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As the Intercontinental Exchange (ICE)’s digital asset platform, Bakkt starts to come together, understanding its specs become crucial. As noted in Bakkt’s official Twitter page, the project has already started filling in vacant positions and news outlet, Cointelegraph has also quoted that the CEO of ICE has confirmed Bakkt’s launch to take place in 2019.
The following piece will explore the different facets of Bakkt, its potential contribution to the crypto sphere, and the hurdles it has come across.
About Bakkt
Backed by ICE’s notable financial market infrastructure, Bakkt has been described as a digital assets platform that will help investors “buy, sell, and store assets in a simple, safe and efficient manner.”
In addition, it has been portrayed as a platform that is surely to meet regulatory guidelines and one founded on trust, where the latter is something that is doubted of by the general public. Although their primary goal is to get the general public involved in cryptocurrencies, ICE also plans to launch a “physically delivered bitcoin futures” for institutional investors.
Plans for such a platform was first revealed in August of 2018. As per Cointelegraph, the CEO of Bakkt, Kelly Loeffler believes this endeavor will bridge the gaps between different types of consumers, i.e. investors, merchants, etc. As per Loeffler herself, the goal is to
“build an open platform that helps unlock the transformative potential of digital assets across global markets and commerce (2018).”
Since its reveal, many interesting partnerships have been formed. Some of which include Microsoft, Wall Street’s very own firms, Boston Consulting Group (BCG) and even Starbucks to name the least.
As previously mentioned, the notion of trust is an important factor to consider as 2018 also marked a year filled with scams, hacks, MLM schemes and crypto theft – all of which have negatively impacted the crypto sphere. This is especially the case for institutional investors, as most remained and continue to remain on the sidelines, as opposed to diving into the world of cryptos.
According to the Founder and CEO of XDAT, Prashanth Swaminathan, Bakkt signifies some confidence, but doubt will still exist until returns help investors overcome it. His exact words went as follows:
“Institutional investors will still be wary of the space until they see regulations coming in […] Institutional investors also need to see returns and the best metric to gauge such return is mass adoption (or demand-supply).”
Bakkt’s Notable Features
Physically-Delivered BTC Futures
As previously mentioned, Bakkt has plans to offer a physically-delivered bitcoin futures. The need for such assets has been trusted as being a necessity as it could help in cryptocurrencies’ volatile markets.
How? Futures are viewed as a “risk management tool”. To date, only two exchanges seem to offer BTC futures including Chicago Mercantile Exchange (CME) and the Chicago Board of Options Exchange (CBOE).
What differentiates the futures offered by Bakkt and those of CME and CBOE is that the latter settles them in cash, whereas the former seeks to deliver, “one-day BTC futures contracts”.
That is, upon an expiring contract, investors will get BTC instead of cash. Again, both Loeffler and Swaminathan seem to hold similar views, as both see it is being ideal to give returns in BTC rather than cash because of the very physical delivery and its ability to reflect market development.
As for the clearing process, once the day closes, amounts will be transferred from buyers to sellers’ accounts and buyers will then be able to pick up their BTC from Bakkt’s digital warehouse. The entire clearing and storing process is supposedly controlled by the U.S Commodities and Futures Trading Commission (CFTC).
Bakkt’s Warehouse Deemed Safe Storage?
The next feature worth mentioning is that of safe storage, which in Bakkt’s case is primarily reflected by its digital warehouse, and AML and KYC policies. To maximize safety, Bakkt will store the private keys in its warehouse with an incorporated double-key security system (i.e. clients use private key and Bakkt uses public key for releasing funds).
“Microsoft’s Azure and Off-Blockchain Transactions”
As found in Cointelegraph’s post, Bakkt is based on Microsoft’s Azure cloud computing service. This has supposedly been done to deal with BTC’s scalability concerns. Loeffler believes keeping the ledger away from blockchain is better as it prevents congestion.
Involving Retailers?
It seems like retail payments is something that has yet to be addressed in the short term. In particular, the Co-Founders plan to incorporate retail payments as a way to increase BTC uses and to help make it a norm in the long run.
This could be the reason why Starbucks has joined, as the beverage firm seems to deliberate the likes of BTC acceptance for its franchises as well.
Some Setbacks Bakkt has Since Overcome
Like any new endeavor that has been suggested within the crypto sphere, Bakkt has also witnessed several setbacks. What was expected as a potential launch in November 2018 has moved to January 24th, 2019 and now, to later 2019 reports Cointelegraph.
Despite the backlash from regulators, Bakkt has supposedly progressed, as per a Medium Post they’ve shared on December 31, 2018. In particular, the team has managed to
“acquire certain assets of Rosenthal Collins Group (RCG) […] with nearly 100 years of earning clients’ trust.”
This acquisition is believed to contribute to Bakkt in the following ways:
- Increase risk management
- Increase treasury operations with systems and expertise
- AML/KYC and customer service operations
- Bring more choice and control to buyers and sellers
Most importantly, “The acquisition underlines that fact that we’re not standing still as we await regulatory approval by the CFTC for the launch,” notes Loeffler.
Besides the acquisition, the project has since raised $180 million from its 12 partners and investors, which indicates high anticipations, trust and progress.
As we sit around for the long-awaited Bakkt launch, the aforementioned features and problems are some factors to keep in mind, as they both have the ability to impact Bakkt’s success altogether. In the meantime, consumers and investors are suggested to keep up-to-date via the following sources:
- Twitter: https://twitter.com/bakkt?lang=en
- Medium: https://medium.com/bakkt-blog
- Official Website: https://www.bakkt.com/index
- LinkedIn: https://www.linkedin.com/company/bakkt/
Disclaimer
The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.