Rare Bits wants to be eBay for the blockchain, where you buy, sell, and trade non-fungible crypto-goods. After CryptoKitties raised $12 million from Andreessen Horowitz last month for its digital collectibles game, there’s been an explosion of interest in the space. But without a popular marketplace, it’s hard to find the goods you want at the right price. Now a team of former Zynga staffers is building out its crypto-collectible auction and commerce site with a $6 million round led by Nabeel Hyatt at Spark Capital, and joined by First Rount Capital, David Sacks’ Craft Ventures, and SVAngel.
“Because of the Ethereum ledger, for the first time, users can truly own their digital items” says co-founder Amitt Mahajan. “Previously in mobile or social games, virtual items earned through play or by spending money were actually owned by the company operating the game. If they shut down their servers, the items would go away and users would be out of luck. We believe this new asset class represents a paradigm shift in digital property whereby centralized assets will be moved onto decentralized systems” For now, Rare Bits isn’t slapping any extra fees on its marketplace, compared to paying 1 percent to 4 percent on other marketplaces like Open Sea and Wyvern Exchange. Instead, if a crypto-item developer charges a fee on secondary sales, say 5 percent, they’ll split that with Rare Bits for arranging the transaction.
Users get the benefit of having all their crypto-collectibles in a single wallet. They can see historical pricing before they buy anything thanks to the transparency of the Ethereum ledger, whether they want to “Buy Now” or win an auction. They collectors can also see related items rather than transacting in a vacuum.
Mahajan, Danny Le, and Dave Pekar all met after selling their gaming startups to Zynga. [Disclosure: I know Pekar from college] Their fourth co-founder Payom Dousti worked at crypto VC fund 1/0 Capital and sold his sports analytics startup numberFire to FanDuel. With experience across the gaming, virtual good, and crypto space, Mahajan tells me “We thought long and hard about potentially building blockchain-based games ourselves but ultimately decided that there was a larger opportunity in focusing on crypto-based property as a whole.” The Rare Bits exchange launched in February and did over $100,000 in transactions in its first month.
With some CryptoKitties selling elsewhere for as much as $200,000, investors liked the idea of taking a cut of everyone’s transactions rather than just launching another digital trading card. That led Rare Bits to raise a $1 million seed from Macro Ventures and angels like Steve Jang and Robin Chan. As scaling issues threaten to prevent the Bitcoin and Ethereum blockchains from supporting micropayments and mainstream commerce, new use cases like crypto-collectibles are taking the spotlight.
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