Coinbase Co-Founder Raises Largest VC Crypto Fund Ever To Bet On Ethereum, Token Economy

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by Tyler Durden
Tuesday, Nov 16, 2021 - 01:00 AM

Over the last few years, cryptocurrencies have moved from extreme niche to more widespread adoption, shrugging off skeptics and 'bankers' along the way, as the vast majority of U.S. adults have heard at least a little about cryptocurrencies like Bitcoin or Ether, and 16% say they personally have invested in, traded or otherwise used one, according to a new Pew Research Center survey.

And that increasing interest has sparked a cavalcade of funds designed to help investors comprehend the increasingly complex crypto investing space, as opposed to the Layer 1 tokens that are best known, and just this week, The FT reports that Coinbase co-founder Fred Ehrsam and former Sequoia Capital partner Matt Huang have finished raising $2.5bn this month for Paradigm One, believed to be the largest new crypto venture capital fund in history.

The FT notes that earlier this year, VC firm Andreessen Horowitz also raised twice as much as it had hoped for a new cryptocurrency fund, bringing in $2.2bn, which at the time it said was the “largest crypto fund ever raised”.

Both firms have staked their fortunes on an expanding ecosystem of applications based on ethereum, a digital ledger that allows programmers to write contracts automatically executing functions such as money transfers.

The programs run on what are known as tokens, digital assets that are granted to users over time, often giving them a say in governance.

Ehrsam told the FT, "it is probably small relative to where we're going in 10 years," noting that the world of token-based apps, sometimes referred to as web3, was only just getting started.

“The biggest companies in the world are large internet tech companies powered by network effects,” Ehrsam said.

We think decades into the future it’s very clear the largest entities in the world will be powered by tokens.”

Paradigm’s founders said they viewed their token investments as long-term holdings that could take at least 10 years to pay off.

The DeFi boom (demand for 'smart' Ethereum-based contracts vs Bitcoin) is evident in the outperformance of ETH relative to BTC in recent years...

In fact, as notes, there is currently over $110 billion in funds locked-up in Decentralized Finance, dominated by over 6.5 million ETH.

Finally, Huang said he had few doubts about Paradigm’s strategy:

“If Fred and I ever found ourselves working in some kind of low growth, low return situation, I think we would prefer death.”

And if Goldman Sachs is right about the inflationary impact on Ethereum...

We suspect Fred and Matt won't be 'bored' anytime soon.