In addition to physical delivery futures, what are the ambitions of Bakkt?

The birth of "rich second generation" Bakkt

In the digital currency industry, which is dominated by grassroots, Bakkt is undoubtedly a decent person, and stands out from the crowd. The prestigious InterContinental Exchange (ICE) is the parent company of Bakkt, the world's second-largest regulated exchange and clearing house operating network, and the second largest and the world's third largest futures exchange in the US. The New York Stock Exchange, the Canadian Futures Exchange, the Paris Stock Exchange, the 14 international securities and futures exchanges in the London International Financial Futures Exchange, and five clearing houses trade more than half of the world's crude oil and natural gas refining futures.

Backed by a big ICE like ICE, even in the cold winter of the digital currency industry in the second half of 2018, Bakkt successfully completed the first round of financing of $182.5 million, including Li Ka-shing’s Horizons Ventures and Microsoft Ventures M12. Ten shareholders such as Tencent's early shareholder Naspers, the famous Boston Consulting Group, hedge fund Pantera Capital, Goldman Sachs Galaxy Digital, and Starbucks. With such a strong shareholder background and strong financial advantages, Bakkt formed a luxury star lineup, attracting a large number of top talents in the industry.

In June 2019, Bakkt passed the regulatory test and finally obtained the approval of the Commodity Futures Trading Commission (CFTC) and resolved the last problem on August 16th. The New York State Financial Services Authority (New York State) Department Of Financial Services) granted it a license to create a trust company.

What is the new bitcoin physical delivery?

At present, the popular digital currency exchanges often serve as a platform for trading of digital currencies. They are the main venue for determining the price of digital currencies and trading. However, the huge price fluctuations in the currency circle must form a price gamble, making the fund capital very It is difficult to invest in it and is strictly regulated by all countries. The establishment of Bakkt represents to a certain extent that the entire US financial community has fully accepted the cryptocurrency market, and not only allows a small number of people to access cryptocurrencies, but allows the entire United States to legally and compliantly invest in the field of encryption.

Different from the current currency exchange, Bakkt provides a safe and reliable Bitcoin trading channel for traditional investment institutions. According to the current stock broker model, the exchange only manages the liquidation between brokers, which is equivalent to the increase in the customer investment sector. A "bitcoin stock". To this end, Bakkt opened the Bakkt Warehouse, a digital currency storage tool consisting of online digital asset storage (hot wallet) and offline air gap digital asset storage (cold wallet). Bakkt Warehouse will be in hot storage and cold. Find balance points between storage tiers to minimize heat storage related risks. Previously, Bakkt had received a $125,000,000 policy from a top global operator to further secure its hot wallet. In addition, Bakkt has partnered with BNY Mellon, the world's largest custodian bank, to provide geographically distributed customer asset storage services and protect private keys and other materials.

Bitcoin can be deposited into the warehouse by Bakkt Warehouse customers, that is, the "physical" of bitcoin must be traded on the platform. In the case of an upper limit on the number of traded goods, infinite shorting is no longer possible, and long-term long-term is an inevitable choice after a large amount of capital participation. In other words, regardless of the long short position, when the closing is closed, the real BTC must be used for delivery, which is a compliance blow for some “out of thin” exchanges with more bitcoins.

Prior to this, most of the bitcoin futures exchanges represented by CME Group's bitcoin futures used cash delivery, and Bakkt futures used physical delivery. Among them, cash delivery refers to the buyer and seller refer to the spot price, calculate the mutual profit and loss, and complete the delivery by cash transfer, and the physical delivery is the seller to deliver the goods to the buyer according to the specified time and the agreed quality and quantity. In contrast, cash delivery highlights its convenience and speed because physical delivery needs to solve a series of complex problems such as physical transportation, storage, certification, and ownership transfer. However, physical delivery is the most important link between the commodity futures market and the spot market. It is the most important guarantee for the commodity futures market to play the two functions of price discovery and hedging. It can be said that the operation of the commodity futures trading system is irreplaceable. effect.

In this light, Bakkt is more of a digital asset “qualified custodian” role, which is exactly what fund managers need to provide customers with a super secure vault for storing digital assets. Be aware that in the transfer of Bitcoin, once transferred to the wrong address, the recipient will automatically own the private key of these Bitcoins, and the sender cannot take it back. Similarly, you will never get your bitcoin back from the thief who hacked into your bitcoin wallet.

While Bakkt has the same network security system as NYSE, unless the customer voluntarily transfers the token from Bakkt Trust to other website storage, the transfer of Bitcoin from one customer to another is carried out in its warehouse. Since all balances are settled on the internal warehouse's account, futures trading avoids the situation where Bitcoin may be sent to the wrong address due to running on the blockchain.

In addition to physical delivery futures, Bakkt has any ambitions.

Bakkt is on the line with great attention, strong background, physical settlement, top security system, etc. It seems that Bakkt has passed the good news of the whole market to the entire currency circle. Many people hope that the addition of Bakkt will bring a new wave of big bull market. . However, after Bakkt went on the market with a handful of trading volume, and the subsequent currency price plummeted, the market was so sorrowful that many people were surprised.

In fact, for investors, earning corresponding profits is a real concern when it comes to cash delivery or physical delivery. If you look at it from this perspective, Bakkt does not have the current currency because of its delivery characteristics. The circle's spot exchange (coinbase) and the futures exchange (CME Chamber of Commerce) are much different, and the biggest benefit is estimated to attract potential customers on the Intercontinental Exchange.

However, the reason why all exchanges currently earn a lot of money is that the futures delivery is only a number. Compared with the general trading platform, you can artificially short, and Bakkt's futures trading needs physical delivery, which is enough for the existing Air Force to be invisible. Once the normal gameplay of Bakkt is popularized, the probability of malicious shorting and 100 times leverage will be rare. When it appears, Bitcoin will enter a stable price range.

Therefore, the logic of conventional speculative speculation cannot be used to judge the meaning of Bakkt, but should be viewed in a larger scope. As Bakkt executives emphasize, their immediate goal is to make Bitcoin as popular as gold and private equity, and claim that it is just another investment. In the future, they hope to build an efficient and regulated cryptocurrency market that will ultimately change the way we pay for everything from coffee to airfare. Among them, the cooperation between Bakkt and Starbucks makes people think about it. Everyone is guessing that the ultimate goal of Bakkt is to bring bitcoin into the retail payment field. Bakkt executives also confirmed this.

In addition, Bakkt clearly wrote on the official website:

“Either consumers and businesses, or peers, they are expected to have the ability to trade in digital assets, because the new global currency will go beyond value storage or speculative assets, and with the development of distributed ledger technology, Bakkt will also work with leading vendors that recognize the potential of digital assets."

You know, today's consumers around the world buy goods worth $25 trillion a year through credit cards. According to reports, companies dealing with payments, especially credit card issuers and bank intermediaries, charge retailers an average of 2.4% to 2.5% of the payment fee, and the high payment fees paid by merchants are the pain point of their fancy.

If Bakkt succeeds in making Bitcoin's trading volume soar, these tokens may play a new role in a highly liquid alternative currency. People who have installed the Bakkt app on their phones can easily use Bitcoin to buy items from merchants. Bakkt will manage the conversion from Bitcoin to US dollars, so they will never display Bitcoin on the merchant side, they will only see the traditional currency, but Bitcoin payment will reduce the current exchange fee by about 75%.

Especially for the younger generation of young people, the habit of mobile payment from a young age is much higher than credit card payment, and the future social mobility will be further strengthened, and the consumption clearing between countries will become more popular, and this will happen. It will be an area where Bakkt has more advantages. In addition, the Bakkt physical delivery bitcoin futures model can further reinforce this feature compared to Libra and other platform tokens, and will provide a lot of comfort to regulators and potential institutional clients.

Author: Dipperin Pan Pengfei

Source: Dipperin