Elena Nadolinsky grew up playing with shells from abandoned tanks and decommissioned battleships in Volgograd, Russia after the collapse of the Soviet Union. When she returned there on a recent trip from her new home in Silicon Valley, she said she was struck by how Russia’s growing authoritarian surveillance continues to impact the very nature of Russia. innovation.
“The lack of privacy, and this expectation that I’m being watched, and I have to hide what I have, because I actually don’t have any guarantees of privacy,” said Nadolinski, speaking from his offices in San Francisco. “Has changed the culture in a way that in my opinion is having a negative impact on innovation and entrepreneurship in the country.”
To help combat this crippling effect, the 29-year-old founder of anonymous cryptocurrency startup Iron Fish has raised $ 27.6 million in a Series A led by Addreessen Horowitz to help secure future generations of Russians and citizens of the growing number of authoritarian states around the world, can continue to have privacy, even as all transactions in the world move to a shared and distributed ledger.
The stake in his work and a rising tide of other privacy innovators building with blockchain goes far beyond what is happening in the once-specialized world of cryptocurrencies. In fact, it could have ripple effects reaching into the very nature of money, and if online payments of all kinds – crypto or fiat – maintain a sense of offline privacy when paying for goods in cash.
“The reason I’m working on Ironfish is that right now we’re moving in a direction where payments are completely transparent,” Nadolinski explains. “If you are a state that is happy with surveillance, you want the future. And for us, it’s a bit of a scary future.
Born in Volgograd, Russia to software engineers parents, she remembers her grandmother showing the only two buildings that survived WWII in what was then called Stalingrad. After studying in Russia for the first and second year, she moved to the United States and in 2014 graduated with a degree in computer science from the Virginia Polytechnic Institute and State University. Turning an internship at Microsoft into her first engineering job at the tech giant, she then worked on the Airbnb property rental site’s autocomplete feature for locations.
In 2017, the rising star developer was invited to a birthday party at Ethereum developer Juan Benet’s in Palo Alto, California. Three years earlier, Benet founded Protocol Labs to create technology that could enable a new version of the Internet without central servers, called Web 3, and Nadolinski was struck by the openness of the blockchain developers she met, including the developer of the Web3 portal, MetaMask. , Dan Finlay, who helped her debug a smart contract she was working on at 3 a.m. “I was like, ‘This looks like a magical open community,’ she said. “Where there is so much potential and so much to build. “
A year later, she started working on the original version of Iron Fish and then on a privacy-preserving cryptocurrency, using the Sapling protocol originally developed by Zcash. With early funding from Benet, Forbes 30 Under 30 alums, Jill Carlson of Slow Ventures Linda Xie of Scalar Capital and others, cryptocurrency has evolved to include a system by which almost any cryptocurrency can be deposited in a smart contract which “wraps” it in the same anonymity as Iron Fish himself. Think of it as the secure sockets layer (SSL) of the internet, except instead of keeping a website secure, it helps protect the privacy of almost all cryptocurrencies.
Based in San Francisco, Delaware C Corp currently employs nine people worldwide, including six developers. In April 2021, the company released the first version of its open source code, allowing anyone to rely on the network, which is currently validated by 1,800 node operators. Earlier this month, they opened pre-registrations for an incentive test network that will reward validators and other network participants with points that qualified users can eventually redeem for Iron Fish’s native currency, the iron.
Along with other Series A investors including Sequoia Capital, LinkedIn executive chairman Jeff Weiner, billionaire Met owner Alan Howard, and others, the company plans to spend the capital to nearly double the size of its team, establish a treasury to award grants to construction companies on the platform and redeem incentive points for iron, and pay legal fees to ensure the process is as compliant as possible. What they don’t do, however, is add someone to the board, which Nadolinski says is increasingly normal with crypto startups relying on a governance model built into the structure. even code.
“If there’s an update that minors like or don’t like, they’ll or won’t run the updated software,” says Nadolinski. “There is, as with any cryptocurrency project, governance by action.”
This is at least the sixth investment Anddreesen Horowitz has made in crypto privacy startups in the past four years. More recently, the company earlier this month ran a Series A in Switzerland, Nym, which uses cryptocurrency, including bitcoin, to reward users who run nodes similar to the Tor network. According to data site Crunchbase, three point one billion dollars has been invested in privacy startups, more than three-quarters of which in the past four years.
To give an idea of the potential value placed on privacy technology, research firm Fortune Business Insights predicts it will grow into a $ 17.75 billion industry by 2028, and the site of ResearchAndMarkets.com analysis estimates that the associated VPN industry will reach $ 107 billion by 2027..
Iron Fish could potentially provide anonymity to more than traditional cryptocurrencies. Perhaps the great threat to financial privacy in recent years has been the nascent and largely experimental concept of central bank digital currencies (CBDCs), where traditional issuers of government-backed currencies seek to make the most of what their new decentralized competitors have to offer in terms of speed and efficiency.
While everyone from the Bank for International Settlements to David Chaum, whose work on electronic money was cited by bitcoin creator Satoshi Nakamoto, has raised concerns about what this new type of currency might meaning, the world’s second largest economy, China, is slowly rolling out its own digital currency and dozens of similar projects are underway.
Proponents of increased transparency say such hybrid cryptocurrencies could undermine terrorist financing and money launderers, while critics worry about the same deterrent effects on innovation as Nadolinsky. “Right now,” she says, “whether or not you are a believer, a disbelieving regulator, a builder, whoever it is, you are inadvertently helping to shape this inevitable future of cryptocurrency-based digital payments. “