July 4, 2024
Venture capital (VC) investment in the cryptocurrency and blockchain space continued its diversification in Q2 2024, with a focus on scalability solutions, Web3 integration, and emerging areas in decentralized finance (DeFi) and prediction markets. While overall deal count dipped slightly, funding remained robust across various sub-sectors.
Category | Apr-24 | May-24 | Jun-24 | Total (USD) |
|---|---|---|---|---|
AI | 4,300,000 | 18,800,000 | 35,000,000 | 58,100,000 |
Data Management |
|
| 26,900,000 | 26,900,000 |
DeFi | 102,000,000 | 267,350,000 | 175,800,000 | 545,150,000 |
DePIN | 6,600,000 | 6,000,000 |
| 12,600,000 |
FinTech | 12,500,000 | 15,290,000 | 38,100,000 | 65,890,000 |
Gambling |
| 70,000,000 |
| 70,000,000 |
Gaming | 94,600,000 | 36,900,000 | 73,850,000 | 205,350,000 |
Infrastructure | 489,150,000 | 88,200,000 | 336,400,000 | 913,750,000 |
Legal & Compliance |
| 2,750,000 |
| 2,750,000 |
Meme | 1,000,000 |
| 8,000,000 | 9,000,000 |
NFT | 1,300,000 | 5,000,000 | 14,375,000 | 20,675,000 |
Other | 69,600,000 | 24,040,000 | 7,900,000 | 101,540,000 |
Security | 51,600,000 | 3,995,000 | 62,000,000 | 117,595,000 |
Social |
| 177,950,000 | 12,500,000 | 190,450,000 |
Web3 | 27,300,000 |
| 25,000,000 | 52,300,000 |
Grand Total (USD) | 859,950,000 | 716,275,000 | 815,825,000 | 2,392,050,000 |
Infrastructure Focus on Scalability and Bitcoin Expansion: Leading the charge were infrastructure projects, attracting nearly $1 billion in investment across over 40 deals. This signals a continued industry focus on scalability solutions and expanded functionality for Bitcoin. Here's a breakdown of notable funding this quarter:
Monad Labs: Raised $225 million to develop a high-performance Ethereum Virtual Machine (EVM) compatible Layer 1 blockchain. This new blockchain aims to address scalability limitations faced by the existing Ethereum network. The funding round was led by Paradigm with participation from Coinbase Ventures, Electric Capital, and other prominent investors.
Berachain: Secured $100 million in funding to build a high-throughput EVM compatible blockchain platform specifically focused on the Decentralized Finance (DeFi) ecosystem. Framework Ventures and the Abu Dhabi branch of Brevan Howard Digital led the investment, with additional support from a consortium of venture capitalists.
Conduit: A crypto infrastructure company, raised $37 million to provide a Rollups-as-a-Service (RaaS) platform. This platform simplifies the process of deploying and managing rollup solutions, which are a scaling technique for Ethereum. Haun Ventures and Paradigm co-led the funding round, with participation from several other investors.
Avail Protocol: Received $43 million to tackle challenges related to interoperability, scalability, and security within the rollup space. Founders Fund, Dragonfly, and Cyber Fund provided the funding to support Avail's development efforts.
Nexus Laboratories: Secured $25 million to create software that emulates physical computers within a blockchain environment. This technology aims to increase trust and security on the internet by leveraging zero-knowledge proofs (zk-proofs). Lightspeed Ventures led the investment round.
Mezo: A Bitcoin scaling network, raised $21 million to improve transaction processing capabilities on the Bitcoin blockchain. Pantera Capital led the funding round, with participation from several other venture capital firms.
MegaETH: Secured $20 million to develop a real-time Ethereum blockchain capable of processing a staggering 100,000 transactions per second. Dragonfly led the investment round, with participation from notable figures in the Ethereum community, including co-founder Vitalik Buterin.
Particle Network: Raised $15 million to build a modular Layer 1 blockchain with a focus on chain abstraction technology. This technology aims to simplify interactions with blockchains for developers and users alike. The Spartan Group and Gumi Cryptos Capital co-led the investment round.
DeFi Maintains Traction Despite Slowdown: DeFi remained a major draw for investors, garnering over $500 million across more than 50 projects despite a 35% decrease in funding compared to May. This highlights DeFi's enduring appeal, with a significant number of projects vying for VC attention. Here's a quick snapshot of the notable funding rounds:
Babylon: A project focused on Bitcoin staking secured $70 million in funding. Paradigm led the investment round, with participation from a consortium of venture capital firms including Bullish Capital, Polychain Capital, and Hashkey Capital.
Biton: A full-chain ecology trading platform, raised $44 million in a funding round spearheaded by Fire Rabbit Capital. This investment signifies growing interest in comprehensive trading solutions within the blockchain space.
Bluefin: A decentralized orderbook exchange built on the SUI blockchain, closed a $17 million funding round. Polychain Capital, SIG, DRW, and Alliance participated in the investment, indicating confidence in the potential of decentralized exchange platforms.
M^0 Labs: A developer of a decentralized dollar minting protocol, successfully raised $35 million in a Series A funding round. This round was led by Bain Capital Crypto, with additional participation from prominent investors like Galaxy Ventures, Wintermute Ventures, and GSR. This investment highlights the ongoing exploration of innovative DeFi solutions.
Gaming Investments Reward Strong Communities and Web3 Integration: The gaming sector saw consistent funding, with over $200 million invested in over 30 projects. This trend suggests a preference for projects demonstrating established user bases and a commitment to Web3 integration.
Here's some notable Gaming funding which occurred last quarter:
The Sandbox: A leading metaverse platform raised $20 million to provide users with immersive experiences. The platform enables them to play games, create content, and even monetize unique creations. Kingsway Capital and Animoca Brands led the funding round, with participation from LG Tech Ventures and True Global Ventures.
Sonic: A gaming-focused Layer 2 network built on Solana, successfully secured $12 million in a Series A funding round. This project aims to improve scalability and transaction speeds for blockchain-based games within the Solana ecosystem. Bitkraft Ventures led the investment round, with participation from Galaxy Interactive and Big Brain Holdings.
Seeds Labs: A developer specializing in high-quality Web3 games and infrastructure, closed a $12 million seed funding round. This funding supports the creation of engaging games and the development of essential tools for the Web3 gaming space. The round attracted a diverse group of investors, including Avalanche's Blizzard Fund, Solana Foundation, Krust, Hashkey Capital, UOB Ventures, Signum Capital, IVC, and Emoote.
FinTech Embraces Crypto Integration: FinTech experienced a surge in funding, with investments more than doubling from April to June. This reflects a growing trend of traditional financial platforms incorporating crypto functionalities. A total of 14 projects shared $65 million in Q2, indicating a potential convergence between these sectors. Here's a look at some notable funding rounds:
XREX: A fully regulated, blockchain-enabled financial institution, secured $18.75 million in funding from Tether. This investment will fuel XREX's mission to revolutionize financial transactions by offering compliant, USDT-based cross-border B2B payments specifically targeted towards emerging markets. This initiative has the potential to significantly reduce costs and improve efficiency. Additionally, XREX plans to launch XAU1, a USD-pegged stablecoin that's over-reserved with Tether Gold (XAUt). This stablecoin aims to provide a secure alternative and act as a hedge against inflation.
Mountain Protocol: The developer behind the USDM yield-generating stablecoin, successfully closed an $8 million Series A funding round. Multicoin Capital led the investment, with participation from Castle Island Ventures and Coinbase Ventures, among others. This funding will support the continued development and growth of the USDM stablecoin within the DeFi ecosystem.
Web3: Disrupting Content Ownership: The Web3 space, encompassing social media, creator-owned platforms, and Social finance (SoFi), emerged as a potential game-changer in content ownership. Close to 20 projects secured nearly $250 million in funding, highlighting investor interest in this disruptive area. Here's some notable Web3 funding:
Burnt: The team behind the XION protocol secured $25 million in Series A funding. Burnt is a Web3 foundry building tools and platforms that make blockchain technology more accessible to mainstream users. The funding round was supported by prominent investors, including Multicoin Capital, Animoca Brands, and Arrington Capital.
Paragraph: A platform focused on supporting creators in the Web3 space, secured $5 million in funding. This funding coincides with their acquisition of the popular blogging platform Mirror. Coinbase Ventures and Union Square Ventures led the investment round, highlighting the growing interest in creator-centric Web3 tools.
Security Solutions Remain Crucial: The importance of robust security solutions in the crypto landscape was underscored by continued investment in this area. Nine projects secured over $115 million, demonstrating the ongoing need for secure infrastructure in the crypto ecosystem. Notable investments were:
Movement Labs: Secured $38 million in a Series A funding round led by Polychain Capital. The funding aims to address vulnerabilities in smart contracts and improve transaction processing speeds on the Ethereum network. Movement Labs plans to achieve this by integrating Facebook's Move Virtual Machine (MoveVM) onto Ethereum. MoveVM offers enhanced security for smart contracts while simultaneously boosting transaction throughput. This zero-knowledge Layer 2 blockchain solution boasts the potential to handle over 30,000 transactions per second (TPS) and prevent common attacks like reentrancy.
PQShield: A cybersecurity company specializing in post-quantum cryptography (PQC) solutions, closed a $37 million Series B funding round. Addition led the investment, with participation from new backers like Chevron Technology Ventures, Legal & General, and Braavos Capital. Existing investors, including Oxford Science Enterprises, also participated. PQC is a developing field of cryptography designed to safeguard information systems from the threat posed by future advancements in quantum computing.
AI and Data Infrastructure on the Rise: Artificial Intelligence (AI) experienced a significant funding jump in June, with 11 projects receiving substantial funding totaling over $58 million. Similarly, data infrastructure projects garnered over $25 million across 4 deals, suggesting a growing need for solutions that address data interoperability and security challenges arising from the proliferation of Layer 1 and 2 protocols.
Here's a look at the latest notable AI funded projects:
ORA Protocol: Secured $20 million to build a verifiable oracle protocol that integrates AI and complex computations directly onto blockchains. This empowers developers to create entirely trustless and decentralized applications powered by AI. The project received backing from Polychain Capital alongside other prominent investors.
GaiaNet: A company focused on a novel AI infrastructure, announced a $10 million funding round. This project aims to decentralize AI, shifting control away from large corporations and towards a more distributed system. GaiaNet boasts a strategic advisory board with industry veterans like Lex Sokolin (Generative Ventures), Brian Johnson (Republic Capital), and Shawn Ng (7RIDGE).
Here's a quick look at the recent Data Infrastructure funding activity:
Glacier Network: Raised $8 million in Angel and Seed funding rounds. This blockchain project is building a programmable, modular, and scalable infrastructure specifically designed for storing, indexing, and querying data. This infrastructure has the potential to support AI applications at scale.
Irys: A developer specializing in on-chain data, secured $3.5 million in funding led by Lemniscap. Irys offers a unique provenance layer that empowers users to efficiently store permanent data on the blockchain while precisely attributing its origin. This focus on data provenance can be crucial for applications requiring trust and auditability.
Prediction Markets: A New Frontier: A new and intriguing development was the emergence of prediction markets as a funded category. Polymarket raised a substantial $70 million investment, potentially fueled by the upcoming presidential election year in the United States.
This diverse funding landscape indicates a maturing VC crypto market, with investors increasingly looking beyond established sectors and exploring the potential of emerging technologies and applications.
Conclusion
The venture capital (VC) crypto market continues to mature and investors are looking at new areas for investment beyond established sectors. This is evident from the funding diversity across various sectors including infrastructure, DeFi, Gaming, Fintech, Web3, security, AI, data infrastructure, and prediction markets.
There is a continued focus on scalability solutions for blockchains like Bitcoin and Ethereum, with a significant portion of funding directed towards infrastructure projects. DeFi remains a major attraction for investors despite a funding slowdown, while Web3 is emerging as a potential game-changer in content ownership. The importance of robust security solutions is underscored by continued investment in this area, and there is a growing need for solutions that address data challenges arising from the proliferation of blockchain protocols.
Overall, the VC crypto market is moving beyond established sectors and exploring the potential of emerging technologies and applications.
A central focus of investor activity in the cryptocurrency space is the evaluation of new crypto projects to invest in, particularly those with huge potential. This blog provides insight into what new ventures are benefiting from venture capital support (VC funding in crypto). These new crypto projects, funded by professional investors, can dictate the next narrative in crypto and the next big crypto movers.
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