Bakkt is the brainchild of the owners of the New York Stock Exchange. By creating a cryptocurrency exchange under the supervision of the US government, Bakkt wants to make the process of crypto trading as normal as trading stocks.

The owner of the New York Stock Exchange wants to make Bitcoin mainstream. But what is considered orthodox? Those are traditional investors and financial institutions. If you can make the rich feel comfortable to generate more money, you will bring a huge new wave of investors to the crypto space and maybe even stabilize it. That is the promise of Bakkt, which hopes to become the on-ramp of institutional investors. On-ramp is often understood as a channel for transferring the converted value between fiat money to cryptocurrency and vice versa in the market.

What is Bakkt?

In the most succinct way, Bakkt is a custody service that stores Bitcoins in a safe form, known as cold storage. The platform manages large amounts of Bitcoin on behalf of institutional investors.

Bakkt is owned by the Intercontinental Exchange (ICE), the parent company of the New York Stock Exchange (NYSE). Next, ICE offers a Bakkt-branded Bitcoin futures product. Accordingly, traders can bet the price of Bitcoin will rise or fall. All Bitcoins used to support transactions are stored in Bakkt’s secure custody.

So, Bakkt manages Bitcoin on behalf of ICE, allowing institutional investors to speculate on it in the form of futures trading. This mix provides institutions with the opportunity to buy and sell digital assets in a US federally regulated environment. As such, they can also experience the ease, volume, and security of Bitcoin as on traditional exchanges.

What is relatively unique about Bakkt is that it allows transactions to be physically settled in Bitcoin, instead of cash. That means that when the transaction ends, the traders will receive Bitcoins into their accounts. All of these Bitcoins are stored by Bakkt and they use a separate ledger to record who owns how much, instead of having to move Bitcoins frequently.

When did Bakkt launch?

Bakkt was introduced in August 2018, but was not released until September 23, 2019. The company that runs ICE is run by veteran Wall Street businessman Jeffrey Sprecher, who is also the chairman of the NYSE. Sprecher finds that many traditional investors are looking to get into crypto, but they need it properly regulated. So ICE created Bakkt to meet the needs of investors.

He initially appointed Kelly Loeffler as CEO of Bakkt, formerly CMO of ICE. Kelly then resigned to become a U.S. Senator at the end of 2019. She was succeeded by former PayPal vice president of engineering Mike Blandina, then ICE deputy general counsel David Clifton (as former vice president of engineering at PayPal). interim CEO) and finally, former Citi chief technology officer Gavin Michael.

In the early days of launch, Bakkt did not shine as many people expected and was a bit slow. On day one, Bakkt’s Bitcoin futures service had just 71 Bitcoins traded, worth about $700,000 at the time. Transactions increase over time; During the last week of 2020, Bakkt Bitcoin futures hit $286 million in trading volume.

A Brief History of Bakkt

August 2018: The Bakkt platform is announced by parent company Intercontinental Exchange (ICE).

December 2018: Bakkt raises $182.5 million in a funding round.

September 2019: Bakkt Bitcoin Futures Launch, Trading Opens on ICE.

December 2019: Bakkt launches monthly Bitcoin options and cash-settled Bitcoin futures.

January 2021: Bakkt announces it will go public.

March 2021: Bakkt receives a BitLicense license in New York.

What is special about Bakkt?

Bakkt is still a newcomer in the space, but it is seen as a way to help Bitcoin become mainstream. Even the giants Microsoft and Starbucks are full of support.

The platform provides a way for traditional investors to participate in Bitcoin under US federal regulation. The company is working with the Commodity Futures Trading Commission (CFTC) for approval. This process sets forth requirements such as compliance, anti-money laundering rules, and strict reporting standards.

That could be the ultimate reassurance that large institutional investors need to decide to “enter” the crypto space. The company says its goal is to make Bitcoin the world’s first global currency.

How does Bakkt work?

Bakkt is a platform for institutional investors, to buy, sell and store digital assets on a global network. Bakkt offers investors the opportunity to trade Bitcoin-based assets and futures in the same way they trade traditional currencies and commodities.

Bakkt also provides a vault to keep Bitcoins safe. Storing customer private keys “offline” adds extra layers of security and deters hackers – providing more peace of mind for the traditional investor.

The company also came up with a solution to overcome the biggest drawback of blockchain: slow speed. Since so many transactions are conducted between customers whose assets are stored in a warehouse, it is not necessary to place every movement on a blockchain. Whatever happens in the vault is recorded on Bakkt’s private ledger. Only assets arriving or leaving the vault need to be recorded on the blockchain.

In that sense, ICE CEO Sprecher said they operate “on a layer on top of the blockchain.”

What can you do with Bakkt?

Bakkt is a way for institutional investors to embrace Bitcoin in a way they never have before.

Bakkt claims to solve two fundamental problems that prevent Bitcoin from being widely accepted.

Infrastructure: Bakkt’s platform provides regulated infrastructure for buying and selling Bitcoin.

– Price discovery: Bakkt wants to create reliable, regulated price discovery — finding a clear price across multiple exchanges — so that investors can have complete confidence in buying and sell. If this can be done, Bakkt has many opportunities to attract the traditional investor they are looking for.

Future

On March 11, 2021, the New York State Department of Financial Services (DFS) issued a BitLicense license to Bakkt. Accordingly, they are allowed to operate in New York, opening custody services for more objects.

Bakkt also plans to become a publicly traded company. On January 11, the company announced plans to merge with VPC Impact Acquisition Holdings in a deal to create a new company called Bakkt Holdings, which will be listed on the New York Stock Exchange. The deal values ​​the startup at $2.1 billion.

The company does more than just provide custody services to institutional investors. They also want to store Bitcoins on behalf of everyday crypto holders. In 2019, the company announced it was negotiating with Starbucks to allow customers to reload Starbucks Cards and buy coffee with Bitcoin, albeit indirectly.

This is the first of many such programs to be launched. Bakkt currently supports more than 30 loyalty program sponsors and over 200 gift card vendors. The company plans to roll out the Bakkt App widely in a short time and plans to expand it to more retail audiences.

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