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FunderBeam Partners With ChromaWay To Build Blockchain-based Marketplace for Equity

The partners aim to create a secondary market for startup equity, using colored coins technology, which allows nearly any asset to be represented and transferred on a blockchain.

Funderbeam plans to leverage ChromaWay’s technology, which is already being used by an European bank to create a marketplace that is transparent, fast, and has less intermediaries.

“Usually colored coins are described as a simple asset transfer/ownership tracking system which lacks capabilities for advanced ‘smart contracts’. This is largely true. But our idea for Functional Colored Coins and Hybrid Consensus provides an innovative solution.” – ChromaWay

The Estonian company also plans to leverage blockchain technology to build more robust and efficient regulatory compliance procedures, for verifying startup equity holders and buyers. "We won’t need a business registry, central depository, or another formal authority to tell us that something is indeed something — and not something else. With the blockchain, every investment, every ownership change has a secure, distributed audit trail," said Funderbeam founder and CEO Kaidi Ruusalepp.

"Using the blockchain adds a new level of trust and certainty."
— – Kaidi Ruusalepp, Funderbeam Founder and CEO

In early June the Estonian bank, LHV, launched a mobile wallet developed by ChromaWay which uses colored coins to send and receive Euros for free and instantly. Released as a beta product, the wallet was free but featured deposit restrictions and required users to have a LHV bank account. The project began last year and is one of the first public trials of blockchain technology by a bank. LHV plans on continuing to develop the product and explore use cases for colored coins in financial trading and settlement.

"ChromaWay breathes technology that’s been limited to cryptocurrencies, and is now making it serve a broader purpose," Ruusalepp commented. "Their technology expertise, flexibility, and knack for innovation play really well with our legal, regulatory, and financial know-how.”

“Startup investments are usually locked up for years, and I can’t wait to see them liberated in a global secondary market.”
— – Ruusalepp

The team behind FunderBeam is made of business and financial industry veterans. The company’s CEO, Ruusalepp, was previously the CEO of NASDAQ OMX Tallinn and served on the stock exchange’s board for four years. She has also advised and worked for a number of government agencies, industry organizations, and financial firms.

“A startup marketplace was one of the first things I had in mind when I discovered the idea of using the Bitcoin blockchain for asset ownership tracking back in 2012," said ChromaWay CTO Alex Mizrahi. "No one else was coding it, so I finished the first colored coins prototype and started an open-source project. We understood that technology alone is not enough: connecting virtual tokens to real assets has a lot of subtleties.”

“I’ve been waiting for a good partner and am excited to work with Funderbeam to bring our ideas to life."
— – Alex Mizrahi, ChromaWay CTO

When FunderBeam launches its blockchain-based marketplace for startup equity it will be the first company to do so, and will pit the company against incumbents, including AngelList. "Being first is never our top priority. It is to be the best: open-source, thoughtful, and secure," states ChromaWay.

The founder of AngelList, a leading startup equity platform, Naval Ravikant was one of bitcoin’s earliest proponents in Silicon Valley. On his popular blog about venture capital, Startup Boy, Ravikant has written several posts detailing how blockchain technology could re imagine much of how we interact and store data, but also how companies raise capital.

In one of Ravikant’s posts he explains that companies wishing to release open source software could make a scarce “app coin,” or cryptocurrency native to the technology. Selling these coins can raise funds directly from the people who use their technology, and be used to run the application. This approach has now been used by blockchain 2.0 projects including Factom, CounterParty, and Ethereum, and allows open source projects to circumvent the approval of investors, who are often sceptical of possible returns from open source software.

Ravikant has also expressed that the adoption of blockchain technology will lead many web services and infrastructure to be decentralized and encrypted in the future. But neither he, nor his company, has expressed interest in bringing the technology to his own platform.


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