Darren Kleine

Decentralized finance technology has been around for a while now but still hasn’t managed to attract the mainstream crowd, investor Santiago Santos observes. “We’re a decade in and we have ten users in DeFi,” he quips.&nbsp;



In today’s “we’re still so early” crypto industry, the self-deprecating “ten user” joke continues to ring true. DeFi’s relatively lackluster numbers hardly resemble what most would consider to be the “mass adoption” phenomenon that was promised years ago.



The timing of the <a href="https://blockworks.co/category/defi">DeFi</a> movement has been a little out of sync, Blockchain Capital general partner Aleks Larsen says, because the technology was born into an environment where the infrastructure wasn’t ready to accommodate mainstream usage.



On the Empire podcast (<a href="https://open.spotify.com/episode/7gxOwAAYYnDO1fMI5eab2Q?si=lCgldroYTZCj3C6u8biH4Q">Spotify</a>/<a href="https://podcasts.apple.com/us/podcast/blockchain-capitals-%24580m-dollar-bet-on-crypto-spencer/id1554930038?i=1000630027335">Apple</a>), Larsen explains that the <a href="https://blockworks.co/tag/ethereum">Ethereum</a> network — the overloaded backbone of early DeFi innovations — “got bloated really quickly. Transaction fees were through the roof,” he says.&nbsp;



But he insists that the DeFi thesis, at its core, “is powerful.”&nbsp;



“These are massive markets that DeFi is going after,” Larsen notes. “That&#8217;s one of the most exciting things about crypto,” he says. “You’d expect a new technology maybe to go for niche use cases initially, but <a href="https://blockworks.co/news/bitcoin-price-market-trajectory-spot-etf-approval">crypto goes straight for the juggernauts</a>.”



“Global permissionless financial services are,” Larsen continues, “at a very fundamental level, better suited to serve the internet economy and will grow with it.”



<h2 class="wp-block-heading">You’re not a daily active user of a mortgage</h2>



DeFi’s mass adoption won’t necessarily look the way many imagine, Larsen says, “You’re not a daily active user of a mortgage.”



Larsen says that DeFi statistics will never resemble the frenzied activity volume of a game, for example, due to the technology’s unique purpose. “But the amount of capital that the system has amassed, I would say, is quite impressive.”



The retail sector drove volume in DeFi’s early days, Larsen explains, but was caught in an “unsustainable transaction fee environment” that “put a damper on adoption” just as broader attention turned to the nascent technology.



Web3 infrastructure simply wasn’t ready for DeFi when it first hit the scene, but “we’re getting there now,” he says. “We&#8217;re going to have infrastructure that&#8217;s high performance, that&#8217;s cheap to use, that’s secure. And we&#8217;ve seen a lot of progress on that front.”



<h2 class="wp-block-heading">The next leg of DeFi users</h2>



Larsen says the industry is now waiting on the “next leg of users,” who will likely not be retail in nature. The “power users” of financial services tend to be institutional, he says.



“When you think about the next leg of innovation in DeFi, <a href="https://blockworks.co/tag/derivatives">derivatives</a> come to mind for me. And these are not really retail products. These are products for sophisticated users of financial tools.”



<iframe loading="lazy" frameborder="0" height="200" scrolling="no" src="https://playlist.megaphone.fm/?e=BWG1300558912" width="100%"></iframe>







Larsen says the movement “<a href="https://blockworks.co/news/real-world-assets-empire-buzzwords-defi">bleeds into tokenized markets</a>,” with upcoming developments from massive entities like <a href="https://blockworks.co/tag/blackrock">BlackRock</a> who are “angling to enter the space.” He adds that he “wouldn&#8217;t be surprised to see them do something big in the next couple of months.”



“Until then,” he concludes, “the major potential user here remains crypto degens and <a href="https://blockworks.co/tag/dao">DAO</a> treasuries, and perhaps forward-looking neobanks.”



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Blockchain Capital

The ‘next leg’ of DeFi users will be institutions, Blockchain Capital’s Larsen expects

Ben Strack

Blockchain Capital has raised $580 million for two new investment funds.



One is the San Francisco-based company’s sixth early-stage fund — in line with such funds it has launched previously — while the other is its first so-called Opportunity Fund.



The $580 million marks the company’s largest raise in its ten-year history, according to Blockchain Capital executives Spencer Bogart, Bart Stephens and Jason Di Piazza.



Such funding coming during a bear market “reflects our investors&#8217; trust in our long-term perspective,” they said in a Monday blog post — adding that innovation often thrives during tough economic times.



“Despite the downturn in liquid pricing, we see a space that is teeming with exceptional innovators and founders, each aligned with the first principles of open source innovation, credible neutrality and censorship resistance,” Stephens told Blockworks.&nbsp;&nbsp;



The firm’s first Opportunity Fund was conceived as “a post-dislocation investment vehicle,” according to Blockchain Capital founder Bart Stephens. It was designed with a “high-conviction, concentrated mandate” to pursue financing opportunities at the later stage, he added.



Stephens told Blockworks that with the inflow of capital at the seed and pre-seed stage during the bull market in 2020 and 2021, valuations became distorted at the later stages.&nbsp;



“We felt generalists and newcomers misjudged the opportunity-set,” he added. “In contrast, today the fundraising environment for late stage crypto companies is barren, creating a unique and compelling opportunity for targeted capital that understands Web3 technology.”



Crypto private financing declined 75% in the first half of 2023 compared to the prior year period, according to <a href="https://architectpartners.com/q2-crypto-ma-and-financing-report/">data</a> from advisory firm Architect Partners. While the number of financings has remained fairly flat in recent quarters, the amount raised has dropped, particularly for later-stage rounds.



Blockchain Capital’s limited partners include “forward-thinking” university endowments, private foundations, financial institutions, sovereign wealth funds and US pension plans, such as the Teacher Retirement System of Texas.



Visa and PayPal are strategic investors of the firm, but have not finalized commitments for Blockchain Capital’s latest funds.



The company declined to comment further on specific investors.



<h2 class="wp-block-heading">Where the opportunities lie</h2>



Blockchain Capital has <a href="https://www.blockchaincapital.com/portfolio">invested</a> more capital into innovators over the past 20 months than at any time in its history, executives said in the Monday blog post.&nbsp;



During the span, it has focused on investments in infrastructure, gaming, DeFi and “consumer and social sectors.”&nbsp;



A key theme has been scalability, as reflected in the company’s investment into zero-knowledge proof tech pioneers Matter Labs and Risc Zero, Stephens told Blockworks.



Matter Labs’ zkSync Era — an EVM-compatible zk proof-based rollup with open-source code — <a href="https://blockworks.co/news/zksyncs-evm-era-opens-to-the-public">opened on mainnet to all users in March.</a>



Read more: <a href="https://blockworks.co/news/zk-embodies-integrity-privacy-magic">‘ZK embodies integrity, privacy and magic’: Matter Labs</a>



<a href="https://blockworks.co/news/risc-zero-zkevm">Risc Zero said last month</a> it would open-source its “Type 0” zkEVM, Zeth, in an effort to make zk infrastructure more accessible to developers.



Blockchain Capital is also exploring opportunities across consumer-focused segments as blockchains have the potential to democratize digital ownership and let individuals monetize online activities and contributions.&nbsp;



“Recent technical improvements are creating smoother onboarding and improved user experiences, creating potential tailwinds to adoption and opening different avenues for distribution,” Stephens said.&nbsp;



The company has also invested in Web3 social platforms and gaming during the bear market. From a research standpoint, it has focused on privacy, loyalty programs, security and the intersection of artificial intelligence and crypto.&nbsp;



“Though we maintain an open-minded approach, we are not yet fully convinced of their immediate viability due to existing challenges in technology, value accrual or market demand,” he said.



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Blockchain Capital raises $580M for two new funds

James Cirrone

Bart Stephens, the cofounder of Blockchain Capital, lost $6.3 million worth of crypto in an alleged SIM swap hack. 



Stephens filed a lawsuit against the anonymous team of hackers on Aug. 16, 2023. The identities of the perpetrators are not yet known, according to a court filing obtained by Blockworks. 



The hacks took place from May 12 to May 14 of this year, per the filing. The hackers impersonated Stephens’ brother, Brad, which allowed them to gain access to one of his accounts. They then bought a Nokia phone through Stephens’ account and carried out the SIM swap by resetting his passwords and passing two-factor authentication prompts.



The filing also revealed that the hackers messaged Stephens from his own account, telling him that they could “remotely hack anyone’s phone number in the mainland US.” They also offered Stephens a deadline to contact them via Whatsapp.



Finally, the hackers drained Stephens’ account on May 14, transferring approximately $6.3 million worth of bitcoin (<a href="https://blockworks.co/price/btc">BTC</a>), ether (<a href="https://blockworks.co/price/eth">ETH</a>), maker (<a href="https://blockworks.co/price/mkr">MKR)</a>, compound (<a href="https://blockworks.co/price/comp">COMP</a>), uniswap (<a href="https://blockworks.co/price/uni">UNI</a>) among other tokens to wallets under their control. 



The hackers also tried to jack 80 BTC and 6,500 ETH from Stephens’ custodial cold wallet, but this failed because an employee at Blockchain Capital received an email notification that alerted them to the withdrawal attempts.&nbsp;



This was when Stephens first became aware that his various accounts were being attacked.



The filing also showed evidence of the hackers funneling their ill-gotten gains through decentralized exchanges to make them harder to trace. Two such exchanges were mentioned in the filing, but they were redacted.    



Stephens is predictably seeking compensation for his lost assets and the time and money spent on investigating the hack. He is also demanding a jury trial, should the hackers be found.



The alleged exploit of Stephens’ crypto accounts is reminiscent of the mid-2017 hack of crypto investor Michael Terpin — though he lost quite a bit more.



<a href="https://blockworks.co/news/att-crypto-sim-swap-lawsuit">Terpin parted ways with $24 million in digital assets</a>, but instead of going after the attackers, he sued AT&amp;T, his cellular provider. The court found in favor of AT&amp;T before the case went to trial.



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Blockchain Capital founder allegedly loses crypto worth $6.3 million in SIM swap attack

Sam Reynolds

<div id="highlights-block_61a62d90ce079" class="highlights">
 <ul>
 <li>Hxro’s protocol allows market makers, traders, and other network participants to access what it calls “globally aggregated liquidity”</li>
 <li>$34 million strategic round follows $15 million HXRO token deal from earlier this year which had the backing of fund managers Alan Howard and Louis Bacon</li>
 </ul>
 
</div>



Hxro, a derivatives primitive built on the Solana blockchain, announced today that it had closed a $34 million strategic round led by Jump Crypto, Blockchain Capital and SIG DT Investments.



Financial primitives refers to protocols that allow for the use of liquidity, leverage, risk, and arbitrage in the broader crypto ecosystem. For DeFi protocols to function properly, they need to incorporate these four primitives in some way, which has led to interest from investors in maturing this underlying infrastructure.



Earlier this year <a href="https://cms.blockworks.co/pantera-capital-leads-15m-fundraise-in-dex-protocol-0x/" target="_blank" rel="noreferrer noopener">liquidity primitive 0x protocol raised $15 million</a> in a round led by Pantera Capital while <a href="https://finance.yahoo.com/news/defi-protocol-element-finance-raises-181119256.html" target="_blank" rel="noreferrer noopener">fixed rate protocol Element Finance</a> closed a $32 million round in October.&nbsp;



“Investors are beginning to understand the impact open source financial primitives [the software building blocks of DeFi] can have on the financial market,” Clay Robbins, head of growth at 0x, told Blockworks in an earlier interview.&nbsp;



In a release, Hxro explained that its protocol allows for market makers, traders, and other network participants to access “globally aggregated liquidity” while combining the risk, margining, clearing, and capital efficiencies of centralized derivatives on Solana.&nbsp;



“The notional size of incumbent derivatives markets is still many times that of what is available in DeFi. The mission of Hxro Network is to change that in a way where all market participants, no matter the size of their contribution and participation, can benefit,” Dan Gunsberg, Co-Founder of Hxro Network, said in a release.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“As a community, we are creating a very powerful foundation for decentralized derivatives to scale and become a significant part of the fabric of the global derivatives landscape.”</blockquote>



In a release, Hxro said it will utilize a unique staking protocol to facilitate network governance, liquidity incentives, and rewards. The network’s value will largely derive from transaction fees generated within the network



Hxro said that it plans on launching its v1 network on the Solana mainnet in December, with more development work occurring during the first quarter of next year.



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<hr class="wp-block-separator">

Solana-Powered Derivatives Primitive Hxro Closes $34 Million Round Backed by Jump Crypto, Blockchain Capital

Jacquelyn Melinek

<div id="highlights-block_60d20c186c948" class="highlights">
 <ul>
 <li>PayPal previously announced that it was launching international crypto offerings and that the company was “significantly investing” in its new crypto, blockchain and digital currencies business unit, CEO said </li>
 <li>Visa has also spent a fair amount of time investing in the digital asset space in recent months and years, and has said it would be working with Anchorage, a digital assets bank, as a settlement partner as well as Crypto.com as a payment gateway, Blockworks previously reported </li>
 </ul>
 
</div>



Blockchain Capital, a cryptocurrency venture capital firm, closed a $300 million fundraising round with investors including PayPal and Visa, the company announced on June 22.&nbsp;



The company’s fifth fundraising, also known as “Fund V,” was oversubscribed at its $300 million hard cap with investors from around the world, the company said. Some of the investors from Fund V, including PayPal and Visa, will participate in Blockchain Capital’s strategic partnership program.&nbsp;



Since its inception eight years ago, <a href="https://cms.blockworks.co/morgan-stanley-blockchain-capital-lead-48m-funding-for-securitize/" target="_blank" rel="noreferrer noopener">Blockchain Capital</a> has invested in more than 110 companies, protocols and crypto assets across the ecosystem. The portfolio includes such industry leaders as Coinbase, Kraken, Anchorage and OpenSea, as well as DeFi leaders Aave, Nexus Mutual and UMA. The company invests in both equity and crypto assets and is a multi-stage investor. 



The company was not available for additional immediate comments requested by Blockworks on June 22.&nbsp;



With the new funding, the company will continue to partner with industry professionals to help them grow their businesses and protocols, while focusing on investments in blockchain infrastructure, DeFi, NFTs and emerging applications of blockchain technology, it said.&nbsp;



&#8220;PayPal is committed to fostering an ecosystem of companies making digital currencies more accessible, useful and secure,&#8221; said Jose Fernandez da Ponte, vice president and general manager of blockchain, crypto and digital currencies at PayPal. &#8220;Investing in Blockchain Capital&#8217;s new fund allows us to engage with the entrepreneurs driving the future of the decentralized economy and the new wave of financial services.&#8221;



PayPal previously announced that it was launching international crypto offerings and that the company was “significantly investing” in its new crypto, blockchain and digital currencies business unit, CEO Dan Schulman said during the company’s fourth quarter earnings in February, Blockworks <a href="https://cms.blockworks.co/paypal-has-a-new-business-division-dedicated-to-crypto/" target="_blank" rel="noreferrer noopener">reported</a>. 



Separately, earlier this month <a href="https://cms.blockworks.co/paypal-alums-launch-decentralized-payment-network-that-connects-fiat-and-digital-currencies/" target="_blank" rel="noreferrer noopener">two former PayPal leaders</a> launched the first international payment network, Six Clovers, that uses regulated stablecoins to power global transfers between banks, merchants and payment providers. 



Similarly, Visa has also spent a fair amount of time investing in the digital asset space in recent months and years, and has said it would be working with <a href="https://www.anchorage.com/" target="_blank" rel="noreferrer noopener">Anchorage</a>, a digital assets bank, as a settlement partner as well as Crypto.com as a payment gateway, Blockworks previously <a href="https://cms.blockworks.co/visa-bets-big-on-digital-assets-integration-with-usdc-ethereum-support/" target="_blank" rel="noreferrer noopener">reported</a>. 



&#8220;We&#8217;re focused on enhancing all forms of money movement, whether on the Visa network, or beyond,&#8221; Vasant Prabhu, chief financial officer at Visa, Inc., said in a statement. &#8220;Through our relationship with Blockchain Capital, we are deepening our efforts to shape and support the role that digital currencies play in the future.&#8221;

Anchorage

PayPal, Visa Join $300M Round for Blockchain Capital

<div id="highlights-block_60d0edf77156c" class="highlights">
 <ul>
 <li>Securitize is adding Co-Head of Morgan Stanley Tactical Value Pedro Teixeira to its Board of Directors </li>
 <li>Participants in the investment round and existing investors will receive their shares in the form of security tokens, or digital asset securities, through Securitize’s platform</li>
 </ul>
 
</div>



Securitize, a digital assets securities firm, announced it has raised $48 million in a Series B fundraising round, co-led by Morgan Stanley and Blockchain Capital, the company said in a statement June 21.&nbsp;



The round marks the first time a blockchain technology company has received major institutional funding from <a href="https://cms.blockworks.co/?s=morgan+stanley" target="_blank" rel="noreferrer noopener">Morgan Stanley</a>, said Carlos Domingo, co-founder and CEO of Securitize, in a <a href="https://twitter.com/carlosdomingo/status/1406921691855458305" target="_blank" rel="noreferrer noopener">tweet</a>, “which is not only great for us but a great validation for the entire space that one of the largest US banks is placing this bet.”&nbsp;



Overall, it’s a good thing for everybody that large financial institutions are getting involved in crypto start ups like Securitize, and while they are the first investment in the space, hopefully they are not the last one, Domingo said to Blockworks.&nbsp;



In addition to Morgan Stanley&#8217;s funding, Securitize is adding Co-Head of Morgan Stanley Tactical Value Pedro Teixeira to its Board of Directors where Teixeira will join Domingo, Securitize co-founder and President Jamie Finn, SPiCE VC co-founder and Managing Partner Tal Elyashiv, and Blockchain Capital co-founder and Managing Partner Brad Stephens.



“We make long-term investments in businesses and asset classes that are ahead of the curve,” Teixeira said. “Our investment in Securitize is a sign that we believe in the growth and adoption of digital asset securities.”



The company was founded in 2017 and allows private companies to raise capital on its digital blockchain-based platform.&nbsp;



“Historically we’ve been viewed as a crypto and blockchain company because that’s the technology, but you’re going to see a shift to focusing less on technology and more on what we actually do,” said Evan Wagner, head of brand and communications at Securitize, in an interview with Blockworks. “Fundamentally, we help companies raise capital and we help investors participate in the private markets which have been closed off to them for the most part.” 



New <a href="https://www.securitize.io/about-us/investors" target="_blank" rel="noreferrer noopener">investors</a> include Ava Labs, IDC Ventures, Migration Capital, NTT Data and Sumitomo Mitsui Trust Bank and no valuation is currently being disclosed. The round also included existing investors including Blockchain Ventures, Borderless Capital, Global Brain, Mouro Capital, Ripio, Ripple and SPiCE VC.



The funding was oversubscribed for the Series B round as the initial target for funding was lower but demand was “quite high,” which resulted in the current funding, Wagner said.&nbsp;&nbsp;



Previously, Securitize raised over $2 million in a Series A round in October 2018, and more than $14 million in January 2020, Wagner said.



The company hopes to use the funds to continue expanding and scaling key existing areas for growth operations as well as launching Securitize Markets, which has no official release date, Wagner said.&nbsp;



Participants in the investment round and existing investors will receive their shares in the form of security tokens, or digital asset securities, through Securitize’s platform. The investors will join a group of over 300,000 verified investors and over 150 companies on the platform, according to the company.&nbsp;



“On the platform, you will be able to access a range of opportunities whether it’s crypto yield funds or startups or real estate developments, you&#8217;re going to see a broader universe of primary offerings as well as secondary offerings,” Wagner said. “Looking forward, that’s the evolution you&#8217;re going to see and as more people become comfortable with crypto, it&#8217;s going to become the means for providing services that is taken for granted in public markets.”&nbsp;

Blockchain Capital

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