Blockchain Bond Startup LedgerEdge Shuts Down

Blockchain bond solution LedgerEdge, co-founded by David Rutter, CEO of enterprise blockchain firm R3, has announced its shutdown after facing challenges in gaining widespread adoption in the corporate bond market. The decision was confirmed by David Rutter, who also served as the controlling shareholder of LedgerEdge. The news was first reported by The Desk.

LedgerEdge was founded in 2020 with the aim of revolutionizing the corporate bond market by allowing buy and sell-side firms to share pre-trade data on a peer-to-peer basis. The platform utilized smart contracts to enable sell-side firms to target their offers more effectively, unlike traditional platforms where pricing data is owned and controlled by the trading platform.

Upon its launch last year, LedgerEdge managed to attract 45 firms in the UK Multilateral Trading Facility (MTF) and 70 globally that were either using the platform or in the process of being onboarded. However, getting these firms to adopt and utilize the platform on a regular basis proved to be a significant challenge.

The startup faced various hurdles, including the need for more capital to extend its runway and achieve greater traction. Unfortunately, the funding environment had tightened, making it difficult for the company to secure additional investment. Additionally, LedgerEdge’s three-year age, compared to Rutter’s previous successful venture LiquidityEdge, which was sold for $150 million to MarketAxess after four years, may have influenced the decision to shut down the struggling platform.

The departure of founding CEO David Nicol earlier this year also raised concerns about the company’s future. Nicol had previously highlighted that LedgerEdge was developed in close collaboration with the market, but the pain point it aimed to address may not have been compelling enough for widespread adoption.

LedgerEdge’s reliance on Distributed Ledger Technology (DLT) or blockchain raised questions about whether the platform would have pursued this approach if not for its founders’ background at R3. DLT offered the advantage of each sell-side participant owning their own data, but the blockchain nodes were centrally hosted, providing a measure of trust. While entering data through screens was initially intended as a temporary measure, it became popular among users.

While the rationale behind LedgerEdge’s blockchain-based system seemed sound, some experts questioned whether a centralized system could have achieved similar outcomes by legally granting ownership of data to the uploading party. Concerns about data privacy and snooping in a centralized system were highlighted, but a level of trust was also required when relying on a single party to host all blockchain nodes.

LedgerEdge’s closure adds to the list of several other enterprise blockchain projects that have shut down in recent times. Notable examples include bank-backed trade finance platforms like we.trade and Marco Polo, IBM and Maersk’s Tradelens, insurance industry-backed B3i, and the ASX’s CHESS settlement system.

The shutting down of LedgerEdge raises questions about the future of blockchain-based solutions in financial markets, with startups facing considerable challenges in gaining industry-wide adoption and competing against well-established centralized alternatives.