Microsoft makes a bet on Web3 by investing in the start-up of Ethereum's co-founder ConsenSys

Starting a blockchain company ConsenSys has raised $450 million in a new round of fundraising, bringing its total valuation to $7 billion.

According to ConsenSys, the fund infusion was led by ParaFi Capital, with Microsoft, Japan's SoftBank, and Singapore's Temasek also joining as new investors.

ConsenSys, based in New York, was formed in 2014 by Joseph Lubin, a co-founder of Ethereum. Ethereum is the blockchain framework that powers ether, the world's second most valuable cryptocurrency.

Whereas bitcoin is mostly used for transactions, Ethereum may be used to build decentralized applications, or dapps — think Facebook or TikTok, but on the blockchain, a shared record-keeping system for crypto transactions. ConsenSys creates software for the Ethereum network.

Microsoft has made a rare crypto-related bet. Previously, the corporation led an early-stage investment in Palm NFT Studio, a start-up co-founded by Lubin.

Microsoft's involvement demonstrates the world's leading IT giants' growing interest in Web3, a loosely defined phrase that refers to efforts to establish a decentralized version of the internet based on blockchain technology.

It's a buzzword that's attracting a lot of attention — and money — in Silicon Valley. According to CB Insights statistics, blockchain startups garnered a record $25 billion in venture capital funding globally last year. Other tech behemoths looking into Web3 include Facebook parent company Meta and Twitter.

Investors see ConsenSys as one of the businesses that will fuel Web3. It has profited from an influx of capital into developing crypto trends such as decentralized finance, or DeFi, and nonfungible tokens, or NFTs.

The MetaMask cryptocurrency wallet and Infura, a suite of tools that helps developers create Ethereum apps, are two of the company's most popular products.

MetaMask is a web browser plugin or a mobile app that allows consumers to store and manage their tokens. Popular blockchain-powered apps such as Uniswap and Axie Infinity are also available. The majority of ConsenSys' revenue is now generated through fees for trading various currencies on MetaMask.

According to ConsenSys, MetaMask surpassed 30 million monthly active users in January, a 42 percent increase over the previous four months. Its most active markets are the United States, the Philippines, Brazil, Germany, and Nigeria. Meanwhile, Infura is used by over 430,000 developers and recently passed the $1 trillion mark in annualized transaction volumes.

ConsenSys stated that the whole proceeds of its most recent round would be turned into ether. The cash will be used to hire 600 more personnel, revamp MetaMask, which is set to be released later this year, and expand ConsenSys' expanding NFT company.

Web3 craze

Web3 has garnered a lot of buzz, but it has also attracted some significant detractors, including Internet billionaires Elon Musk and Jack Dorsey.

Web3 was criticized by Dorsey as a centralized technology owned by venture capitalists rather than the crypto community, while Musk believes it is more of a "buzzword" than a reality.

Lubin, for one, does not see it that way.

"What Jack might be concerned about is how a tiny number of VCs are acquiring the lion's share of equity or tokens in many of the greatest projects," said ConsenSys' CEO. "I'm not worried in the least."

"Decentralized protocol technology, like its global society, is anti-fragile," Lubin remarked. "The community will see centralization as both a disadvantage and an opportunity, and it will aggressively decentralize."

U.S. legislation

The crypto community has also been keeping a close eye on regulatory developments in the United States, following President Joe Biden's executive order calling for a coordinated government response to industry oversight.

Bitcoin, ether, and other digital tokens initially reacted positively, only to fall as investors became concerned about the lack of detail in Biden's plan.

Lubin stated that the US government "has a significant policy decision on its hands," and that ConsenSys "is ready and happy to assist policymakers in any way we can."

"At the end of the day," he continues, "permissionless blockchain networks are global, and they will grow and change our daily lives whether or not the United States is a leader."

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