Coinbase's Best Investments in 2023 - Part 2

Tracking VC investments can be highly profitable in any market condition. And among the key VCs, Coinbase Ventures takes center stage.

This article marks the second segment of our comprehensive four-part series. Let’s dive in Coinbase’s best investments! Here is the first part of the article series.

Coinbase as a VC

Coinbase Ventures, the investment arm of the largest US-based CEX, Coinbase. According to data from Crunchbase, Coinbase Ventures has made 344 investments to date.

Moreover, CoinGecko identifies Coinbase Ventures as the most active participant in the crypto investment landscape. Coinbase Ventures is strongly inclined towards early-stage investments. It has 144 at pre-seed or seed stages and 199 at the early VC stages of Series A or B. Also, the venture arm has been involved in 25 later-stage VC deals and 4 venture growth deals.

Notably, Coinbase Venture’s historical ROI has been remarkable. Let’s explore some noteworthy projects that have captured Coinbase Ventures’ attention this year.

1) Obol Labs

In January 2023, Coinbase Ventures contributed to the $12.5 million Series A round of Obol Labs. While Pantera Capital and Archetype co-led the round, the exact investment figure from Coinbase Ventures remains undisclosed. Nevertheless, this successful funding round propelled Obol Labs’ cumulative funding to an impressive $19 million.

Obol Labs is a frontrunner in developing Distributed Validator Technology (DVT). It is a groundbreaking solution addressing the vulnerability of single points of failure in staking infrastructure.

DVT is also integral to Vitalik Buterin’s Ethereum roadmap. It enables Ethereum Proof-of-Stake validators to operate concurrently across multiple machines. Its key breakthrough lies in the fragmentation of a single validator private key. This allows a collective to share validation rights for an Ethereum validator.

Besides, the FTX collapse has underscored the imperative of decentralization across the entire Web3 stack. Obol’s DVT injects decentralization and resilience into the foundation of staking products.

This Series A funding infusion will propel the Obol Network’s roadmap, facilitating the integration of DVT into the Mainnet Ethereum. Furthermore, Obol Labs is committed to extending DVT’s advancements to other Layer 1 Proof-of-Stake blockchains like Cosmos. Additionally, it is contributing to the resiliency of sequencers within the Layer 2 ecosystem.

2) zkLink

In May 2023, zk Link concluded a significant $10 million strategic funding round, with Coinbase Ventures playing a pivotal role. This funding marks a crucial step in zk Link’s mission as a unified multi-chain trading infrastructure, connecting various Layer 1 and Layer 2 chains.

Moreover, of zk Link’s total funding amounting to $18.5 million to date, Coinbase Ventures’ contribution is $10 million.

The overarching goal of zk Link is to simplify the intricacies of multi-chain trading while upholding robust security measures. As a unified multi-chain trading infrastructure secured with zk-SNARKS, zk Link empowers the next generation of decentralized trading products, including order book DEXs, NFT marketplaces, and more.

At the heart of Zk Link’s architecture is a ZK-Rollup middleware that seamlessly interfaces with various L1s and L2s, offering developers a suite of high-level APIs. This approach allows for the effortless deployment of trading dApps with high customizability and access to aggregated liquidity.

In turn, end users can enjoy a smooth multi-chain trading experience. Additionally, zk Link extends support for Omnichain Fungible Token (OFT) issuing and bridging.

More importantly, zk Link addresses several critical issues within the decentralized trading landscape:

Features
  1. Liquidity Fragmentation: The rise of high-performance chains and zkEVMs has led to liquidity silos, resulting in low capital utilization rates and hindering seamless trading across different ecosystems.
  2. Navigation Complexity: Presently, trading multi-chain tokens involves a laborious and costly process, requiring stablecoins as intermediaries and cross-chain bridges. This cumbersome user experience often discourages traders from exploring new DeFi projects and applications.
  3. Security Risks During Inter-Chain Transactions: The vulnerability of data transmission in cross-chain trading. Including bridges and chain interoperability processes dependent on multi-sig committees for security poses a significant challenge. Such security concerns impede users’ enthusiasm for venturing into new ecosystems beyond Ethereum.

With the infusion of capital from Coinbase Ventures, zk Link will accelerate the development of its protocol, ensuring a more rapid adoption in the market.

3) Azra Games

Coinbase Ventures played a significant role in Azra Games, participating in the $15 million Seed Round in May 2022 and an additional $10 million seed funding in February 2023.

Azra Games, headquartered in Sacramento, CA, is dedicated to crafting top-tier, distinctive collectible and combat games on the blockchain. Founded by industry luminary Mark Otero, a former executive at EA and BioWare, the game studio has garnered support from a formidable lineup of backers, including a16z, NFX, Play Ventures, Franklin Templeton, Coinbase Ventures, ROK Capital, and a syndicate of esteemed supporters.

Drawing from his wealth of experience, Otero has assembled a seasoned development team with shared credits on blockbuster titles such as Star Wars, Mass Effect, Dragon Age, Battlefield, and more.

More on Azra

The genesis of Azra Games is rooted in Otero’s early days, growing up playing Dungeons & Dragons, a tabletop role-playing game that significantly influenced subsequent video game genres. Starting the journey in the stockroom of Mochii Yogurt, a business he owned in Sacramento, Otero transitioned to launch his own game development company.

Later, EA acquired his firm, showcasing Otero’s prowess in leading development for successful titles like Heroes of Dragon Age and managing Star Wars: Galaxy of Heroes. This mobile game generated over $1 billion in revenue.

After a hiatus from the gaming industry, Otero returned with a conviction in the potential of player-owned assets, particularly NFTs, as the next evolution in free-to-play games. Assembling a team from his EA days, Otero founded Azra.

Currently, the studio is working on its debut title, Legions & Legends, a mass combat strategy RPG. On a side note, Azra released the Play Forever Pass™. This exclusive NFT pass unlocks a private Discord and provides early access, exclusive invitations, and epic drops. Notably, the pass is tradable and benefits all Azra titles, with only 5,555 ever produced. Furthermore, Azra Games plans to release the first version of its highly anticipated game, Legions & Legends, later this year.

4) Mauve

In March 2023, Coinbase Ventures participated in a $15 million investment in Violet, supporting the launch of Mauve—a crypto exchange strategically introduced in response to the repercussions of the FTX fallout.

Violet is a provider of privacy-centric compliance and identity infrastructure for DeFi. On the other hand, functioning as a non-custodial exchange, Mauve strongly emphasizes real-world assets, ensuring full Anti-Money Laundering (AML) compliance and holding a Virtual Asset Service Provider (VASP) registration from the Cayman Islands Monetary Authority.

More on Mauve

Mauve operates as a non-custodial AMM protocol and is a fork of UniswapV3. The platform signifies a significant step forward in the era of on-chain finance.

Tokenized assets present a vast opportunity, estimated in the trillions, but trading them in a decentralized, non-custodial environment poses challenges. Asset issuers must navigate stringent anti-money laundering requirements and comply with national regulatory regimes, often making their offerings incompatible with much of the existing permissionless DeFi infrastructure.

Mauve addresses this hurdle by offering highly customizable and fully compliant pools. Out of the box, these pools come configured with advanced AML and sanctions checks embedded directly on-chain.

Furthermore, pool access can be tailored, with restrictions based on geographic jurisdiction and investor categories. For instance, Mauve is currently unavailable to US users due to ongoing regulatory uncertainty, and certain pools are exclusively accessible to accredited investors.

With the injection of capital, Violet aims to propel the adoption of Mauve, solidifying its position as a pioneering force in DeFi.

5) Hourglass

In May 2023, Coinbase Ventures actively participated in Hourglass’s $4.2 million seed funding round led by Electric Capital. Hourglass is a pioneering DeFi protocol designed to enhance liquidity for time-locked and semi-fungible assets.

The protocol introduced a groundbreaking marketplace for trading Time-Bound Tokens (TBTs). This innovative concept involves tokenizing a user’s staked assets within a DeFi protocol based on the lock-up period. Hourglass facilitates liquid staking on top of time-locked vaults within the Frax and Convex ecosystems.

The marketplace’s core idea is to enable users to trade their position in line for their time-locked assets. Essentially, users can transfer ownership of assets locked in a protocol to another buyer.

How does it work?

In simpler terms, through TBTs, the marketplace allows users to gain liquidity for their time-locked assets by selling the rights to the time duration in a secondary market. For instance, if a user holds 10 Frax ether and stakes them in the Frax protocol for a month, they will receive 10 TBTs and any staking rewards. These TBTs are then tradable in the marketplace.

Moreover, the platform operates like any secondary market, allowing for discounts on TBTs based on the duration of the locked-up asset. For example, a trader might bid for a 3% discount on ETH with a 10-month lock-up period, and this discount can vary based on the duration of the asset’s lock-up.

Hourglass envisions broad applications across the web3 ecosystem, with various protocols and DAOs benefiting from incentivizing locked liquidity. Examples include:

  1. DEXs can incentivize time-locked liquidity providers to enhance the user experience for traders, strengthen their long-term compatibility with money markets, and improve integration with aggregators.
  2. Lending Markets can incentivize time-locked lending liquidity to maintain low borrowing rates consistently and encourage usage.
  3. Stablecoins can incentivize time-locked liquidity to prevent de-pegs, as users cannot sell locked liquidity in a bank-run scenario.
  4. Asset Managers, such as banks, can utilize locked liquidity (certificates of deposit) to align terms on their assets/liabilities and prevent bank runs.
  5. Real World Asset (RWA) providers like Maple and Ondo can leverage time-bound liquidity to avoid bank run scenarios against their termed RWAs.
  6. Liquid Staking Protocols can incentivize time-locked liquidity to ensure composability, generate revenue, and minimize user churn (withdrawals).
  7. Layer 1s, Layer 2s, and bridges can incentivize locked liquidity to bootstrap usage and network effects in their application ecosystems.
  8. Insurance protocols can incentivize locked liquidity to establish systematic guarantees about coverage of long-term liabilities.

Hourglass, with the support of Coinbase Ventures, is well-positioned to play a pivotal role in advancing the integration of time-bound liquidity across the DeFi landscape.

Conclusion

In 2023, Coinbase Ventures strategically positioned itself at the forefront of transformative developments in the crypto landscape. The venture arm invested astutely in innovative ventures such as Obol Labs, zkLink, Azra Games, Mauve, and Hourglass.

These investments underscore Coinbase Ventures’ commitment to pioneering solutions that redefine the future of DeFi, blockchain infrastructure, gaming, compliance-driven exchanges, and time-bound asset liquidity. Stay tuned for the final part of the series!

Disclaimer

The information discussed by Altcoin Buzz is not financial advice. This is for educational, entertainment, and informational purposes only. Any information or strategies are thoughts and opinions relevant to the accepted levels of risk tolerance of the writer/reviewers, and their risk tolerance may be different from yours.

We are not responsible for any losses that you may incur as a result of any investments directly or indirectly related to the information provided. Bitcoin and other cryptocurrencies are high-risk investments, so please do your due diligence.

Copyright Altcoin Buzz Pte Ltd.

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