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Digital currencies

The Chinese wallet that’s home to US$35 billion of cryptocurrency assets gets funding from IDG

PUBLISHED : Friday, 01 June, 2018, 9:34am
UPDATED : Friday, 01 June, 2018, 12:17pm

It pays to be early, especially when it comes to cryptocurrencies.

Take ImToken, a Chinese start-up that developed one of the first cryptocurrency wallet apps to support the Ethereum blockchain. The free software has attracted 4 million users, who’ve used it to stash US$35 billion of crypto assets over the past year, more than at big-name competitors including Coinbase.

The previously unreported figures help explain why venture firm IDG Capital is betting US$10 million on the business. The Series A funding round, announced by ImToken on Thursday, is the latest indication that some investors are looking past this year’s tumble in virtual currencies to back start-ups seen as vital to the crypto ecosystem.

“We noticed very early the potential of Ethereum and focused on it to differentiate against competitors,” Ben He, the 35-year-old founder of ImToken and its parent company ConsenLabs, said in an interview. “The growth has been completely organic. We didn’t have any marketing or promotional budget.”

He’s decision to support Ethereum came in 2016, a year before its blockchain became the main tool for crypto start-ups raising money through initial coin offerings. Since then, the number of the so-called ERC-20 tokens tracked by Etherscan.io has surged to more than 500. Supporting all of them has made ImToken the world’s largest Ethereum wallet provider, according to He, a self-taught programmer who learned about the tech industry via podcasts including Diggnation and 5by5.

The US$35 billion stored in the app over the past year compares with “more than US$20 billion” in customer assets held by Coinbase, according to a spokesperson for the US crypto platform.

ImToken users accounted for about 10 per cent of the average daily activity on the Ethereum blockchain since the start of the year and about 21 per cent in May, according to data provided by ImToken and analysed by Bloomberg.

While it’s not a purely apples-to-apples comparison, ImToken’s deposit growth over the past year rivals even that of JPMorgan Chase & Co. and Citigroup, according to figures from the Federal Deposit Insurance.

Ether, the second-biggest cryptocurrency by market value, was little changed at about US$580 on Friday.

Almost all cryptocurrencies are stored in wallets, or unique addresses recognised by a blockchain. The world’s biggest include those of exchanges like Binance and BitMEX, which pool the trading assets of their users. Others from the likes of Coinbase and Xapo offer an easy-to-use interface or enhanced security, with the wallet providers maintaining access to or control over the deposits, similar to a traditional bank. There are also local wallets, which give users full c563 wordsontrol of their coins as well as responsibility for securing them.

The ImToken app falls into the latter category, allowing customers to store coins locally on their smartphones. The model comes with trade-offs. Because it isn’t holding users’ coins directly, ImToken is less vulnerable to hacking attacks that have plagued many crypto platforms. But it also means the company has limited scope to offer wallet users additional services, such as investment plans.

He, who declined to disclose details of the company’s financials or its valuation, said IDG’s investment will be used to fund an expansion beyond China, which currently accounts for 70 per cent of users. That includes adding a new office in Singapore and increasing headcount, which has grown to 30 people from 10 a year ago. ImToken also plans to expand the company’s offerings to institutional investors after building additional security features.

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