EMERGING TECH RESEARCH

Crypto Report
VC trends and emerging opportunities

Q1
2023
Contents
Vertical overview 3 Institutional Research Group
Analysis
Q1 2023 timeline 5
Robert Le Senior Analyst, Emerging Technology
Crypto landscape 6
[email protected]

Crypto VC ecosystem market map 7 [email protected]

VC activity 9 Data

Matthew Nacionales, Data Analyst

Emerging opportunities 18

Zero-knowledge proofs 19 Publishing

Web3 identity 22 Report designed by Jenna O’Malley and Drew Sanders

Select company highlights 25 Published on May 11, 2023

Intmax 26

Obol 27

Q1 2023 Crypto Report CONFIDENTIAL. NOT FOR REDISTRIBUTION. PG 2

Vertical overview
The crypto market has grown rapidly over the past decade, attracting a large number of users,
institutional investors, and billions of dollars in investment. Crypto’s use cases and underlying Crypto VC deal activity by quarter
blockchain technology have evolved beyond just the storage and transfer of value to include
collateralized borrowing, automated market making, and the tokenization of off-chain assets.
$12 1,000
Many believe that blockchain technology has the potential to transform industries such as finance,
media, and transportation. For example, crypto payments can significantly lower fees for retail 900
$10
payments, thus saving money for merchants and their customers by tying transaction fees to 800
market demand rather than central authorities that periodically raise interchange rates.1 This could
700
one day threaten card networks Visa, MasterCard, and American Express, which have enjoyed $8
decades of dominance in facilitating card-based payments while imposing take rates of 2% to 3%. 600

$6 500
While use cases are expanding, the practical benefits of crypto remain uncertain as many projects
and companies are still in the experimental phase. The collapse of several crypto companies in 400

2022 serves as a reminder that significant challenges still exist. Mainstream adoption of crypto is $4
300
unlikely to occur until better regulations and guidelines are in place. The lack of clear regulation
200
is a major concern for the industry and is seen as a limiting factor. Governmental regulators, $2
particularly in the US, tend to be reactive rather than proactive. However, Europe is ahead. The 100
EU’s Markets in Crypto-Assets (MiCA) proposal is one of the most comprehensive pieces of crypto
$0 0
regulation currently being considered. However, it is not expected to take effect until at least
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
mid-2024. We believe that 2023 could represent a policy inflection point for the industry, and we
2018 2019 2020 2021 2022 2023*
expect financial regulators and central banks around the world to increase their focus on crypto
Deal value ($B) Deal count
assets and accelerate their work in writing new rules that help prevent an FTX-type collapse in
the future.
Source: PitchBook • Geography: Global • *As of March 31, 2023

1: “Visa, Mastercard Prepare to Raise Credit-Card Fees,” Wall Street Journal, AnnaMaria Andriotis, March 8, 2022.

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VERTICAL OVERVIEW

Despite recent challenges, we believe that crypto and Web3 will continue to grow and evolve. The
ecosystem has seen significant progress in recent years, including decentralized finance (DeFi)
protocols facilitating trillions of dollars in transactions, stablecoins tokenizing hundreds of billions
in fiat currency, and blockchains scaling to speeds faster and cheaper than traditional payment
rails. Yet the crypto industry is still in its early stages, and there is a lot of room for growth and
innovation. Overall, the crypto market is not without risks and challenges, but with greater focus
on safety, security, and valuable use cases, along with prudent legislation, it has the potential to
bring significant benefits to consumers, businesses, and other institutions.

Q1 2023 Crypto Report CONFIDENTIAL. NOT FOR REDISTRIBUTION. PG 4

 Q1 2023 timeline Q1 VC deal count summary

353
total deals
January 2 February 9 March 22
Binance returns to the South Korean market Crypto exchange Kraken settles with the Coinbase receives a “Wells Notice” from -12.2%
after acquiring a majority stake in local Securities and Exchange Commission (SEC) the SEC, indicating that the regulator plans QoQ growth
VC exit

VC exit

News
crypto exchange GOPAX. The acquisition over its crypto staking services, which to recommend an enforcement action
will help GOPAX resume withdrawals and
interest payments after it suspended these
the regulator alleged were unregistered
securities. The company must also pay a
over some of the exchange’s products. The
company pledges to let the courts decide on
-64.4%
services due to an issue with Genesis.
YoY growth
$30 million fine and unstake assets from US any outcome.
GOPAX has over 600,000 users. investors. Non-US investors are unaffected.
-64.4%
YTD growth
Jan 1

Feb 1

Mar 1

Mar 31
Q1 VC deal value summary

January 4 March 7 March 27

Coinbase is fined $50 million by the New A US bankruptcy court approved the sale of The Commodity Futures Trading
$2.6B
Voyager to Binance.US in an approximately
total deal value
York State Department of Financial Services Commission sues Binance and its founder,
News

News

News
and ordered to invest $50 million more $1 billion deal. The SEC and Department Changpeng Zhao, alleging that Binance
in its compliance program for having of Justice opposed the deal. Binance.US offered unregistered crypto derivatives -11.0%
an inadequate know-your-customer subsequently cancelled the deal. products, violated laws, poorly supervised QoQ growth
(KYC) program. its business, and failed to implement anti-
money-laundering processes.
-78.0%
YoY growth

-78.0%
YTD growth

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 5

Crypto 3

landscape 2

1 Blockchain networks

4
2 Infrastructure & developer tools

3 Access

4 Web3

5 DeFi

Q1 2023 Crypto Report

Crypto VC ecosystem market map
Market map is a representative overview of venture-backed or growth-stage providers in each segment.
Click to view the interactive market map on the PitchBook Platform.
Companies listed have received venture capital or other notable private investments.

Blockchain networks Infrastructure & developer tools Access

Bridges & interoperability Crypto corp management & finance Institutional services Asset management & taxes

Layer 1 Data storage & accessibility Security & compliance Exchanges, wallets & crypto financial services

Layer 2 & scalability Development platforms Onboarding & payments

Research & data tools

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Crypto VC ecosystem market map
Market map is a representative overview of venture-backed or growth-stage providers in each segment.
Click to view the interactive market map on the PitchBook Platform.
Companies listed have received venture capital or other notable private investments.

Web3 DeFi

Content & social Hardware Asset tokenization

Decentralized communities Metaverse & gaming Insurance

Enablement platforms & marketplaces NFT platforms & collectibles Lending, borrowing & yield generation

Trading, derivatives & liquidity

Q1 2023 Crypto Report CONFIDENTIAL. NOT FOR REDISTRIBUTION. PG 8

VC activity Crypto VC deal activity

In Q1 2023, crypto companies raised $2.6 billion in venture capital globally across 353 investment 2,786
2,570
rounds, representing an 11.0% decrease in QoQ deal value and a 12.2% decrease in the number
of deals. This was the lowest amount of capital invested and deals completed since Q4 2020,
1,184 930
representing the fourth consecutive quarter of declining investment activity. Although we 474 941
353
$2.2
forecasted that the decline will continue in our 2023 Industry and Technology Outlook, there were $2.7 $3.5 $2.6
$5.3 $25.1 $28.2
a few notable bright spots in Q1 2023.
2017 2018 2019 2020 2021 2022 2023*

Layer-2 (L2) scaling solutions continue to attract investments, continuing momentum from 2022. Deal value ($B) Deal count

Bitcoin scaling platform Blockstream raised a $125.0 million convertible note and debt round, and
it will use the funds to build out bitcoin mining infrastructure. The company previously raised Source: PitchBook • Geography: Global • *As of March 31, 2023

a $163.1 million Series B in August 2022. Scroll, which is building a zero-knowledge Ethereum
Virtual Machine (zkEVM) scaling solution, raised a $50.0 million late-stage VC round in Q1. Crypto
custodial services also received significant investments, including a sizable round for Ledger,
Crypto VC exit activity
which raised a $493.0 million Series C, and Taurus, which drew a $65.0 million Series B.

72 74

35 37

11 23 14
$0.2
$1.0 $0.3 $0.2 $87.6 $1.5 $0.0

2017 2018 2019 2020 2021 2022 2023*

Exit value ($B) Exit count

Source: PitchBook • Geography: Global • *As of March 31, 2023

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VC ACTIVITY
Crypto VC deal activity by segment in Q1 2023*

Valuation trends in 2023 are mixed so far, with seed rounds up 33.3% and late-stage 18
17
rounds up 209.2% for the quarter compared with full-year 2022, while early-stage 13 13

rounds are down 16.7%. Seed, early-stage, and late-stage pre-money valuations for the 9

quarter stood at $20.0 million, $50.0 million, and $390.0 million, respectively. We believe
$224.2
late-stage valuations are being skewed upwards, as we suspect that only outsized, up- $956.5 $325.7 $39.6 $289.3

rounds are being disclosed and down-rounds are being kept private. Additionally, Q1 Access Blockchain networks DeFi Infrastructure & Web3
2023’s sample size is small and represents only a single quarter of data. We expect rising developer tools

seed and late-stage valuations to reverse throughout the year. Deal value ($M) Deal count

Venture exits continue to remain muted so far in 2023 just as they were throughout Source: PitchBook • Geography: Global • *As of March 31, 2023

all of 2022. However, there was one notable exit—the acquisition of crypto payment
streaming platform Streami by Binance—through a majority stake of Streami’s GOPAX
exchange. The startup last raised a $33.7 million Series B at a $292.0 million valuation.
TTM crypto VC deal activity by segment*
We expect incumbent exchanges like Binance and Coinbase to become active acquirers
in 2023, particularly targeting smaller competitors like crypto exchanges, custodians, or
peripheral businesses like financial technology (fintech) stock brokerages. 203

149 159

72 72

$755.6
$5,138.9 $3,005.5 $3,960.9 $3,304.5

Access Blockchain networks DeFi Infrastructure & Web3

developer tools

Deal value ($M) Deal count

Source: PitchBook • Geography: Global • *As of March 31, 2023

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VC ACTIVITY

Median crypto VC deal value ($M) by stage Median crypto VC pre-money valuation ($M) by stage

$390.0 $187.5
$400 $200

$300 $150
$126.1 $111.0
$200 $60.0 $100
$15.0 $50.0 $12.4 $5.2
$100 $20.0 $50 $5.6 $5.0
$2.6 $2.8
$0 $0
2017 2018 2019 2020 2021 2022 2023* 2017 2018 2019 2020 2021 2022 2023*
Angel and seed Early-stage VC Late-stage VC Angel and seed Early-stage VC Late-stage VC Venture growth

Source: PitchBook • Geography: Global • *As of March 31, 2023 Source: PitchBook • Geography: Global • *As of March 31, 2023

Crypto VC exit value ($M) by type Crypto VC exit count by type

$100 Buyout 80 Buyout

Acquisition Acquisition
$80
60
Public listing Public listing
$60
40
$40

20
$20

$0 0
2017 2018 2019 2020 2021 2022 2023* 2017 2018 2019 2020 2021 2022 2023*

Source: PitchBook • Geography: Global • *As of March 31, 2023 Source: PitchBook • Geography: Global • *As of March 31, 2023

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VC ACTIVITY

Key crypto angel and seed VC deals*

Post-money
Company Close date (2023) Segment Category Deal value ($M) Lead investor(s)
valuation ($M)

Futurism Labs March 12 Access Research and data tools $38.4 N/A N/A

Plai Labs January 20 Web3 Metaverse and gaming $32.0 N/A Andreessen Horowitz

Azra Games February 21 Web3 Metaverse and gaming $25.0 N/A Andreessen Horowitz

Infrastructure and
Chaos Labs February 21 Security and compliance $20.0 N/A Galaxy Digital Holdings, PayPal Ventures
developer tools

REALLY February 28 Web3 Hardware $18.0 $108.0 Mike Maples, Polychain Capital

Infrastructure and
Ulvetanna January 19 Data storage and accessibility $15.0 $55.0 Bain Capital, Paradigm (Crypto Fund), WEB3 Venture Capital
developer tools
6th Man Ventures, Lobby Capital, Relay Ventures, Scribble
The Easy Company January 10 Web3 Content and social $14.2 N/A
Ventures, Tapestry (US), Upside Partnership
Infrastructure and
Brale February 23 Crypto corp management and finance $11.1 $41.1 New Enterprise Associates
developer tools

DigiFT February 28 DeFi Trading, derivatives, and liquidity $10.5 N/A Shanda Group

Exchanges, wallets, and crypto

BlockBank February 22 Access $10.0 $56.7 N/A
financial services
Source: PitchBook • Geography: Global • *As of March 31, 2023

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VC ACTIVITY

Key crypto early-stage VC deals*

Post-money
Company Close date (2023) Segment Category Deal value ($M) Lead investor(s)
valuation ($M)

Infrastructure and
EigenLayer February 17 Security and compliance $71.1 N/A Blockchain Capital, Ethereal Ventures, Polychain Capital
developer tools

Celestia March 15 Blockchain networks Layer 1 $52.3 $1,000.0 Polychain Capital

Circularr January 30 Web3 Hardware $50.0 N/A N/A

tomi March 21 Blockchain networks Layer 2 and scalability $40.0 N/A DWF Labs

Candy January 3 Web3 NFT platforms and collectibles $38.4 N/A Consensys Mesh, Galaxy Digital Holdings

Magic Eden February 3 Web3 NFT platforms and collectibles $27.6 N/A N/A

Exchanges, wallets, and crypto Cameron Winklevoss, Craft Ventures, Franklin Templeton, JetBlue
Kresus March 7 Access $25.0 $100.0
financial services Ventures, Liberty City Ventures, Marc Benioff, Tyler Winklevoss
Exchanges, wallets, and crypto
CoinFLEX February 4 Access $25.0 N/A N/A
financial services

DisruptDEX February 1 DeFi Trading, derivatives, and liquidity $20.0 N/A N/A

Infrastructure and Crypto corp management

Toku March 8 $20.0 N/A Blockchain Capital
developer tools and finance
Source: PitchBook • Geography: Global • *As of March 31, 2023

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VC ACTIVITY

Key crypto late-stage VC deals*

Company Close date (2023) Segment Category Deal value ($M) Post-money valuation ($M) Lead investor(s)

Ledger March 30 Access Exchanges, wallets, and crypto financial services $493.0 N/A 10T Holdings

Taurus February 14 Infrastructure and developer tools Institutional services $65.0 N/A Credit Suisse

Salt Lending February 7 Access Exchanges, wallets, and crypto financial services $64.4 $164.4 N/A

QuickNode January 24 Infrastructure and developer tools Development platforms $60.0 $800.0 10T Holdings

Scroll March 6 Blockchain networks Layer 2 and scalability $50.0 $1,800.0 N/A

Matrixport January 1 Access Exchanges, wallets, and crypto financial services $38.0 $1,538.0 N/A

Coincover February 9 Infrastructure and developer tools Security and compliance $30.0 N/A Foundation Capital

Beldex February 23 Blockchain networks Layer 1 $25.0 N/A DWF Labs

Radix March 23 Blockchain networks Layer 1 $10.0 $400.0 DWF Labs

Quasar Finance January 12 DeFi Trading, derivatives, and liquidity $5.4 $70.0 Shima Capital

Source: PitchBook • Geography: Global • *As of March 31, 2023

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VC ACTIVITY

Key crypto VC exits*

Post-money
Company Close date (2023) Segment(s) Exit value ($M) Exit type Acquirer(s)/index
valuation ($M)

Ignium February 14 Infrastructure and developer tools $4.3 M&A Coinmetro $4.3

DMarket January 25 Web3 N/A M&A Mythical Games N/A

Streami January 2 Access N/A M&A Binance N/A

Hal February 21 Infrastructure and developer tools N/A M&A ConsenSys N/A

Mint Songs February 16 Web3 N/A M&A Napster N/A

Trofi Group January 26 Access N/A M&A Yield N/A

Tactic January 17 Access N/A M&A TaxBit N/A

Forkast January 16 Access N/A M&A Forkast Labs N/A

Tap January 10 Access N/A Reverse merger Quetzal Capital N/A

cocoNFT January 3 Web3 N/A M&A Metaverse Property N/A

Source: PitchBook • Geography: Global • *As of March 31, 2023

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VC ACTIVITY

Top strategic acquirers of crypto companies since 2017* Top VC investors in crypto companies since 2017*

Deal Angel Early-stage Late-stage Venture

Company Deal count Investor type Company Investor type
count and seed VC VC growth

Coinbase
Binance 4 VC-backed company 343 129 189 22 3 Corporate VC
Ventures

Riot Blockchain 3 Corporation NGC Ventures 249 94 146 9 0 VC

Kraken 3 VC-backed company AU21 Capital 247 103 137 7 0 VC

Digital
Yearn.Finance 3 VC-backed company 237 103 109 20 5 Corporate VC
Currency Group

Cypher Metaverse 3 Corporation Shima Capital 216 100 108 8 0 VC

CryptoBlox Technologies 2 Corporation Pantera Capital 199 61 111 24 3 VC

Ripio 2 VC-backed company LD Capital 194 81 105 8 0 VC

Fenbushi
SmartMedia Technologies 2 VC-backed company 176 52 107 15 2 VC
Capital
Andreessen
Avast Software 2 Corporation 165 35 107 20 3 VC
Horowitz

Blockchain.com 2 VC-backed company Moonwhale 158 56 80 19 3 VC

Source: PitchBook • Geography: Global • *As of March 31, 2023 Source: PitchBook • Geography: Global • *As of March 31, 2023

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VC ACTIVITY

Top VC-backed crypto companies by total VC raised to date*

Company VC raised to date ($M) Segment Category HQ location

eToro $1,671.4 Access Exchanges, wallets, and crypto financial services London, UK

Fireblocks $1,227.9 Infrastructure & developer tools Institutional services New York, US

Circle $1,114.0 Infrastructure & developer tools Institutional services Boston, US

Blockchain.com $1,056.5 Access Exchanges, wallets, and crypto financial services London, UK

Forte $952.0 Infrastructure & developer tools Development platforms San Francisco, US

Improbable $864.5 Web3 Metaverse and gaming London, UK

Sorare $738.0 Web3 NFT platforms and collectibles Saint-Mandé, France

ConsenSys $733.0 Infrastructure & developer tools Development platforms New York, US

Dapper Labs $643.6 Web3 NFT platforms and collectibles Vancouver, Canada

Amber Group $630.2 Access Exchanges, wallets, and crypto financial services Singapore

Source: PitchBook • Geography: Global • *As of March 31, 2023

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Emerging opportunities
Zero-knowledge proofs Web3 identity

Strong use cases for ZKPs include scaling Primitive for enabling more secure, private,
blockchains and preserving privacy. and innovative online ecosystems.
Zero-knowledge proofs
Zero-knowledge proofs (ZKPs) are cryptographic methods that enable someone (the prover) ZKPs were first incorporated within layer-1 (L1) blockchains to enhance privacy, for uses such as
to prove something is true to another party (the verifier) without revealing its information. For confidential transactions or encrypted communication. An early adopter of ZKPs was Zcash, a
example, a person can prove that they are of age to buy alcohol without revealing their birthday, privacy-focused L1 protocol based on bitcoin’s codebase. Developed starting in 2013 and launched
or somone can prove that they have sufficient bank balances without revealing details like exact in 2016, Zcash uses a form of ZKP known as zk-SNARKs to shield transaction information such as
balances, account number, or transaction history. ZKPs use computationally intensive calculations sender, receiver, and amount.2 Unlike Bitcoin, Zcash is able to offer private transactions, while
to process the following steps: still maintaining a public, decentralized blockchain, like bitcoin. Zcash offers users the ability to
choose between transparent or private transactions, enabling greater flexibility than bitcoin and
1. The prover generates a proof that demonstrates the possession of specific knowledge, or that a wider range of use cases. One of the drawbacks of Zcash is that since it is based on the bitcoin
a statement is true, without revealing any actual information about the knowledge or statement. protocol, it relies on bitcoin’s energy-intensive proof-of-work consensus mechanism. Another
2. The verifier checks the proof to ensure it is valid. method, Mina Protocol, is a ZKP proof-of-stake L1 that uses zk-SNARKs to compress its entire
3. If the proof is valid, the verifier accepts the claim contained within the proof without gaining blockchain to a constant size of around 22 KB, substantially smaller than the sizes of bitcoin (475
any additional knowledge about the underlying data or statement. GB) and Ethereum (614 GB), 3, 4 which continue to grow over time. Blockchain data on Mina is
compressed into a single zk-SNARK proof, which serves as a cryptographic representation of the
ZKPs have been researched and developed in academia for decades for privacy and security entire blockchain’s state. As more transactions and subsequent blocks are added to the chain,
applications across multiple sectors including financial services, healthcare, and government. new zk-SNARK proofs are combined with previous proofs to create the single new proof at each
Yet the recent adoption of crypto and blockchain technologies has driven strong, new use cases new block. Mina’s highly compressed blockchain can be scaled more efficiently due to its reduced
for ZKPs, leading to significant strides in ZKP innovation and funding over the past few years. The storage and bandwidth requirements for each node, making it easier for users to run full nodes
transparency, decentralization, and security of public blockchains like Ethereum are beneficial for and participate in the network.
establishing trust, accountability, and auditability of transactions. However, these characteristics
also limit Ethereum’s use cases to only those like messaging and payments due to the lack of
privacy, speed, and scalability. ZKPs can be used to address some of these challenges, such as
enabling confidential transactions that preserve the privacy of transaction details while still ensuring
the transaction’s validity. The technology can also be used in L2 scaling solutions such as zero-
2: Zero-Knowledge Succinct Non-Interactive Argument of Knowledge (zk-SNARKs) are ZKPs that are small in size (succinct), allowing for quick verification.
knowledge rollups (zk-rollups) to considerably increase transaction throughput and reduce on-chain
They do not require the prover and verifier to interact directly, leading to simplified communication and higher scalability.
computational load. For more details on L2 scaling, see our Q3 2022 Crypto Launch Report. 3: “Bitcoin,” Blockchair, n.d., accessed April 19, 2023.
4: “Ethereum,” Blockchair, n.d., accessed April 19, 2023.

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ZERO-KNOWLEDGE PROOF

Although ZKP L1 blockchains offer new base layer alternatives with native privacy and scalability Each of these zkEVM companies take different approaches to the architectural design of using
features, the use of ZKPs has been become increasingly popular in L2s over the past couple ZKPs to achieve EVM compatibility. For example, Scroll uses a hierarchical ZKP system with two
of years, particularly around scaling solutions for Ethereum. Known as zk-rollups, some early separate layers, each using distinct ZKP systems to balance the flexibility and efficiency of the
iterations of these solutions like Starknet and zkSync Lite (also called zkSync 1.0) were not solution. zkSync Era, on the other hand, uses a single ZKP system.
Ethereum Virtual Machine (EVM) compatible, meaning they did not offer seamless interaction
with the Ethereum network, its smart contracts, and its tokens. Most zk-rollups today are based on We note that the primary objective of zkEVMs today is to scale the Ethereum blockchain and not
zkEVMs, a technology that enables scaling solutions to be fully compatible with Ethereum. There to enable privacy. We believe that it will be technically challenging to build a solution that will both
has been an explosion in zkEVM development over the past quarter: scale Ethereum and provide for private transactions due to the fact that Ethereum smart contracts
are inherently public. Aztec Network, a private scaling solution for Ethereum, shut down its Aztec
• zkSync Era (also called zkSync 2.0) launched its mainnet on March 24, 2023. Connect blockchain in Q1 2023, stating that it was difficult to scale. 5 The company is now focusing
• Polygon zkEVM launched its beta mainnet on March 27, 2023. on Noir, a zero-knowledge programming language. Still, we view ZKPs as a valuable technology
• Scroll launched its first testnet on February 27, 2023. that will enable a wide range of applications and improvements in the crypto space, including
• Taiko launched a second version of its testnet on March 22, 2023. scalability and privacy in the near term and cross-chain communication, secure multi-party
• ConsenSys launched its first zkEVM testnet, Linea, on March 28, 2023. computation, and decentralized storage in the long term.

5: “Regulatory Pressure Did Not Shut Down Privacy Tool, Aztec Founders Say”, CoinDesk, Anna Baydakova, March 24, 2023

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ZERO-KNOWLEDGE PROOF

Select VC-backed ZKP crypto startups*

Company Segment HQ location Year founded Total raised ($M)

Polygon Layer 2 Grand Cayman, Cayman Islands 2017 $451.0

Blockstream Layer 2 Montreal, Canada 2014 $265.4

StarkWare Layer 2 Netanya, Israel 2017 $261.5

Matter Labs Layer 2 George Town, Cayman Islands 2018 $258.0

Aleo Layer 1 Reno, Nevada 2019 $228.0

Aztec ZKP infrastructure Winchester, UK 2017 $125.3

O(1) Labs Layer 1 San Francisco, California 2017 $121.4

Scroll Layer 2 Victoria, Seychelles 2013 $83.0

=nil; Foundation ZKP infrastructure Limassol, Cyprus 2018 $22.0

RISC Zero Layer 2 Seattle, Washington 2021 $14.0

Source: PitchBook • Geography: Global • *As of March 31, 2023

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ZERO-KNOWLEDGE PROOF

Select VC-backed ZKP crypto startups* continued

Company Segment HQ location Year founded Total raised ($M)

Dusk Network Layer 1 Amsterdam, Netherlands 2018 $9.9

Manta Network Layer 1 Boston, Massachusetts 2020 $6.6

Elusiv ZKP infrastructure Munich, Germany 2022 $3.5

Electric Coin Company Layer 1 Denver, Colorado 2015 $3.3

Hyper Oracle ZKP infrastructure Sunnyvale, California 2022 $3.0

Anoma Layer 1 Zug, Switzerland 2020 N/A

Suterusu Layer 2 Singapore, Singapore 2019 N/A

Source: PitchBook • Geography: Global • *As of March 31, 2023

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Web3 identity
The first two generations of the internet, colloquially known as Web 1.0 and Web 2.0, were Startups in this space are innovating and developing Web3 identity across a few core areas:
developed without native user identity and characterized by a fragmented approach to digital data infrastructure, authentication, and social profiles. Lit Protocol is a blockchain-agnostic
identity management, such as email services, social media platforms, and e-commerce websites, infrastructure that decentralizes public key cryptography, enabling developers to incorporate
particularly in Web 2.0. The primary reliance on the username-password model has many access control and programmatic signing for Web3 applications. Lit works by enabling users
disadvantages, including vulnerability to data breaches, insecure username-password models, to encrypt data client-side and set rules for decryption based on on-chain conditions. It also
and limited user control over personal data. Centralized systems can also infringe on privacy enables the storage of private data on the open web, facilitating interoperability and portability
by tracking online activities and sharing information with third parties, leading to unwanted between users, applications, and ecosystems. Lit has various use cases across Web3, like access
marketing or identity theft. Furthermore, Web 2.0 creates a fragmented user experience with to exclusive content within a Web3 platform (for example, only a list of specific wallets can read a
multiple accounts and credentials, while also enabling censorship and data manipulation. Online blog post) or automating DeFi transactions. Lit also has native support for Web 2.0 authentication
businesses and entities that require the identification of individuals are also subjected to costly including for Passkey, Google, and OAuth 2.0.
identity authentication tasks and inefficient verification processes that are time consuming.
The most activity is in the authentication space, which enables users to securely verify access
We believe that Web3 will eliminate the need for passwords and traditional authentication, and interact with decentralized applications (dApps) on blockchains. These tools provide a secure
with Web3 identity simplifying the login procedures through single sign-ons (SSO) that use self- way for users to manage their identities, sign transactions, and access decentralized services.
custodial wallets. Web3 identity can deliver numerous advantages to users by putting them These authentication technologies are typically integrated into Web3 wallets like MetaMask and
in control of their identity data and enabling them to better manage their information. This Argent. Startups that are building Web3 authentication platforms include Web3Auth, Fractal, Privy,
decentralized method reduces data breach risks and enhances privacy and security through SlashAuth, and Arcana.
cryptographic techniques like ZKPs. Further, the ability to put identity on-chain will be crucial for
enabling unique identities in decentralized autonomous organizations (DAOs) and other online
communities and services, as well as for facilitating single-person voting for governance of these
spaces. Additionally, by shifting identity to the blockchain, hiring teams can rely on verification
rather than trust, streamlining the recruitment process.

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WEB3 IDENTITY

Web3 social profiles are digital identities that provide users with self-sovereign, secure, and We believe one of the next areas of innovation for Web3 identity will be around nontransferable
privacy-preserving identities across various platforms and applications. Unlike traditional Web NFTs, also known as Soulbound Tokens (SBTs), for representing an individual’s or entity’s identity
2.0 profiles, Web3 social profiles give users more control over their data and privacy. Key features on the blockchain. SBTs can also grant users access to exclusive content, serve as a reputation
include self-sovereign identity, decentralized storage, cross-platform interoperability, token- system, enable personalized experiences, and provide cross-platform interoperability. These
based interactions, and enhanced privacy and data control. Web3 social profiles are expected tokens differ from other Web3 identity solutions due to their nontransferrable nature, NFT-based
to significantly influence the future of online interactions, communication, and content creation, representation, and flexibility for customization. Soulbound Token startups that have recently
emphasizing decentralization, user empowerment, and privacy. Lens Protocol is a Web3 social emerged include Quadrata, Otterspace, Masa Finance, and Ormi Labs.
graph on the Polygon blockchain that enables creators to own connections within their community
through a decentralized social graph. It offers data ownership and an open social graph for any
application, unlike traditional Web 2.0 networks. Key components include profile creation and
publishing using profile NFTs, tokenization of content, and modularity to integrate Lens profiles
into other Web3 applications.

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Select company highlights
SELECT COMPANY HIGHLIGHTS: INTMAX

Founded Total raised: Last financing valuation: Lead investors:

2021 N/A N/A N/A

Location
Switzerland

Overview Leadership
Intmax is a stateless zk-rollup designed to improve the scalability of the Ethereum ecosystem Intmax was cofounded by CEO Leona Hioki and Mai Fujimoto. Hioki has contributed to
while claiming to offer customizable privacy options that traditional zk-rollups cannot provide. authentication systems that use NFTs and to the development of various decentralized
Intmax is designed to improve the scalability, efficiency, and accessibility of the Ethereum protocols. Fujimoto serves as an advisor at Web3 crypto fund Emoote and as a blockchain game
ecosystem by working alongside other L2 solutions and integrating with them as a Layer-3 developer and investor for Animoca Brands. Fujimoto previously founded a bitcoin donation
solution. Its primary focus is on facilitating payments and token transfers, while also aiming to platform, KIZUNA.
support more generalized web applications and the expansion of property rights in the future.
Intmax aims to serve as a scalable and global payment/token transfer system within the Ethereum Financing history
ecosystem. Intmax inherits user account states from Ethereum and can utilize states from other
L2 solutions for conditional transfers and minting processes, making it stateless and safe. The Intmax has not raised any funding as of March 31, 2023. However, the company raised a $4.9
system processes transactions through parallelized nodes, allowing for over 10,000 transactions million early-stage VC round in April 2023, data that is not included in the scope of this report. The
per second and significantly reduced gas costs, a type of fee on the Ethereum blockchain. The round’s investors include Hashkey Capital, East Ventures, and L2 Scroll, among others.
Intmax algorithm introduces an online communication protocol to zk-rollup, which removes
data availability costs on the L1. It also enables true interoperability by partnering with Scroll for
deploying Solidity smart contracts and integrating with other L2 solutions like Starknet and zkSync.

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SELECT COMPANY HIGHLIGHTS: OBOL

Founded Total raised: Last financing valuation: Lead investors:

2021 $6.2M $23.2M Ethereal Ventures

Location Last financing:

New York, NY $6.2M in a series A deal

Overview validator among multiple nodes. These nodes operate together while requiring multiple signatures
to command a validator, thereby lowering the risk of attack, total network control, or a single-point
Obol is a researcher and developer of proof-of-stake (PoS) infrastructure on public blockchain of failure through a sole validator. DVT allows validation to be orchestrated together with multiple
networks. PoS blockchains can be vulnerable to “33% attacks” should any validator control nodes versus standalone validator nodes.
enough staked tokens, usually around 33%, and this can lead to the token controller knowingly or
unknowingly attacking the network. Becuase of the recent Ethereum Merge, Ethereum, the largest With the staking provider ecosystem continuing to grow, Obol’s technology will benefit staking
smart contracts blockchain, is now potentially exposed to validator concentration risk. Obol pools, liquid staking protocols (LSPs), exchanges, and institutional providers, as well as individual,
currently focuses on decentralizing Ethereum’s validator ecosystem through the development at-home validators. DVT has the potential to increase performance and availability—thus elevating
of Distributed Validator Technology (DVT).6 DVT is a method of distributing the resources of a staking rewards—while lowering risks such as centralization, security, and slashing.7

7: Slashing involves penalty mechanisms coded into PoS blockchains that remove part of the stakes of a validator for misbehavior like signing two blocks
6: DVT was earlier known as Secret Shared Validators (SSV). at once or being offline.

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SELECT COMPANY HIGHLIGHTS: OBOL

Leadership Financing history

The company is led by CEO and Co-founder Collin Myers, CTO and Co-founder Oisín Kyne, and Obol raised a $6.2 million Series A in October 2021 in a deal led by Ethereal Ventures, placing the
Head of Product, Chris Battenfield. Myers was previously in DeFi product strategy at ConsenSys company’s post-money valuation at $23.2 million. Coinbase Ventures, Archetype, Figment Capital,
and head of business development at Token Foundry. Kyne also previously worked at ConsenSys and other investors participated in the round. The company recently raised a $12.5 million Series
as a full-stack developer, and prior to that, at Accenture as a consultant. Battenfield came to Obol A1 led by Archetype and Pantera Capital in January 2023; this data will be included in the Q2 2023
first as an advisor before leading its product full time in June 2022. Battenfield previously held edition of this report.
engineering roles at multiple crypto and Web3 companies, including Keep Network, ConsenSys,
and Layer.

Q1 2023 Crypto Report CONFIDENTIAL. NOT FOR REDISTRIBUTION. PG 28

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