- Sherlock has raised $4 million in a seed round led by Archetype.
- The crypto auditing platform wants to address the challenge posed by endless web3 protocol attacks.
- Sherlock pays up to $10 million to their clients if a protocol the firm audited is hacked.
Crypto auditing platform Sherlock has announced the completion of a $4 million seed round led by Archetype. The company said it will use the new funds to expand its team and fund outside audits on the Sherlock platform.
Sherlock’s smart contract-based auditing platform is trying to address one of the biggest challenges facing the crypto space. According to crypto data and analytics company Chainalysis, hackers stole more than $1.9 billion through July. That’s a $700 million rise compared to the same period last year. The company recently helped US authorities to recover $30 million from North Korea’s Lazarus hacker group.
Sherlock notes that web3 hackers have been targeting web3 protocols for exploits, with current audit firms don’t have incentives aligned with the protocols they audit. The company wants to change this by launching an incentivised program for investors who want to stake assets to the auditing protocol.
This allows Sherlock to offer certain guarantees other web3 protocol auditors can not.
No auditors have incentives aligned with the protocols they audit. Sherlock is the first auditor that actually cares if a protocol they audit gets hacked because we pay out up to $10 million if they do get hacked,” Sherlock co-founder Jack Sanford told CoinDesk in an interview.
The company’s staking program offers investors a 10% APY on the USDC stablecoin, plus a 5% APY on the native SHER token that is yet to begin trading.
Sherlock’s fundraising also attracted participation from CoinFund, which recently launched a $300 million web3 fund to invest in early-stage Layer 1 blockchain infrastructure, gaming and non-fungible tokens (NFTs).
On the other hand, the lead investor, Archetype raised $150 million to invest in several segments of Web3. In February, the company also poached web3 investor Catherine Wu from Coinbase Ventures, becoming a venture partner at the web3 venture capital firm.
Other venture capital firms backing Sherlock’s seed round include digital asset management group Spartan Group and crypto-focused venture capital firms Lattice Capital. Lattice last month closed a $60 million fund to invest $500,000 to $1.5 million in 40-50 early-stage crypto projects.
A crypto protocol audit involves a deep dive into the underlying code, with auditors taking weeks to scour through. Sherlock uses a competence-based auditing process where participants are rewarded for finding flaws in a code before the company sells it directly to protocols.
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