Despite concerns about centralization, crypto VC firms are channeling significant investments into startups focusing on “Professor Coins.”

This year has seen a surge in funding from crypto VC firms, particularly towards projects led by university professors, known as “Professor Coins.” A recent Bloomberg report highlights the influx of funds into these virtual asset projects, signaling a growing interest in academia-driven initiatives.

Following a resurgence in investment in Q1 2024, fueled by Bitcoin's surge to an all-time high above $72,000, firms like CheckSig and Sahara, founded by university academics, have attracted substantial investments over the past two months.

Crypto VC Firms Embrace Restaking Services

The trend towards “Professor Coins” has notably directed investments towards firms offering restaking services. Restaking enables validators to utilize already staked assets, providing a platform for new projects to leverage existing resources for a head start.

EigenLayer and Babylon have garnered significant attention from crypto VC firms, with recent investments totaling $118 million in both projects. EigenLayer, founded by Sreeram Kannan of the University of Washington, secured $100 million from Andreessen Horowitz, while Babylon, led by Stanford University Professor David Tse, raised $18 million.

Riad Wahby, an engineering professor at Carnegie Mellon University, praised the research and practicality of these projects, emphasizing their potential impact on the industry. Despite concerns about academic focus on theory over practice, Kate Lawrence, CEO of VC firm Bloccelerate, highlighted the appeal of the restaking model and invested in both projects.

Centralization Challenges and Criticisms

The shift towards “Professor Coins” by crypto VC firms has sparked industry debates, particularly regarding reduced decentralization. Criticisms arose following EigenLayer’s token distribution plan, allocating over 50% of 1.67 billion tokens to early participants and investors.

Furthermore, concerns were raised about the non-transferability of the coins, prompting discussions about the impact on decentralization. The project team defended this decision, stating that the non-transferable feature allows time for enhancing decentralization efforts.