ArchVM Launches a Test Version of Its Bitcoin Virtual Machine, Raising $10M in Funding

Virtual machines are a type of software used in smart contracts—sets of code that execute terms of an agreement when predetermined conditions are met—making it

Crypto startup Arch Labs, which is building a virtual machine for smart contracts on Bitcoin’s blockchain, has raised $50 million in a Series B funding round led by Blockwall.

The startup, which is still in stealth mode, is aiming to make it easier to use crypto technology for new use cases, like property ownership in the metaverse or the trading of NFTs.

Smart contracts are sets of code that execute the terms of an agreement when predetermined conditions are met. They are used in many blockchains to create decentralized applications (dapps) and can be used for a variety of purposes, such as transferring cryptocurrency, registering property ownership, or managing the terms of an insurance policy.

Other blockchains, including Polygon, Arbitrum, and Avalanche, have made use of the Ethereum Virtual Machine, and Solana has built its own virtual machine for smart contracts on its blockchain.

But Bitcoin doesn’t have a virtual machine, making it harder to deploy Bitcoin-native applications and forcing Bitcoin holders to take their tokens elsewhere, Arch Labs founder and CEO Francesco Neretti, known as "Cisco" Mudano, told Fortune.

“You really don’t have the ability to build any type of native applications on Bitcoin,” Mudano said. “You can certainly take Bitcoin to other places and then make it play in some other ecosystem, but as far as on Bitcoin, it’s impossible.”

Arch Labs, which was founded in 2023, launched a test version of its ArchVM in November. Since then, it has attracted more than 300,000 crypto wallets and multiple decentralized finance applications.

The startup plans to launch ArchVM publicly in early May and will use the money raised in this latest funding round to expand his engineering team and accelerate the product’s deployment. It will also be used to support the development of the Arch Labs ecosystem.

ArchVM is not the first project to try to make building applications on Bitcoin’s blockchain easier. Two other companies, Rootstock and Stacks, already have products that let developers deploy smart contracts on Bitcoin’s blockchain. However, both companies’ products are still relatively limited in scope.

Arch Labs is aiming to create a more complete and powerful virtual machine that will enable developers to build a wide range of dapps on Bitcoin.

This Series B funding follows a $25 million Series A round in November 2022. Previous investors in Arch Labs include 3M Ventures, Bain Capital Ventures, and Circle Ventures.

As part of the move to expand the engineering team, Arch Labs plans to reduce his team’s operational control over the product as it grows by establishing a foundation, similar to the Ethereum foundation that supports the network by distributing funds to development projects. The goal of creating a new foundation is to benefit the people who support the ArchVM ecosystem by volunteering to run computers and lock their assets on the network, he said.

“The ultimate goal of the network is to become decentralized in the same type of way that Ethereum, Solana and Bitcoin are. It’s more so to benefit the people that support the platform, not just the builders of it. Over time, we get removed from the situation and just become users of the platform like everybody else.”

Arch Labs will also be launching a token that will be used by customers to pay for transaction fees on the network. The investors in this round will be given those tokens in the future in lieu of company equity in what is known as a simple agreement for future tokens, or a SAFT—a common type of arrangement in the crypto space.