Mergers are commonplace in the non-crypto business world; they are nothing new.

For some time I have been wondering how, if at all, this would be possible in the crypto world.

https://pixabay.com/en/puzzle-share-togetherness-hand-526419/

Crypto mergers – a look to the future

This post is not strictly necessary yet; but as a futurist I like to project global events forward and try to anticipate them as accurately as possible. It’s probably my years of operations planning experience that simply refuse to shut off and is trying to apply itself to my crypto endeavours.

Crypto partnerships are making me think

A relatively large amount of fuss was made about the recent Digibyte and UTrust partnership. I saw it advertised and blogged about all over my various crypto media channels. To me it was just another deal, but the public seems to have paid more attention to this one than normal. Perhaps market sentiment was ripe for a bit of hype, or maybe the old Digibyte stalwarts were keen on having some positive Digibyte development, it’s not important.

What is important is that these partnerships are happening. Some cryptos intrinsically rely on such partnerships. Take a favourite of mine: CargoX, for example. It’s a shipping industry coin. Without shipping industry partners it’s nothing. With them, it grows exponentially in accordance with a logistics version of Metcalfe’s Law.

Another coin like TenX is seeing great gains because of rumours of a partnership, allowing it to finally issue working crypto “credit cards”.

Platform coins like Ethereum, NEO, EOS or Cardano are strongly linked to the cryptos that run on them, but have no need to enter into traditional partnerships any more than a software publisher needs to partner with Microsoft to allow its software to run on their platform.

Yet coins may be perfectly fine on their own and have no need to partner with anybody. A coin like Bitcoin works just fine on its own, though there could be definite advantages to partnerships. Of course, due to the decentralised nature of some coins, partnerships may become difficult to define or execute! Good luck in getting Satoshi Nakamoto to sign an agreement…

Partnerships are happening

Two types of partnerships are already happening:

Crypto and traditional companies

I’ve already mentioned CargoX, it’s a good example of this. It’s forging partnerships across the globe in order to grow its electronic "Smart B/L" solution and other products for the shipping industry.

From https://cargox.io/news/new-fast-growing-companies-supporting-us-all-around-globe/

I mentioned UTrust too, it already has many partnerships with significant regular companies like. Gambio: https://medium.com/@UTRUST/utrust-announces-partnership-with-germanys-largest-e-commerce-solution-gambio-to-enable-2bc2772f8335

and UMT AG: https://medium.com/@UTRUST/zug-23-march-2018-481176ede211

From https://utrust.com

There are numerous other examples: VeChainThor, carVertical, Vice, Stellar…

These types of partnerships are to be expected, but they are not of great interest to me, though they may help the prices of some coins I hold to climb.

Crypto and complimentary dissimilar cryptos

These are more interesting. An example of this type of partnership is the UTrust/Digibyte partnership. (For those unfamiliar with UTrust, it is a payment platform – think PayPal in crypto guise.)

Another good example is the UTrust/PundiX partnership. For those who are not familiar with it: PundiX is a POS crypto – no, not Proof of Stake - Point of Sale. I suppose this sort of acronym overlap was inevitable… https://medium.com/@UTRUST/utrust-joins-forces-with-pundi-x-to-enable-in-store-payments-d39e76602f38

Or UTrust/Trustroot: https://medium.com/@UTRUST/utrust-announces-partnership-with-leading-blockchain-security-solution-trustroot-to-secure-4406019b6cd4

I’m using UTrust a lot because I know that it is a good example of a crypto company with various partnerships, it’s by no means the only one.

Mergers and acquisitions

Why merge?

The crypto space is limited in size, especially in these early days. Invariably, toes will be trampled – too many projects are just too similar. While competition is healthy, there must be enough business to go round, otherwise some projects will die.

Cryptos in too similar a space will be faced with some options:

1. Struggle on and either conquer the competition or possibly die off (high risk for a strategic business plan!).
2. Diversify into another core business.
3. Merge with or acquire the competition.

I understand that mergers differ from acquisitions. But as I foresee the end results being similar for the two, from hereon I will just refer to both cases together as “mergers”.

The immediate major benefit of a merger is that the competition vanishes. Of course, competition is not always bad, especially for the customers; but in a fledgling market space it could spell the end for a potentially good company.

Ideas and patents can be shared. The combination of two sets of intellectual property rights (or even just ideas and knowledge) may lead to more powerful products and services, where the whole is greater than the sum of the parts. If my business holds the patent for storing 3D object data files on a blockchain database and your business hold a patent for sending 3D printer instructions over a blockchain, then our competing companies may combine into something far greater than either one could have become individually.

Companies can focus on their core business without having to worry about constantly looking over their shoulders; remaining ahead without expensive marketing campaigns, having to worry about industrial espionage, fighting inter-company legal battles etc: all the little things that pull the focus of the everyday running of a company away from what it should be doing: focussing on its products or services.

What is the chance of crypto mergers taking place?

It’s difficult to say just how big crypto industries will become. I see blockchains as a superior technology that will give blockchain users a massive advantage in many areas of business. For this reason, I think that the market will be fairly large overall. In a large market space there is room for several competitors doing the exact same job, but that is not always a good thing and it doesn’t mean that mergers won’t or shouldn’t happen.

Take identity verification for example. Identity verification cryptos exist to give you a digital fingerprint. They enable you to have one login that verifies your identity with a central identity provider. Anyone else who wants to verify your identity does not have to do so themselves; instead they approach your identity provider and ask: “Is this person who they say they are?” and hey presto; they are told "yes" or "no". This is useful for applications such as internet banking, logging into crypto exchanges, conducting Know Your Customer processes for ICOs etc.

Identity verification in the crypto world was first successfully taken on (as far as I know) by Civic. Then THEKEY came along and announced a very impressive looking similar service – to much hype from crypto investors (myself included). While THEKEY were busy getting their act together for an ICO; Selfkey sneaked through and launched their own identity verification service. I really doubt that Selfkey is nearly as polished and well planned as THEKEY, but they were clever enough to come in and blatantly start scooping up the eagerly waiting market, while THEKEY were still getting their more carefully executed ICO off the ground.

The question is: “is there enough space for these three to co-exist?”

Maybe. But would you want them to?

Because: your bank might use Civic for verification, while your exchange uses THEKEY and the ICO you want to invest in uses Selfkey. See the problem? Unless they agree to share a format and databases, then you will have to either sign up with all of them, or your bank, exchange, etc will have to support all of them. Neither situation is ideal and it somewhat defeats their very raison d'être.

To me they are good candidates for a possible merger.

Identity verification is just one example, here are a few other that I can think of off the top of my head:

• Gaming coins: WAX, CryCash, Enjin etc. – the more games that support the same coin the better. If they all start snapping up some game developers each, we may end up in a Betamax/VCR situation or a Blu-ray/HD DVD situation where both get some initial support, but eventually only one survives. Gamers would like to be able to exchange premium in game currencies between all of their games!

• Payment coins (rather obviously): Bitcoin (yes it’s slow, but future upgrades may change that), Bitcoin cash, Litecoin, Dash, Nano etc.

• Crypto credit cards: TenX, Monaco etc. (No, definitely not Centra thank you!) Or perhaps they could also combine with a coin such as UTrust…

And don’t forget the huge potential online business of coins like:

• Porn coins: Vice industry Token, SpankChain etc.

• Gambling coins (plenty of these around already).

How?

That’s really the million-dollar question. It’s not an easy question either. This is one of those rare examples where blockchains make life harder!

The issue is that during a merger there will be multiple blockchains upon which people hold coins/tokens. You can’t just discard one blockchain and keep another, investors will need to be treated fairly, or they won’t support a merger. Naturally things may get nasty and you could eventually have crypto hostile takeovers and similar tricks; but this post is already speculation, so I don’t want to take things too far and go into too much detail. If you really want that information then send me 500 STEEM and I’ll send you my thoughts on it. 😋

To me the most obvious solution is to launch a new mainnet (or new token if it will run on a platform such as NEO, EOS, Cardano, Ethereum etc). Coin/Token holders of the merging blockchains can be compensated in the new tokens, being careful to ensure that token supply will result in similar or better token value than before. A snapshot should be taken on the merging chains at a pre-published time and the relative prices of the chains should be calculated using some form of Kalman filter.

Companies must be careful about how they do this: an initial announcement of a pending merger would be a good start, this should be followed by the price calculation period and then only the announcement of the snapshot. If the snapshot announcement happens too soon, then price manipulation is sure to occur. There s probably a better solution than this one which I have proposed; this was also just off the top of my head while I was typing – I haven’t really applied my mind to the problem.

Final notes

That was another glimpse into the future, compliments of yours truly. I don’t count on seeing mergers happen any time soon, but I consider crypto mergers to be a strong possibility and it would be good for investors to have an idea of what to expect from them. Forewarned is forearmed. I can’t say that things will happen as I have written here, but that is how I see things playing out.

Yours in crypto mergers,
Bit Brain

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Published on

by Bit Brain

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