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Digital Asset Holdings Reveals Plans as it Picks Up Two Blockchain Startups

A blockchain-focused startup run by ex-JP Morgan executive Blythe Masters has made two acquisitions in the bitcoin space, that reveal a lot about their bitcoin-free business strategy.

In March Blythe Masters, former head of global commodities at JP Morgan, left Wall Street to be the CEO of a blockchain technology start-up, Digital Asset Holdings LLC.

Not only was this move widely seen as a sign of Wall Street starting to embrace Bitcoin, but Masters made many in the community hopeful for Bitcoin’s future when she made very positive statements such as “Financial Blockchain Applications will be Measured in the Trillions.”

On Thursday Digital Asset Holding announced that they acquired two startups in the space, although neither one of them are involved in Bitcoin, only in blockchain technology.

“Hyperledger and Bits of Proof add valuable new dimensions to our product offering and great talent to our team. We build tools to help clients harness the power of distributed ledgers to serve their own customers. We integrate financial infrastructure with a variety of innovative new technologies inspired by the blockchain. Different ledger technologies serve different purposes and all of those we integrate with are additive”
— – Blythe Masters, Digital Asset Holdings CEO

Both of the acquisitions, Hyperledger and Bits of Proof, focus on technology that does not use the Bitcoin blockchain, and in Hyperledger’s case, would most likely compete with it.

Digital Asset Holding’s stated mission is "to Reduce Settlement Latency and Counterparty Risk" in the global banking industry.

"Digital Asset Holdings is a technology company that provides tools that use distributed ledgers to track and settle both digital and mainstream financial assets in a cryptographically secure environment, where counterparty risk is minimized, and settlement times are drastically reduced."
— – Digital Asset Holdings LLC

Hyperledger, a finalist in the SWIFT Innotribe startup challenge last year, appears to have its eyes set on replacing the SWIFT network itself. Often referred to as a blockchain without a coin, Hyperledger creates blockchain-like settlement networks designed for financial institutions. The networks provide very fast confirmation times, do no mining at all, and come in either a centralized or decentralized layout, although neither layout is actually peer-to-peer.

Without mining consensus to protect a network from attacks and double spending, all nodes on a Hyperledger network require permission to join the network in the first place, from some kind of central administrator. By many estimates if more than a third of the nodes decide to steal from the rest, they can easily pull off a successful attack. It’s essential that the administrator of each Hyperledger chooses trustworthy people to join.

It has yet to be seen if banks will find this solution safe enough to move large amounts of value, but the acquisition of Hyperledger by Digital Assets would seem to signal their intent to venture into blockchain technology that doesn’t involve bitcoin.

The other company aquired is Bits of Proof, a software company based in Budapest that has built and deployed several Bitcoin business applications, such as the Trezor hardware wallet’s web server software, a bitcoin-to-gold bullion exchange server, and an enterprise-level server for businesses to integrate any blockchain technology into their financial applications called BopShop. The latter includes an innovative accounting program for small and medium businesses, to keep track of the back office side of bitcoin retail.

Since Bits of Proof has several different focuses, it is impossible to know which or how many of these software assets Digital Assets purchased Bits of Proof for.

Proponents of Digital Asset Holdings and Hyperledger often try to explain that Bitcoin is not the one and only solution for every situation, and that banks need a different set of tools than bitcoiners do.

"If you do not need censorship resistant as a feature, then you do not need proof-of-work."
— – Tim Swanson, Melotic

Treasurer of the Nakamoto Institute, Pierre Rochard, tweeted “If you are in the Bitcoin industry, banks are not your demo. If you are in the blockchain industry, bitcoin users are not your demo”

Meanwhile, the Bitcoin faithful argue back that this argument is shortsighted in the case of security; that you also need proof-of-work to keep any sizable value safe from theft or network-wide attack.

During a recent interview John Matonis, founding director of the Bitcoin Foundation, stated that “VCs are not interested in a blockchain without bitcoin.”

“It is technically possible to have a blockchain without bitcoin, but it also will not have any of the security and/or resiliency features which make Bitcoin’s blockchain the most secure, distributed supercomputer on the planet. We can put ash trays on motorcycles — but that doesn’t mean that we should!”
— – John Matonis, Bitcoin Foundation Founding Director

Only time will tell if the experiment will pan out for Digital Asset Holdings, but until it does the debate is likely to rage on.

In the case that Digital Assets decides that blockchains need valuable coins to secure them, there may be a backup plan that can save their business; They may be able to add a coin or token to their blockchain and assign it as a sidechain to the bitcoin blockchain. Jon Matonis tweeted: “So, does Blythe Masters’ DAH now become a Bitcoin sidechain?”

Competition to Digital Asset Holdings already exists, sort of. Nasdaq chose Chain to power their cryptosecurities backbone, and they’re doing so exclusively on the bitcoin blockchain. CEO Patrick Byrne has recently launched, a trading platform for digital securities, and often talks about plans to expand his bitcoin-based services out to several financial products in a push he calls “Medici.” Also, Symbiont, another Bitcoin-blockchain-based securities exchange, received $1.25M earlier this year, and some of that from the NYSE.

These solutions are closer to being securities exchanges than a SWIFT system replacement, but they have everything needed to offer that product too, with the safety of the Bitcoin mining network behind them.


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