A central challenge facing crypto is the ever-expanding list of blockchains, with new projects from Sui to Sei popping up even as other layer-1s overstay their welcome.
While different developers have sought to create solutions to create compatibility across different blockchains, San Francisco-based Connext Labs argues it has a long-term answer. Investors seem to agree, with Connext announcing a $7.5 million strategic round on Wednesday at a $250 million valuation, with backers including Polychain Capital, NGC Ventures, Polygon Ventures. Connext raised a $12 million series A in 2021.
In an exclusive interview with Fortune, Connext founder Arjun Bhuptani described the project as the "HTTP of Web3," a reference to the pioneering protocol that enabled the creation of an interconnected World Wide Web.
"The big narrative in this space has been, 'We can use [blockchain] infrastructure to build really amazing public goods, but this infrastructure can't scale even past really 100,000 people,'" Bhuptani said. "Folks have realized in this space that kind of like the internet itself, the way that we scale blockchains is by actually scaling them out horizontally—so many different blockchains running in parallel."
HTTP of Web3
Connext facilitates interactions across blockchains. Bhuptani cited different use cases, such as an application like a decentralized exchange wanting to access users across different blockchains, from Bitcoin to Ethereum to Solana, or having copies of applications across different blockchains. He also argued that we will continue to see more specialization of blockchains, such as Filecoin, which is focused on storage, or Sei, which is focused on trading.
Other projects are focused on interweaving blockchains, such as Polkadot—a self-described "layer zero" that undergirds different blockchains—as well the USDC issuer Circle's new cross-chain transfer protocol.
"They're trying to build what will eventually be the fabric of the future of what the internet will look like," Bhuptani said.
While he cautioned that Connext is "not trying to fix everything," he said the project is different because it's not aiming to solve the problem on a per-blockchain case, instead leveraging the existing infrastructure of each, rather than trying to build everything in-house. In other words, Connext is providing the protocol rather than the ecosystem.
Next steps
Despite what Bhuptani admitted is a "terrible market," he said Connext plans to use the new capital to decentralize "more aggressively" by funding the setup and operation of its foundation, which will also support community-led initiatives.
Connext plans to launch a token later this year. As opposed to other cryptocurrencies, which are generally built on top of a single blockchain with "wrapped" versions then ported over to other blockchains, Bhuptani said he wants the Connext token to be chain-agnostic from the start. Connext is working on a standard for cross-chain tokens that could work across different ecosystems.
"I think we would be the first people pushing toward this model," he told Fortune.
The main challenge for Connext, and other crypto projects building across blockchains outside of Bitcoin and Ethereum, will be the regulatory challenges in the U.S. After the Securities and Exchange Commission's aggressive stance labeling many altcoins as securities in lawsuits against Coinbase and Binance last week, cryptocurrencies such as Solana and Polygon saw their value plummet.
"We're seeing this flight to some of those more well-known, well-established chains," Bhuptani said, but he argued there hasn't been as much of a transition away from Ethereum-specific scalability solutions like Arbitrum and Optimism. "Our collective thesis is just that over time, there is no real option except to have the fragmentation of applications, and users across all of these different ecosystems, and then to tie them together."
