Alphabet, Google’s parent company, invested over $1.5 billion in four blockchain startups in 2022.
Investment by the Internet Giant in Crypto Startups
Major financial corporations are focusing on innovative technologies, and as a result, they are striving to make strides in blockchain and digital currencies. Among them, Alphabet invested over $1.5 billion in four blockchain startups in 2022.
In the previous article titled “The Internet Giant Won’t Let Go of Its Position in the Digital Space!” from the last issue of the Blockchain Research Digest, we explored Google’s positioning in the Web3 industry. That article explained how the world’s most widely used search engine has evolved into a platform supporting blockchain and Web3 startups while striving to dominate this innovation-driven sector. Here, we’ll delve deeper into the details of Google’s platforms for investing in Web3 and blockchain industries.
Alphabet’s Investments in Blockchain and Web3-Focused Startups
In mid-2022, Blockdata, a reputable research company, analyzed investment data from the world’s top 100 corporations. This analysis reviewed leading banks and major financial institutions investing in crypto and blockchain startups. Their findings revealed that large financial companies, including Google, pool resources to capitalize on the rapidly advancing blockchain and digital currency technologies.
- According to Blockdata’s report, Alphabet invested $1.5 billion in 2022 into the following four blockchain and crypto-focused startups:
- Fireblocks: A digital asset custody platform.
- Dapper Labs: A Web3 and blockchain-based company.
- Voltage: A provider of Bitcoin infrastructure-based tools.
- Digital Currency Group: A venture capital firm focusing on cryptocurrencies.
Below is a brief overview of these companies:
Google’s Investment in Fireblocks
Fireblocks, accessible at fireblocks.com, describes itself as offering “a suite of applications for managing digital asset operations and a robust platform for launching blockchain-based businesses.” Essentially, it enables businesses to securely support digital currencies and assets.
In 2017, a hacker group known as Lazarus attacked four South Korean exchanges, stealing nearly $200 million of Bitcoin. This event revealed two significant issues: first, a shift in cybercriminal motivations from traditional financial platforms to digital asset providers, and second, the complexity and lack of solutions for securing digital assets in enterprise environments.
This led Michael Shaulov, Idan Ofrat, and Pavel Berengoltz, members of the original investigation, to create Fireblocks—a security platform for safeguarding digital assets. Fireblocks leverages advanced technologies like Multi-Party Computation (MPC) to protect institutional digital assets from theft and hacking. It also provides an all-in-one platform for trading, storing, transferring, and issuing digital assets for financial institutions.
Since receiving support from Google Cloud’s crypto startup fund in 2022, Fireblocks has attracted more institutional investors. Reports indicate that its valuation has exceeded $8 billion in its latest financial cycle.
Google’s Investment in Dapper Labs
Canadian startup Dapper Labs, accessible at dapperlabs.com, serves customers worldwide. It merges various domains, such as gaming, art, sports, and technology, through blockchain-based products. Notably, it’s recognized as the developer of NBA Top Shot and the Flow blockchain.
NBA Top Shot, which literally refers to the best moments in the NBA basketball league, is a blockchain-based platform for the creation and sale of non-fungible tokens (NFTs) focused on basketball. In other words, NBA Top Shot allows users to create, buy, or sell basketball videos and moments as NFTs.
Meanwhile, Flow is a new proof-of-stake blockchain tailored for Web3 and metaverse applications. It’s designed for scalable decentralized applications across various sectors, including DeFi, DAOs, PFP projects, and NFTs. Google’s investment in Dapper Labs aligns with its strategy to empower Web3 innovation, reduce constraints, and facilitate new digital interaction and ownership forms.
“The same transformation that email brought to postal services, Bitcoin brings to banks.” –Rick Falkvinge, IT entrepreneur and founder of Sweden’s Pirate Party
Since Google is committed to maintaining leadership in empowering the next generation of the web, fueled by blockchain, it has focused on the startup Dapper Labs and its developing projects. By investing in these companies, Google aims to leverage blockchain-based applications to bring fans closer to the brands they love and, in doing so, create new ways for consumers to become creators themselves. In this way, Google can enable users to access new forms of digital interaction and track their ownership more securely.
Google’s Investment in Voltage
Voltage, a company providing Lightning as a Service (LaaS) solutions based on Bitcoin’s Lightning Network, operates through its official website, voltage.cloud. On their platform, Voltage addresses the questions “What is Voltage, and why choose it?” as follows:
“Voltage empowers teams and projects engineering Bitcoin-centric infrastructures with enterprise-level capabilities. By leveraging Voltage, you gain access to the fastest and most scalable Lightning-based methods that adhere to the highest standards of security and privacy. Through the Bitcoin Lightning Network architecture, Voltage offers a suite of tools for liquidity, data services, and nodes, thereby enhancing the value proposition of your project for both internal and external stakeholders.”
Google’s collaboration with Voltage aims to expand the project’s capabilities and hosting locations, enabling clients to leverage Bitcoin’s network and Lightning-based nodes globally. According to an announcement by Google Cloud, this partnership facilitates real-time payments with near-zero fees, a revolutionary step in fund transfers and new business model creation.
Voltage’s team identifies three key challenges their partnership with Google aims to overcome: enabling money transfers via the Lightning Network, providing an affordable alternative for financial and fintech companies, allowing businesses to reach a global customer base by adopting the Lightning Network standard, activating microtransactions and real-time interactions—challenging to execute using traditional payment methods—which helps businesses retain customers, reduce customer acquisition costs, and enhance Customer Lifetime Value (CLV).
“We are seeing the entry of managed money and, to some extent, institutional money into the [crypto] space. Based on personal experience, I know many people who work in hedge funds or other investment funds and personally trade cryptocurrencies. The question is, when will people start doing this with their companies and large assets?” -Olaf Carlson-Wee, CEO of the cryptocurrency fund Polychain Capital and former head of the risk management team at Coinbase.
Google’s Investment in Digital Currency Group (DCG)
Digital Currency Group (DCG) is a venture capital firm focused on accelerating the development of a better financial system. Leveraging its network, expertise, insights, and capital, DCG supports and builds blockchain- and cryptocurrency-based companies. With investments in over 200 companies across 35 countries, it is regarded as one of the most active investors in the digital currency space.
DCG also acts as a parent company for several major startups in the cryptocurrency ecosystem. While the valuation of many of its investments has remained undisclosed, the company initially raised just $25 million in seed capital during its first six years. However, in late 2021, DCG sold part of its shares to SoftBank, a Japanese telecommunications firm, and two Alphabet subsidiaries, CapitalG and Ribbit Capital, as part of a $700 million deal led by SoftBank. Following this transaction, DCG’s valuation was estimated at over $10 billion.
Barry Silbert, founder, and CEO of DCG, regarding this deal and the sale of shares, said: “This part of Google’s and SoftBank’s investments in DCG was not about raising capital or collecting money, but rather about providing an opportunity for early investors who wanted to exit their shares and realize profits.”
Ownership of shares in DCG marked Google’s first steps towards the cryptocurrency industry. In this context, David Lawee, Managing Partner at Capital G, said in an interview with the Wall Street Journal: “I see similarities between the internet companies of the Dot Com Boom era and the companies operating today in the cryptocurrency industry.” He also refers to decentralized finance (DeFi) as a unique and fascinating space and points out signs of the enduring power of crypto.
The Dot Com Boom refers to the rapid increase in technology stock valuations in the U.S. stock market during the late 1990s, driven by investments in internet-based companies. During the exponential growth fueled by the rising popularity of internet companies, known as “Dot Coms,” the NASDAQ index rose from 750 to over 5000 points between 1995 and 2000.
“I see similarities between the internet companies of the Dot Com Boom era and the companies operating today in the cryptocurrency industry.” -David Lawee, Managing Partner at Capital G
The Fintech Outlook with Google’s Crypto Investments
Google Cloud’s dedicated support for blockchain and Web3 demonstrates its commitment to advancing these technologies and bringing them to a broader audience. Google’s expertise in cloud-native technologies like Kubernetes provides the scalability necessary to meet the organizational requirements of crypto startups. As these startups scale their services in collaboration with Google Cloud, companies in the financial and fintech sectors can further benefit from blockchain and Bitcoin-driven capabilities. These include leveraging the Lightning Network to streamline payment processes, reduce costs, and explore new business opportunities.
Reports from Blockdata reveal that companies like Samsung and BlackRock are heavily investing in blockchain projects and products with high growth potential alongside Google. These corporations aim to integrate blockchain initiatives into their business models and develop practical use cases. While Alphabet’s and other firms’ investments in crypto projects are difficult to trace, they often fund the sector through private financing rounds and unique investment mechanisms.
