Blocknative, a crypto infrastructure data dredger that monitors transactions as they wait to be confirmed, has raised $12 million in its latest funding round, CoinDesk has learned.
The “in-flight transaction” tracker received Series A investments from Foundry Group, Blockchain Capital Robot Ventures and others, CEO Matt Cutler told CoinDesk. Rho Capital’s Ignition Fund led the round. Last July Blocknative raised $5 million in a seed round.
Blocknative’s tools surveil the mempool – digital waiting rooms for not-yet-validated crypto transactions – to get a sense of upcoming on-chain activity. Shedding light on this “dark forest” can help projects estimate gas fees, detect attackers and track “in-flight transactions” that haven’t settled in their wallets yet, Cutler said.
Front-running bots on the Ethereum network have become an issue for professional traders.
Mempool data is publicly available, but Cutler said it's nearly impossible for laypersons to parse. Only a handful of companies in the space are currently building tools for the mempool, he said, but he expects that to change as the market grows.
The market has so far responded with gusto. Annual recurring revenue has spiked 1,500% with well-known projects including Compound, Curve, Zapper and Yearn Finance signing up in the last 12 months. About 40% of Blocknative customers are “builders” such as them, Cutler said. The other 60% are traders hoping to leverage mempool data.
“The trading category has grown really rapidly – it came from basically zero” at this point last year, Cutler said.
Altonomy Ventures, the investment firm based in Singapore, began using Blocknative eight months ago as a way to confirm its transactions were executing on decentralized exchanges, head of investments Ricky Li said.
“There’s a lot of very basic things that you enjoy trading at a centralized exchange,” he said, offering order execution notifications as an example. “But on the DeFi side if you trade on 1inch or Uniswap, you don’t have the luxury of that. We send an order out, it’s like sending it into a black hole,” he said.
Beyond tracking “in-flight” orders, Li said Altonomy Ventures has also leveraged mempool intelligence for an all-important edge on cutthroat digital trading floors to avoid being front-run.
A majority of the top decentralized finance protocol builders are also using Blocknative to shore up their networks, according to Blockchain Capital partner Spencer Bogart, who sits on Blocknative's board.
“If you're very proactively monitoring the mempool, you can run blocknative simulation platform to detect if any of those transactions” would pose a threat to the protocol once they confirm, he said.
Cutler plans to double Blocknative’s 20-person staff by year’s end, with new hires in marketing, sales, C-suite, customer support and development.
“We're trying to build a real core infrastructure that's going to be sustained and grow as the whole ecosystem grows,” he said.