P2P.org, a blockchain infrastructure firm, announced on Thursday that it had raised $23 million in a round led by Jump Crypto, Bybit, and Sygnum.
Dmitry Argunov, P2P.org’s chief product officer, declined to provide the implied valuation of the company, whose only physical office is in Cyprus. A company spokesperson also declined to make public other participants in the funding round.
P2P.org’s business piggybacks on proof of stake, an increasingly common method blockchains use to secure their network, or prevent bad actors from hijacking a public database to, for example, falsely deduct a user's funds.
As opposed to Bitcoin’s proof of work, which requires a large amount of electricity to verify transactions, blockchains like Ethereum require those who’d like to secure the network—the validators—to put in escrow a certain amount of Ether, Ethereum’s native cryptocurrency. For validators, it's a direct financial incentive to help protect the network.
In return, validators receive interest on the amount of cryptocurrency they stake, or put into escrow. They also receive rewards for directly validating transactions on the blockchain.
For a crypto-naive institution that wants to reap the rewards of staking’s high yields, the process can be quite complicated. Anyone who would like to be a validator needs to follow a complicated protocol for depositing cryptocurrency and then offer up a computer to validate the transactions.
This is where companies like P2P.org come in, which simplify the process for staking on a wide set of protocols, including Ethereum.
Investors can send companies like P2P.org the amount of cryptocurrency they’d like to stake, and the firm then pools customer funds to stake the cryptocurrency, offering up its own computers to validate transactions. In return, P2P.org takes a cut of the yield.
Originally proof of work, Ethereum switched to proof of stake in 2022 and recently implemented two upgrades to its staking system in April, separately named Shanghai and Capella.
"The recent Shanghai Upgrade is opening up the possibility for further institutional interest in the direct staking of ETH," Konstantin Lomashuk, founder of P2P.org, said in a statement.
As Ethereum, the second-largest blockchain next to Bitcoin, continues to upgrade its proof-of-stake system and the energy-intensive proof-of-work method continues to draw criticism for its environmental impact, companies that facilitate staking, like P2P.org, are positioned to continue attracting both venture and institutional capital.
"The third iteration of the internet was born with the promise of decentralization and democratization of finance," Bill Xing, Bybit’s head of financial product, said in a statement. "It is vital that we fortify the nodes that connect the users of Web3 and harness the power of network effect."
