A startup that spun out of research from one of the Ivy League universities has managed to raise a whopping $3.7 million in a seed round. Offchain Labs, which is a blockchain-based startup and has a Princeton professor as a co-founder, raised the amount led by the Pantera Capital, one of the project’s investors.
Gone are the days when people would scurry after legacy firms in hopes of landing their dream job, it is now the age of startups. Some of the best startup ideas were conceived in university halls and dorm rooms – case in point, Facebook. The internet gave fire to startups and it doesn’t seem like its dying down anytime soon. But the internet is officially old news; it is the age of blockchain and cryptocurrency. Despite all that has happened and all that has changed, startups are still going pretty strong. The only difference is that it’s all about blockchain now.
What is a Seed Round?
Basically, seed round is a form of security offering and is sometimes also known as “seed funding” or “seed capital”. In a seed round an investor invests capital in a startup in exchange for an equity stake in the company. The term “seed” is used in order to imply that it is a very early investment. And just as you would care for a seed so it can bear fruit, you have to support the startup until it can generate revenue on its own.
Many blockhain startups are surviving on seed funding. For example, Celer Network, which is a leading layer-2 scaling platform that enables fast, easy and secure off-chain transactions for not only payment transactions but also generalized off-chain smart contract. It has a total funding amount of $6.1 mln.
Another blockchain-based platform Cosmian is working on guaranteeing user’s direct control and full rights over their private data, all the while favoring sustainable economic models for privacy-by-design applications. Cosmian currently has a total funding of €1.4M.
The main aim of a startup is to provide a connective tissue between blockchain technology and businesses. In other words, it wants to facilitate blockchain adoption for enterprises. The team behind Offchain is planning on achieving that goal through their unique smart contract scaling and privacy layer, known as “Arbitrum”.
Ed Felten, one of the co-founders, who is a professor of computer science at Princeton and also a former deputy chief technology officer (CTO) to the White House, believes that there are roughly four features that blockchain developers need in order to facilitate blockhain adoption for businesses: scalability, privacy, compatibility and a strong trust guarantee.
While speaking to Forbes, he explained just how Arbitrum could help in increased privacy and scalability.
With Arbitrum, we have invented a protocol that sits on top of any blockchain, with the ability to execute code and transactions off-chain through either sidechains or state channels. With increased privacy and scalability, as well as much lower costs to run a contract, Arbitrum adds immense value to developers and enterprises. We believe it can create a new wave of quality, blockchain-based applications and services.
The Need for Arbitrum
According to reports, last year 95% of the companies panning out across different industries were investing in blockchain projects. However, blockchain adoption still remains limited as many businesses project a sense of hesitation when it comes to moving their systems onto a decentralized network. Interestingly enough, the utilization of private blockchain has been on the rise. According to a 2018 Deloitte Global Blockchain survey, 44% of companies that were surveyed are focusing on private blockchain.
Private and public blockchains function similarly. However, private blockchains come with access controls which restrict people who can join the network. Basically, it functions like a centralized system. On the other hand, public blockchains are truly decentralized — it is a distributed, public ledger that is used to record transactions across several computers so that any involved record cannot be altered retroactively, without the alteration of all successive blocks.
Enterprises prefer private blockchains because they provide them with confidentiality over their valued information. The public blockchain is not too ideal for businesses because all information related to transactions are out in the open and can be seen by any owner of that network.
Furthermore, the issue of scalability still very much plagues the world of blockchain. Even big names in the crypto world, like Ethereum, haven’t been able to eradicate it despite having smart contract technology. This is where Offchain Labs’ Arbitrum can come in handy as it can address the shortcomings that hinder blockchain adoption.
Arbitrum incentivizes the involved parties to agree off-chain how a virtual machine would act. It basically streamlines the execution of smart contracts. All this ensures that miners only have to verify digital signatures and not every part of the contract.
Moreover, Arbitrum increases the speed of the transactions significantly, all the while limiting exposure to public. It achieves this by employing the “AnyTrust” consensus mechanism which guarantees correct behavior for each transaction.
According to reports, Offchain Labs is planning on releasing its prototype soon, which, the startup believes, will significantly lower the barrier to entry for businesses that are interested in all blockchain technology. Additionally, Arbitrum is interoperable with Ethereum which is a win-win situation for developers as they get the luxury to move any service, dApp, or token from Ethereum to Arbitrum, all the while maintaining significant privacy and scalability.
The funding Offchain Labs has raised will be used to expand the team in order to rope in more developers to build Arbitrum. You can also read their academic paper here.