The for-profit subsidiary of the Stellar Development Foundation has purchased Chain, a venture backed blockchain startup with some of the biggest names in enterprise adoption among its customers.
As part of the all-cash deal for an undisclosed amount, San Francisco-based Chain’s existing investors, including Visa, Nasdaq and Citi Ventures will all receive a return on their investment, according to Chain co-founder Adam Ludwin.
But from a larger perspective, the deal stands out for being some of the clearest evidence yet of a blurring of the lines between the once firm division between private, enterprise blockchain solutions and public blockchains supporting a native cryptocurrency.
While enterprises like IBM have recently started to experiment using Stellar’s native lumens (XLM) cryptocurrency, and Visa, Nasdaq and Citigroup have all built products with Chain, the merger stands to jump start activity between the entities.
“All of the clients that we have now have effectively shifted from using a traditional database model to using a tokens model, issuing assets on a local environment,” said Ludwin, who is now CEO of the newly formed Interstellar. “By partnering with Stellar you can fire an asset to another institution.”
Ludwin says the acquisition was for “significantly more than $40 million” the investors put into Chain, adding that the company “has had millions in revenue and millions of dollars in the bank,” though he declined to share further details.
“Chain did not need to sell the company,” he said. “This needed to be a great strategic move and a great return and it was both.”
In addition to Ludwin taking over as CEO of the new Interstellar company, Stellar creator Jed McCaleb will take over as chief technical officer. McCaleb, who is also a co-founder of Stellar competitor Ripple and founder of the closed Mt Gox cryptocurrency exchange, will continue his duties at the foundation that helps facilitate development on the open source Stellar code.
The lumens cryptocurrency is now valued at $0.02 each, with a total market value of $3.9 billion.
As part of the deal Chain’s existing enterprise customers using its Chain Core software for permissioned blockchain—including Visa, Nasdaq and Citigroup—will now be served by the Interstellar firm. Fintech customers Cloudwalk and LPS, a French insurance company, that use Chain’s Sequence cloud storage services will also move to Interstellar.
Formally, the acquisition is being made by the for-profit branch of the Stellar Development Foundation, called Lightyear. The Chain and Lighteyear brands will both be retired as a result of the deal. At launch, Interstellar will employ 60 people with headquarters in San Francisco and offices in New York City.
Ludwin compares the permissioned blockchain environments running with Chain’s existing clients as a layer that will sit on top of the public blockchain platform created by Stellar, and powered by the lumen cryptocurrency. A trading service expected to launch soon called StellarX, for crypto-assets created on the Stellar blockchain, will also move under the Interstellar umbrella.
Last year Visa announced it had launched the first phase of a B2B payments network powered by Chain, and Nasdaq and Citi revealed a separate joint project for cross-border payments using Chain. While Ludwin later said he had six similar networks in various stages of development he has now described a number of obstacles preventing further growth.
Specifically, he says Chain was unable to bring new customers together without a public network and his company briefly considered launching its own public blockchain. But when McCaleb last year launched Lightyear as a way to lure partners to build on Stellar Ludwin says the pair re-evaluated their trajectories. “Chain and Stellar had equal and opposite problems,” said Ludwin. Problems they now believe can best be solved together.
The merger points to the larger concern in the blockchain space of how permissioned networks can interoperate with other platforms. While the U.S. Depository Trust and Clearing Corporation built its soon-to-be launched blockchain platform to interoperate with the public ethereum blockchain, the Chain merger shows another possible path forward.