Markets are down, but blockchain companies can still attract capital at sky-high valuations.
In the latest example, Ethereum developer StarkWare has raised a $100 million Series D round at a valuation of $8 billion. Led by Greenoaks Capital and Coatue, the round closed last week, just six months after the company’s Series C raise, which valued StarkWare at $2 billion. Other investors include Tiger Global, Paradigm, Three Arrows Capital and Sequoia Capital.
“We closed this deal in the midst of a bear market for cryptocurrencies, highlighting the strength of investor confidence in StarkWare’s scalability,” says Uri Kolodny, co-founder and CEO of StarkWare.
The Tel Aviv, Israel-based company uses zero-knowledge accumulation (ZK) technology to improve the efficiency of Ethereum without sacrificing security or decentralization. It involves a computationally intensive process, which instead of adding transactions to the blockchain one by one, bundles thousands of transactions into a single batch far from the main Ethereum layer.
It then writes the entire batch to the blockchain using a file just 80 kilobytes — “far less than a smartphone photo,” as the company puts it — that acts as “proof” of the contents of the batch. This test system belongs to a class of privacy-enhancing and scaling technologies called STARK, which were invented by Eli Ben-Sasson, co-founder and president of StarkWare, and other computer scientists.
Using this technology, StarkWare has built StarkEx, a scaling engine that helps businesses use Ethereum more efficiently. Since its launch 18 months ago, StarkEx has handled 173 million transactions worth a total of $602 billion, helping its customers significantly reduce the costs of using the network (called gas). For example, for the dYdX decentralized exchange, settling a transaction on the Ethereum main layer could cost 200,000 units of gas (about $12 at current prices), while settling using the StarkWare service would cost less than a quarter of that. amount. dYdX passes these savings on to its users in the form of reduced business fees, according to Antonio Juliano, co-founder and CEO of dYdX. StarkWare’s other big clients for the service include fantasy sports company Sorare and Immutable X, a protocol for trading Ethereum NFTs.
Additionally, the company launched StarkNet, a scalable network that allows developers to deploy decentralized applications at a fraction of the cost of using the Ethereum mainnet. StarkWare has seen over 100,000 downloads of its developer tools. “To me, having that just a few months after the alpha was released is a very strong signal of developer interest,” says Kolodny.
Traction is high even as the market is considering the fallout from the $50bn collapse of algorithmic stablecoin TerraUSD and its sister token LUNA, and other macroeconomic uncertainties. The sell-off has led to double-digit percentage drops in the prices of most major digital assets, including ether. The native Ethereum token is down 32% over the past month, trading below $2,000.
As is the case with most developers, price fluctuations are of little concern to StarkWare. “Investors who entered this round are certainly not investing for the price of LUNA or, frankly, for the price of ETH and bitcoin today, tomorrow or next week,” says Kolodny. “They are investing because of the vision we have for the next 5 to 10 years, so we think blockchain will mean business and society for years to come.”