Bitcoin developer Lightning Labs raised $70 million from early investors in Tesla and SpaceX to help turn the first major blockchain into a network capable of transacting trillions of dollars in volume annually, making it a competitor to the likes of Visa.
Lightning Labs Raises $70 Million To ‘Bitcoinize’ The U.S. Dollar
While bitcoin is conducting $50 billion in volume daily, the public network is only capable of handling a few transactions per second, compared to Visa’s 65,000. Since 2016, Lightning Labs has been working to fix that problem by developing the Lightning Network, a so-called layer-2 solution that sits on top of the bitcoin blockchain.
With the investment, the California-based Lightning Labs plans to build out Taro, a protocol that, it hopes, will open Lightning Network to assets other than bitcoin, including stablecoins and fiat currencies.
“That’s really significant because the potential here is for all the world’s currencies to route through Bitcoin over the Lightning Network,” Elizabeth Stark, CEO and co-founder of Lightning Labs, told Forbes ahead of the announcement.
To realize that vision and ensure the company’s further growth, the bitcoin payments startup raised a Series B funding round, led by Valor Equity Partners and global asset manager Baillie Gifford, both early backers of Tesla and SpaceX. Among other high-profile investors are Robinhood CEO Vlad Tenev, NYDIG and Silvergate CEO Alan Lane. This follows on a $10 million Series A in 2020, following an even earlier investment by Twitter and Block co-founder Jack Dorsey. Stark declined to disclose the firm’s post-money valuation.
In 2018, Lightning Labs launched what many saw as a solution to bitcoin’s slow throughput—the Lightning Network. Originally described in a white paper by academics Joseph Poon and Thaddeus Dryja, the network now operates via more than 30,000 nodes and enables cheap and fast bitcoin transactions by conducting small and frequent payments away from Bitcoin’s main layer. Stark compares the network to Visa, a global online system handling electronic payments between over 100 million merchants and 15,000 financial institutions. But unlike its counterpart, Lightning relies on bitcoin’s liquidity, and anyone can run a Lightning node.
Growth in the network’s capacity, or the amount of bitcoin locked up in its channels, has slowed down in recent months, but the network continues to gain adoption, according to Stark. More than 300 companies and startups are building on Lightning Labs’ open source technology. Just last week, leading cryptocurrency exchange Kraken joined the Lightning Network with its own node. Earlier in September, Twitter added support for bitcoin-based payment features, including Lightning wallets.
The first step in Lightning Labs’ plan to turn the network into a multi-asset layer on top of Bitcoin is to add stablecoins. With the launch of the new protocol, developers will be able to issue these assets (which are pegged to other assets, like the U.S. dollar) on the bitcoin blockchain, and then move them onto Lightning for speed and scalability, explained Stark.
According to a statement provided to Forbes, “Lightning Labs is already in talks with numerous major players about issuing stablecoins and building on its platform using this technology.” Stark declined to disclose additional details but shared that the protocol could offer support for various types of assets, including in-game collectibles and NFTs (Lightning Labs is not actively working on these assets).
The launch of Taro is the latest in a series of efforts to unwrap the potential of the blockchain that started it all. In February, Muneeb Ai, cofounder of Stacks, a smart contracts network linked to Bitcoin, raised $150 million to bring applications and assets like NFTs that took off on chains like Ethereum and Solana to Bitcoin.
Taro’s development was accelerated by Taproot, a recent upgrade to bitcoin that introduced a number of improvements, including making it easier and faster to confirm transactions on the bitcoin network.
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