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Companies

Winklevoss twins, Pantera get behind a business that’s capitalizing on a new trend sweeping crypto hedge funds

Quick Takes

  • Pantera Capital has led a $4.5 million fundraise in Staked 
  • Staked provides services that makes it easier for investors to earn additional yield on their crypto

Big names in the crypto world are getting behind a firm that’s capitalizing on a new trend sweeping the bitcoin hedge fund world: staking. 

Staked, a company led by Tim Ogilvie, offers services that allow hedge funds and institutions to earn extra yield on certain types of digital assets that run on proof-of-stake networks. In such networks, investors can “stake” their coins in order to receive a payout when block rewards are given out by the network. Staked, essentially, handles all the dirty work that goes into staking, including maintaining multiple servers. It also white labels its services for other firms, including potentially exchanges and custodians, to offer to their own clients. The firm raised $4.5 million in the round. Pantera led the fundraise, but other investors including Coinbase Ventures, Digital Currency Group, Winklevoss Capital, and Fabric Ventures. Staked provides staking services for six cryptocurrencies including Tezos, Dash, Decred, Livepeer, Factom, and EOS, according to a press release. The firm will use the capital from the raise to build out its engineering team to support more coins. 

“We realized the combination of assets moving to proof-of-stake as a security model and folks looking for passive yield on their crypto, created the emergence of a need for a company like this,” CEO Tim Ogilvie said. Ethereum, for instance, is in the process of switching from proof-of-work to a proof-of-stake model.

So-called “Mining 2.0” strategies have increased in popularity among crypto hedge funds as such firms look for new ways to make money in the bear market. Such strategies aim to squeeze alpha through active participation in crypto-networks with wide-ranging opportunities, including staking, providing validation services, or provisioning resources (e.g. compute power) directly to decentralized networks.

Many firms have adopted these types of strategies, with many adjusting LP agreements to allow for this “crypto-native” activity, due to unique custody requirements and tax treatment. Still, staking provides a number of technical headaches for investors, including having to run multiple servers and 24/7 monitoring to maintain those servers, Ogilvie said. “For every cryptocurrency, you need 2 to 3 servers and someone to keep it up 100% of the time,” Ogilvie said. “It is not a 9 to 5 job. It’s a nights and weekend job. And that’s for every chain you want to support.”

As for a firm like Pantera, most want to focus on managing their portfolio — not servers. “We want to be focused on investing in entrepreneurs,” Paul Veradittakit, a partner at Pantera, told The Block in an interview. Pantera is using Staked’s services to stake a number of digital assets, which Veradittakit declined to name. 

Still, Pantera could be making a pretty penny from staking. Participating in the practice can produce annual yields as high as 100%, according to Staked.