M&A Snapshot

Assessment of Digital Asset’s four startup acquisitions illustrating typical intra-sector M&A activity

Posted On: June 16th, 2017

Sector Status:

As M&A volume remains low during this early stage of the blockchain M&A market, Architect Partners will publish related market analyses and perspectives to augment the normal M&A Snapshot analysis.


Authors: Eric Xu, John Ascher-Roberts, Eric Risley


Transaction Overview

Between June 2015 and April 2016, Digital Asset Holdings, LLC acquired four young blockchain startups: Hyperledger, creator of a real-time clearing and settlement technology, Bits of Proof, integrator of blockchain into financial applications, Blockstack.io, provider of “blockchain-as-a-service,” and Elevence Digital Finance, developer of a language for executing financial agreements via blockchain.


Target Descriptions

Hyperledger, acquired in June 2015, built the Hyperledger Value Transfer Protocol (HVTP), which allows banks to clear and settle transactions in real-time via multiple private blockchains without the need for a central party.  As on open standard for value transfer, HVTP increases liquidity and reduces costs, delays, and settlement risk.  The protocol improves the transfer of multiple financial instruments, including foreign exchange, interest rate swaps, and correspondent banking.  Additionally, Hyperledger does not have a built-in cryptocurrency or single public network, making it highly adaptable for different use cases.  Based in San Francisco, Hyperledger was founded in March 2014 by Daniel Feichtinger, CEO, and Dan O’Prey, CTO.

Bits of Proof, also acquired in June 2015, built enterprise-grade servers to integrate blockchain technology into financial applications.  Bits of Proof offered four main products: the BOP Enterprise Bitcoin Server, which provides an API for enterprise blockchain applications, myTREZOR, the backend for the first hardware Bitcoin wallet, the Bullion Bitcoin Exchange, and BopShop, a merchant bitcoin payment processor.  Támas Blummer, CEO, founded the Budapest-based company in March 2013.

Blockstack, acquired in October 2015, created blockchain application development tools for financial institutions.  Blockstack offered a hosted platform for financial institutions to develop applications using APIs and SDKs.  Its platform provided financial institutions a customizable stack of interoperable components to build on, including a private blockchain, a colored coin issuer for representing real-world assets, a framework for smart contracts using multi-signature security, and the ability to plug in external open source components.  Miron Cuperman and Lior Saar founded the San Francisco-based company in January 2015.

Elevence, acquired in April 2016, developed a modelling language for agreements between financial institutions.  The language can express any contractual right or obligation, including cash, securities, and derivatives, and the code determines how these contractual relations can evolve over time.  Elevence’s language provides relevant parties with information on a need-to-know basis, rather than revealing confidential information as smart contracts do.  The Zurich-based company was founded in 2015 by Vincent Peikert, CEO. Elevence had approximately eight employees upon acquisition.


Buyer Description

Digital Asset develops distributed ledger solutions that allow financial institutions to securely commit transactions and contractual and legal parameters to blockchains. In December 2016, Digital Asset released a white paper detailing the Digital Asset Platform, which enables confidential sharing of financial market data infrastructure to eliminate discrepancies between siloed records while reducing errors, latency, risk, and the costs in processing financial transactions.  Digital Asset also developed a Digital Asset Modeling Language (DAML) that enforces logic and behavior for the DA Platform and models contractual rights and obligations adhering to market rules in executable code.  DAML serves as an alternative to public smart contracts, fulfilling financial markets’ need for confidential agreements and deal terms.

In September 2015, the $5 million capital investment in public opinion marketplace Pivit marked the first use of Digital Asset software in a digital securities issuance.  In early 2016, the Australian stock exchange ASX awarded Digital Asset a contract to upgrade their trading and clearing and settlement systems with its blockchain-based software, which Digital Asset expects to be ready for commercial use in 2018.  Digital Asset’s key competitor is R3CEV, the leader of a consortium of 70 financial institutions dedicated to R&D of blockchain usage in improving financial transaction efficiency.

Donald Wilson, founder of the DRW trading company, and Sunil Hirani, founder of the Dodd-Frank compliant interest rate swap exchange trueEX, founded the New York City-based company in 2014 and currently serve as board members.  In 2015, the company brought on Blythe Masters, the high-profile former J.P. Morgan executive known for engineering the credit default swap, as CEO.  The company has received $67.2 million in total equity funding, making it the seventh most highly funded blockchain startup, according to CB Insights.  The first Series A round in February 2016 raised $60 million from Goldman Sachs (lead), IBM, J.P. Morgan (Sanoke Viswanathan), Santander InnoVentures (Manuel Silva Martinez), ASX Limited (Peter Hiom), BNP Paribas (Catherine Flax), Deutsche Börse (Ashwin Kumar), and 8 others.  In June 2016, they raised a second Series A round of $7.2 million from ASX Limited.


Transaction Parameters

Deal terms relating to each transaction remain undisclosed.


Strategic Rationale

Digital Asset made their four acquisitions in areas that directly complement their goal of applying distributed ledger technology to financial services, and the company has benefitted from the talent acquired from these companies.  Key talent acquisitions include Daniel Feichtinger, Hyperledger CEO, who became CMO, Dan O’Prey, Hyperledger CTO, who joined as a senior software engineer, Miron Cuperman, Blockstack CTO, who joined as a senior developer, Támas Blummer, Bits of Proof CEO, who joined as Chief Ledger Architect and head of the Budapest office, and Vincent Peikert, Elevence CEO, who became Head of Digital Asset Switzerland, and James Litsios, Elevence CTO, who became Head of Development in Switzerland.

Technology from Digital Asset’s acquisitions has directly contributed to the development of the company’s products.  Digital Asset built upon work done by Hyperledger, Bits of Proof, and Blockstack to implement Hyperledger as an enterprise-ready blockchain server with a client API, which remains a core aspect of Digital Asset’s financial transaction solutions today.  The company then open-sourced Hyperledger to become a collaborative effort to build cross-industry blockchain technologies.  Technology from Bits of Proof and Blockstack helps Digital Asset develop software for financial institutions, with Digital Asset’s resources enabling rapid scaling of the Blockstack development platform.  Elevence’s team worked with Digital Asset to integrate their modeling language into Digital Asset’s technology stack prior to the announcement of DAML, possibly contributing to development of the language, which will power agreements made on the DA platform.


Architect Partners’ Observations

The financial industry is beginning to embrace blockchain as a technology to process transactions.  Blockchains can replace clearing houses and the reconciliation process by creating a shared record of transactions that is tamper-proof and confidential, which is crucial to expediting the security purchase and sale process. This can potentially reduce investment banks’ infrastructure costs by $8 to $12 billion a year by 2025, according to Accenture.  Furthermore, according to research firm Greenwich Associates, 56% of 130 executives working on blockchain in capital markets said that transaction confidentiality was their top concern, which is a problem with smart contracts that Digital Asset designed DAML to solve.  Digital Asset’s key competitor R3CEV is also working to build confidentiality into distributed ledgers through their ledger platform Corda.  With their technology’s strong industry traction, Digital Asset is well-positioned to become the leading provider of blockchain-enabled financial data infrastructure, which is one industry among many, including IoT, legal, human resources, and healthcare, that blockchain is poised to disrupt.




Digital Asset Acquires Hyperledger and Bits of Proof

Digital Asset Acquires Blockstack.io

Digital Asset Acquires Elevence

Digital Asset Platform Whitepaper

Digital Asset Introducing DAML

CB Insights

Pivit Issues Captival Investment




R3CEV Blockchain Test

R3CEV Introducing Corda