Ethereum co-founder takes on the fast-growing Solana blockchain economy

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Ethereum co-founder Joseph Lubin has questioned the sustainability of rival projects, including the fast-growing Solana blockchain, as venture capital pours into a slew of new cryptocurrency networks.

The Ethereum blockchain has become one of the most widely used digital ledgers in the world, but it faces challenges from competitors such as Solana, which has set lower transaction fees to attract users.

Lubin told the Financial Times that Solana, which bills itself as a faster and cheaper alternative to Ethereum, pays outrageous rewards to users who validate transactions on the network compared to the revenue generated from those transactions.

Solana needs to “find a more sustainable business model for the network,” Lubin said.

“It’s natural,” he said. “All projects in our ecosystem essentially simulate until they succeed, or they die.”

The fast-growing blockchain project has already faced doubts. Some reviewers have argued that Solana sacrifices security for greater efficiency, and the network has experienced several major outages.

In response to Lubin’s criticisms, Solana said that “just looking at protocol revenue doesn’t tell the whole story of the long-term performance” of a blockchain’s business model.

Lubin’s comments came as tech investors are placing big bets on new projects trying to create more efficient alternatives to Ethereum – including Avalanche, Near Protocol and Solana – in a race to capitalize on growing interest from the mainstream. public for cryptocurrency applications.

ConsenSys, a Lubin-led cryptocurrency software company with close ties to Ethereum, said on Tuesday it had more than doubled its valuation to $7 billion in a new $450 million funding round. The company’s value skyrocketed as an influx of new users turned to its products to browse Ethereum.

Ethereum is the most widely used digital ledger for rapidly expanding areas such as decentralized finance and non-fungible tokens. Lubin became one of the project’s strongest supporters on Wall Street after playing a role in developing the network.

MetaMask, an app developed by ConsenSys with over 30 million monthly active users, has recorded nearly $330 million in transaction fees since late 2020 thanks to a feature that allows users to swap between crypto tokens -currency on Ethereum, according to public data.

The venture capitalists invested the new funds in ConsenSys Software, an entity created by Lubin with the help of JPMorgan in a restructuring that was finalized in 2021.

It comes after nearly three dozen former employees of its Swiss-incorporated predecessor, ConsenSys AG, recently challenged the legality of the restructuring and requested a special audit. Employees alleged the deal undervalued the intellectual property behind MetaMask and other key products transferred to the new entity.

Lubin said ConsenSys was “extremely open” to negotiating with former employees and “understanding their concerns,” and that the company’s products were effectively “pre-monetized” at the time of the transaction.

“It’s a very different world in our ecosystem as we cross the mainstream adoption chasm than it was during the darkest times of Covid,” Lubin said.

ParaFi Capital, a KKR-backed cryptocurrency venture capital firm, led ConsenSys’ new funding round. Microsoft, Singapore’s Temasek and SoftBank’s second Vision Fund also invested.

ConsenSys declined to say whether Lubin or other shareholders sold shares in the financing.

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