ConsenSys

ConsenSys is the leading software company that develops decentralised solutions on Ethereum blockchain. It enable developers, enterprises, and users worldwide to build next-generation applications, launch modern financial infrastructure, and access the decentralized web. 

Official website: www.consensys.net

HQ: New York, USA 

Why invest in ConsenSys?

Metamask — the largest non-custodial (OTC) wallet with the number of active users exceeds 30 million

Societe Generale, Binance, central banks of South Korea, Australia and Singapore are among the clients

The company’s valuation has grown from $3,2 B to $7 B during 5 months alone

Financial metrics of ConsenSys

• Total funding: $725m
• Last funding round: $450m — Series D
• Last funding round valuation: $7b
• Last funding round date: March 2022
• Lead investors: UBS, BlackRock, Morgan Chase, MasterCard, Coinbase, Microsoft, Softbank, HSBC

ConsenSys’ products and solutions

• MetaMask is the largest non-custodial (OTC) wallet for storing and managing crypto assets. Users can store NFTs, invest in DeFi, stake or exchange cryptocurrencies. Since November 2021, the number of active users has grown by 42% and today exceeds 30 million. By November 2021, MetaMask had processed over $10 billion worth of transactions.

• Codefi helps corporate clients integrate blockchain into their business processes: digitize assets, launch decentralized networks, etc. Clients include Societe Generale, Binance, crypto.com and central banks of various countries. South Korea, Australia and Singapore are planning to develop their own blockchain solutions in partnership with ConsenSys.
• Infura — API solution for accessing Web3. Used by over 430,000 developers and supports $1 trillion worth of transactions.

• Other solutions include Diligence, which helps to audit the security of star contracts, Quorum — an enterprise blockchain solution, and Truffle — a testing software for blockchain developers.

Business model

The main income comes from transaction fees in MetaMask, and the company also has a revenue stream from Infura subscriptions. CodeFi and other services receive profit based on the results of completed projects or consulting.

To diversify revenue, ConsenSys invests its own funds in crypto assets within the Ethereum ecosystem and manages a corporate venture fund to support young projects.

ConsenSys — Investment opportunity

• According to a ConsenSys spokesperson, its revenue for 2021 exceeded $100 million – mainly due to the growth in the number of MetaMask users due to emerging NFT and DeFi trends.

• Over the past year, the company has raised $650 million in venture capital investments, raising its valuation from $3.5 billion in November 2021 to $7 billion in March 2022.

• Capital raised on Series D will be invested in hiring more than 300 employees, redesigning of MetaMask and a further development of the fast-growing NFT business.

• The company holds Ethereum and many other crypto assets on its balance sheet. For each position, the company additionally earns from 4% to 16% per annum through staking. With the growth of the Ethereum exchange rate and the entire crypto market, the company will have more free capital for development.

Market overview

ConsenSys specialises on the market for the development of decentralized applications (DApps) based on the Ethereum blockchain. The capitalization of Ethereum is $350 billion (April 2022), which makes it the second largest crypto asset after Bitcoin. Over the past year, the total number of Ethereum addresses has increased from 146 million to 193 million. 

Ethereum also holds 77% of the $75 billion decentralized finance (DeFi) market and about 80% of the NFT market with a transaction volume of more than $54 billion.

In 2021, crypto startups raised 8 times more venture capital funding than in 2020. One of the largest venture capital firms, Andreessen Horowitz, even created a separate $2.2 billion crypto fund, making a big bet on this industry.

Competitive analysis

ConsenSys leads the non-custodial wallet market with its flagship MetaMask product. The major competitor is a CoinbaseWallet from Coinbase, also among other popular solutions there are Trust Wallet, Phantom, Dapper, Torus. One of the main advantages of MetaMask is the browser built into the application, which allow users easily connect to more than 3700 decentralized applications and Web3 services.

In the B2B blockchain market ConsenSys is considered the most experienced and reputable company that offers solutions build on Ethereum blockchain.

Founders and management of ConsenSys

Joseph Lubin is the CEO and founder of ConsenSys. He has held management positions at Morgan Stanley and Blacksmith Technologies. In 2014, together with Vitalik Buterin, he co-founded Ethereum and at the same time started working on ConsenSys. Considered one of the pioneers of blockchain and cryptocurrencies. 

Simon Morris is the CSO at ConsenSys. Former Director of Strategy at BitTorrent (10+ years of experience) and Director of Product at Libra. He received a degree in economics from Cambridge and an MBA from Stanford.

Deal exit

In the absence of a strong correction in the cryptocurrency market and a further development of the NFT, DeFi and Web3 economy, the company is likely to maintain the growth rate of users and revenue.

Given the leading position in the market and the high interest of venture investors in the mature crypto projects, next year ConsenSys can hold a round with $10-$12 billion valuation.

Associated risks

• The success of the ConsenSys business model largely depends on the popularity of cryptocurrencies among investors. With tighter regulation, higher interest rates or a strong correction, the demand for the company’s products may decrease.
• The Ethereum blockchain protocol has been criticized for its low throughput capacity and high fees. However, Ethereum 2.0 is planned to be released in the summer for greater efficiency.

• Internal litigation. A group of 35 ConsenSys developers filed a lawsuit alleging the illegal transfer of intellectual property of MetaMask and Infura to one of the company’s subsidiaries.