Multicoin Leads $2.3M FastLane VC Deal, Continuing Its Bet on MEV Infrastructure

The crypto-focused investment firm has now backed three projects centered around maximal extractable value (MEV), a way for validators to earn extra money from traders.

AccessTimeIconMay 23, 2023 at 2:00 p.m. UTC
Updated May 23, 2023 at 8:37 p.m. UTC

Crypto-focused investment firm Multicoin Capital has led a $2.3 million seed funding round for FastLane Labs, a maximal extractable value (MEV) protocol for Polygon. The fundraise marks Multicoin’s third time backing infrastructure for MEV, a controversial way for validators to earn more money while ordering transactions into the blocks on a blockchain.

MEV is a way for miners or validators to profit from how a pending blockchain transaction is ordered or arranged before the transaction becomes a block. The method of earning MEV varies a bit depending on the chain, but it’s common for traders to focus on a high volume of attempts or spamming to maximize the profit potential.

Founded in March 2022, FastLane Labs provides an auction system that allows validators a chance to earn rewards without the need to spam the blockchain. Polygon validators earn their tips in the native MATIC token from traders who are competing for specific positions in the blocks. The auctions happen off-chain and externally to minimize redundant transactions on the network. FastLane stands apart from other Polygon MEV protocols by allowing validators to use their current Polygon clients to participate rather than downloading a new proprietary client, FastLane co-founder and CEO Alex Watts said in an interview with CoinDesk

“We actually didn't originally intend to raise capital," said Watts. "We were planning to sort of bootstrap the whole way ... Then we were approached by Multicoin Capital, and they actually pitched us a few ideas that we thought were really fascinating," he continued. "We realized that by working with them, and by raising capital, we could actually become much larger than we had originally been planning.”

The talks with Multicoin started in late August of last year, when FastLane didn’t have a corporation or even a pitch deck to show investors, Watts said. The long fundraise period gave the FastLane legal team time to get the infrastructure in place. Other participants in the round included Polygon Ventures, Shima Capital, Delphi Ventures and Everstake Ventures, a41 Ventures and Symbolic Capital, the venture capital fund from Polygon co-founder Sandeep Nailwal.

Multicoin Capital made its first MEV-related investment in Sept. 2021 leading the $17.4 million round for Eden Network, multi-chain infrastructure for reducing the negative impacts of MEV on a network. The firm then co-led a $10 million round last August for Jito Labs, an infrastructure provider focused on Solana-based MEV.

“As DeFi on Polygon continues to blossom we expect more MEV opportunities to emerge," said Shayon Sengupta, investment partner at Multicoin Capital, in a statement. "Polygon FastLane today represents the best way to get exposure to DeFi activity within the Polygon ecosystem ... MEV protocols do more than create additional revenue streams for validators; they are now critical infrastructure that helps maintain the stability and usability of any given network.”

Update (UTC 16:30): Update corrects the third paragraph to note that traders can spam a network, not validators.

Edited by Stephen Alpher.


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