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Markets are down, but blockchain companies can still attract capital at sky-high valuations.
In the latest example, Ethereum developer StarkWare has raised a $100M Series D round at an $8 billion valuation. 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 thick of a bear market for crypto, highlighting the strength of investor confidence in StarkWare scaling,” says Uri Kolodny, StarkWare’s cofounder and CEO.
The Tel Aviv, Israel-based company uses zero-knowledge (ZK) rollup technology to improve Ethereum’s efficiency 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 away from Ethereum’s main layer.
It then writes the entire batch to the blockchain using a file of just 80 kilobytes—”far less than a smartphone photo,” as the company puts it—that acts as “proof” of content in the batch. This proof system belongs to a class of privacy-enhancing and scaling technologies called STARKs, which were invented by Eli Ben-Sasson, StarkWare’s co-founder and president and other computer scientists.
Using this technology, StarkWare has built StarkEx, a scaling engine that helps companies use Ethereum more efficiently. Since its launch 18 months ago, StarkEx has handled 173 million transactions worth a total of $602 billion, helping its clients significantly bring down the costs of using the network (referred to as gas). For example, for decentralized exchange dYdX settling a transaction on Ethereum’s main layer could cost 200,000 gas units (about $12 at current prices), while settling using StarkWare’s service would cost less than a quarter of that amount. dYdX passes on these savings to its users in the form of reduced trading fees, according to Antonio Juliano, dYdX’s cofounder and CEO. 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 has launched StarkNet, a scaling network that enables developers to deploy decentralized applications at a fraction of the cost of using Ethereum’s main network. StarkWare has seen over 100,000 downloads for its developer tools. “To have that only a few months after the alpha went live to me is a very strong signal of developer interest,” Kolodny says.
The traction is high even as the market is reckoning with the aftermath of the $50 billion collapse of algorithmic stablecoin TerraUSD and its sister token LUNA, and other macroeconomic uncertainties. The broad selloff has led to double-digit percentage drops in prices of most major digital assets including ether. Ethereum’s native token is down by 32% over the past month, trading below $2,000.
As is the case for most developers, price fluctuations are of little concern for StarkWare. “The investors who came into this round are investing certainly not because of the price of LUNA nor frankly because of the price of ETH and bitcoin today, tomorrow or next week,” says Kolodny. “They’re investing because of the vision we have for the next 5-10 years, for what we think blockchain will mean for businesses and society in the coming years.”