Symbiont is planning to issue its first private equity shares as smart securities on the bitcoin blockchain next month with a view to demonstrating its capabilities to financial institutions interested in programmable securities that are stored on a cryptographic distributed ledger called a blockchain. Beyond the demonstration, the company aims to offer a service based on its Smart Securities technology platform that will allow institutions to issue, trade and process instruments cost-efficiently and securely in a global and distributed peer-to-peer financial network.
Symbiont is the result of a January 2015 merger between 2013 start-up MathMoney, a specialist in cryptogrphic currencies and blockchains, and Couterparty, also a 2013 start-up and the creator of the Counterwallet deterministic web wallet. Mark Smith, founder of MathMoney and co-founder and CEO of Symbiont, explains: “We joined up to develop a generic platform that allows users to create, issue, manage, trade and clear and settle financial instruments using digital contracts on a blockchain. We are using the open source bitcoin blockchain at the moment, but the platform is blockchain agnostic so will be able to work with future blockchains.”
Blockchain technology breaks electronic transactions into blocks that are created at specific intervals and linked sequentially to build a cryptographic distributed ledger. The blocks are dependent on each other, which means any changes in one block are carried forward, making the ledger accurate and immutable. This can eliminate inefficiencies in existing markets and drive faster, lower-cost markets that are more efficient and provide increased liquidity, transparency and security.
One example of smart securities on a blockchain could be a corporate bond that is issued as a smart security with elements including a coupon amount and coupon date. When the security is issued, it communicates with the atomic clock and will make payments on the coupon deadline to owners across the blockchain. Friction in clearing and settlement is reduced – it could be T+10 minutes – and any errors and counterparty risks are eliminated.
Smith describes Symbiont as a technology company supplying solutions to regulated institutions such as banks and broker-dealers. He says: “We can help these institutions improve efficiency, decrease costs and find alpha in opaque markets by increasing transparency and removing middlemen. Our Smart Securities technology can change the structure of how firms do business.”
The company recently secured $1.25 million of seed funding from influential financial market leaders including Duncan Niederauer, former CEO of NYSE Euronext and now a member of the Symbiont board of directors. He comments: “Symbiont is bridging the gap between Wall Street and the emerging blockchain ecosystem. It’s an exciting, timely and much needed development for the long-term health of the markets.”
Smith says more than 50% of the top tier financial institutions on Wall Street already have teams tasked to understand smart security and blockchain technologies, identify uses cases and start pilot projects. He has talked to some and says Symbiont’s solution is being well received and could soon be the basis of a handful of projects. Longer term, and after the issue of the company’s own private equity securities, he says: “We will help other companies issue private equity securities and hope to follow that by issuing public securities with a major financial institution.” A round of institutional investment in the company is expected to close in the third quarter of this year.