Ethereum Scaling Startup Valued at $1.6B Following Major VC Investment

Key Insights:

• Optimism has secured a Series B funding round for $150 million.
• The platform scales Ethereum for faster, cheaper network transactions.
• There is a total of $5.7 billion locked in layer-two Ethereum scaling networks.

The latest crypto startup to secure a venture capital funding round is Ethereum scaling solutions platform Optimism.

The firm has closed a $150 million Series B funding round co-led by Andreessen Horowitz (a16z) and Paradigm, which gives is a valuation of $1.65 billion. Earlier this month, a16z invested $70 million in Ethereum staking platform Lido.

Scaling Ethereum

Optimism is a layer-two (L2) network that uses rollup technology to enable transaction data to be processed off the primary blockchain. This alleviates some of the pressure resulting in faster and cheaper Ethereum (ETH) transactions.

Demand for such technology has surged over the past year as Ethereum adoption has jumped on the back of burgeoning decentralized finance (DeFi) and nonfungible token (NFT) markets. This has pushed up transaction or “gas” fees to unsustainable levels.

Andreessen Horowitz Partner Chris Dixon tweeted that the current Ethereum layer-one network is “constraining growth, stifling innovation, and pricing out some users” in reference to these high fees. At the time of writing, the average cost of a transaction on Ethereum was $20, according to Bitinfocharts.

According to Tech Crunch, Optimism is a Public Benefit Corporation that uses open-source code. Optimism CEO Jinglan Wang told the outlet that the firm did not want to take profits from centralized parts of the system, adding:

“While we are making revenue, we’re giving all of that revenue back toward funding public goods on Ethereum … We don’t just want to say that we want to be decentralized; we also want to show the community that we’re setting up our own incentives to be compatible with that.”

Ethereum has its scaling upgrade planned with side-chains or “shards”, but it is not likely to be launched until the end of 2022, which is why users have turned to solutions such as Optimism.

Massive Network Fee Savings

According to L2beat, a platform that analyzes the layer-two market, Optimism has $440 million in total value locked, ranking it the fourth largest L2 platform.

It has been operating for more than a year and has saved Ethereum users a billion dollars in gas fees, according to a March 17 tweet.

After over a year on mainnet, our milestones keep adding up: $1B in gas fees saved for users, thousands of smart contracts deployed, three separate forks…

And now: funds raised to the tune of $150M, giving us runway to keep shipping rain or shine.https://t.co/pBC2jmXtnh

— Optimism 🔴✨ (@optimismPBC) March 17, 2022

The total value locked across all layer-two platforms is currently $5.76 billion, and it is likely to continue climbing as demand on the Ethereum network increases.