DeepDive, Coinbase, DCG, Overstock, Bakkt, Grаyscale and Their Impact on the Future of Blockchain

The initial speculative trend of the blockchain industry, which gave it a negative appearance, is gradually decreasing. Previously, speculations and a large number of fraudulent schemes pushed the large players and companies away. Right now, the market is starting to clear itself from this “wild west” brand, and corporations are beginning to look into the available technologies and even integrate them.

Here you can draw a parallel, frequently used when you start talking about DLT applications (Distributed Ledger Technologies, to which blockchain also belongs) — dotcoms. This matches very well with the current situation — from a financial bubble to real use cases.

For many years some of the major companies, with ties to different business fields were developing their own proprietary DLT solutions, as well as supporting the developments by the third parties with investments.

One of such examples is Overstock, a large retailer that invests in blockchain startups through the venture division Medici Ventures and helps them develop. Perhaps, the only one of these startups known to the public is Evernym. Other projects, such as Symbiont, PeerNova, Netki, Votem, etc. are relatively unknown. This is because they create narrow targeting solutions, which do not require crypto communities or public integrations. For example:

• Symbiont is working on blockchain technologies integrations into financial markets: into mortgage, exchange, stock and credit markets, to accelerate processes and improve transparency;
• Factom provides enterprises with a completed Rest API for chronological connection, ensuring the integrity and invariability of corporate documents and data, easing audit and report making;
• PeerNova, founded back in 2013, simplifies coordination, automates the exclusion handling and provides complete end-to-end operation transparency of work processes in real-time with the help of data synchronization in different systems by applying blockchain platform;
• Votem is a voting platform, already tested in some states

Parent Overstock is also actively joining the industry. For instance, on September 24, 2019, they submitted an application to the SEC to register their preferential shares implemented on the blockchain.

DeepDive, a company that develops DLT products, has a similar position regarding the publicity for corporate solutions. In one of their articles, they write that, unfortunately, at crypto conferences, the main conversation topics are speculations in cryptocurrency and related fields: exchanges, mining, etc. Despite the significant activity in the crypto community regarding the use of DLT for supply chains, work process organization and asset tokenization, it all comes down to cryptocurrency, instead of practical technology applications. Public ideas, for the most part, either remain on paper or not needed by anyone. After all, it is hard to believe that a former gamer, who purchased graphic cards and started mining, can suddenly offer a cybersecurity solution to large companies.

This unnecessary hype only repels the corporate sector. People have an active mental link that blockchain is equal to cryptocurrency. However, the potential scope of blockchain applications is much broader: cybersecurity, duplicate codes and identifiers problem solution, financial and accounting registers. There is a lack of understanding that DLT is relatively easy to integrate into the existing software solutions, without rewriting the entire code and completely changing the software itself. A blockchain platform can be viewed as a separate plug-in for software. It is crucial to break the association that “Blockchain is Bitcoin.”

Solutions, developed by well-known ICO startups, have serious disadvantages, even though their code is publicly available and accessible for verification. Corporate integrations require a focused security audit. The most important task is to verify whether the code is correct. There are two main issues here: technical requirements and software implementation method. During the protocol’s development, a lot of time is dedicated to defining technical requirements. At the same time, the code must also be efficient from an economic perspective.

It is necessary to consider areas that are potentially weak to attacks and all the existing risks. As soon as technical requirements are created, the next step is their implementation, and when the final product is completed, it must comply with these requirements. Otherwise, the system will not function as it originally intended. This is the business focus of companies such as DeepDive.

In addition to the technical implementations and product development, the blockchain industry has legal issues in financial operations and tools integration. Consider how significant players such as Grayscale, Coinbase and Bakkt tackle them.

Grayscale Investments, a subsidiary of DCG (Digital Currency Group — an accelerator for blockchain projects), has recently received the approval of their application for Bitcoin trust (BIT), by meeting SEC requirements. At the moment, they have a GBTC (Grayscale Bitcoin Trust BTC) asset in the form of shares, available as a private placement for institutional players and via brokerage accounts similar to traditional securities for ordinary people. It is vital to notice that the capital inflow into these stocks is rising rapidly: compared to the Q2 of 2019, Q3’s quarterly growth has reached 189%. However, this type of placement has a significant disadvantage — it blocks funds for 12 months. Creating a trust, on the one hand, leads to information disclosure and reporting requirements increase and allows reducing private placements blocking from 12 to 6 months. Without a doubt, these kinds of actions will lead to increased liquidity and operation security in the cryptocurrency market.

Here comes Coinbase — it acts as a depository of Grayscale assets, providing storage and maintenance as securities. Coinbase is also actively working on introducing masses to cryptocurrencies. Recently, exchange’s CEO, Brian Armstrong, received a patent for an invention, which allows you to send bitcoins via e-mail, which may help bitcoin and crypto business become widespread as a whole. This solution, of course, has its limitations: the system takes around 48 hours to confirm the transaction. However, this is one of the things, which may lead to mass adoption. Another important event is this message about Coinbase working together with Visa on releasing the card, which would allow users to pay with any cryptocurrency, supported by the platform.

To work on financial instrument promotion related to blockchain more effectively, large players unite themselves in consortia. For instance, Grayscale investment, Bittrex, Kraken, Circle and others, joined Coinbase to create a Crypto Rating Council. This organization helps crypto companies to comply with complicated US security laws. In particular, by creating a rating system, which evaluates the compliance of cryptocurrencies on a 5-point scale.

BTC options trading at the Chicago CME Group and Bakkt platform — the brainchild of the New York Stock Exchange ICE operator, has made a lot of noise in the crypto sphere. You can talk a lot about how the crypto community and the exchange rate reacted to news about launch dates of these platforms and their delays. However, what is important here is that transactions on these platforms are supported by cryptocurrency, stored on custodial servers (deposits). Traders can trade bitcoin via options in compliance with institutional norms and security laws. Before this, only Bitcoin futures were available at CME, which essentially were unsupported bets on the growth of the asset. Bitcoin options launch by the largest financial market operators is a big step towards regulation and increased transparency for cryptocurrencies.

All of this combined demonstrates how much work and effort is needed to legalize both cryptocurrencies and financial instruments based on them as well as to integrate blockchain technologies into markets and various corporate systems. Although cryptocurrencies and corporate DLT products are often not connected, the industry is gradually moving towards mass adoption, albeit from completely different sides.