Happy Friday! This has been a very busy week in NFTs (Non-Fungible Tokens) - we have been flooded with questions, headlines, and I have been lucky to speak on a few panels over the last week. This is very much an artist-of-all-types-led phenomenon (see Kings of Leon NFT album announced below), and not a tech driven one. Signum Theme #1: No More Starving Artists! (See AsyncArt) We have been excited about NFTs and their potential to monetize all digital art forms, in-game or otherwise, since 2017 / 2018 when the concept hit the scene. Recent entrants are also early because the ERC-721 token standard was only finalized in the middle of 2018. And now there are NFTs in the wild which aren't even ERC-721 tokens, found on blockchains other than Ethereum. Below are several primers we wrote back then. Stay tuned for...you guessed it! Our truly ebullient overflow of excitement for NFTs on Polkadot! As heard in the ARK Invest brainstorm this morning and to quote the Schuyler Sisters in the best musical ever:
How lucky we are to be alive right now!
Also this week, we discuss the strategic importance of Epic Games acquisition of the Tonic Games Group, which includes video game studio Mediatonic, the creator of smash hit Fall Guys. We believe the acquisition is not material to financials near term, but is strategically very important as it bolsters Epic Games’ hit game portfolio and further enhances the company’s efforts to build its own Metaverse. But more importantly, we believe investors may be missing the real long term value of Epic Games beyond just hit game titles, but in their ability to license their technology like Unreal Engine 5 which is coming soon. The games are just demos of the technology!
Thanks and have a great weekend,
Angie
NFT Primers:
New Blockchains and NFTs in Gaming — No Copy Cats! August 2018
The Future of Entertainment and Gaming is Happier— NFT Primer 1 February 2019
Marshmello Saturday / Super Bowl Sunday— One Year Later — Feb 2020
MIT Presentation on NFTs & The Metaverse Accelerated by a Global Pandemic November 2020
This week Epic Games announced the acquisition of the Tonic Games Group, which includes video game studio Mediatonic, the creator of smash hit Fall Guys. Financial terms of the deal were not disclosed, but we believe the impact to near term financials is not material given Tonic Games Group reported revenue of $23.08 m in 2019 vs Epic Games reported revenue of $4.2B in 2019 revenue. Mediatonic’s hit game Fall Guys is an indie hit game, which has sold more than 7 million copies on Steam and is believed to be the most downloaded Playstation Plus title of all time. The game is coming to the Nintendo Switch and Xbox this summer.
Although the financial impact in the near term is not material, we view this acquisition as strategically important as it:
Bolsters Epic Games hit game portfolio, which enable Epic Games to showcase their superior technology such as game engine Unreal Engine. We believe that the real long term value in Epic Games is not on hit games, but on potentially licensing their superior technology. Long term, we believe that Epic could make more money from licensing their technology throughout the video games industry than from selling any one game.
Further enhances the company’s efforts in building its own Metaverse, a shared, virtual space that is persistently online and active.
Guarantees the Fall Guys game will reach as many platforms as possible.
Creates incremental revenue opportunities and synergies: these include the opportunity to add Fortnite-style features in the future, such as crossplay, squad modes, and account systems.
Provides the opportunity for crossovers between games as well as cross brand potential between Fortnite and Rocket League with Fall Guys. Fortnite, Rocket League and Fall Guys have all incorporated content from other intellectual property (IP) in the past.
Strengthens Epic Games’ already deep bench of creative talent. CEO Tim Sweeney said in an official statement, "It’s no secret that Epic is invested in building the Metaverse and Tonic Games shares this goal. As Epic works to build this virtual future, we need great creative talent who know how to build powerful games, content, and experiences.”
This Week’s Other Headlines
Paypal reported to be in talks to acquire Curv for a sum between $200 and $300 million
Curv is a cryptocurrency custodian specializing in multi-party computation encryption
Integration with MetaMask has allowed Curv to offer DeFi application access to clients
Would align with PayPal’s stated intentions of becoming a banking “super app”
Ethereum core developers officially slate EIP-1559 for this summer’s London upgrade
EIP-1559 introduces a burn mechanism for a portion of Ethereum fees, rather than directing all to miners
The burn mechanism is expected to result in a deflationary effect with net Ether supply emissions going negative following its implementation
Aside from its implications for Ether scarcity, the upgrade is viewed as another mechanism by which to eventually migrate users and applications away from the Proof-of-Work Ethereum blockchain to Ethereum 2.0
Kings of Leon to release its new album as an NFT
Will grant holders of the various runs of the NFT specific perks related to touring and merchandise
Comes shortly after EDM musician 3lau sold $11.6M worth of NFT audiovisual art
Sushiswap launches multi-chain hub for its decentralized exchange platform
Sushiswap, the second largest decentralized exchange on Ethereum, now exists on two Ethereum side-chains (Polygon and xDAI) as well as three other blockchains (Binance Smart Chain, Fantom, and Polkadot’s Moonbeam parachain)
This is primarily in response due to gas fee congestion on Ethereum having priced out smaller retail users
Uniswap, the leading incumbent decentralized exchange, continues to work heads-down on its 3.0 iteration, which is expected to remain on Ethereum and rely on optimistic roll-ups for its scaling solution
Galaxy leads $1.75M investment round in Compass
Compass is a two-way marketplace connecting Bitcoin mining sites, primarily in North America, with hardware suppliers and owners
This is the first such platform to launch, streamlining access to mining operations for HNWI and family offices
Signum Growth Capital Team
Angela Dalton | Founder and CEO | angela@signumgrowthcapital.com
Max Fiege | Head of Digital Assets | max@signumgrowthcapital.com