If two years ago someone said that a few cryptocurrency and blockchain companies are going to break into billion dollar club, he would probably be ridiculed. However, today things are different. Cryptocurrency and blockchain analysis firm Chainalysis has made the cut to the Forbes list of Next Billion Dollar Startups, and with this development it has become the first cryptocurrency firm to do so. Chainalysis analyzes blockchains and human behavior in the space of crypto to help combat crypto crime. It also helps banks in allowing their services to crypto companies while ensuring that their services are not used for financing illegal activities on crypto networks (something which should be of interest to our own country’s bankers as well).
Chanlysis was founded by Jonathan Levin almost 3 years ago. The first major case that brought it to spotlight came in its kitty almost an year later when it started investing the incident of hacked Mt. Gox cryptocurrency exchange. In that case he recovered $1.2 billion in Bitcoins which investigators had believed to be lost. Later on Chainalysis founder Levin felt that the way they analyze crypto usage patterns can also be used to help a number of other organizations. So his team built a new tool that would help banks and other financial institutions open cryptocurrency accounts without having to worry about compliance with regulatory requirements. The tool would help them ensure that their services are not utilized by entities dealing in crypto for any illegal activities.
It’s this business which has made Chainalysis a company with more than $8 million in revenue. The company, which is backed by Accel Partners and Benchmark Capital with more than $53 million of funding, said that now his company’s focus is largely on banking service providers. Here’s what Jonathan Levin recently told Forbes in a statement:
“We’re now helping banks understand how they can build programs to allow cryptocurrency businesses to access banking services, but also make sure there’s no illicit activity going on.”
Hacking in crypto space has emerged as a big problem that needs to be addressed with immediate focus. More than a billion dollars were lost last year in hacks of cryptocurrency exchanges alone. These figures are enough to tell about how important of a job Chainalysis has got on its hands. And it’s not alone with this job – it’s also getting competition from a number of other startups, including London-based Elliptic, California-based CipherTrace and Crystal Security platform of Bitfury.
Today half of Chainalysis revenue comes from working with various regulators, central bankers, tax authorities and investigation agencies. The other half comes from providing services to banks and financial institutions. Now it will be interesting to see which other sources of revenue they discover in the coming days, and how long they take to reach a billion-dollar valuation.