CryptocurrencyWeb3NFTsInvestingBitcoin

Mastercard, UBS, and JPMorgan pour $65 million into Ethereum startup studio ConsenSys

April 13, 2021, 1:00 PM UTC

Subscribe to The Ledger for expert weekly analysis on fintech’s big stories, delivered free to your inbox.

ConsenSys, a software development firm that builds cryptocurrency-related infrastructure, raised $65 million in funding from big banks such as UBS and JPMorgan Chase, the company said Tuesday. It is the company’s first major external funding.

Another financial giant, Mastercard, also joined the round as an investor. In addition to injecting cash into ConsenSys, the payments firm inked a strategic partnership focused on enterprise blockchain applications, corporate database software that borrows from the technologies first popularized by Bitcoin.

Businesses are excited about the potential of blockchains to build faster, more flexible successors to legacy financial systems. Raj Dhamodharan, Mastercard’s head of blockchain, said in a statement that the deal with ConsenSys will help Mastercard’s “work supporting central banks as they explore CBDCs,” or central bank digital currencies, an area of active research by world governments.

Other investors in the round include Protocol Labs and the Maker Foundation, also makers of blockchain-based software. CMT Digital, Alameda Research, and China’s Greater Bay Area Homeland Development Fund also participated.

Enter the ether

Joseph Lubin, a cofounder of Ethereum, the second-most valuable cryptocurrency network next to Bitcoin, started ConsenSys in 2014. For much of its existence, the venture has been self-funded by Lubin, who is widely believed to be a multibillionaire based on his holdings of Ether, or ETH, the cryptocurrency that fuels Ethereum.

ConsenSys’s work is directly related to two of the hottest fields to explode from the crypto underworld into public consciousness over the past year. Ethereum is the home for most of the biggest non-fungible token, or NFT, projects, which involve blockchain-based digital art or collectibles. NFTs surged in interest in recent months, with everyone from the NBA to the world’s biggest artists dipping toes into the white-hot, speculative category.

Almost exactly a year before the current NFT mania took hold, similarly frenzied interest began to grip a segment of the cryptocurrency market called “decentralized finance,” or DeFi. This nascent sector automates financial contracts, like loans, and often offers risky, high-yield investing opportunities.

ConsenSys also provides consulting services and develops software in support of central bank digital currency projects for clients including the Central Bank of Thailand and France’s Société Générale. Such currencies have become a major topic of interest worldwide mostly thanks to China’s aggressive development of a “digital yuan,” which some see as a geopolitical tool to extend Beijing’s power.

Reaching consensus

ConsenSys’s name is a play on one of the key processes underpinning blockchain technology: “consensus algorithms,” software that helps coordinate records between the distributed nodes on a blockchain. ConsenSys has sometimes been informally referred to as the “Google of crypto” because of its once-sprawling structure, broad software portfolio, and commitment to adventurous “moonshots,” including asteroid mining. That sprawl was substantially trimmed back in rounds of streamlining in 2018 and 2020, when ConsenSys spun off its venture arm.

Products from ConsenSys are crucial to both DeFi and NFT applications. ConsenSys’s MetaMask browser plug-in lets users not only store and manage cryptocurrency but also interact with crypto and NFT applications on the web. For instance, games like Gods Unchained require MetaMask to connect their web interfaces to blockchain-based components. The wallet now has over 3 million monthly active users.

Possibly more interesting, if less flashy, is ConsenSys’s Infura product, which could be described as something akin to Amazon Web Services for Ethereum. Running an Ethereum node, or a copy of the blockchain, can be extremely difficult, but DeFi companies and others with Ethereum-based products need those nodes to provide key information and functionality. Infura runs nodes and provides data to those companies while eliminating the hassle of managing a node directly.

The importance of Infura to the Ethereum and DeFi ecosystems was illustrated in November of last year when Infura failed for roughly six hours. The outage disrupted DeFi and other Ethereum applications, and some have pointed to reliance on Infura as a weak point of the wider Ethereum ecosystem. But if that dependence looks like a weakness for the system as a whole, it could be a strategic advantage for ConsenSys.

“Adults in the room”

ConsenSys has 360 employees and plans to add another 100 positions by the end of 2021. The company said the new funding will be used to “accelerate the convergence of decentralized finance (DeFi) and Web3 applications on Ethereum with enterprise blockchain infrastructure.”

DeFi refers to automated financial applications built on blockchain platforms, and Web3 is a broad term for the integration of blockchain technology with websites.

Lubin could be described as one of the “adults in the room” during the announcement, funding, and development of Ethereum from 2013 to 2015. A tech developer and investor, Lubin saw the potential of Ethereum mastermind Vitalik Buterin’s vision and helped make that vision a reality by rallying investors and developers to the project.

According to Lubin, Mastercard does not currently have plans to support ETH, Ethereum’s native cryptocurrency.

More must-read finance coverage from Fortune:

Never miss a story: Follow your favorite topics and authors to get a personalized email with the journalism that matters most to you.