As the cryptocurrency industry experiences another surge in fundraising, venture capitalists are once again turning their attention to crypto startups founded by professors. Companies like Sahara, CheckSig, and NEBRA, all established by scholars, have raised new funds in the past two months. Among the projects in the industry known as “professor coins,” two have stood out: EigenLayer and Babylon.
EigenLayer, founded by former associate professor Sreeram Kannan from the University of Washington, raised $100 million in February from Andreessen Horowitz. Babylon, founded by Stanford University professor David Tse, raised $18 million in December last year. Both projects focus on a rapidly evolving area of cryptocurrency called “re-delegation,” which allows new projects and blockchains to leverage the security infrastructure and resources of Ethereum or Bitcoin to gain a competitive edge.
Riad Wahby, CEO of Cubist, a crypto startup and engineering professor at Carnegie Mellon University, stated that some of the technologies used to generate profits in the crypto cycle come from the research of David and Sreeram. He believes that more of these technologies will come from academic research in the future.
According to the personal profile on the website of the Information Theory Laboratory at the University of Washington, Kannan spent two years as a postdoctoral researcher at the University of California, Berkeley, and Stanford University, working with Tse. They collaborated on 23 academic papers between 2015 and 2023, publishing numerous articles on blockchain and the concepts relied upon by their respective startups. Kannan and Tse did not respond to requests for comment.
Re-delegation, an investment favorite
The global venture capital activity of crypto startups. Source: PitchBook
Kate Laurence, CEO of Bloccelerate VC, stated that her venture capital firm often considers academic backgrounds as a disadvantage when deciding which founder to support. She said, “Professors tend to focus on academia and theory rather than practice and business applications.”
However, Kannan’s work in re-delegation and his close relationship with Tse led Bloccelerate to invest in EigenLayer first and then in Babylon. Laurence said, “They collaborated to solve the same problems, but EigenLayer addresses a different market.”
The process of re-delegation is inspired by how Ethereum operates. In Ethereum, tokens are “staked” into the network to help validate transactions on the blockchain. For new projects and blockchains operating under the same mechanism, establishing their own staking system can be too slow and costly due to a lack of user activity and funds. Re-delegation allows new players to borrow Ethereum’s staking capabilities to gain a competitive advantage.
Babylon adopts a similar approach but focuses on Bitcoin. This task is more complex because Bitcoin uses a different mechanism (proof of work) to validate transactions. If successful, the Babylon platform will also solve a long-standing problem for Bitcoin holders: a lack of returns.
Vance Spencer, founder of Framework Ventures, also invested in Babylon and believes it makes sense for these advanced technological achievements to come from universities. He said, “There are very few people who can build blockchains, and they are likely to come from these research institutions.”
What controversies exist?
Emin Gun Sirer, CEO of Ava Labs and former associate professor of computer science at Cornell University, who developed the Avalanche blockchain, said that the future path is often not smooth for professor-led crypto projects, with most projects ending in failure. “They are playing the game of technological innovation, not the alignment of products and markets,” Sirer said.
DefiLlama reported that despite attracting over $15 billion in crypto assets, the EigenLayer platform has faced setbacks, with critics claiming it misunderstands the broader crypto asset market.
Although Kannan stated in February that they had no plans to issue tokens, EigenLayer announced its token distribution plan in April and began distribution on Friday. The total supply of Eigen tokens is approximately 1.67 billion, with over half designated for investors and early contributors. This distribution method has sparked criticism of the EigenLayer team and initial supporters for enriching themselves, as well as concerns about potential selling pressure from users. The decision to make the tokens non-transferable at the time of issuance has also disappointed early users who invested significant amounts of money in EigenLayer.
The Eigen Foundation, responsible for the token plan, stated in a blog post that by restricting token transfers, they can have more time to improve the project’s decentralization and enhance key token-related functionalities.
Ayesha Kiani, COO of MNNC Group, a cryptocurrency hedge fund and adjunct professor at New York University, opposes the criticism surrounding EigenLayer. She believes that this startup is not just another “get-rich-quick scam.” She said that Kannan and Tse are working hard to improve the crypto industry.
“In the industry, we have become accustomed to free incentives. If things don’t go well, we basically have to abandon the project,” she said.
Tags:
Babylon
EigenLayer
Ethereum
Bitcoin
Game
Source link: https://foresightnews.pro/article/detail/59939
Note: The translation provided above represents the author’s views and does not constitute investment advice.
Original article link: https://www.bitpush.news/articles/6719997
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