

Moon said that the general focus is not on cryptocurrency but instead enterprise-led technologies. So, on the blockchain side, that might mean protocols and other infrastructure layer plays, although Moon said he does believe that there is scope for more consumer companies, too.

SparkLabs has a dedicated blockchain fund — SparkChain Capital — but neither that fund nor its principal, Stellar founder Joyce Kim, is directly involved in the accelerator. That’s very deliberate, Moon said, because SparkLabs wants to grow its network in the blockchain space outside of SparkChain, although he did explain that the program will be “a vetted deal source” for the fund, so graduates could potentially look it to when they want follow-on funding.

Outside of SparkChain Capital, SparkLabs is active in crypto, primarily through its presence in Asia — especially Korea where it operates its first accelerator program. The company is even tokenizing two of its accelerators — a six month IOT-focused initiative in Korean smart city Songdo and Cultiv8, an accelerator for agriculture and food tech in Australia — although Moon said that the project has been delayed but remains on track to happen soon. Investment-wise, it has backed over 10 blockchain companies and a dozen in the cybersecurity space.

The cybersecurity and blockchain program has an interesting story. Park and Bott originally spun out AOL’s Fishbowl Labs accelerator program but after a discussion with Moon for advice, the pair ended up signing up with SparkLabs. That’s a move that Moon believes will help bring a global perspective through SparkLabs’ presence in the rest of the world — it has six other programs globally — and marrying that with what’s happening in the U.S.

“We want to foster and grow a robust ecosystem in both cybersecurity and distributed ledger technologies.  We believe these two verticals are synergetic by nature, but we will seek innovations beyond the overlap,” Park said in a statement

“It’s so early within this space that we are only seeing the Friendsters and MySpaces of the blockchain world.  The next Facebooks and Twitters will be developed over the next several years,” he added.