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Facebook Makes Its First Blockchain Acquisition

Facebook has reportedly acquired blockchain startup Chainspace in what is its first blockchain-related acquisition. The news was first reported by Cheddar earlier today.

According to sources, the deal is primarily an “acquihire” — an acquisition whose main purpose is to bring on the staff of the acquired company, as opposed to their technology, or their core business. Indeed, four of the five researchers that worked on Chainspace’s whitepaper will join Facebook, who did not acquire any of the company’s technology.

Founded by researchers from University College London, Chainspace was working on solving blockchain scalability issues — one of the main problems facing the space as a whole. Bitcoin’s blockchain usually processes somewhere between two and ten transactions per seconds (tps), while for comparison, Visa is able to process 2,000 tps.

Their solution involved using a process called “sharding,” which involves splitting up data into smaller chunks, spread across separate buckets. Multiple machines within a network divide up the work of verifying transactions, and the networks are called “shards,” with each one running a smaller consensus protocol. Because the transaction processing occurs in parallel, sharding could allow for hundreds of transactions to be processed per second, which would do wonders for blockchain’s scalability issues. A handful of companies are already employing sharding, including Sharder, which uses the technology for decentralized file storage.

In May 2018, Facebook Messenger head, David Marcus, announced he would be leading a new group “to explore how to best leverage blockchain across Facebook, starting from scratch.” Notably, Marcus was a former board member of leading U.S.-based cryptocurrency exchange, Coinbase. Given this connection, some opined Facebook may make a play to acquire Coinbase, but those rumors have died down for the time being.

For now, what Facebook will do with its blockchain group, and the newly-acquired researchers from Chainspace, remains a mystery.