Mythical Games NFTs & the National Football League (NFL) all in one?! THIS is exciting! "Delivering on the fantasy of being a team general manager, the game will allow NFL fans and gamers alike to compete against other GMs with their assembled player rosters and teams, building, leveling up, and improving their lineup. In addition, fans will be able to own, collect, and trade non-fungible tokens (NFTs) of their favorite players through this play-and-own game experience." -Dean Takahashi, Venture Beat
Why is this important? Because in a world that continues to shift away from TV and toward time spent in the metaverse, sports continue to take share. Within sports, the NFL dominates media property values. According to the Sport Business Journal, the most watched event in 2021, Super Bowl LV, had 3x the viewers of the Inauguration of President Joe Biden & VP Kamala Harris.
"Sports in 2021 dominated the most-watched telecasts in the U.S. like never before, accounting for 95 of the top 100 programs. That figure is up from 92 two years ago and a significant increase from just 75 last year, in which political programming cut into sports’ overall dominance. Among those 95 sports telecasts in 2021, 75 were NFL games."
We Are Seeing a Trend of ‘Web2 Entering Web3’ Announcements…
Ebay formed a partnership with Tezos-based NFT platform, OneOf, to distribute OneOf NFTs from Ebay’s marketplace. To purchase NFTs from Ebay, users log in with standard Web2 emails and passwords and then click an email link to claim their NFT on OneOf, where they can trade or send their NFTs to external wallets after a set period of time. Rather than being its own marketplace, Ebay acts as a front end to OneOf, and may or may not work to integrate Web3 custody solutions over time. Here is an NFT listed on eBay (like other products listed on eBay):
Sony Music Entertainment has set up a Greater China venture for its American label, RCA Records, to explore opportunities in streaming, NFTs and the metaverse. The label is planning to sign and invest in “Web3 artists looking to broaden their artistic and commercial opportunities across streaming, gaming, Virtual Reality, Augmented Reality, NFTs, the Metaverse and more.”
Linktree and OpenSea collaborated to integrate NFT features into the link-in-bio service. Users can select NFTs to be their PFPs and backgrounds, showcase NFT collections from their Linktree, and add token-gating to certain links (only users with a certain NFT can click this link). NFT PFP/backgrounds require Linktree Pro, while the latter two are free.
VanEck issued 1000 free, NFT-backed memberships on a first-come-first-served basis, which “may unlock opportunities, such as advanced access to our research, invitations to private events, and more.” The NFTs will transform into avatars that distinguish each member. Members are not allowed to trade, transfer, or sell the NFT.
Spotify is currently piloting displaying NFTs through its artist merchandise marketplaces with artists The Wombats and Steve Aoki, both of which have explored making NFT collections or are avid collectors. Select Android users will be able to preview NFT offerings on each artists’ page, and follow the offerings to external marketplaces to purchase. Spotify is not selling NFTs, just helping artists advertise them.
In other NFT & Gaming News
OpenSea’s Seaport Protocol
On Friday, OpenSea unveiled an open source decentralized protocol called Seaport that aims to make trading NFTs safer, more efficient, and more modular than ever before. Up until now, NFT marketplaces operated on an NFT ←→ (fungible) token transaction basis. There were a few platforms such as nfttrader which acted as an escrow service between users who wanted to exchange NFTs, but no NFT ←→ NFT service was widely used.
Seaport will be the newest base layer protocol for NFT marketplaces, following the Wyvern protocol, which revolutionized NFT adoption and has acted as the foundation for NFT marketplaces. Seaport allows NFTs to be traded with other NFTs in addition to or in place of fungible tokens. Users can also bid on specifically filtered traits or ID numbers, and can even bid on items from various collections in a single transaction. These bids can use fungible tokens, NFTs, or a combination of both (i.e., NFT + ETH). Users can even tip each other with extra items, so long as they are not more valuable than the listing. On the more complex end of bartering, bidders/sellers can accept partial fills on listings based on a scalable numerator and denominator supplied by the offerer. In other words, if you want to sell 50 NFTs and accept a range of assets for them, bidders can chip away at your listings with what they have.
Seaport can be modified to a user or platform’s needs through “zones,” “conduits,” and again, tipping. A zone is an escrow service that can be applied to a person’s wallet or a smart contract that can verify or cancel a bid on behalf of the offerer. Conduits are approval contracts where a bidder can set approvals for tokens in their wallet, telling Seaport who they can be sent to and under what parameters. Outside of P2P transactions, tipping can work on a marketplace level, letting the platform charge fees, or “tips” on transactions.
OpenSea reiterates that SeaPort is free, and open for anyone to build with. To incentivize development, OpenSea and code4rena are hosting an auditing contest with a $1 million prize pool. The Seaport integration date into the OpenSea platform is TBA.
Epic Games
On May 5th, Epic Games announced a partnership with Microsoft to bring Fortnite to Xbox’s Cloud Gaming service as the service’s first free-to-play game. After being banned from the Apple and Google Play store for bypassing the 30% in-app purchasing fees, Fortnite is once again available on mobile devices, providing users have a Microsoft account and a device with iOS version 10 or higher / Android version 6.0 or higher. The Cloud version of Fortnite offers the same playing experience as past mobile versions, and is available in 26 countries.
Although some mobile players of Fortnite shifted to console or PC following Fortnite’s app store removal, many users were left unable to play due to inaccessibility. Now, those players can once again play for no extra costs outside their phone bill. VP and Head of Product at Xbox Cloud Gaming writes, “Quite simply we want you to have more choice in both the games you play and the way you choose to play them.”
Square Enix Continues to Pioneer NFTs among Traditional Publishers
During their Q1 2022 earnings report, gaming publisher Square Enix announced their NFT ventures have been well-received, and that they will be moving forward with more blockchain exploration and NFT-based content. Since February, Square Enix has been testing new IP and business models in their new Blockchain Entertainment Business Division The report outlines two major strategies to be implemented:
Promote Blockchain Entertainment domain
Help establish regulatory clarity and guidelines for blockchain games
Tackle scalability
Issue fungible tokens and design in-game economies (guilds, governance, and more)
World building and story-based NFTs
Establish an overseas entity to issue, manage, and invest in tokens, as well as publish games in crypto-accepting countries
Consider a CVC unit
Invest in Key Areas
Animoca Brands and the Sandbox Game for blockchain
Ubitus (Japanese cloud & telecom company) for cloud gaming and streaming
Recognizing how Web3 technology could promote “self-sustaining game growth” through inspired users, as well as hearing out the many gamers who are hesitant to embrace blockchain games, president Yosuke Matsuda has carefully tread the unexplored space of gaming's next frontier. As well as understanding gamers’ views on blockchain/NFTs, Square Enix seems to have a grasp on another necessity of success – regulatory compliance – and is making a point to progress carefully. While clarity on blockchain gaming is minimal, we do have some guidance. The FinHub’s “Framework for Investment Contract Analysis of Digital Assets” highlights that unclaimed property laws may apply, the closer the digital currency comes to being:
…redeemable for fiat currency, exchangeable for valuable cryptocurrency,
…denominated in U.S. dollars,
…or used to purchase real goods (including other video games).
Square Enix’s teaser website offering NFTs of their Shi San Sei Million Arthur IP
Immutable X
Immutable X is a carbon-neutral layer-2 built on Ethereum aiming to support the future of Web3 gaming. Their product suite consists of order books, minting tools, trading primitives, wallets, marketplaces, and more, made cost-efficient energy and cost efficient by the Zero-Knowledge scaling solution Starkware.
On Tuesday 5/24, co-founders of Immutable X, Alex Connolly and Robbie Ferguson, announced on the Bankless Podcast the ‘Cross-Rollup NFT Liquidity’ protocol, which will let games have their own custom contracts and chains, as well as share interoperable, cross-rollup marketplaces. Until now, ZK-rollups like Immutable X couldn’t handle smart contracts beyond the standard ERC721 / ERC20, which only allow for the minting and trading of NFTs. For Web3 gaming to thrive, chains not only need to be cost and energy efficient but must offer modular design for applications who have different needs.
Instead of lumping all games onto one chain and having them abide by the same rules, each game will be able to have its own dedicated rollup while still sharing the security of Ethereum. The first specialized rollups will be StarkNet and StarkEx, the former allowing for complex DeFi contracts while the other ideal for solely NFT minting/trading. While each game can exist separately, the assets will be interoperable. Users won't even have to leave their current marketplace to access another, meaning each marketplaces can retain their own, game-branded UI.
** Immutable X’s stack of layers is arranged bottom-up as Ethereum → StarkNet/StarkEx → Immutable X → Game-specific roll-ups (Layer 3s!).** (we will be releasing a basic guide on blockchain layers soon)
The protocol is being implemented in 5 phases:
Phase 1: NFT Minting - Custom token standards, metadata, royalties, L1<>L2 bridges - available now
Phase 2: NFT Trading - exchange contracts and order books - July
Phase 3: StarkEx Parity - full Starkware support on indexers/node operators, wallets, and marketplaces - Q3
Phase 4: Seamless Interoperability - bridging between StarkEx & StarkNet - Q4 ‘22/Q1 ‘23
Phase 5: Dedicated Rollups - Custom chains for specific games, publishers, StarkWare partners - TBD
In Other Crypto News
Does FTX Know that Equities Margins have been Squeezed for Decades?
After watching equities margins get squeezed for two decades, we were surprised to see FTX announce that it will begin offering traditional equities and ETF trading to its existing user base. FTX founder, Sam Bankman-Fried (SBF), has previously announced positions in both payment-for-order flow platform, Robinhood, and IEX, which has implemented a “speed-bump” into its matching engine in an effort to mitigate the technological advantage held by HFT firms. Of note, SBF was a high-frequency trader in his prior life, and understands the predatory nature of payment for order flow. As such, they are offering commission free trading at a loss, using crypto fees to prop up the equities business and offer best execution to its customers.
While traditional brokerages have historically pivoted from equities to crypto, this may be the first instance of a crypto firm pivoting to traditional finance. FTX has been incredibly profitable since its launch in May of 2019, with the global adoption of crypto increasing 800% from 2020 - 2021 alone. What could be the rationale for this move?
Aside from more concrete regulatory guidelines, offering equities to clients through NASDAQ requires similar software and hardware solutions to offering crypto trading. FTX appears to be launching this platform at a loss, potentially in hopes of attracting traditional customers who will then migrate to crypto
It's possible that the equities business could end up adopting a subscription model, where the 0% trading fee is supplied only to those who pay a recurring fee. Coinbase’s CoinbaseOne, which is currently in Beta for select users, offers 0% trading fees for an unannounced cost.
Social Media On-Chain — More Than a PFP
Lens Protocol
AAVE’s Stani Kulechav and a number of other contributors have developed Lens Protocol, a decentralized social media platform based on NFTs. While centralized social media apps like Facebook and Twitter operate off closed servers where data is essentially owned by a single entity, Lens Protocol gives users ownership of their profiles, publications, and connections, by storing them as on-chain NFTs. If you write a post or follow a new person, an NFT of that interaction is minted and stored under your profile. To unfollow/delete a post, the NFT can be sent to a burn address.(0x00000….)
Not only does Lens allow for more user control over data, but it encourages collaboration – Anyone can design lens-compatible apps or integrate Lens into their apps, also meaning you can keep your same unique profile across all those apps and websites. There are currently 50 apps built so far, including LensFrens (follow people based on your Web3 activity) and Iris (share content privately or publicly), as well as a $250k grant program for inspired builders. Lens launched last week on Polygon and has been incrementally letting new users claim usernames.
Lens Protocol will bring important changes and new thought processes on how we can interact digitally:
Accountability: Everything you post on Lens will be immutable on the blockchain, forever. If you delete a post, it can be seen on-chain.
Mainstream adoption: So far, Lens is designed for niche Web3 communities. To attract a new crowd, Lens could undergo a cultural revolution like that of SoundCloud — In 2016, musicians on the platform began to garner international attention and validation from record labels. What apps might blossom on Lens?
Cost: Polygon’s cost of user decentralization is cheap (a few cents), but users are still expected to pay for each post, follow, message, etc. Some apps may subsidize transactions to accrue more users, thus creating new competition between apps.
Analytics: Many Web2 social networks use hidden algorithms to recommend posts or follows, but Lens could offer hundreds of different dApps for content curation like coins traded, NFTs liked, etc.
Regulatory Environment
The Meaning of the News on the SEC and the 5th Circuit Court of Appeals:
This week, the 5th Circuit US Court of Appeals (Jurisdiction: Texas, Mississippi, Louisiana) granted a defendant’s 7th Amendment right to a jury trial, and overturned an SEC imposition of civil penalties and disgorgement for Securities Fraud. This caused an uproar on Twitter with excited comments like:
“The 5th Circuit just dismantled the SEC's power to enforce securities law. This decision is beyond radical.” And, “in plain English, means that the federal government can't enforce a huge swath of regulations.”
The comments seemed a little alarmist and maybe even wishful thinking for some in crypto, who might think that this means that they can now challenge every SEC decision. Our views are more aligned with those of Mike Wawszczak, General Counsel at the Web3 accelerator, AllianceDAO:
This is “not a dismantling of the SEC’s enforcement power, this is a dismantling of the SEC’s judicial power. They are free to enforce. They just need to do it in a way that will persuade an impartial judiciary, not their in-house courts.”
As a reminder, a result of Dodd Frank in 2010 was that the SEC had more power to enforce - Section 929P (a) of Dodd-Frank expands the SEC’s enforcement tools by granting it authority to impose civil penalties in cease and desist proceedings under the Securities Act, the Exchange Act, the Investment Company Act, and the Investment Advisers Act, even against those individuals not regulated by the SEC.
New Fundings
Azra Games, a gaming studio founded by Mark Otero raised $15M from a16z, Coinbase Ventures, NFX, Play Ventures, and Franklin Templeton. Funds will be used to build its first game, Project Arcanas.
N3TWORK, a gaming studio that is integrating blockchain into mobile games, raised $46M in Series A led by Griffin Gaming, along with Kleiner Perkins, Galaxy Interactive, Floodgate, LLL Capital, N3TWORK Inc (the parent company of N3TWORK Studios). N3TWORK was acquired by Forte in January.
Freshcut, a 20-month-old, Los Angeles-based app for creators to post short, gaming-related videos and earn through tokens, raised $15 million in funding. Investors include Galaxy Interactive, Polygon, Animoca Brands and Kevin Lin, co-founder of Twitch. Freshcut was founded by James Kuk, himself a former business development executive at Twitch.
Medallion, a two-year-old San Francisco startup that leverages web3 protocols to help artists from direct connections with their fans, raised $9.15 million in seed funding led by the Chernin Group.
Parcl, a two-year-old New York startup that has built a blockchain-based real estate platform that allows users to invest in and trade specific geographical real estate markets, raised a $7.5 million round. Investors included Fifth Wall, JAWS, IA Capital, Eberg Capital, Big Brain Holdings, and Santiago Santos.
QuestBook, a two-year-old startup based in Hyderabad, India, that helps web3 and blockchain companies screen and hire developers, raised a $8.3 million Series A led by Lemniscap with participation from Coinbase Ventures, Alameda Research, Dragonfly, Hashed, and Polygon also participated.