10 months ago
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2023 hasn’t been the best year for crypto companies. According to PitchBook data, VC investments in crypto companies are down by 68% in 2023 compared to 2022. To be fair, crypto companies still raised $9.5 billion. But that’s a small number compared to 2022, the year during which crypto companies raised $30 billion.
And yet, some startups are faring better than others. French crypto startup Kiln just closed a $17 million funding round in December 2023. 1kx is leading the round with Crypto.com, IOSG, Wintermute Ventures, KXVC and LBank also participating. Some existing investors also put more money in the company.
Even if you’re familiar with the big names in the crypto space, you might not be aware of Kiln as the company has focused on white-label infrastructure-focused products. Companies like Ledger, Crypto.com and Coinbase rely on Kiln’s technology for their pooled staking services in their non-custodial wallets (Coinbase Wallet, Ledger Live, etc.).
As a reminder, staking consists in locking crypto assets in a blockchain to secure a blockchain and its transactions. There are financial incentives when you stake assets as you earn rewards over time.
Several proof-of-stake blockchains let its users stake crypto assets, such as Polygon, Solana and Avalanche. But the biggest proof-of-stake blockchain by far is Ethereum, which switched to this mechanism in September 2022.
In this ecosystem, Kiln provides a suite of smart contracts that facilitates staking. Essentially, Kiln programmatically manages staking through these on-chain contracts. With a simple transaction, users participate in Kiln’s staking pools and start earning rewards. Kiln and its partners also get a commission, which is also automatically handled by the smart contract.
And it’s been working extremely well as the company currently manages 1,168,288 staked ETH. At today’s exchange rate, it represents nearly $3 billion in ETH assets under management. Over the past year, Kiln has increased its “stake under management” by 5x.
The largest operator of Ethereum validator nodes
In addition to these on-chain products, Kiln has SDKs and APIs to facilitate integrations with its staking pools. It also operates a large network of validators. On the Ethereum blockchain, Kiln currently is the largest operator of validator nodes with a bit more than 4% of market share according to Rated data.
“Operating our own validator nodes is a way to guarantee the highest level of security while optimizing for the highest financial performance. It also helps up when it comes to improving monitoring. Finally, this hands-on approach helps us appear as a legitimate company with strategic partners such as the Ethereum Foundation, which shares our best practices and anti-slashing strategy,” Kiln’s head of marketing Marie Siegrist told me.
There are several ways to offer staking or “pseudo-staking”. For instance, many centralized exchanges like Coinbase and Binance offer staking rewards. Behind the scenes, these centralized exchanges manage crypto assets for you. There are also liquid staking protocols like Lido, which provides a different token to represent a staked ETH.
But if you want to integrate one-click staking in a non-custodial wallet, Kiln appears to be a good white-label technology provider. It’s a low-level approach to staking and some companies even ask Kiln to operate dedicated validators for them.
“Today’s news demonstrates our commitment to growing our enterprise-grade staking platform and we are delighted to be joined by leading digital assets investors who are primed to help us achieve our goals . . . We have an exciting lineup of products and upcoming expansion plans, including the establishment of an office in Singapore,” Kiln co-founder and CEO Laszlo Szabo said in a statement.
Kiln has raised a total of $35 million since its inception. The company takes a commission on staking rewards, which means that the company’s revenue will grow in parallel with its total assets under management.
