The news has been circulating for a couple of months that the Intercontinental Exchange, owner of the New York Stock Exchange (NYSE) is set to launch a platform. They have revealed their collaboration with Starbucks, Microsoft and others on their entirely new crypto centric platform named Bakkt. According to the announcement that launched Bakkt, the new ecosystem is expected to include federally regulated markets and warehousing along with merchant and consumer applications. In normal terms, this means investors using Bakkt will use the already existing laws and regulations. This will help set aside fears that anyone might have about the cryptocurrencies market.
Bakkt has easily been one of the biggest pieces of blockchain news this year. It is understood that Starbucks will be using Bakkt to accept Bitcoin in in-store purchases. Some state that the release might be the breakthrough that we have been looking for to make bitcoin mainstream. It could also have a significant impact on the cryptocurrency market by easing the way into the market for new investors. With Bakkt scheduled to be released as soon as this November. This platform is certainly exciting news for this industry
A deeper look into the Bakkt platform
Bakkt plans to tackle how digital assets are bought, sold, stored and spent in a safe efficient way. The ICE wants to transform Bitcoin into a trusted global currency with widespread usage and Bakkt is their attempt to spark that transformation. Bakkt has announced that they will follow already existing guidelines for futures trading. The team tweeted about this stating:
“Bakkt uses the existing time-tested, regulated futures market infrastructure market to introduce physically delivered bitcoin and warehousing to global markets. All aspects of the existing futures market will for the first time be part of physical delivery and warehousing of Bitcoin. “
They have also announced their first bitcoin futures contracts and have described it as follows: “Our first contacts will be physically delivered bitcoin futures contracts versus fiat currencies, including USD, British Pounds Sterling, and Euro.”
This means if an investor buys 1x USD BTC futures contract they will receive 1 Bitcoin into their account within a day. The Futures contracts will be regulated by the CFTC and will have clear rules. It is also worth noting, Bakkt is owned by the ICE and they trade a large amount of futures already so it’s something they’re well practised in.
Bakkt has come out to state their initial focus will be to support institutional investors. They made this clear in a tweet that reads the following.
Bakkt may be far larger for this space than we have been led to believe. All attention has been focused on the pending Bitcoin ETF, however, Bakkt proposes a solution to get institutional investors on board that could be just as good. Bakkt is targeted for a launch in November pending CFTC approval. The date of November 5th has been floated around but not official.
ICE is positioning Bakkt to bring digital assets to the mainstream and their efforts will likely open up the possibilities for the first SEC-approved Bitcoin ETC, should the VanEk / Solid X ETF be declined. After all the SEC has denied previous applications of the grounds of market manipulation and market infrastructure. As Bakkt is addressing both of those, it allows prospective ETF to be both trusted and efficient. As they have stated, they’re starting with a proven framework that underpins exchanges, including a consistent regulatory construct. Transparent, efficient price discovery and an institutional quality pre-and post-trade infrastructure.
Furthermore, Bakkt has said its exchange will not allow Bitcoin to be traded on margin or leverages, and that they want to establish on finding a trusted price formation.
Bakkt will trade bitcoin and not just speculate on its price movements which are good news for Bitcoin. This makes it different to other platforms that have appeared in recent times that just speculate on the price movements. Bakkt platform will function as a second layer protocol. This is similar to the lighting network which is also a second layer protocol. This means that it is tethered to Bitcoin but functions both independently and in conjunction with the main chain at the same time.
Bakkt has announced that their platform will function in a similar manner. In an interview with fortune, CEO of Bakkt, Kelly Loeffler spoke about platform stating “Our system would operate on a later above the blockchain, and we’d keep our own omnibus ledger apart from the blockchain.”
The Bakkt platform is expected to attract high amounts of usage. Between the platforms, many clients will be thousands of transactions per day. While the money remains within the platform, it can be transferred between clients similar to opening a payment channel. Much like the Lighting Network, these transactions do not need to be recorded to the Blockchain. Bakkt acts as “scorekeeper” monitoring the balances of each client. It is only upon the removal or addition of funds entirely from the platform that the final balance data is recorded to the blockchain.
Essentially the platform acts as protocol operating on top of the main blockchain. Although it may act independently it is still anchored to the main chain, benefitting from immutability and security afforded by the bitcoin mainchain.
The ICE will have to be connected to the bitcoin blockchain periodically to anchor it’s second-layer trades to the base later (i.e. the actual bitcoin blockchain.) introducing new cyber risks as they interact between layers.
Summary of Bakkt
Bakkt brings with it traditional banking practices that could put a lot of power and manipulation capabilities into the hands of the bankers but could boost market cap. However aside from the market cap boost. Bakkt could really help with general adoption, no question. It makes crypto easier to access, something that really could bring in more investors, which is desperately needed if this space is going to expand. Anyone who wants crypto to succeed wants to see it widely adopted and provided as a payment solution in stores and services. Bakkt will raise cryptos profile and perhaps lead to more merchants worldwide accepting crypto
As well as that, Bakkt facilities tokenisation of more assets. The name even hints at the idea of things being backed by Crypto and the tokenisation of everything is an exciting concept. Security tokens offerings of STO’s would be a perfect fit for Bakkt. Art, real estate and other forms of physical good could be digitalised and sold as tokens. This would enable regular people to invest in things that were previously only for the elite. All these changes open the doors for more interesting ideas and innovation, more adoption more real use cases and more money in the space. But at what cost? How much of the core ideas behind the invention of cryptocurrency will be traded away to facilitate the new era of crypto? 10 years after Satoshi gifted us the blockchain are we about to enter a new era of different principles and ideals.
Let me know your thoughts below!