Goldman Sachs invests in blockchain backbone firm Blockdaemon

Blockdaemon, a firm that creates and hosts the computer nodes that make up blockchain networks, raised $28 million from lead investor Greenspring Associates as well as from Goldman Sachs Group Inc.

The firm plans to use the proceeds to double its headcount to 100 and to make acquisitions, Chief Executive Officer Konstantin Richter said in an interview. The company has seen rapid growth in the past year, and has won customers including JPMorgan Chase and Citigroup.

“We’re selling 10 times what we did a year ago, mostly to new institutions coming into the space,” Richter said. He declined to give a valuation for Blockdaemon.

Investors have been pumping money into cryptocurrency projects such as Coin Metrics, Paxos Trust, Digital Asset Holdings and Chainalysis as Bitcoin and Ether have surged to records and then retreated. The startups receiving investor attention tend to be building infrastructure for the broad blockchain industry like exchanges, analytics or nodes.

Blockdaemon had net income of $18 million in the first quarter with revenue at about $24 million, Richter said. Companies including PayPal Holdings, Robinhood Markets and E-Trade have sought its services to expand their blockchain and cryptocurrency offerings.

In May, Goldman Sachs led the $15 million investment into Coin Metrics, a cryptocurrency and blockchain data provider to institutional clients. The bank contributed $5 million to the Blockdaemon round, Richter said. “It’s been a long dialogue with them,” he said.

Also last month, Coinbase Global, the largest U.S. crypto exchange, became a public company through a direct listing on Nasdaq. Richter said he’s seen a progression among large financial firms that starts with them allowing their customers to buy Bitcoin and Ether. Then they branch out to protocols that pay interest if you hold enough tokens to help secure the network.

“Large institutions are getting serious about paying yield on tokens out to their customers,” he said. “It shows that large financial institutions over time will want to rival Coinbase” by copying its model of making it easy to buy and earn interest on various digital coins.

Other investors in the Series A fundraising for Blockdaemon include BlockFi, Warburg Serres, Uphold and Voyager Digital, according to a company statement.