Blockchain company Chain acquired by Stellar

Chain, one of the hottest blockchain startups, has sold to Lightyear, the commercial arm of the Stellar Development Foundation, which is the nonprofit behind the Stellar network and cryptocurrency stellar lumens.

That may sound like a mouthful. It may also look like a surprising move for a fast-growing company that counts Citigroup, Nasdaq, and Visa among its clients. As Chain CEO Adam Ludwin acknowledges about Lightyear, “We are being acquired by an entity that no one has ever really heard of.”

But in a candid interview with Yahoo Finance, Ludwin explained the strategy behind selling the company. (Read on for the interview, after some background on Chain and Stellar.)

Chain builds private blockchains for enterprise clients — internal ledgers that allow them to digitize assets faster and with less friction. Chain launched in 2014 and has raised $44 million in venture funding.

Stellar is a blockchain protocol for facilitating cross-border payments and digital asset exchanges, and lumens (XLM) is the network’s native cryptocurrency. (The price of XLM is down 65% so far this year amidst the larger crypto market rout.) Stellar was incubated at the payments startup Stripe, then spun out; IBM, Deloitte, and messaging app Kik are some of the bigger names using Stellar.

In the race to get banks on blockchain, Stellar competes with Ripple, among many others. And the same man created both Stellar and Ripple: Jed McCaleb, who also cofounded the infamous bitcoin exchange Mt. Gox.

Lightyear and Chain will combine and be called Interstellar; the Chain branding will go away. Interstellar will focus on helping companies build on top of the Stellar network. Ludwin will be CEO of Interstellar, McCaleb will be CTO, and all of Chain’s 30 employees are staying, totaling 60 Interstellar employees. The parties are not disclosing the terms of the deal, but Chain’s investors are all getting cashed out.

Chain CEO Adam Ludwin spoke to Yahoo Finance by phone before the announcement of the acquisition. What follows is an edited transcript.

Yahoo Finance: Are people going to be surprised that Chain, which is a hot company in the crypto and blockchain world, is selling to a company that isn’t really a household name?

Adam Ludwin: Lightyear is relevant because it was set up last year to be the commercial arm for the Stellar network. As more institutions have been interested in transacting in stellar, the foundation was not positioned to do that kind of work. So we are going all in on Stellar, and we will do that enterprise work, the hand-holding, the service providing.

How long has this been in the works? There have been reports and rumors of this acquisition for a few months.

We started talking as far back as January. We did our absolute best to prevent any information leaking, and it’s hard because it’s such a small community, and we have so many investors. There were some leaks, and some things published on the internet with wrong information, like people wrote that we were merging with the foundation.

How did it come about?

Jed McCaleb came to me and told me the idea, and his idea was to basically do what Chain has done but focus on Stellar. So basically Chain retools through Stellar.

He probably thought I would say no very quickly, but what he didn’t know at the time was that we had learned that what our customers ultimately need is for us to bring them to a network. We found that they wanted to just be told what network to join.

Any fellow tech types or mentors you went to for advice?

There were four or five folks that I consulted with that I often turn to for coaching, mentorship, strategic advice. Kevin Ryan [cofounder of Business Insider, Gilt Groupe, and MongoDB].Glenn Hutchins of [VC firm] Silver Lake. Jim Robinson of RRE Ventures, former CEO of American Express. And Keith Rabois [early investor in PayPal, Yelp, and Square].The four of them were extremely helpful.