In traditional finance, credit card companies and banks block transactions when they come from unusual locations, abnormal vendors, or are otherwise suspicious. In crypto, however, transactions are typically final—a positive thing for those who dislike outside authorities having a veto over how they spend their money, but far from ideal for those who fall prey to hacking attacks.
That's why Eyal Meron and Oren Fine founded SphereX. The startup has a plan to translate a basic security measure from traditional finance—the blocking of suspicious transactions—to the blockchain, and on Wednesday, they announced that they’ve raised $8.2 million in a seed round led by Aleph at a $24 million valuation. Other backers include Pillar VC, Fabric Ventures, and Mensch Capital Partners.
"The market has been pigeonholed for years on monitoring solutions, while SphereX’s flagship product is focused on actually stopping malicious actors," Parker McKee, a principal at Pillar VC, said in a statement.
SphereX isn't the first crypto-focused cybersecurity startup to announce millions in funding in the past year. Hackers, especially those from North Korea, stole nearly $4 billion in 2022, according to Chainanalysis, and amid a constant deluge of exploits, other firms have recently launched products that aim to protect blockchain applications and users from ne’er-do-wells.
Before crypto, Meron, SphereX’s CEO, and Fine, the CTO, spent most of their professional careers in the cyber unit of the Israeli military. Meron then spent a year in the world of finance at Bank Lumi, one of Israel’s largest financial institutions, before he and Fine teamed up to found SphereX in July 2022.
Through their product SphereX Protect, the two founders, along with nine employees, allow protocols and blockchain applications to stop suspicious transactions from executing, replicating one of the first lines of defense that we take for granted in our non-Web3 financial lives. “We must bring the cyber resilience of the space to the next level,” Meron told Fortune.
Developers of protocols and applications can inject SphereX’s code into their software, and through analyzing past transactions that are both run-of-the-mill and abnormal, SphereX’s program can flag future transactions it deems suspicious. In fact, Meron and Fine say that they retroactively tested their software against well-known hacks and exploits over the past few years and that SphereX Protect would have prevented more than $2 billion in losses.
The ability to revert blockchain transactions may raise eyebrows among those who wish to preserve the decentralized ethos of the crypto community, but Fine noted that once SphereX’s software flags a transaction, developers can adjust how decentralized the decision-making process is, turning over the choice to permanently reject a transaction to either just a few core decision-makers or to an entire decentralized autonomous organization.
With the $8.2 million Meron and Fine raised, they plan to begin marketing their software to Web3 developers and grow their team to combat the ever-changing landscape of hacking.
“It's always,” Meron said, “a cat-and-mouse game with the bad actors.”
