Consolidations Are Coming to Crypto

If I were going to guess on an acquisition in the cryptocurrency business, I'd pick the newly listed Coinbase picking up Dharma, the user-friendly on-ramp to decentralized finance (DeFi).

This is entirely a guess. It hit me while writing about a post-Nasdaq Coinbase, in a world where crypto has gone mainstream. My thinking went like this: Coinbase may not actually see DeFi as a threat, but it must see it as a business opportunity. What company seems to be directionally aligned with Coinbase? Dharma came immediately to mind. Both firms are devoted to easy access and good user experience.

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I could be wrong; I'm probably wrong! But here's what I'm not wrong about: Consolidations are coming fast and hard to the blockchain industry. Consolidation and centralization aren't quite the same, but they have been known to sing in the same band and their harmony is pretty good.

When companies get big it becomes easier to acquire new business lines than start them. It's become such a big part of Silicon Valley that the research firm CB Insights closely tracks acquisitions by the tech giants, such as Google, Apple and Amazon. The whole insight of the "startup" concept is that little companies are better than big ones at initiating ideas and then iterating on them until they work.

Once they do, it's easier for the big guns to write a check than copy (usually). We have already seen a certain amount of consolidation in crypto and more money and people will only accelerate it.

It’s happening

Whether or not it's going to pick up Dharma, Coinbase has bought Bison Trails, Routefire and Tagomi. It's printing money at a rate that it could clearly pick up more and has easy access to capital now that it’s on the public markets.

In other news, Lightyear, the for-profit company building on the Stellar protocol, picked up Chain.

Tendermint purchased B-Harvest.

PayPal bought Curv.

FTX brought in Blockfolio.

Kraken bought an exchange in Australia, Bit Trade, and Binance bought one in Indonesia, WazirX.

The issuer of stablecoin TrueUSD has been purchased by ... someone.

And, oh yes, CoinDesk bought TradeBlock and our corporate parent, Digital Currency Group, bought the Luno Wallet.

Everybody is hooking up. In fact, the abacuses at PriceWaterhouseCoopers totted up $1.1 billion in mergers and acquisitions across crypto in 2020. Look for 2021 to be much larger.

Right now, two different tokens are in the process of merging on Ethereum. Project Keanu is a proposed protocol merger between Keep and Nucypher, though, uniquely, the companies will remain distinct, building separate ways to interface with the same underlying network.

Similarly, DeFi projects keep glomming onto Yearn Finance like some sort of strange rat king for yield: No one really knows what it quite means to merge into that particular ecosystem but no one can doubt that it's formidable.

An era of consolidation is coming, where companies will start coming together like Voltron into giant machines of borderless liquidity, tossing about energy swords of value and smashing lion-faced fists into traditional intermediaries and financial markets.

Which all sounds very exciting, but then you're still left with Voltron (he's nice on the show, of course, but this is blockchain).

The downside

That is, you're left with a big, powerful thing. Something so powerful that it doesn't need to care much about individuals. It might not even care about groups.

Look, this is the part of the essay where I should make some bold and specific prediction that will sound prescient now or at least feel truthy, but that's why I started with a bold prediction, because I'm not going to make one here.

If Coinbase does not, in fact, buy Dharma, it doesn't really matter. Coinbase is going to buy things, for sure. And with the success of its public market debut, other crypto companies are sure to follow and they will also do what public companies do: They will buy things.

I can't tell you exactly what shape things will take when the money washing into this space inevitably congeals into the inevitable crypto mega-platforms. All I can say is that will happen.

I've seen this movie before and you have, too. Did you like it? Would you have wanted a different ending?