Sequoia and Silver Lake fund crypto infrastructure start-ups

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The world’s biggest tech investors are pumping money into cryptocurrency infrastructure companies as the growing industry struggles to keep pace with new users.

Alchemy, which makes software for cryptocurrency developers, said on Tuesday its valuation had risen to $10.2 billion after receiving $200 million in funding led by private equity investor Silver Lake. and venture capital firm Lightspeed Venture Partners.

The announcement came a day after Polygon, an Indian company that offers software to reduce the cost and friction of trading on the popular Ethereum digital ledger, raised $450 million in a sale of the cryptocurrency tokens. currency of the company run by Sequoia Capital India.

The deals show how tech investors believe they can profit from companies that help developers build cryptocurrency apps and handle large trading volumes, one of the earliest challenges in the growing crypto industry that some call “Web3”.

Companies like Alchemy help power many popular cryptocurrency projects. Silver Lake, which manages over $90 billion in its funds, had never invested in a cryptocurrency-focused business before Alchemy.

“There are a lot of people working on the infrastructure for Web3,” said Nikil Viswanathan, co-founder of Alchemy. “There is a lot of space in the market.”

The deals followed a record $31.6 billion investment in private cryptocurrency companies last year, PitchBook data shows, helping to fuel a boom in digital assets that has sharply divided some software developers.

While investors have poured money into mainstream cryptocurrency applications in industries such as gaming, they have also paid high prices to win contracts in start-ups that want to facilitate the development and Web3 application maintenance.

Ethereum’s current transaction processing limits and long delays in its efforts to revamp its system have driven up fees – known as “gas prices” in crypto industry parlance – giving a boost to rival blockchains with faster networks and lower costs.

Solana Labs, which has developed one of the most popular alternatives, raised more than $300 million from Silicon Valley venture capital firm Andreessen Horowitz and other investors in June last year. Near Protocol raised $150 million last month to help develop another contender.

More than 40 other investors participated in Polygon’s funding, including Tiger Global Management and SoftBank’s second Vision Fund.

Sandeep Nailwal, co-founder of Polygon, said the money would be used to invest in new groups he had acquired. Polygon paid $400 million in December to buy Mir Protocol, a startup that is also trying to improve Ethereum’s performance.

“We really want to be the AWS of Web3,” Nailwal said, referring to Amazon’s cloud computing division.

Alchemy made its first product a year and a half ago and claims to make the most widely used software for cryptocurrency applications, such as OpenSea, to communicate with Ethereum and several other blockchains.

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The company said $105 billion in deals went through Alchemy software on an annualized basis, up from $45 billion in October, when investors valued the startup at $3.5 billion.

Polygon said that 2.7 million monthly active users perform 3 million transactions per day on Polygon, more than double the volume on Ethereum. The company’s token, MATIC, has a market capitalization of over $14 billion based on current circulating supply.

The emergence of infrastructure start-ups has raised concerns that new intermediaries will amass enough traffic to become gatekeepers to the so-called decentralized cryptocurrency world, much like the tech giants. technology today have come to dominate the web.

Nailwal said Polygon would not be able to wield such influence because its network would be primarily run by a “community” of independent developers.

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