Omise Holdings: Strategy Update
It has been a while since I last posted an update on Omise Holdings’ strategy and plans.
To complement the updates provided through our social media channels, I’d like to offer a long overdue follow up to my previous blog post in April 2018. More specifically, I’d like to address two things:
- Exchange acquisitions
- Developing a digital asset exchange
However, before I begin, I’d like to set the context and remind readers that I wear a few hats within the company. For the purpose of this post, I will be speaking on behalf of Omise Holdings, the parent company that manages a number of subsidiaries; two of which you are probably especially familiar with - Omise Payment (initially referred to as Omise) and OmiseGO. I am responsible for Omise Holdings and therefore am involved in its strategy as well as the strategies of the subsidiaries. As such, you have probably seen comments and articles that relate to each of those businesses from my Twitter and Medium accounts. I’ve been switching from one hat to another without always using clear demarcation, which unfortunately has caused some confusion. Here, I’d like to attempt to clarify the company structure that was the basis of the Omise/OmiseGO strategy vol. 1 blog post.
In the April 2018 blog post entitled Strategy vol. 02, I talked about an addition to our strategy that pertains to the question of “where can we capture transaction volume in the real world?” This question led us to the chicken-and-egg problem. In that blog post, I also stated that Omise Holdings was “working to acquire small to mid-sized exchanges that will ultimately transact via OMG Network.” I was not able to disclose full details then, but I will give an overview with what I am able to share.
I can inform you that the acquisition of small to mid-sized exchanges is no longer part of Omise Holdings’ plans. I’d like to provide information on how we arrived at that decision.
The road to acquiring an exchange
In late 2017, the Omise Holdings team was looking at a number of options to help support the growth of the OMG Network. Based on the information we had at the time, it seemed that acquiring an existing exchange would be the best way to jump-start such a platform.
We understood, of course, that embarking on the exchange acquisition route would be incredibly challenging. We undertook this in a rapidly evolving industry, where environment and contingencies are constantly in flux, and we happened to embark on this initiative just prior to a drastic shift in the market. In the aftermath of this shift we found many exchanges to be over-valued, as valuations did not adjust commensurate with market conditions. Finding an exchange that offers volume, technical soundness, regulatory compliance, and operational excellence is a challenging task that carries a high risk. Mergers and acquisitions in general are difficult. Many aspects need to be right before any deal can close, and we were not willing to over invest in an acquisition that ultimately seemed likely to underdeliver.
We came close to finalizing deals with a few exchanges. The first acquisition attempt reached a verbal agreement but did not go beyond this, as another buyer purchased the exchange before we could complete the necessary due diligence to finalize a deal. The second exchange acquisition reached a verbal agreement with an agreed valuation of the exchange. However, with the bull run in 2017 and early 2018, volume increased significantly across most exchanges resulting in a change in valuation on the seller’s part to a level we were not comfortable with. We withdrew from that deal. The third exchange acquisition attempt reached the due diligence stage. Unfortunately, this was when we learned that the technical, business and operational aspects of this particular exchange did not meet our requirements, and therefore we did not press forward. In short, we tried, but the conditions were not right for us to acquire any exchanges.
As a side note, allow me to reiterate that exchange acquisitions was an Omise Holdings initiative. Funds to cover holdings level activities as in this case are to be borne from the Omise Holdings budget. OmiseGO’s ICO fund has not and will not be used to support any of the other Omise Holdings subsidiaries or operations.
Building a digital asset exchange
Following the attempts to acquire small to mid-sized exchanges and after conducting more research on the exchange market, we felt the real opportunity was to build a platform that would be better than what was out there. As such, we focused on developing a digital asset exchange. Developing our own platform gives us more flexibility on tech development as opposed to inheriting technology that was built with different premises in mind. This gives Omise Holdings more ownership over the direction of the exchange, and we’re able to incorporate insights from (and provide feedback to) the OmiseGO team to optimize for our unique position and goals.
For these reasons, Omise Holdings launched a new subsidiary called GO.Exchange that would develop a user-facing digital asset exchange. The thinking behind this decision was framed around many factors, but the most publicly communicated point was that this trading platform would add value to the OMG Network ecosystem.
In retrospect, communication could have been clearer on our part. We understand the important role transaction volume plays in our business. However, from the Omise Holdings vantage point, it is crucial that we treat each entity as a unique building block. While we aim for synergy between our subsidiaries, there is a time and place for everything. We want to allow each business (Omise Payment, OmiseGO and GO.Exchange) to grow independently, and offer them the freedom to carve out their own unique paths to fulfill their individual mandates. In this way, they will each be able to maximize their contribution to what we all aspire to achieve — financial sovereignty for everyone.
GO.Exchange aims to be a secure, sustainable platform for the exchange of digital assets, striving to support Omise Holdings’ vision and contribute to the future of decentralized finance.
Internal incubation of GO.Exchange solidified during the summer of 2018 with an initial team of five, who commenced research and development of the exchange. As of March 2019, GO.Exchange has expanded to over 20 people. The company continues to grow as they look to recruit top-tier talent to accelerate their mission. If you are interested, please view open positions here.
With that, I’m excited to announce that the team is now opening up the waiting list ahead of their soft launch and congratulate them for their hard work. The purpose of the soft launch will be to collect more feedback and observe trends in usage behavior, so that the full launch of GO.Exchange will be as beneficial to its users as possible. If you are interested, please sign up to be on the waiting list.
I’d like to emphasize that although GO.Exchange and OmiseGO teams are in communication with one another, the OMG Network is not being built to GO.Exchange’s specifications or vice versa. Both companies are developing different products intended to address different needs, and it’s important for each to retain autonomy in order to optimize for their respective purposes. The first goal for GO.Exchange is to attract volume to their platform, then to integrate emerging technologies when the time is right. We want to time the introduction of new elements carefully, such that they will improve rather than disrupt the user experience.
The OmiseGO team is a part of the OMG and Ethereum communities, contributing as builders of the OMG Network. The teams there are heads down working on the OMG Network (DEX + implementation of plasma), eWallet Suite and further defining their products and business. I’m sure you have been following their progress through their newsletter (which you can subscribe to here) blog, GitHub and community tracker.
Now that OmiseGO has released the Ari testnet onto Rinkeby in a closed alpha version — collaborating with our friends at Hoard on the first-ever plasma dApp deployment on a public Ethereum network — we’ll be seeking to incrementally increase engagement with developers, partners and implementers; as well as encouraging and supporting community initiatives to contribute to the OMG vision. Among other things we’ve already contributed to the founding of both the Stanford Center for Blockchain Research, which brings some really brilliant minds to some of the most challenging problems in furthering blockchain technology; and Plasma Group, which was founded to create standards and general tools for plasma development which will benefit the entire ecosystem (including OMG). We’ll also be ramping up business development efforts, both to bring volume to the network and to continually improve our strategy based on information and feedback gathered from implementers.
On the Omise Payment front, the company continues to forge ahead with their business targets for 2019 and as always, continues to strive to optimize their services and solutions for their customers. We’re looking forward to exploring the ways that the OMG Network can help us achieve this goal as it matures.
I hope the above helps to clarify some points and has served to provide an update where details of our strategy have evolved from what I have stated before. Omise Holdings’ vision of ‘Payment for Everyone’ and high-level strategy remain the same even as we make adjustments to the path that leads us to those goals.