By Tom Blitzer
Key Insights:
- EigenLayer and Babylon leverage academic expertise to innovate restaking, securing $100M and $18M in funding, respectively.
- Academic-led crypto startups face challenges but bring advanced technical solutions, driving new investment opportunities in the digital asset space.
- Despite criticisms, EigenLayer and Babylon showcase how rigorous research can foster advancements in blockchain technology.
Venture capitalists are showing renewed interest in crypto startups founded by academics, often referred to within the industry as “professor coins.” The growing focus on digital asset funding has brought attention to companies like Sahara, CheckSig, and NEBRA, all of which recently secured fresh capital. However, two standout projects, EigenLayer and Babylon, have particularly captured investor attention due to their innovative approaches and academic foundations.
EigenLayer, established by Sreeram Kannan, a former associate professor at the University of Washington, received $100 million in funding from Andreessen Horowitz in February. Babylon, founded by Stanford University Professor David Tse, secured $18 million in December. Both startups are pioneering the concept of “restaking,” which allows new blockchain projects to leverage the security and resources of established networks like Ethereum and Bitcoin. This strategy offers a competitive edge in the rapidly evolving crypto market.
Riad Wahby, an engineering professor at Carnegie Mellon University and CEO of crypto startup Cubist, highlighted the importance of Kannan and Tse’s research in restaking technologies. Their extensive academic work has laid the groundwork for their startups, making them influential figures in this niche area of blockchain technology.
Challenges for Academic Entrepreneurs
Despite the promising potential of professor-led startups, they face unique challenges. Kate Laurence, CEO of Accelerate VC, pointed out that an academic background could sometimes be seen as a disadvantage in entrepreneurship. Professors are often perceived as being more focused on theory than practical business applications.
However, the collaboration between Kannan and Tse has proven to be a strong counterpoint to this notion, as evidenced by their joint research and the subsequent investments from firms like Bloccelerate VC.
Babylon’s approach to integrating restaking with the Bitcoin ecosystem presents additional complexity. Bitcoin’s proof-of-work validation mechanism differs significantly from Ethereum’s staking process, making Babylon’s task more challenging but also more potentially rewarding if successful. The platform aims to address the lack of yield generation for Bitcoin holders, which could open up new investment opportunities.
EigenLayer’s Controversial Token Launch
EigenLayer, despite its substantial fundraising success, has faced controversy following the launch of its Eigen token. Critics have raised concerns about the token’s distribution plan, which allocates a significant portion to investors and early contributors. This has led to accusations of potential self-enrichment and fears of sell-off pressure. Additionally, the decision to make the tokens non-transferable at launch has frustrated some early users who committed large amounts of capital.
The Eigen Foundation defended its strategy, stating that the non-transferable status of the tokens allows more time to improve the project’s decentralization and key features. This move, according to the foundation, is intended to enhance the long-term viability and robustness of the platform.
Industry Perspectives on Professor-Led Crypto Innovations
The advanced technical work coming out of universities is increasingly seen as a key driver of innovation in the crypto industry. Vance Spencer of Framework Ventures, an investor in Babylon, emphasized the rarity and value of individuals capable of building blockchains, noting that they are likely to emerge from research institutions.
Ayesha Kiani, COO of crypto hedge fund MNNC Group and an adjunct professor at New York University supported the notion that projects like EigenLayer and Babylon are not merely profit-driven schemes. She argued that Kannan and Tse are leading efforts to improve the overall industry despite criticisms about decentralization and perceived profit motives.
While the path for professor-led crypto startups is fraught with challenges, the recent successes of EigenLayer and Babylon indicate a growing acceptance and trust in academic contributions to the industry.