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, theres been an explosion of interest in the space.
But without a popular marketplace, its hard to find the goods you want at the right price.
Now a team of former Zynga staffers is building out the Rare Bits crypto-collectible auction and commerce site with a $6 million round led byNabeel Hyatt at Spark Capital, and joined by First Round Capital, David Sacks Craft Ventures and SV Angel.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 isnt 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, theyll split that with Rare Bits for arranging the transaction.Rare Bits lists more than 500,000 items from a dozen games, including CryptoPunks, Ether Tulips, CryptoBots, CryptoFighters, Mythereum and CryptoCelebrities.
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.
The collectors can also see related items rather than transacting in a vacuum.
One item sold for more than $10,000, and sales in the 5-10ETHrange ($555 each today) arent uncommon.Rare Bits founders from left: Danny Lee, Payom Dousti, Dave Pekar and Amitt MahajanMahajan, Danny Lee 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 fund1/0 Capital and sold his sports analytics startup numberFire to FanDuel.
With experience across the gaming, virtual goods 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 more than $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 everyones transactions rather than just launching another digital trading card.
That led Rare Bitsto 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.Now with the $6 million Series A, Rare Bits is bringing in some heavyweight angels from the world of gaming.
That includes Emmet Shear and Justin Kan, the co-founders of Twitch.
Former Dropbox execs and married couple Ruchi Sanghvi and Aditya Agrawal are also in the round, alongside Greenoaks Captial MD Neil Mehta and Channel Factory CEO Tony Chen.The team hopes the runway will help it secure partnerships with developers and creatives to publishnew collectibles for the blockchain that have a home on Rare Bits.
Mahajan says,People are viewing these items as assets that can be invested in instead of liabilities that are one way transfers of value towards the developer, its one of the major changes in this ecosystem versus traditional virtual items.Rare Bits will have to deal with the inherent scaling troubles of the Ethereum blockchain it operates on.
For now, its refunding users the gas it costs to execute purchases and sales on its marketplace in a timely manner.
Those range from a few cents to a few dollars, depending on network congestion.
But Rare Bits could be looking at a steep bill or be forced to push those fees onto users if it gets popular enough.Theres always the danger that CryptoKitties and the like are just the new Beanie Babies valued today, but worthless when the fad dies.
Rare Bits benefits from getting to follow the trend to whatever crypto-collectible is in vogue, and just has to hope the whole concept doesnt fade.But Rare Bits has a hedge against that.
While today most of these items are items from games and collectibles, we envision that we will see licenses, tickets, rights, even tokenized physical goods represented as digital assets, Mahajan tells us.
Its now building a Fan Bits feature that will let YouTubecreators, Twitch streamers and Instagram celebrities create crypto-based collectibles to engage with their audience and let their fans support them, he explains.
You might one day be able to buy and resell a meet-and-greet pass for your favorite band.Our ultimate goal is to convince millions of new people to begin owning and transacting crypto-based property, says Mahajan.
But the founders will probably be okay regardless.
Likeanyone crazy enough to start a crypto app company this early, we started buying and HODLing BTC and ETH years ago.