Facebook has made its first acquisition in the blockchain space.
The social network has quietly hired the team behind Chainspace, a small blockchain startup founded by researchers from University College London, Cheddar has learned. Chainspace was building a decentralized “smart contracts” system that could facilitate payments and other services through blockchain technology.
The acquisition of Chainspace’s team, a move known in Silicon Valley as an acqui-hire, is the clearest sign yet of Facebook’s ambition to be a big player in the nascent blockchain industry. Veteran Facebook executive and former PayPal President David Marcus was tapped to lead Facebook’s blockchain group earlier last year.
According to Chainspace’s August 2017 white paper, which outlines the academic and technological details behind the project, the team wanted to build a “distributed ledger platform for high-integrity and transparent processing of transactions within a decentralized system.”
That essentially means that one of Chainspace’s goals was to improve the speed of transactions through blockchain technology, which currently functions much slower than traditional financial institutions like Visa. The researchers behind Chainspace were also looking at how blockchain and decentralization could be applied to areas outside of payments, like polling.
Four of the five researchers behind Chainspace’s academic white paper are joining Facebook’s blockchain group, according to people familiar with the matter. Two of the white paper authors, Alberto Sonnino and George Danezis, already list their employment as blockchain researchers in Facebook’s ($FB) London office on LinkedIn.
The Chainspace website was recently updated to say that the team behind the startup is “moving on to something new,” and people familiar with the startup told Cheddar that the startup will shut down now that Facebook has hired most of its employees.
A Facebook spokesperson confirmed to Cheddar that the company had hired employees from Chainspace but declined to comment on specific hires. Facebook isn’t acquiring any of Chainspace’s technology, according to the spokesperson, who referred to an earlier statement about the company’s blockchain efforts:
“Like many other companies, Facebook is exploring ways to leverage the power of blockchain technology. This new small team is exploring many different applications. We don’t have anything further to share.”
Cheddar first reported last year that Facebook was exploring the creation of its own cryptocurrency, which Bloomberg recently reported will take the form of a stablecoin, or cryptocurrency backed by a fiat currency, in WhatsApp.
Facebook has been aggressively recruiting academics, product managers, engineers, and legal experts with experience in cryptocurrencies and blockchain technology, as Cheddar previously reported. More than 40 people work in Facebook’s blockchain division currently, and Facebook has shown interest in hiring other teams behind nascent cryptocurrency and blockchain-related projects like Chainspace.
It’s unclear how much Facebook would be willing to pay for an acquisition in the blockchain space. Chainspace was in the process of raising an initial round of funding of less than $4 million, according to people familiar with the matter. Early backers of Chainspace include Lemniscap and MW Partners.
Facebook could still acquire more blockchain companies. The social network has also held talks with Algorand, a blockchain-based payments platform, which has raised about $66 million to date. But those talks fell through, people familiar with the matter said. Algorand didn’t respond to requests for comment.