Even amid the crypto winter, some web3 companies are racking up hefty valuations. P0x Labs, the team behind Manta Network, a privacy-preserving protocol running on the Polkadot blockchain, announced today that it has reached a $500 million valuation following a $25 million Series A funding round.

Lead investors in the round are crypto-focused Polychain Capital and China-focused venture firm Qiming Venture Partners, which has built a reputation in web3 for backing projects like the ImToken wallet and web3 infrastructure platform InfStones. Other backers include Alliance, CoinFund, and SevenX Ventures. Past investors include Binance’s investment arm, Binance Labs.

P0x Labs’ valuation is buoyed by an emerging technology called zero knowledge, which is rapidly gaining popularity in decentralized finance (DeFi) by addressing a key user pain point: ensuring blockchain transparency while maintaining user privacy.

Zero-knowledge proof, as its name implies, is a cryptographic protocol that enables one party to prove to another that a statement is true without revealing additional information beyond the statement itself. In layman’s language, zero knowledge allows users to transact anonymously on DeFi services without disclosing their wallet addresses or transaction details on the blockchain.

Utilizing ZKP, P0x Labs is competing with projects like Aleo and Aztec to build the private layer for web3.

Blockchain-based applications have long struggled to demonstrate mass adoption due to usability issues, but Manta has released numbers indicating that its network is gaining some ground.

Manta Network has minted over 300,000 zero-knowledge “soulbound” tokens, a type of token designed to be permanently bound to a specific address on a blockchain, hence providing a high degree of security. As they cannot be transferred, soulbound tokens are becoming more popular as a way to manage unique digital assets such as identity verification and property ownership.

In addition, the network’s native wallet, Manta Wallet, has amassed over 200,000 installs. Its ecosystem projects ReadOn, Dmail and AsMatch, which altogether have over 1.5 million users, have integrated zkSBT (zero-knowledge soulbound token) functionality for private user identity and other privacy features.

To be sure, these user numbers are very modest compared to any known web2 application. But VCs betting on blockchain technologies remain bullish. Yi Tang, a principal at Qiming Venture Partners and formerly ConsenSys’ China lead, has this to say about Manta:

“We invest in the P0x Labs as we recognize that its core team has strong capability in both cryptography research and development, as well as ecosystem building and execution,” Tang told TechCrunch. “Trust and privacy are a key component in web3. ZKP is becoming an essential tool to build these properties into blockchain protocols. This is an area that offers immense growth potential.”

Proceeds from P0x Labs’ new round will go towards scaling the testnet of Manta Pacific, Manta’s Layer 2 for ZK applications. Layer 2, in crypto lingo, comprises solutions designed to increase a blockchain’s transaction processing capability by moving some computational load off the main network. The new financing will also help the company expand in key Asia markets.

Developers are already building consumer-facing applications on Mnata Pacific, such as zkHoldEm, an on-chain and private Texas Hold’em game, as well as zkMe, a protocol for private and verified credentials.

Manta Network was founded in 2020 by Victor Ji, Shumo Chu, and Kenny Li.