Why Multicoin Capital Invested $5.7M in Squads Labs

On October 16, 2023, investment firm Multicoin Capital divulged its latest funding round for Squads Labs, amounting to $5.7 million. This investment surge elevates the total funding for Squads to $12.5 million, marking a significant financial milestone for the core contributor to the Squads Protocol, a multisig (multi-signature) solution on the Solana blockchain. Multicoin’s initial investment in Squads dates back to late 2021, showcasing a growing rapport between the two entities.

Squads Labs is at the forefront of developing robust smart contract wallet infrastructure alongside a variety of products aimed at simplifying self-custody at a larger scale. Key products include “Squads,” a multisig standard for Solana assisting teams and developers in managing treasuries, programs, tokens, and validators, and “Fuse,” a wallet for secure individual interactions with Solana dapps and protocols from a multisig’s safety. Through their open-sourced and audited Squads Protocol, they provide a foundational smart contract wallet infrastructure layer for the Solana blockchain, encouraging collaboration in building self-custody products.

The essence of asset custody remains intact despite technological advancements over centuries. Traditionally, businesses leaned on banks for asset security since the era of 17th-century goldsmith bankers. However, modern banking structures are not immune to insolvency risks, as exemplified by the recent Silicon Valley Bank collapse. Besides, the financial sector has been entrapped in a convoluted clearing and settlement process, a situation exacerbated in the 1960s’ Wall Street paperwork crisis.

This historical dilemma led to the birth of the Depository Trust & Clearing Corporation (DTCC), which propelled the digitization of securities and centralized clearing and settlement services. Nonetheless, the settlement timeframe, extending to days, remained a challenge despite the advent of electronic trading. Following the 2008 financial meltdown, a custodian bank consolidation emerged under stringent regulatory scrutiny, leading to a $136.6 trillion asset under custody by the four predominant custodian banks as of June 2022.

Blockchains symbolize a promising leap in financial custody, blending digitization with bearer instruments adeptly. This innovation empowers real-time global settlement and significantly curtails counterparty risks, setting a solid foundation for tokenizing real-world assets. An illustrative testament is the over $1 billion in notional private credit and US treasuries currently onchain.

The inherent challenge of self-custodianship in blockchain necessitates a shift towards organizational spread of custody authority. The envisaged end-game is a setup where multiple parties exercise authority in managing assets through multi-signature wallets.

Squads, launched in February 2022, emerged as a pioneering multisig solution in the Solana ecosystem. It has garnered rapid adoption, with over 100 teams including notable entities like Helium and Hivemapper entrusting Squads with asset coordination, valued around $500 million.

With a solid 13-month market-tested track record, four independent audits, and formal verification, Squads stands as a robust platform for institutional investors and internet-native organizations.

Squads revealed a major platform upgrade earlier this week, introducing SquadsX, Solana’s maiden multisig browser extension wallet, and Squads (v4), an audited protocol upgrade slated for immutability by November end. These upgrades encompass enhanced security features, roles and permissions, fee relay, mass payouts, and expanded transaction complexity, laying the groundwork for blockchain-native custody infrastructure.

The Squads initiative is a beacon of crypto adoption simplification, poised to offer compelling enterprise and institutional-grade products. Over the past 18 months, the Squads team has showcased relentless dedication and execution, with Multicoin Capital’s backing amplifying its potential to redefine internet-native infrastructure for self-custody and on-chain capital coordination.

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