It pays to be early, especially when it comes to cryptocurrencies.
Take ImToken Pte., a Chinese startup 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 $35 billion of crypto assets over the past year, more than at big-name competitors including Coinbase Inc.
The previously unreported figures help explain why venture firm IDG Capital is betting $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 startups 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 Inc., 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 startups 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 $35 billion stored in the app over the past year compares with “more than $20 billion” in customer assets held by Coinbase, according to a spokesperson for the U.S. crypto platform. ImToken users accounted for about 10 percent of the average daily activity on the Ethereum blockchain since the start of the year and about 21 percent in May, according to data provided by ImToken and analyzed 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 Inc., according to figures from the Federal Deposit Insurance Co.
Almost all cryptocurrencies are stored in wallets, or unique addresses recognized 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 control 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 tradeoffs. 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 percent 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.