With a valuation of 1 billion and investment from top VCs, why is Karak frequently questioned by the community?

Original title: "Karak, the Middle East Restaking project with a valuation of 1 billion, has a luxurious financing background but is questioned by the community"

Original author: Frank, PANews

Recently, the Restaking track has become one of the important narratives in the Layer2 track. From Eigenlayer's TVL quickly breaking through 10 billion US dollars to Ether.fi breaking through 3 billion US dollars, it has aroused enthusiastic responses from the market. Projects in the Restaking track have almost become the focus of market attention, but Karak, which has a luxurious lineup of investment institutions, seems to be an exception.

Karak is a popular kind of milk tea in the Middle East, and this name highlights its regional background. In December 2023, Karak announced that it had received $48 million in Series A financing at a valuation of more than $1 billion, led by Lightspeed Venture Partners, with participation from Mubadala Capital, existing investors Pantera Capital, Framework Ventures, Bain Capital Ventures, Digital Currency Group, Coinbase, Proof Group, Nima Capital, Naval Ravikant and other institutions. Among them, Mubadala Capital is the second largest fund in Abu Dhabi, and most of the other investors are well-known investment institutions in the traditional and crypto circles. However, it is worth mentioning that Nima Capital sold off a large number of its tokens and real estate last year, and was questioned by the community as "rug".

On February 28, Karak announced the launch of an early access program, where users can earn XP points by re-staking on Karak, but the response was mediocre. A private channel was opened on April 8. As of April 9, Karak's total TVL was $100 million. This level of TVL is "incompatible" with its luxurious endorsement lineup, and there is a constant stream of questioning voices on social media.

According to the official introduction, Karak is a general re-staking network, similar to re-staking projects such as Eigenlayer, and also uses the points gameplay to encourage users to re-stake and obtain multiple benefits. At present, Karak has supported the re-staking of multiple mainstream protocol assets of the Ethereum mainnet, Arbitrum (L2), K2 (L2) and other networks. Its team members come from Coinbase, Google, AWS, Microsoft, Twitter, Goldman Sachs and other companies.

Currently, the TVL on Karak is about $100 million, which is a huge gap from the TVL of EigenLayer ($13 billion) and ether.fi ($3 billion). On the one hand, it may be because Karak is still in the early access program stage. But the more likely reason is that the community has many doubts about the background of the project.

According to IAN (@cryptoian), the Twitter KOL, the team behind Karak is the Risk Harbor team, which was once the asset risk insurance service provider in the Terra ecosystem. The project previously ranked second in TVL in the Terra ecosystem and suffered heavy losses in the Terra crash. Twitter user @RayRaspberry1 said that the team embezzled 200 million UST (worth $7 million) from the community in the process of withdrawing from Terra.

Karak's CSO (Chief Strategy Officer) Victor Cheng responded to this on Twitter, saying that the funds were $1 billion minted by the Terra Foundation as collateral for our risk pool. After the collapse of UST, in order to prevent further losses, the Risk Harbor Foundation sold $6 million worth of UST from the initial grant. These funds are currently designated as an insurance fund for the initial recosting pool.

Perhaps to break away from past controversies, Risk Harbor has been renamed Andalusia Labs. Andalusia Labs has launched three products, namely Karak (Layer2 network), Subsea (digital asset risk management market, formerly Risk Harbor), and Watchtower (digital asset institutional security platform).

But such a response apparently did not seem to completely dispel the community’s doubts about Karak. One user commented: “All their posts are about getting XP points through re-staking. They never mentioned progress, construction, technology, ecosystem development, etc.” As of now, the number of people in Karak’s Telegram channel is about 5,700, which does not seem to match the tens of millions of financing. In addition, the details of the platform’s XP usage plan have not yet been announced. If Karak wants to increase its TVL, the first step may be to eliminate the “public relations crisis”.

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