On Dec 31, 2018, Bakkt announced that it had raised over $180 million during its first round of funding. The 12 investors include multi-national corporations, venture capitalist firms, and centralized financial institutions. Like Coinbase, Bakkt grants centralized control and authority to the exact type of entities that Bitcoin was designed to resist.
Twelve investors partnered together to raise the total of all funds raised for Bakkt during the first round of venture capitalist fundraising. The amount invested by each partner has not been publicly released, though it has been announced that a total of $182.5 million from all partners.
The 12 partners and investors include:
- Boston Consulting Group, Inc.: A multinational management consulting firm whose clients include more than two-thirds of the companies on the Fortune 500 list
- CMT Digital: the division of multi-national investment and asset management firm Capital Markets Trading (CMT), LLC which invests in blockchain technology
- Eagle Seven: a privately held proprietary trading firm
- Galaxy Digital: A digital assets merchant bank
- Goldfinch Partners: A public tax and accounting firm
- Alan Howard: Co-founder of Brevan Howard Asset Management, LLP
- Horizons Ventures: A venture capitalist (VC) firm
- Intercontinental Exchange: The operator of the New York Stock Exchange (NYSE)
- M12: The VC division of Microsoft
- Pantera Capital: an investment firm and hedge fund which focuses on cryptoassets
- PayU: The fin-tech arm of Naspers, a multi-national internet-based entertainment/media group
- Protocol Ventures: a multi-manager venture capitalist firm focusing on cryptoassets
In addition to Microsoft’s venture capitalist division, there is also included a bank for digital assets; a number of investment, hedge, and venture capitalist firms; a tax and accounting firm; and the operator of the New York Stock Exchange (NYSE) — Intercontinental Express (ICE).
Coinbase and Bakkt
The Intercontinental Exchange also owns 12 other regulated exchanges and marketplaces. It is developing Bakkt as a cryptoasset and cryptocurrency futures trading platform. If it receives approval from the U.S Commodity Futures Trading Commission (CFTC), Bakkt will become ICE’s thirteenth regulated platform alongside the NYSE.
Possible collusion between Coinbase and various cryptocurrencies like CIVIC have made headlines recently. Further collusion may be developing similarly between Coinbase and Bakkt. The NYSE has invested into Coinbase at least twice. Adam White left his job as Vice President of Coinbase to work as COO of Bakkt. At least three former NYSE executives have been hired at Coinbase. Coinbase and Bakkt are begin funded by centralized financial institutions, corporations, and investment firms.
Collusion cannot be necessarily concluded from these various events. There is, however, a corollary pattern of influence these four entities:
1. The NYSE
4. Intercontinental Exchange
Centralization vs. Decentralization
Coinbase and ICE give influence to centralized financial institutions via cryptocurrency exchanges and trading platforms. They represent one of several centralized authorities which suggest that the Theory of Decentralization presented by Satoshi Nakamoto may not be practical. Bitcoin was designed to use proof-of-work to develop a currency that could be used outside the authority of third-party centralized financial institutions. Neither Bitcoin nor the Proof-of-Work protocol included safeguards against the influence of centralized financial authorities via the exchanges they operate.
Other centralized authorities which represent threats to the Nakamoto Theory of Decentralization include ASIC manufacturers and the Proof-of-Work miners who operate them. The primary fault in the theory seems to be the reliance on Proof-of-Work. Nakamoto’s theories have been amended to include other consensus algorithms such as Proof-of-Stake, Proof-of-Authority, Proof-of-Storage, and many others.
There is another solution.
New cryptoassets yet to be released may use consensus algorithms which have not been integrated into any major cryptocurrency like Bitcoin, Litecoin, or Ethereum.
Do you think the influence between Coinbase, Bakkt, the NYSE, and ICE is worrisome or could it benefit the mass adoption of cryptocurrency and other cryptoassets? Let us know your thoughts in the comments below!