Joseph Lubin, co-founder of Ethereum.
Adam Jeffrey | CNBC
Blockchain startup ConsenSys raised $450 million in a new funding round that more than doubled its valuation to $7 billion.
The cash injection was led by ParaFi Capital, ConsenSys said on Tuesday, with Microsoft, Japan’s SoftBank and Singapore’s Temasek also joining as new investors in the company.
ConsenSys, headquartered in New York, was founded in 2014 by Ethereum co-founder Joseph Lubin. Ethereum is the blockchain platform behind ether, the second largest cryptocurrency in the world.
While bitcoin is primarily used for transactions, Ethereum can be used to build decentralized applications, or dapps – think Facebook or TikTok, but on the blockchain, a shared record system for crypto transactions. ConsenSys develops software that runs on the Ethereum network.
This is a rare crypto-related bet from Microsoft. The company previously conducted a initial investment in Palm NFT Studioa start-up also co-founded by Lubin.
Microsoft’s involvement highlights the growing interest of the world’s biggest tech companies in Web3, a loosely defined term that refers to efforts to create a decentralized version of the internet based on blockchain technology.
It’s a term that has generated a lot of talk – and money – in Silicon Valley. According to data from CB Insights, blockchain startups raised a record $25 billion in venture capital funding globally last year. Other tech giants exploring Web3 include Meta and Twitter, parents of Facebook.
ConsenSys is seen by investors as one of the companies that will power Web3. It has benefited from a flood of investments in emerging crypto trends such as decentralized finance, or DeFi, and non-fungible tokens, otherwise known as NFTs.
The company’s most popular products include the MetaMask cryptocurrency wallet and Infura, a suite of tools that helps developers build Ethereum applications.
MetaMask allows users to store and manage their tokens through a web browser extension or mobile app. People can also access popular blockchain-powered apps like Uniswap and Axie Infinity. The bulk of ConsenSys’ revenue currently comes from the fees for trading various tokens on MetaMask.
MetaMask surpassed 30 million monthly active users in January, ConsenSys said, up 42% over the past four months. The United States, the Philippines, Brazil, Germany and Nigeria are its most active markets. Infura, meanwhile, is used by over 430,000 developers and recently surpassed $1 trillion in annualized transaction volumes.
ConsenSys said all profits from its latest cycle would be converted into ether. The funds will be used to hire 600 additional employees, redesign MetaMask slated for release later this year, and expand ConsenSys’ growing NFT business.
The Web3 hype
Just as Web3 generated a lot of hype, it also attracted notable critics, including tech billionaires Elon Musk and Jack Dorsey.
Dorsey dismissed Web3 as centralized technology owned by venture capitalists rather than the crypto community, while Musk says he thinks it’s more of a “buzzword” than reality.
For his part, Lubin does not see it that way.
“What may concern Jack is how a small number of VCs are grabbing the lion’s share of equity or tokens in many of the top projects,” the ConsenSys CEO said. “I’m not worried at all.”
“Decentralized protocol technology is anti-fragile, as is its global community,” Lubin added. “The community will interpret centralization as suboptimal and as an opportunity, and decentralize relentlessly.”
The crypto world has also been closely watching regulatory developments outside of the United States, after President Joe Biden has issued an executive order calling for a coordinated government response to industry surveillance.
Bitcoin, ether and other digital tokens initially reacted positively, only to turn south as investors worried about the lack of details in Biden’s plan.
The U.S. government “has a big political decision to make,” Lubin said, adding that ConsenSys “is ready and willing to help policymakers any way we can.”
“Ultimately, permissionless blockchain networks are global, and they’re going to grow and change our daily lives, whether or not the United States is a leader,” he added.