Chain Reaction raises $70M, emerges from stealth to launch chips designed to compute encrypted data

The CPU power needed to execute homomorphic encryption, blockchains, and other cryptographic algorithms has been a major stumbling barrier to the networking industry’s efforts to advance data protection and complicated computing. One of the startups that thinks it can fix this problem is coming out of stealth mode today, and it has raised a lot of money to do so.

Israeli firm Chain Reaction has received a total of $115 million to far, with the recent closing of a $70 million Series C financing. Chain Reaction is developing semiconductors and associated architecture for use in blockchain and privacy devices performing cryptographic algorithms. Despite the fact that the corporation isn’t willing to discuss it, rumors have it that its worth is close to $500 million.

Morgan Creek Digital is the lead investor in this round, while other participants include Hanaco Ventures, Jerusalem Venture Partners, KCK Capital, Exor, Atreides Management, and Blue Run Ventures.

Now employing 100 individuals, the business has attracted former employees from Nvidia, Mellanox, Israeli intel, and TSMC to help bring its first products to market by the end of the current quarter (Q1 2023). Chain Reaction has stated that their upcoming offerings will consist of Application Specific Integrated Circuits (ASICs) and related systems, as well as solutions for cloud data infrastructure designs to run privacy enhancing technologies (as some of the cryptographic security approaches are sometimes described).

At this time, Chain Reaction only collaborates with TSMC, and there are no intentions to work with any other foundries.

Although while this venture may seem like a moonshot because its founders are working on some of the most cutting-edge (and, some would argue, not yet combat tested) computer technology, the founders’ track record mitigates the dangers of taking such a risk. It was founded by Chief Executive Officer Alon Webman and Chief Technology Officer Oren Yokev, who, respectively, were the man in charge of cyber for the Israeli Prime Minister for decades and the co-founder of Mellanox (which Nvidia purchased for over $7 billion following a bidding battle with Intel).

Webman (possibly the best surname ever for a tech entrepreneur) tells me that the original motivation for Chain Reaction was for privacy applications, and more specifically to build processors to help handle the compute around privacy-related encryption technologies. This work has been going on in stealth mode for about six years.

In the academic world, progress was being made toward homomorphic encryption, an approach to data protection and privacy that encrypts data from beginning to end and all the way through its use. However, the practicalities of how to actually apply it and the compute power required to do so were already presenting major roadblocks.

He and Yokev, who were approaching it from the processing side, saw this as a chance to build to solve, and if they succeeded, it would be a home run. Webman remarked in an interview, «We might become the next Nvidia.» They were approached by blockchain professionals who were hitting their own computing blockages while trying to mine bitcoin, a notorious energy and compute resource eater, while they were still in stealth mode of development.

This strangely led to Chain Reaction’s first clients being data centers and others creating mining hardware. While Chain Reaction currently describes itself as a company focused on both opportunities, Webman has stated that «privacy is the longer play,» and that the privacy applications, along with the computing being carried out in the cloud, will be the opportunities with the greater market potential and longevity for the business.

We believe our approach will make homomorphic encryption a practical option,» he added. We are aware of the current computation and memory constraints of CPUs and have designed our own architecture to overcome them. We know the answer that will allow it to happen.

The development of Chain Reaction highlights an intriguing trend in the history of semiconductors. Recently, especially in the last decade, there has been a proliferation of startups in the space developing what many believe to be the next generation of where chips will be needed: to support complex algorithmic calculations for artificial intelligence in a wide variety of industries and applications.

Webman speculates that cryptographic calculations will come to dominate the following generation of processors, and that Chain Reaction is a precursor to this trend.

«AI ushered in the current crop of semiconductor firms, which supplied the acceleration and scale AI required,» he explained. The same is true in this case. Notwithstanding the fact that we are an early adopter, we are certain that this will soon be followed by other similarly disruptive cloud-based technologies. I believe that this is the case.

Mark Yusko, CEO and CIO of Morgan Creek Capital Management and managing partner of Morgan Creek Digital, said in a statement, «We fully expect Chain Reaction’s blockchain products will become the new industry standard in blockchain compute infrastructure, laying the foundation for all future sustainable blockchain technologies.» While crucial to protecting liberties and decentralization, blockchain technology requires a lot of processing power. As a result of using Chain Reaction’s solutions, the value of current blockchain technologies will increase, and future use-cases for blockchain technologies will be completely transformed.

Hanaco Ventures’ founding partner Pasha Romanovski said, «Hanaco has believed in Chain Reaction from the very beginning. We foresaw the opportunity to construct the next generation of computing infrastructure by fusing our knowledge of analog and system design with that of algorithms and encryption. While Chain Reaction has already made significant headway in disrupting the established and convoluted market for data center, cloud, and even edge computing hardware infrastructure, this is just the beginning of their disruptive efforts.

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