Blockchain Startup Chain Merges With Stellar to Accelerate Use

(Bloomberg) -- Blockchain startup Chain is being acquired by the for-profit arm of the Stellar Foundation, merging an enterprise that’s signed up big financial firms as customers with a group that publicly advocates the technology’s adoption.

Stellar’s Lightyear is making the purchase and will merge with Chain under a new name, Interstellar. It will be run by Chain Chief Executive Officer Adam Ludwin, based in San Francisco and employ about 60 people, he said in an interview. The companies didn’t disclose terms in a statement announcing the deal.

The transaction seeks to accelerate the adoption of blockchain in the corporate world. Chain counts Visa Inc., Nasdaq Inc. and Citigroup Inc. as customers for its service of creating private blockchains -- but it has found some companies slow to shift operations to the new systems. Stellar is a blockchain network co-created by Jed McCaleb, who also founded the defunct Bitcoin exchange Mt. Gox and was among the creators of Ripple.

Proponents of blockchain have splintered into two paths as the protocols evolved in recent years. Private efforts, known as enterprise blockchain, have pitched the technology to banks, stock exchanges and health-care companies to overhaul databases and speed up transactions. Meanwhile, public efforts such as the Bitcoin network and Ethereum have offered their networks to anyone, encouraging innovation. Chain was in the private world, Stellar in the public.

Little Use

“We were regularly finding across the board that we were making a lot of progress with our customers until the point where it was on the customer to launch a network,” Ludwin said. Clients complained it was too difficult to manage a platform on their own, so now they can use Stellar’s, he said. “We recognized Stellar had the perfect design if your goal is to have a high-scale public network” that transfers assets over the internet.

Blockchain is promising for corporations, if they can figure out how to use it. Proponents predict billions of dollars in savings by handling transactions more efficiently and speeding up settlement, which in financial markets can free capital for other uses. Yet most corporate efforts are still in early development or testing.

“There’s been little real-world use,” said McCaleb, who will be Interstellar’s chief technology officer. Public blockchains accelerate adoption by allowing anyone to see transactions that can’t be changed, building trust, he said. “Marrying these two things together will really allow progress to be made.”

Chain’s Goal

Chain’s goal isn’t changing, Ludwin said. It wants to enable trading of assets over the internet as easily as Bitcoin. While it’s simple for blockchains to handle digital assets, such as tokens, developers have struggled with securities like stocks or bonds, or hard assets like real estate, because they still need to be handed over in the real world. Ludwin has long been involved in working out that “last-mile problem,” as he put it.

Stellar will transfer both tokens as well as “anchored assets,” representing stocks or bonds, Ludwin said. “It’s the idea that has the most potential and we think will have the most impact on how real-world financial services operate.”

What Stellar has lacked is the software that allows companies to quickly experiment with blockchain, the type of code Chain has developed over the years, McCaleb said. The main focus behind the acquisition is that both firms are concentrating on getting the technology to a point where people are actually using it, he said.

“It’s time for all this blockchain stuff to become real,” McCaleb said. “We’ve been talking about it for years now.”

©2018 Bloomberg L.P.