As the crypto world continues to heat up, developers are clinging to the Ethereum network despite its general struggle to meet the stresses of a global network’s transaction load. To speed and cheapen transactions on Ethereum, developers are looking towards so-called Layer-2 (L2) blockchains which build on the Ethereum network, offloading the computational stresses while still writing transaction data to the main network.
StarkWare, which builds an Ethereum scaling solution called StarkNet, has just closed a $50 million Series C led by Sequoia Capital. The raise comes several months after the firm raised a $75 million Series B led by Paradigm, a crypto vc firm co-led by former Sequoia Capital partner Matt Huang.
This latest raise values the Israeli startup at a whopping $2 billion.
As the Ethereum network continues to swell in popularity despite traction from competing blockchains with deeper efficiency, investors are starting to dump more money into the infrastructure startups aiming to help Ethereum scale to more users and more transaction volume. Earlier this month, TechCrunch covered the Series B raise of Matter Labs backed by Andreessen Horowitz. In August, Lightspeed backed startup Offchain Labs in a raise that valued the blockchain scaling company at $1.2 billion.
Despite being one of the more renowned investment firms in the tech sector, Sequoia has been slower to fully embrace crypto startups, leaving competitors like Andreessen Horowitz space to back more early players through dedicated funds. Sequoia first backed StarkWare back in 2018, though this is the first time leading a round for the startup. A recent report from The Information detailed that a quarter of Sequoia’s new investments this year were made in blockchain startups.
“The main thing that distinguishes us in the L2 ecosystem… is that we are basically servicing the largest throughput today in terms of both transactions and volume across all the [L2] solutions out there,” co-founder Eli Ben-Sasson tells TechCrunch. “We’ve settled over $200 billion and settled over 50 million transactions.”
StarkWare’s particular scaling solution is what’s called a zero-knowledge rollup; it processes a number of transactions on its platform and inscribes the bundled data to the Ethereum network. Unlike competing “optimistic rollups” which rely on a network of validators to ensure that the bundled data is legitimate after its published, zero-knowledge proofs leverage cryptography to mathematically ensure that everything is up to snuff before publishing it. Those cryptographic proofs require more computational effort than other solutions, but their more secure architecture has led plenty of developers to believe they are the the future of scalability for the Ethereum network.
Some of StarkWare’s customers include Conseysys, Immutable, dYdX and Sorare. The startup is currently gearing up for the Ethereum mainnet deployment later this month of its StarkNet L2 after months in public testing.
“[Our valuation] indicates that the investment community expects great things from the permission-less blockchain space and understands that scaling it is really a necessary capability that must be put in place and deployed,” CEO Uri Kolodny tells TechCrunch. “And that’s exactly what we’re doing two weeks from now.”