The Funding: Inside the record VC rush to Bitcoin
Quick Take This is an excerpt from the second edition of The Block’s The Funding newsletter sent to our loyal readers on May 18. The Funding is a fortnightly newsletter written by Yogita Khatri, The Block’s longest-serving editorial member. To subscribe to the free newsletter, click here.
What caught my attention the most in the last two weeks is Multicoin Capital's rare Bitcoin BTC -0.28% deal.
In the first edition of this newsletter, I discussed the Bitcoin ecosystem as one of the four big trends catching VC attention this year. Notably, the current allure of Bitcoin was compelling enough for Multicoin Capital to take an unusual route last week and lead a $7 million seed funding round for a Bitcoin-native application platform called Arch Network. Multicoin Capital recently also invested in the Bitcoin scaling network Mezo's $21 million funding round. Historically, the firm has been particularly active within the Solana SOL +1.27% and Ethereum ETH +0.48% ecosystems, having invested early in Solana Labs itself and notable Ethereum projects like StarkWare.
That shows that the recent growth of the Bitcoin ecosystem is prompting major VC firms to explore its opportunities further.
Kyle Samani, managing partner of Multicoin Capital, told me that the Bitcoin ecosystem is experiencing "a developer renaissance" with the advent of Bitcoin's Taproot upgrade and the Ordinals protocol.
For some developers, building financial tools on Bitcoin is much more attractive because it's the oldest and most secure blockchain, Samani said.
Bitcoin started as a peer-to-peer payment system in 2009. But things got a lot more interesting after the Taproot upgrade in November 2021, which brought smart contracts to the biggest blockchain by market cap. Then, in January 2023, developer Casey Rodarmor launched the Bitcoin Ordinals protocol, letting people create NFTs known as "inscriptions" on Bitcoin. A couple of months later, an anonymous developer known as Domo introduced BRC-20, an experimental token standard using Ordinals, which allowed for fungible tokens on Bitcoin. Just last month, Rodarmor launched the Runes protocol , similar to BRC-20, but even more efficient for trading new tokens on Bitcoin. These tech advancements have opened up new use cases for Bitcoin, sparking more startups and more VC investment.
RELATED INDICES
Arch and Mezo are just two Bitcoin-related projects that have recently received VC funding. Other notable ones include Bitcoin scaling infrastructure developer Alpen Labs and Bitcoin-based DeFi platform ALEX. In total, we've seen over 90 deals related to Bitcoin this year — marking the highest number ever recorded in Bitcoin's history for a single year — according to The Block Pro's Funding Data Dashboard .
"We're seeing a surge of innovation as developers quickly build things like NFTs and lending markets on Bitcoin. This means there's more to invest in beyond just BTC,” Samani said.
Bitcoin's limited programmability
While the Bitcoin ecosystem is expanding, it is expected to consistently fall behind Solana and Ethereum due to Bitcoin's limited programmability, according to Samani.
"The programmability design space of Bitcoin is much, much smaller than Solana and Ethereum," he said. "Those platforms were designed to be programmable from the ground up, which means they will always have an inherent advantage over Bitcoin. Thus, we expect the Bitcoin ecosystem lag behind Solana and Ethereum in terms of applications simply because there’s a native handicap."
To subscribe to the free The Funding newsletter, click here .
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
You may also like
Morgan Stanley’s $50.6M BTC buying shields market – But rally to $82K has THIS hurdle
Will the Fed "continue raising interest rates"? Will the "tightening cycle" of the late 1980s be repeated?
The Citi report points out that the current macro environment is highly similar to the tightening cycle of 1988-1989, when the economy remained resilient and inflation pressures gradually accumulated, followed by a slowdown in economic activity before policies shifted to easing. During that tightening cycle, the Federal Reserve raised interest rates 16 times in a row.
Rare alliance of arch-rivals! Musk and Altman support Dario Amodei's call to "slow down AI globally"
Anthropic's Amodei issued a call to "slow down AI globally," and to everyone's surprise, rivals Musk and Altman both publicly endorsed the initiative. The three industry giants unanimously agreed to grant third-party access to "employee-level" evaluation rights and to implement coordinated deceleration measures. Altman went further, announcing that OpenAI will not IPO this year. The resignation of a researcher and a collective breakout of uncontrollable AI systems have ignited long-standing industry fears.
Bitcoin vs Ethereum ETFs: Which asset is winning September’s flow battle?
Crypto prices
More
