Deal focus: NFT start-up declares war on the internet

Much of the argument for non-fungible tokens (NFTs) is about financial inclusion. The blockchain-based assets distinguish themselves from popular cryptocurrencies with code that defines them as individually unique and irreproducible. The idea is to introduce true ownership to the stuff of cyberspace, whether it be a one-of-a-kind parcel of virtual real estate or piece of online art given scarcity value by the artist’s digital signature.

Investors have therefore increasingly regarded NFTs, and by extension the entire concept of blockchain-enabled decentralization, as part of a social revolution. Furthermore, it appears that they now believe that a sufficiently large public is either ready for it or will be soon.

In the past week, two of the biggest global names in NFTs raised rounds at $1 billion valuations: US-based Forte and Hong Kong’s Animoca Brands. The latter secured $88.9 million from a raft of specialist crypto investors and generalist VCs such as Kingsway Capital, Ellerston Capital, and Appworks Fund.

There is a feeling that NFTs represent the beginning of an inflection point in new business model building, as well as the beachhead of “Web 3.0,” the internet’s theoretical next evolutionary step into decentralization. The main driver of the phenomenon, however, is human nature; people crave social status, community, upward mobility, and control of worldly possessions. In their digital lives, they don’t have it.

“This is more than just an idea – this is a movement,” explains Yat Siu, co-founder and chairman of Animoca. “As we begin to understand that we need to take more ownership of everything digital, then you realize that our relationship with digital property needs to be peer-to-peer the way we have it in physical life. If I own a car, and I want to sell it, I don’t need to go to Tesla to seek permission.”

Central to understanding the Animoca thesis is that people buying virtual merchandise in the context of an immersive game or other online fantasy do indeed believe that they truly own the items they’re buying.

This reality is being laid bare in an ongoing lawsuit brought by Tencent Holdings against DD373.com, operator of an in-game trading platform, where gamers buy virtual goods that Tencent claims are its properties. The proceedings have stoked incredulous outrage on Chinese social media among gamers who follow the logic that if they buy it, they really own it.

“We actually have terrible user experience in the digital world, but we’ve been conditioned to it for the last 20-30 years because we looked at our digital lives as an add-on to physical life,” says Siu, who also helped pioneer Hong Kong’s internet start-up scene in the early 2000s. “Now, we’ve tilted, and COVID-19 definitely accelerated this thinking. Our digital lives have become center stage.”

Animoca started out as a traditional games developer and has found significant success distributing titles with brands such as Star Trek, Marvel and the NBA. With the latest funding, however, a years-long transition toward NFTs has come into focus. The company will use the fresh capital to develop new ways of monetizing the tokens as in-game rewards and virtual property rights – but that’s only the beginning.

“Our mission here is to deliver digital property rights to everyone,” Siu says. “The goal isn’t to change gaming. The goal is to change the entire internet, to change and redraw our relationships with our social networks – WeChat, Tencent, Amazon, Google, Facebook – who are the ones that have been taking all the value.”

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• Topics
• Greater China
• Consumer
• Technology
• Media
• Expansion
• Hong Kong (China)
• blockchain
• Cryptocurrency
• gaming