After eBay, Visa, Stripe and other high-profile partners ditched the Facebook -backed cryptocurrency collective, Libra scored a win today with the addition of Shopify. The e-commerce platform will become a member of Libra Association, contributing at least $ 10 million and operating a node that processes transactions for the Facebook-originated stable coin.
If Libra manages to assuage international regulators’ concerns, which are currently blocking its roll out, Shopify could gain a way to process transactions without paying credit card fees. Libra is designed to move between wallets with zero or nearly-zero fees. That could save money for Shopify and the 1 million merchants running online shops on its platform.
Shopify stressed that helping merchants reduce fees and bringing commerce opportunities to developing nations as reasons it’s joining the Libra Association . “Much of the world’s financial infrastructure was not built to handle the scale and needs of internet commerce,” Shopify writes. Here are the most critical parts of its announcement:
Our mission is to make commerce better for everyone and to do that, we spend a lot of our time thinking about how to make commerce better in parts of the world where money and banking could be far better . . . As a member of the Libra Association, we will work collectively to build a payment network that makes money easier to access and supports merchants and consumers everywhere . . . Our mission has always been to support the entrepreneurial journey of the more than one million merchants on our platform. That means advocating for transparent fees and easy access to capital, and ensuring the security and privacy of our merchants’ customer data. We want to create an infrastructure that empowers more entrepreneurs around the world.
As part of the Libra Association, Shopify will become a validator node operator, gain one vote on the Libra Association council and can earn dividends from interest earned on the Libra reserve in proportion to its investment, which is $ 10 million at a minimum.
The Libra Association had lost much of its e-commerce expertise when a string of members abandoned the project in October amidst regulatory scrutiny. That included traditional payment processors like Visa and Mastercard, online processors like Stripe and PayPal and marketplaces like eBay. That threw into question whether Libra would have the right partners to make the cryptocurrency accepted in enough places to be useful to people.
As it works to convince regulators Libra is safe, Facebook has been working on its other payment plays, including Facebook Pay and WhatsApp Pay, that rely on traditional bank transfers or credit cards.
Shopify’s CEO Tobi Lutke tweeted that “Shopify spends a lot of time thinking about how to make commerce better in parts of the world where money and banking could be far better. That’s why we decided to become a member of the Libra Association.”
“We are proud to welcome Shopify, Inc. (SHOP) to the Libra Association. As a multinational commerce platform with over one million businesses in approximately 175 countries, Shopify, Inc. brings a wealth of knowledge and expertise to the Libra project,” writes Dante Disparte, the Libra Association’s head of Policy and Communications. “Shopify joins an active group of Libra Association members committed to achieving a safe, transparent, and consumer-friendly implementation of a global payment system that breaks down financial barriers for billions of people.”
A recent hire further tied the two companies together. Facebook’s former lead product manager for its payment platform and billing teams, Kaz Nejatian, in September became Shopify’s VP and GM of money.
Operating an e-commerce store can be difficult or impossible without a traditional bank account that can be tough to attain in some developing countries. Libra could allow these merchants to establish a Libra Wallet where payments are sent instantly, without steep credit card fees, and in theory could be cashed out at local brick-and-mortar establishments or ATMs for local fiat currency.
But for any of that to happen, the Libra Association will have to convince the U.S. government, the EU and more that it won’t help terrorists launder money, hurt people’s privacy or weaken nations’ power in the global financial system. “The French Finance Minister Bruno Le Maire said, “the monetary sovereignty of countries is at stake from a possible privatisation of money . . . we cannot authorise the development of Libra on European soil.”
Libra was initially slated to launch in 2020. We’ll see.
Here’s the full list of Libra Association members:
Facebook’s Calibra, Shopify, PayU, Farfetch, Lyft, Spotify, Uber, Illiad SA, Anchorage, Bison Trails, Coinbase, Xapo, Andreessen Horowitz, Union Square Ventures, Breakthrough Initiatives, Ribbit Capital, Thrive Capital, Creative Destruction Lab, Kiva, Mercy Corps, Women’s World Banking.
Vodafone, Visa, Mastercard, Stripe, PayPal, Mercado Pago, Bookings Holdings, eBay.
As the number of IoT devices proliferate, and machines conduct transactions with machines without humans involved, it becomes increasingly necessary to have a permissionless system that facilitates this kind of communication in a secure way.
Enter the IOTA Foundation, a Berlin-based open source distributed ledger technology (DLT) project, which has hooked up with the Eclipse Foundation to bring IOTA DLT to the enterprise via the Tangle EE project. For starters, this involves forming a working group.
The distributed ledger idea first emerged as a way to distribute digital currency on the blockchain. Since then, there have been multiple ideas, both open source and commercial, to bring this concept to the enterprise to provide a secure, immutable and frictionless way to share data.
One such open source project is IOTA, which saw an issue with DLT as it was being implemented by other entities. “IOTA is the first distributed ledger technology that went beyond blockchain with a completely new architecture that resolves the bottleneck problems of blockchain that has prevented real world adoption,” Dominik Schiener, co-founder of IOTA Foundation told TechCrunch.
The broad vision is to provide a way for machines and devices to communicate securely. “We provide a protocol layer that enables both humans and machines to bulk transact value without fees, as well as ensure data integrity, which is of course, increasingly important in the age of Internet of Things where hundreds of billions of devices are being connected over the next decades,” Schiener said.
Tangle EE is the part of the project aimed at enterprise users — EE stands for Enterprise Edition — that can take this technology and enable larger organizations to build applications on top of the project. For starters the foundation is working with the Eclipse Foundation to bring corporate entities on board who can help better define the requirements of the large business user.
Dell Technologies and STMicroelectronics are the first major companies joining the project, but the hope is that through discussion and dialogue, Tangle EE will begin to gain traction. “The main reason why we created Tangle EE was because of the discussions that we’ve had with corporations. They really understood that we need to have a working group around IOTA to discuss the application layer, to discuss what kind of solutions we can develop broadly across industries, but also really start having more serious discussions about the protocol,” Schiener said.
Much like the Linux Foundation, the Eclipse Foundation will provide a governance framework for the project. “The Eclipse Foundation will provide a vendor-neutral governance framework for open collaboration, with IOTA’s scalable, feeless and permissionless DLT as a base,” Mike Milinkovich, executive director of the Eclipse Foundation explained in a statement.
If it gains traction, more companies will join in the coming months and years, and begin building out Tangle EE, while developing applications based on the protocol.
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Most recently, Sathaye was a general partner at Formation 8, the embattled venture firm co-founded by Palantir’s Joe Lonsdale, Brian Koo (a scion of the Koo family, owners of the electronics giant LG) and former Khosla GP Jim Kim. Formation 8 announced in 2015 that it would not raise a third fund and would begin winding down operations.
Sathaye, who’s been in the VC business since 2001 as a GP at Matrix Partners, then at Khosla Ventures, remains a partner in Formation 8’s sophomore fund. His previous investments include Nutanix, Samsung-acquired Grandis, McAfee-acquired Solidcore Systems, cybersecurity startup Vectra Networks and data storage provider Panzura.
He’d only been at Formation 8 for one year when the firm began to crumble. As we now know, conflict between the firm’s founding partners led to its demise. Lonsdale quickly raised $ 425 million for a spin-off fund called 8VC; Koo, in a similar fashion, brought in $ 357 million for Formation Group and Kim followed up with a $ 200 million fund called Builders.
Sathaye, for his part, had grown tired of the “bigger is better” mentality and opted to leave the business of big VC for good.
“Smaller funds, in general, make better decisions,” Sathaye told TechCrunch. “At a larger fund, there are more people around the table to make decisions. I think returns are better when there are fewer people making those decisions.”
Watching funds swell past the billion-dollar mark and investors deploy the “spray and pray” strategy was a turn-off, Sathaye said. Startups have more access to capital than ever before, yet most companies can get off the ground with very little funding, thanks to recent innovations like Google Cloud and Amazon Web Services.
“With AWS, companies can bring products to market quickly and they can reach their customers with much less money,” Sathaye said. “If you look at it just from a returns profile, the smaller funds will get better cash-on-cash returns simply because companies don’t need that much money to be successful.”
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