Blockstream, one of the most prominent Bitcoin technology companies, announced a funding round of $210M. The financing was arranged through a convertible note, led by fundraising experts from Fulgur Ventures.
Blockstream has taken up the task of bringing Bitcoin to the global stage through L2 scaling. To complete its task, Blockstream announced a funding round of $210M, led by Fulgur Ventures. The funding will be used to accelerate the unrolling of more L2 technologies for the company, boost mining operations, and additionally buy more cryptocurrency.
L2 on Bitcoin are still in flux, and there is no consensus on which ones are the legitimate projects. There are multiple attempts to raise funds for L2 on Bitcoin, with niche applications usually tied to a form of decentralized finance.
Blockstream, however, has the reputation of Adam Back behind it and a long track record of applied Bitcoin-based solutions. The recent funding round remains an outlier in an otherwise more subdued fundraising space. Most crypto projects raise up to $100M, backed by a list of funds specifically concentrated on crypto. Fulgur Ventures has a more limited footprint in raising rounds as a Tier 4 fund, up until now leading rounds of $1M to $3M.
Blockstream raised $125M in debt financing through Fulgur Ventures in 2023, and before that, another $210M backed by Bitfinex.
Blockstream aims for tokenization, faster BTC payments
One of the problems of BTC is extracting its value. At this point, multiple wallets have held for years, accruing big unrealized gains. More than 16M BTC remain unmoved in the past three months. Actively moving BTC during bull markets has proven to be non-viable, creating congestion and extreme fees.
Blockstream already runs its Liquid Network service, which will get further development from the funding. Liquid Network is a sidechain, built by Elements, an open-source blockchain platform. The sidechain is governed by a group of entities, and issues its own standard of tokens, not related to Runes or other existing types of Bitcoin tokens.
The other scaling solution, Greenlight, will expand its offers of non-custodial payments powered by the Lightning network.
The L2 by Blockstream do not copy the Ethereum model, where the most important feature is drawing in liquidity and users from the main net. Rather, Blockstream’s approach is to onboard new users through Bitcoin-related activities and financial tools, without the need to invest in BTC itself and hold.
“This fundraise is pivotal in our journey to bridge Bitcoin with broader finance,” said Blockstream CEO Adam Back in a X thread.
“We’re excited to bring on Michael Minkevich as COO, and to have Fulgur Ventures’ support in advancing Bitcoin finance,” he said.
In addition to offering platforms to third parties, Blockstream will actively engage in tokenization and issuing its own products. The BMN2 is a tokenized mining contract, which is EU-compliant and taps Bitcoin value without directly buying the coin.
Stokr, one of Bitcoin’s partners, already issued its own asset, CMSTR, as one of the first security tokens tied to the Bitcoin network.
Blockstream remains an influential entity, despite skepticism about going against the initial idea of Bitcoin. The L2 solutions are also uncertain about their adoption, as the crypto space has moved into other types of assets, no longer concerned with scaling BTC.
The competitors to Blockstream’s approach include issuers of Runes. Using the value of BTC is also the main focus of Babylon Labs, which recently completed its second round of non-custodial BTC lockup.
Bitcoin L2 is still seen as early stage, though projects like Merlin managed to draw in up to 26,000 BTC during the heyday of hype. Months later, the L2 holds only around 7,778 BTC after stakers backed out.
Bitcoin scaling attempts multiple approaches, including various forms of wrapping and usage within Ethereum’s DeFi space. Native, non-custodial BTC staking is only available through Babylon Labs. As for Blockstream, some of its products may not need actual BTC.
BTC is currently brought to mainstream buyers mostly through BlackRock’s ETF. The ETF continues to expand its wallets, now holding 1.76% of the entire BTC supply, with accelerating trading volumes for the fund.
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