Bain Capital Crypto Leads $3.3M Round for Privacy-Focused Identity Protocol

Notebook Labs, a startup that aims to verify the identities of crypto users without compromising privacy, has raised $3.3 million in a seed funding round led by Bain Capital Crypto. The funds will go toward building out the development team, scaling the technology infrastructure and funding security audits for the platform, co-founders Solal Afota and Nathaniel Masfen-Yan told CoinDesk in an interview.

Bain Capital, an investment firm with about $155 billion in assets, launched Bain Capital Crypto in March with $560 million in committed capital. Other investors in the Notebook Labs’ round included Y Combinator, Soma Capital, Abstract Ventures, Pioneer Fund and NFX, among others.

“Until now, blockchain users have been required to identify themselves with wallet addresses, which has not only compromised their privacy but has also subjected the blockchains themselves to Sybil attacks,” said Afota, referring to a type of cyberattack in which the hacker creates a number of fake accounts to gain increased access.

“Notebook is paving the way towards mass adoption of DeFi by giving Web3 users the privacy and anonymity they deserve, while also enabling more secure logins that will make protocols safer,” he continued, referring to decentralized finance.

Notebook Labs intends to offer a way for Web3 protocols to verify the identity of users without compromising anonymity through a technology called zero-knowledge (zk) proofs, which algorithmically show that a statement is true without sharing the details behind that example. For example, a protocol could require proof that users are U.S. citizens. Users would supply their license as proof, but the license wouldn't be linked to the user’s wallet.

Trackable yet anonymous verified data can open up a variety of use cases in crypto, particularly within DeFi where the lack of traditional credit scores leads to over-collateralized loans.

California-based Notebook Labs was founded earlier this year by Stanford undergraduates Afota, Masfen-Yan and Dhruv Mangtani after creating the project during the university’s largest hackathon.

The version of Notebook Labs that’s currently live can be used to develop a Sybil-resistant protocol and run airdrops, said Masfen-Yan. The team will continue developing the full product suite over the coming months, including credit scoring and cross-chain capabilities, and should launch next year.

Read more: What Is DeFi?