Tel Aviv-based chip startup Chain Reaction, which plans to begin mass producing its blockchain chip Electrum in Q1 2023, raised $70M led by Morgan Creek Digital
Context & Ripple Effects
Chain Reaction's $70M round fits a broader pattern of large checks into crypto infrastructure: analytics firm Chainalysis went from a $100M Series C at a $1B valuation to a Series D above $2B within months, and TRM Labs later reached a $1B valuation on a $70M Series C of its own. What sets this round apart is the target — not analytics or trading software, but purpose-built silicon, with mass production of the Electrum blockchain chip slated to begin in Q1 2023.
The thesis was later validated at larger scale: more than a year after this raise, Block reported finishing its own 3nm bitcoin mining chip developed with a leading global foundry, showing that dedicated crypto silicon had graduated from startup bet to strategy at major payments companies. That Chain Reaction is Tel Aviv-based also slots it into the cohort of cities — alongside Lagos, Recife, Bengaluru, Shenzhen, and Medellín — gaining ground as tech hubs beyond Silicon Valley.
First-order effects
- Chain Reaction now carries execution risk on a hard deadline: turning Morgan Creek Digital's capital into volume production of Electrum by Q1 2023, while the investor takes direct exposure to the mining-hardware layer rather than coins or exchanges.
Second-order effects
- The knock-on lands on merchant-silicon economics — Block's later in-house 3nm mining chip illustrates that the biggest potential customers are becoming chip designers themselves, forcing independent startups like Chain Reaction to compete against their buyers' own fabs-bound roadmaps.
Third-order effects
- If operator-built silicon keeps advancing, crypto compute structurally consolidates around vertically integrated players, leaving independent chip startups to win on speed-to-fab and specialized designs the giants don't prioritize.
The trend: Venture capital is funding purpose-built silicon for crypto workloads just as the largest operators begin designing mining chips in-house — a race between startup agility and vertical integration.