Bakkt

What is Bakkt?

Bakkt is an upcoming exchange by the Intercontinental Exchange ICE (the parent company of the New York Stock Exchange NYSE). Bakkt “will enable consumers and institutions to buy, sell, store and spend digital assets on a seamless global network.”^[1][2][3]

The first Bakkt product will be physically settled 1-day Bitcoin contracts. Keep reading to learn more about what Bakkt has to offer.

LAUNCH UPDATE 1: Pending regulatory approval, ICE will list the new Bakkt Bitcoin (USD) Daily Futures Contract for trading on January 24, 2019. This was delayed from December 12, 2018. Learn more.

LAUNCH UPDATE 2: Bakkt’s Jan 24th 2019 launch date has been pushed back again. The new launch date is not set, but the plan is to announce it in early 2019.

TIP: As time has gone on we have learned more about Bakkt contracts, for an official description, see: the official ICE page on Bakkt contracts.

TIP: If you want a simple overview of everything you need to know about Bakkt, I suggest this thread by Jake Chervinsky.

TIP: See the description of Bakkt below from the form ICE filed with the SEC. It explains most of the details someone would want to know.

On August 3, 2018, Intercontinental Exchange, Inc. announced its plans to form a new company, Bakkt, with the goal of establishing a global platform for digital assets. Bakkt intends to work with BCG, Microsoft and Starbucks, among others, to create an integrated platform designed to enable consumers and institutions to buy, sell, store and spend digital assets on a seamless global network. Seeking to address evolving needs in the growing digital asset marketplace, Bakkt’s platform aims to include federally regulated markets and warehousing along with merchant and consumer applications, and is expected to first support Bitcoin. As an initial component of the Bakkt offering, Intercontinental Exchange’s U.S.-based futures exchange and clearing house plan to launch a 1-day physically delivered Bitcoin contract along with physical warehousing in November 2018, subject to CFTC review and approval. These regulated venues will establish new protocols for managing the specific security and settlement requirements of digital currencies. In addition, the clearing house plans to create a separate guarantee fund that will be funded by Bakkt. Bakkt is currently in preparation for launch, and is in discussions with regulators and in the process of finalizing definitive agreements with select partners. ICE currently expects that further operational details will be announced when available.

About Bakkt

Bakkt isn’t live yet, but the early explanations from the Bakkt team are mind meltingly awesome (for example, see this Medium post and this Medium post). Here are some of the highlights:

• Bakkt is formed by one of, if not the, biggest player in terms of exchanges in the world the Intercontinental Exchange ICE (an operator of global exchanges, clearing houses, data and listings services… including the New York Stock Exchange NYSE).
• Bakkt is led by Kelly Loeffler, ICE’s former head of communications from 2002 to 2018 (she left that position for Bakkt). Her previous role in ICE was impressive, and it bodes well for Bakkt.
• Bakkt is working with companies like Starbucks and Microsoft (meaning this is a partnership between some of the world’s biggest companies; this doesn’t mean Starbucks will be accepting Bitcoin, it means those companies have a working relationship on some level).
• Cleary Bakkt is regulated and in compliance with regulations given the players involved. However, it seems they still need final approval from the U.S. Commodity Futures Trading Commission (CFTC).
• Bakkt plans to go live in November 2018 assuming all goes to plan.
• The first Bakkt product will be physically settled and delivered 1 day Bitcoin futures (Bitcoin “backed” contracts). Meaning [from what I understand] you trade futures each day, but then you get your Bitcoin balance from contracts as Bitcoin at the start of the next day in your account.
• Bakkt plans to dabble in many aspects of crypto. It’ll allow conversion between BTC and dollars at first (via Bitcoin “backed” contracts) and it’ll act as a custody solution, but plans to move into a variety of merchant and consumer applications. In short, it means Bakkt can potentially be used for everything crypto. It can be used to buy, sell, and store cryptos for your 401k, be used for crypto credit cards, be used to take payments as a business, etc.
• In other words, Bakkt is potentially going to be a one-stop crypto hub for retail investors (for both personal and retirement accounts), institutional investors, and businesses.
• Bakkt paves the way for ETFs and other products to be approved, because Bakkt will provide a regulated US exchange and regulated US custody solution (two things that were lacking outside of Coinbase, which unlike Bakkt comes from the crypto space and not the traditional markets).

I’ll update this page as we learn more and Bakkt launches in the upcoming weeks.

If you don’t get why you should be excited yet, see the official re-Tweet from @bakktapp below and let CNBC’s Brian Kelly explain:

Buckle in because this is the biggest #bitcoin news of the year, says @BKBrianKelly pic.twitter.com/0i6fjx8r3U

— CNBC’s Fast Money (@CNBCFastMoney) August 3, 2018

What I’m Not 100% Clear on

That covered, here are a few things I’m not 100% on:

• From what I understand Bakkt isn’t going to do every transaction on the Blockchain (I am not sure of this, but this is logical and from what I’m reading is the case). Logically speaking and from what I understand: Bakkt will instead flip between BTC and fiat in-house via Bitcoin “backed” contracts, essentially like most crypto exchanges (where not every trade that happens on the exchange is settled on the blockchain, and is instead settled on the platform). I believe it works like this: People can hold Bitcoin on Bakkt, people can trade 1 day physically settled futures contracts on Bakkt, traders get Bitcoin in their account at the start of a trading day, otherwise Bakkt keeps its Bitcoin in cold storage (secure offline storage). That covered, I’m not if every transaction is going to be recorded to the blockchain, or if this will be avoided by crediting users with Bitcoin while keeping Bitcoin in cold storage on Bakkt (crypto exchanges typically don’t record every transaction to the blockchain, it would make sense Bakkt wouldn’t either).
• It is unclear what limitations Bakkt will have. With an ETF you can’t send your Bitcoin to a outside wallet, I’m not sure how it’ll work with Bakkt. They tout “storage,” so clearly this is an aspect, but I don’t know if this is custody for existing Bitcoin, a way to store it on their platform but not transfer off like Square, or if they will offer a mix of these things. As the details become clear, we will clarify them on our site. Make sure to check out the official Bakkt site for details.

1. The NYSE’s Owner Wants to Bring Bitcoin to Your 401(k). Are Crypto Credit Cards Next? Backed by Microsoft and Starbucks, Intercontinental Exchange is launching a startup called Bakkt to make the cryptocurrency safe for your retirement fund, and maybe for retail, too. Fortune.com.
2. Introducing Bakkt. Medium.com.
3. What Bakkt aims to solve as a first step. Medium.com.