Scaling blockchain to one billion users: rollups

Crypto and especially Decentralized finance (DeFi) promised to democratize finance, the same way the internet made content accessible to everyone.

The first commercial Bitcoin transaction back in 2010 was to buy two Papa John’s pizzas, with the moment heralded as the first step towards widespread everyday crypto payments.

More than a decade on that's still nowhere in sight. Bitcoin and Ethereum support 7 and 15 transactions per second (TPS) respectively compared to the 5000 and 24000 TPS of Mastercard and Visa.

Supply and demand dictates that transaction costs surge with heavy use. With particular load heaped on Ethereum due to the explosion in popularity of DeFi, NFTs and crypto gaming which all run on the protocol, average transaction (gas) fees have increased from $2 a year ago, to $50 in November 2021.

If Ethereum wants to power the vision for the web 3.0 and metaverse (check out our overview of NFTs and crypto gaming) it needs to enormously scale its capacity.

The quick way to achieve scalability would be to sacrifice decentralization or security (AKA the blockchain trilemma). The Ethereum community has instead chosen to execute a wide scalability roadmap towards Ethereum 2.0. Rollups in particular are poised to be the key scalability for Ethereum in the foreseeable future and have already reached almost $6B in Total Locked Value (TLV), up 8x in the last months.

But what is a rollup, what are modular blockchains, and why should we care about the blockchain trilemma?

In other news

🔗 Square renamed as "Block" - Techcrunch. Its founder Jack Dorsey just left Twitter to focus only on Square Block. Great meme not to be missed.

🌎 Chubb and Chile Insurtech Betterfly Form Partnership for LatAm Offering - Insurtech Insights.

🛒 E-Commerce Giant Mercado Libre to add crypto services in Brazil - Coindesk

👉 Check out why we think Latam is the hottest fintech market. 

🙄 Fed: inflation is not transitory - CNBC. Inflation has reached 6.2% in the US last month and 4.9% in Europe in November. Watch your savings 🚨

🛑 Crypto exchange Bitmart hacked for $200M following Ethereum, Binance Smart Chain exploit - Coindesk

🏦 What is white label solution and how can white label fintech platform boost your business - Crassula with Dealroom data.

Latest fintech deals:

The largest this week

🇺🇸 Mortgage lender Better Mortgage has laid off roughly 9% of its nearly 10,000 person staff. Over a Zoom call, just before Christmas and accusing them of ‘stealing’ by working only two hours daily. It also just raised half of the $1.5 billion committed by SPAC Aurora Acquisition Corp. and SoftBank. 

DeFi exchanges (DEX) aggregator 1inch.exchange raised a $175B Series B from institutional investors, led by Amber Group. The ambition of 1inch is to be a  gateway for institutions that want to enter the DeFi space: “The next $1 trillion of assets entering DeFi will come from institutions rather than retail users, and 1inch would like to facilitate entry for them”

🇫🇷 Lydia grabs another $100 million for its European financial super app. For more about SuperApps ambition in the West.

🇬🇧 The Bank of London is set to enter the UK's clearing market with a pre-revenue round of $90M at a $1.1B valuation. It is only the second new clearing bank in more than 250 years. Finally a breath of fresh air in the sleeping global transaction banking world.

🇲🇽 Kueski, a Mexican Buy Now, Pay Later and consumer lending provider, raised $202M in debt and equity led by Victory Park Capital Advisors and StepStone Group.

Crypto exchange FTX is looking to raise another $1.5B at $32B Valuation. The startup has already raised $420M in October and $900M in July. Why all this funding? FTX is on a strong investment spree. It participated in $1.2B of funding in 2021, it launched a $100M fund with Solana ventures and Lightspeed to invest in GameFi and advertising expenses like buying ads for the Superbowl.

Other notable fintech deals from around the globe:

🇫🇮 Payment service provider Enfuce has raised a €45m Series C. It's the 11th largest funding round for a female-founded fintech in Europe this year.

🇺🇸 Neobank for small businesses Nearside (formerly known as Hatch)  has raised a $58M Series B. 

Read up on all the latest fintech deals in Dealroom.co

Exits:

🇬🇧 Seedrs bought by US group Republic for $100M after the merger with UK rival Crowdcube was blocked. The plan is to create the world's first global private investment platform and accelerate expansion across Europe. Last year EU introduced a new regulation to enable crowdfunding platforms to easily provide services across the EU market under a single set of rules. The merger between Seedrs and Crowdcube was blocked by regulators in March to avoid a market monopoly in the UK.

Tip of the week

European fintech startups have raised a record $30B in 2021. Round size and valuation have increased massively, this can be visualized through self-labelled Series A rounds (meaning rounds that the startup itself has indicated as Series A). We can see Megarounds becoming more and more common among Series A.
Are we in a bubble or are these valuations justified? Keep tuned since we are releasing something you do not wanna miss 👀

Job opportunities

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And Dealroom.co is hiring for 12 positions, including a Head of Research, Impact Specialist, Content Editor, and Intelligence Analyst internship.

Discover 163,000+ job openings at fintech startups (login for full results)

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💰 2000 early-stage funding rounds for fintech this year

🔎 Startups discovered through trade registers

Lorenzo Chiavarini

Innovation Analyst
Dealroom

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