The crypto winter is getting colder.
Crashing valuations in cryptocurrency markets and a chill in the initial coin offerings (ICO) market have affected operations at two more ventures involved in the space.
Blockchain and smart contract consulting company Consensys, which dominates ethereum research and development, has confirmed to online publication Coindesk that it is laying off 13% of its staff. Meanwhile, ETCDEV, a team involved in developing ethereum classic’s blockchain, has shut down because it was unable to fund operations. The cutbacks come on the heels of blockchain social media platform Steemit’s announcement that it was laying off 70% of its staff due to the declining price of its coin in crypto markets.
As of this writing, ethereum’s ether is down by 93% from a peak of $1365.21 on Jan 14. Ethereum Classic, which is the original blockchain for ethereum before its fork, is down by 92% from its peak of $45.98 on the same day.
What Went Wrong at Consensys?
Consensys was started by Joseph Lubin, ethereum cofounder. It has become a hub of sorts for ethereum and smart contract research and development. A recent Forbes profile describes the company as a crypto conglomerate with offices around the globe. It has “spawned” 50 businesses related to the ethereum blockchain and has a headcount of 1200 employees, according to Forbes.
Explaining the business model for his company in an interview, Lubin said it was funded and owned internally by employees. Consensys derives revenues from an assortment of business lines, which include consulting and development solutions, and providing marketing & advertising solutions to blockchain companies. “Some business lines make small amounts of money while some make big amounts of money,” he said. As an example, he said the company’s security auditing business was a lucrative venture.
Sale of ICO tokens from projects funded by Consensys are another source of cash. Funding for token launches for Consensys-backed companies also thrived during an ICO boom that started in June of last year. According to online database Crunchbase, Consensys is an investor in nine startups. Some have conducted successful ICOs: NYC-based Airswap raised $36 million in its ICO last year. Successful offerings are profitable for startup investors because they get tokens at discounted prices. When they are listed on cryptocurrency exchanges, tokens generally appreciate in value allowing investors to cash out at a profit.
But the script changed during the second half of this year, when the ICO market took a hit. Civil, a blockchain journalism initiative in which Consensys invested, had to cancel its ICO.
“We are looking at lots of different situations – some of them will shrink, some of them will grow,” Lubin told Coindesk. He added that Consensys was planning to focus “much more rigorously” on its business lines for accountability, including financial stability.
And at ETCDEV..
Ethereum Classic, whose market capitalization has fallen by 59% since the start of this year, is mainly funded by Barry Silbert, founder of the Digital Currency Group – another crypto conglomerate. But Igor Artamonov, founder and team lead at ETCDEV, claims that his development team has mostly survived on “small donations”. According to its website, the ETCDEV team consists of ten members. It has worked on major projects for the ethereum classic blockchain, such as Classic Geth – the main client or desktop interface used for the ETC blockchain. But the team’s shutdown is not expected to have a major impact on development of the ethereum classic blockchain. The official ethereum classic account tweeted that developers on its blockchain should Keep Calm and Build On.