Happy Friday!
This week we participated in an AdWeek discussion on esports + crypto. Our view for a while has been that crypto generally, and NFTs specifically, will be an important future revenue driver for esports. It is worth noting that the entire esports industry is only $2 billion (compared to mobile gaming at ~$85 billion) so NFTs could really move the needle. Please join us at the 2021 Esports Awards (Nov 18-Nov 20), including a private investor + influencer + exec dinner and VIP Access at the show.
Putting the $2 billion esports industry in perspective, the largest NFT marketplace, OpenSea, saw $4 billion in trading value over 30 days into September, up from $8m in January. A back of the envelope calculation implies an annual run rate of $1.2 billion. Just to put this in perspective, the Chicago Mercantile Exchange Group (CME Group) Clearing & Transaction Fees in 2020 were $3.9 billion.
This is enough to get anyone’s attention, especially regulators in the mode of figuring out investor protection in this nascent space. While we have no idea what has occurred behind the scenes, we found OpenSea’s move to delist digital assets an underappreciated positive. Clearly they are getting guidance from someone on what does and does not constitute a security, and they might even be taking this action proactively. This is clearly preferable to the fears in the crypto community of dramatic shut downs, and unfounded rumors of subpoenas at conferences.
Language from OpenSea stated that it is prohibited to “carry out any financial activities subject to registration or licensing, including but not limited to creating, listing, or buying securities, commodities, options, real estate, or debt instruments,” on the OpenSea platform.
We have long argued that “clarity” on the regulatory front will come from good actors setting positive examples (and likely based on current securities frameworks.) OpenSea, as the largest platform, seemed to be setting a leadership precedent with these actions, and we would argue that it is worth watching, and perhaps even emulating.
Come meet us at the following conference where we will be presenting soon
Virtual Beings Conference (October 29th)
NFT.NYC (November 1st to 4th)
MIT: 3rd Annual Update on Gaming + NFTs (November 8th)
Roblox: Maturing in Metaverse years
Roblox has made a flurry of announcements over the last 25 days, all with the underlying statement “Roblox doesn’t want to create the metaverse. Instead, it wants its users to create the metaverse.”
Two weeks ago, it was reported that Roblox charges developers 26%, making it one of the most expensive platforms for creators. Since then, we have seen numerous announcements on margin expansion opportunities which also increase engagement with the platform's 43m DAUs.
Roblox announced that it is teaming up with Anzu (customers include Microsoft Xbox, Ubisoft, and Amanotes) to help creators develop in-game advertising.
A major development is the launch of “Limiteds”, which offer the ability to sell “limited-edition,” user-generated items, allowing creators to earn money from initial sales and subsequent resales. With these limited items, the creator’s unique account name will be listed so purchasers will know they are buying from a verified source. Additionally, developers will be able to watermark their assets as a further means of verification.
Listening Parties for players was also announced - this enables artists to premiere a new album to select top experiences. The first was hosted by Grammy-nominated artist Poppy, with her new album Flux on September 24th, and allowed for simultaneous game play.
Electronic Daisy Carnival Las Vegas 2021 will become the first music festival to be held in Roblox from October 23 - October 25, alongside an in-person event for 500,000 at the Las Vegas Motor Speedway
Age verification was rolled out in the last week of September, allowing for the introduction of new features that will be offered exclusively to users aged 13 and up. The two-step process requires an ID document check and a selfie.
Bitcoin ETFs finally launch
ProShares launched the first ever Bitcoin ETF (BITO) on the NYSE on Tuesday, October 19 and saw around $1B in volume on its opening day. We were especially excited to see our friends at Valkyrie Investments one up Proshares on the ticker, launching BTFD on NASDAQ on Oct 22! Roughly a dozen proposals have been made since 2013 so this is a meaningful development. Many critics of the first ETF point to "contango," or the scenario in which futures' prices of commodities are higher than spot prices due to the operational intensity of rolling futures contracts to avoid delivery, which results in lower returns than owning Bitcoin directly.
Our Take: The listing of an ETF will open the doors for institutional and individual investors to trade crypto from any brokerage account. The lack of opposition from regulators is a sign that the industry is being seen as increasingly legitimate.
Forgotten Rune Wizard's Cult
CultForgotten Rune Wizard's Cult is an NFT collection of 10,000 pixelated wizards, released on June 20th, 2021. This week, it was announced that the NFT project will be adapted into a linear TV show produced by Titmouse Productions, the animation studio responsible for the Emmy-nominated show Big Mouth. While executive production is in the hands of the Cult's creators and Titmouse animators, each Wizard holder will get to vote on which stories get told and how the show evolves. This creates a collaboration between TV producers, animators, and fans in a large-scale media production. NFT holders will actually own the commercial rights to the characters depicted in the NFT they own, and will have a direct influence on what they do in the show.
A few teams have been experimenting with producing movie and streaming content via a DAO (decentralized autonomous organization). Separately, there has been some authenticity criticism of AI generated social media influencers like Lil Miquela. We think it would be really exciting to see community members truly breathe life into characters, using governance to decide what they wear, where they go and the challenges they take on.
Lucky for us, our friend Edward Saatchi will be hosting a conference to discuss this topic soon. Everyone has their definition of the metaverse and we will be presenting ours - the human, multi-sensory understanding of authenticity. Please click here to join us at the Virtual Beings and Virtual Organizations Summit on October 29 and 30th!
Other highlights
Parallel raised $50m in funding from Paradigm, Yunt Capital, and YouTube cofounder Chad Hurley valuing the company at $500. The funds will be used to build a game on the back of its existing art, which already has generated $100m in OpenSea volume traded.
Epic Games announced a partnership with new studio, Eyes Out, co-founded by Nine Inch Nails guitarist Robin Finck and Spry Fox, the studio behind this year’s Cozy Grove.
Candy Digital, Fanatics' sports NFT studio, has raised $100 million at a $1.5 billion valuation in its Series A funding to expand its team as it further scales its NFT business.
Cboe Global Markets has announced the acquisition of crypto spot and derivatives marketplace ErisX. CBOE COO Chris Isaacson pointed to ErisX’s different regulatory approvals as a reason for the acquisition.
Facebook announced a trial version of its payment platform, Novi, that will initially function as a means to send USDP (Pax's stablecoin) between the US and Guatemela. Facebook also publicly stated that they are going to change the name of the company, debuting the new name on October 28 at their annual Connect conference.
Steve Madden is launching the Steve Maddenverse in collaboration with talent media company Elite World Group to bring back Madden's iconic 90's ad, “Big Head” girls, as AR avatars. The ad campaign features actress Sydney Sweeney, singers Normani, Justin Skye, and Nessa Barrett, and Gossip Girl Jordan Alexander.
Art Blocks, the generative art platform that has done over $1 billion in volume on its secondary market, completed a $6M equity round, led by True Ventures, with support from Galaxy Interactive and prominent investment platforms Flamingo DAO and The LAO. The goal of the funding is to expand the engineering side of the Art Blocks team and “[to build] up the generative art scene.”