P2P.org raises $23 million after upgrading to Ethereum

Ethereum, one of the largest blockchains, turned to proof of stake in 2022. Illustration of Fortune

P2P.org, a blockchain infrastructure firm, announced Thursday that it had raised $23 million in a round led by Jump Crypto, Bybit and Sygnum.

Dmitry Argunov, P2P.org’s chief product officer, declined to provide the implied valuation of the company, whose only physical office is in Cyprus. A spokesperson for the company also declined to disclose other participants in the funding round.

P2P.org’s business piggybacks on proof-of-stake, an increasingly common method blockchains use to secure their network, or prevent bad actors from hijacking a public database to, for example, mistakenly withdraw a user’s funds.

Unlike Bitcoin’s proof of work, which requires a large amount of electricity to verify transactions, blockchains like Ethereum require those who want to secure the network – the validators – to deposit a certain amount of Ether, Ethereum’s original cryptocurrency. For validators, there is a direct financial incentive to protect the network.

In return, validators receive interest on the amount of cryptocurrency they stake, or deposit. They also receive rewards for directly validating transactions on the blockchain.

For a crypto-naive institution looking to reap the rewards of its high return on investment, the process can be quite complicated. Anyone who wants to be a validator must follow a complicated protocol for depositing cryptocurrency and then provide a computer to validate the transactions.

This is where companies like P2P.org come in, simplifying the process for staking on a wide set of protocols, including Ethereum.

Investors can send companies like P2P.org the amount of cryptocurrency they want to stake, and the firm then collects customer funds to stake the cryptocurrency, offering its own computers to validate transactions. In return, P2P.org takes a cut of the return.

Originally proof-of-work, Ethereum switched to proof-of-stake in 2022 and recently implemented two upgrades to its staking system in April, separately called Shanghai and Capella.

“The recent Shanghai upgrade opens up the possibility of further institutional interest in direct betting of ETH,” Konstantin Lomashuk, founder of P2P.org, said in a statement.

As Ethereum, the second-largest blockchain next to Bitcoin, continues to upgrade its proof-of-stake system and the energy-intensive proof-of-work method continues to draw criticism for its environmental impact, companies facilitating efforts such as P2P. org, is positioned to continue to attract both risk-averse and institutional capital.

“The third iteration of the Internet was born with the promise of decentralization and democratization of finance,” Bill Xing, Bybit’s head of financial product, said in a statement. “It is important that we strengthen the nodes that connect the users of Web3 and harness the power of the network effect.”