(Bloomberg) -- Venture firm Andreessen Horowitz invested $100 million in crypto startup EigenLayer, suggesting that some of the industry’s top backers are still betting on blockchain despite a steep downturn in crypto venture funding.

EigenLayer was founded by Sreeram Kannan, who previously was an associate professor at the University of Washington. The startup facilitates a process called “restaking” that has gained major traction in recent months and is a takeoff on the method that runs Ethereum, where tokens are deposited or “staked” to the network to help validate transactions on the blockchain. Restaking allows new projects building on top of Ethereum to lever the blockchain’s security for their own networks.

“The idea is that when you stake on Ethereum, you are promising that you’re going to run the Ethereum network nodes correctly,” Kannan said in an interview. “With restaking, you are taking the same Ether and making additional promises that you will also validate other networks correctly.”

The companies plan to announce the investment Thursday. Andreessen Horowitz was the sole backer in the funding round, Kannan said. The startup raised $50 million in March in a funding round led by Blockchain Capital. Kannan declined to provide a current valuation for the company. 

Andreessen Horowitz was one of the top deal-makers for crypto venture funding last year, according to data from PitchBook. The firm raised a record $4.5 billion crypto fund in 2022 and is still actively pursuing investments in the space. General Partner Ali Yahya said in an interview that EigenLayer is an important player in the crypto industry. 

“It will enable all sorts of new kinds of applications to be built,” he said. “People will stake capital in order to gain rewards from new services that get spun up on top of EigenLayer.” 

Currently, EigenLayer offers a points system for those who restake using its platform, but Kannan said there are currently no plans for launching a crypto token.

“There are many paths that they could take for monetizing,” Yahya said. “It could be a more traditional business model or there could be a token.” 

The staking process has drawn scrutiny from regulators, including US Securities and Exchange Commission Chair Gary Gensler, who has warned crypto companies that staking digital assets could violate federal securities laws.

Kannan said that the firm is essentially offering a marketplace for those looking to restake, rather than conducting the actual staking process that has attracted regulators’ attention. 

“If Gary Gensler understood what we’re building, he would like us a lot,” he said. 

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