One of the marquee investors in crypto is making another big bet. The crypto arm of venture capital firm Andreessen Horowitz announced Thursday that it had invested $50 million into Jito, a crypto protocol that supports the blockchain Solana. In return for the investment, the firm received an allotment of Jito’s cryptocurrency, said Brian Smith, executive director at the Jito Foundation, one of the main entities behind the protocol.
According to Smith, the deal encourages “long-term alignment” between Andreessen Horowitz and the crypto protocol. He also said this was the largest ever commitment from one investor into Jito. “If you’re accepting long-term alignment where you can’t sell for a while, then there’s traditionally some modest discount associated with that,” added Smith, who declined to provide specifics about the transaction.
Deals involving token purchases, or when an investor buys a stash of cryptocurrency not currently circulating in the market, are common in crypto. One of the most prolific investors in digital assets, Andreessen Horowitz has made a number of these purchases over the past year. These include investments in two other crypto protocols: a $55 million deal in April for cryptocurrency from LayerZero and a $70 million deal in June for tokens from EigenLayer.
Liquid staking
Even though Jito doesn’t have brand-name appeal beyond in-the-know crypto investors and traders, the protocol is a key part of the infrastructure for Solana, one of the most popular blockchains on the market. “We’re intricately tied to Solana’s growth,” said Smith.
Blockchains are akin to decentralized cloud computing networks where unaffiliated servers compute data and process transactions. To incentivize these computer servers, or what those in crypto call “validators,” from faking transactions and committing fraud, validators must often put a certain amount of the network’s cryptocurrency in escrow.
Crypto developers call this arrangement “staking.” For so-called proof-of-stake blockchains like Ethereum, validators receive a certain amount of interest for staking tokens, but, if they are dishonest, they receive a penalty and lose some of the crypto they’ve staked.
Blockchains require validators to stake large amounts of cryptocurrency, which can lock up a significant amount of a token’s supply. “Liquid staking” solutions, like Jito for the Solana blockchain, allow validators to essentially trade their staked cryptocurrency as if it weren’t in escrow.
