Blueprint: 72% HNWI invest in crypto; $725M Funding for Blockchain Gaming; $1.4B in Axie's market maker; $29MM Beeple astronaut statue; Ripple's gamble
Gm Fintech Futurists — our agenda for today is below.
FINANCIAL METAVERSE: Forte Closes Additional $725 Million in Funding to Extend Its Lead in Building a Compliant, Interoperable Blockchain Gaming Platform (link here)
DEFI: Ripple to Launch Bitcoin and Ethereum Hub, Plans DeFi Offering (link here)
RESEARCH: Plaid's payments ecosystem & Affirm's decoupled debit card reveal embedded finance Trojan Horse (link here)
PODCAST: DAOs 101, with SharkDAO, PartyDAO, and Juicebox contributor Nicholas (link here)
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METAVERSE: Forte Closes Additional $725 Million in Funding to Extend Its Lead in Building a Compliant, Interoperable Blockchain Gaming Platform (link here) and Katana, broke $1.2B in total value locked in less than a week (link here)
Imagine a world where cut-throat institutional market makers are providing $1.4 billion of trading capital … for making cartoon video game characters. As an example of this crazy world, Axie Infinity and its automated market maker, Katana, broke $1.2B in total value locked in less than a week and EA called NFT and blockchain games the future of the gaming industry. Traditional asset classes are getting repackaged and updated for the next generation, and blockchain-based gaming is booming.
Venture capital investors are pouring into the space as well. The latest investment of note is a $725 million check into Forte, a leading provider of blockchain solutions for game publishers. This allows for plug-in features like embeddable token wallets, NFT minting and selling, payments rails, and other financial services to be integrated into digital worlds. Users are able to create new economies, supported by goods that they genuinely own (i.e., NFTs), and mechanisms that reward players for collaboration, creativity, and skill with tangible value. Currently, the platform is in invite-only and private testing, with 40+ game developer partners, whose games have over 15 million users.
Monetization of games has taken on many different shapes. Consider arcades, where players paid for the time consumed, to consoles, where users paid once for the hardware and software, to free-to-play games, where users pay for in-game add-ons. We are now moving into an era where in-game and real-world economies are increasingly intertwined, and generating an income from interacting with digital objects or entertaining a large audience are feasible career options.
As finance seeps into game engines, you start needing compliance, KYC/AML, tax, and IP protection for both companies and players. Some of that might come through traditional fintech avenues, while most will simply be built on new money movement, identity, and digital asset rails. This is the Web3 story.
NFTs: NFT Artist Beeple’s First Physical Sculpture Fetches About $28.9 Million (link here) and Sotheby’s to Accept Live Ethereum Bids for Banksy Auctions (link here)
The Art world continues to converge with crypto culture via (1) the sale of Beeple’s new statue and and (2) Sotheby’s beginning to accept Ethereum for Banksy auctions. Beeple’s “Human One”, a 7-foot-tall LED screen covered tank depicting an astronaut walking through a fantasy landscape, sold for $28.9 million in Christie’s. The object has a physical frame that resembles another famous sculpture, the Damien Hirst shark (The Physical Impossibility of Death in the Mind, $12 million). There are particularly interesting meditations here on capitalism, technology, and even life itself. While the shark is suspended in formaldehyde, Beeple’s astronaut is suspended in a digital rendering invoking the metaverse.
There appears to be increasing mainstream acceptance of digital assets among classic auction houses like Christie’s and Sotheby’s. In an upcoming Sotheby’s auction of Banksy pieces, ETH, USDC, Bitcoin will be accepted for bids and payment along side regular fiat. Neither of the pieces being sold are NFTs, yet it is clear that markets are beginning to cater to a growing population of crypto millionaires that are contributing a growing slice in the art market’s revenue streams. The two pieces “Love is in the Air” and “Trolley Hunters” expect to go for between $4-6 million and $5-7 million respectively.
Art and wealth have always been closely connected. The takeaway here for finance is that it is irresponsible to not position your business for this generational wealth shift. As an example, There may now be as many as 100,000 bitcoin millionaires and Nearly half of millennial millionaires have at least 25% of their wealth in cryptocurrencies, according to the CNBC Millionaire Survey. According to Gapgemini and the World Wealth Report, 72% of high net worth individuals have invested in crypto.
DEFI: Ripple to Launch Bitcoin and Ethereum Hub, Plans DeFi Offering (link here)
Let’s say you are Gary Gensler, trying to protect American investors from all the wreckless innovation from pesky kids. Maybe you are trying to make an example of all these roboadvisors making it easy to invest in the stock market. There is something to be said about oversimplifications of “capturing a client’s risk tolerance” and the chance that the “client may be harmed” in an economic environment where the Fed engineers stock market returns of 20% every year.
Maybe you just want to “clean up” all this crypto stuff and be Treasury Secretary. That brings us to Ripple, and its ongoing lawsuit with the SEC for issuing XRP, the maybe-security worth $60 billion. There’s also something to be said about what kind of information would possibly be useful to an investor in an early stage protocol trying to explore the frontier of tech and money — as well as the wealth creation opportunity we had just alluded to in the previous entry.
Anyway, while this lawsuit is going on, Ripple has to do something other than continuing to issue XRP as a liquidity bridge for international payments. Also, Ethereum has become the de facto Web3 settlement layer, and other technologies are eating into Ripple’s proposed use case of fast payment transactions and liquidity provision. To that end, the company is branching out to create the Ripple Liquidity Hub. The new offering will launch in 2022 and will allow enterprise customers to buy and sell BTC, ETH, XRP, LTC, BCH, and ETC.
The platform will also plug into Ripple’s “On Demand Liquidity” platform which is used by financial institutions for cross-border payments, using XRP if they so wish.
This looks like a best execution router across multiple exchanges, likely using XRP as an intermediating asset. It also likely provides custody for these assets to ensure that the funds meet compliance requirements. While creating a new institutional exchange in large cap crypto assets is not particularly novel, as well as highly competitive with a number of market makers and exchanges, we do think that the firm has a credible shot given their widespread partner network across financial institutions. Getting access to the crypto asset class has become a more important proposition than transforming internal payments infrastructure. Ripple’s move provides increasing evidence in that regard.
Rest of the Best
Here are the rest of the updates hitting our radar:
IDENTITY: Investors pump $450 million into digital identity fintech Socure (link here)
WEALTHTECH: Bita raises €6m Series A from ETFS Capital for next generation index customisation (link here)
DIGITAL INVESTING: Options AI Closes $4.1 Million Seed Funding Round to Bring Smarter Options to Retail Investors (link here)
BNPL: London-based fintech startup, Zilch, becomes fastest European double unicorn following funding boost of €95 million (link here)
PAYMENTS: Philippines steps up payments digitization (link here)
OPEN BANKING: UK’s TrueLayer Partners with Fintech Lightyear to Provide Instant Account Funding Services (link here)
CRYPTO: London fintech Mode teams up with PayEscape to trial first-ever Bitcoin Payroll product in the UK (link here)
CRYPTO: $76 Billion a Day: How Binance Became the World’s Biggest Crypto Exchange (link here)
CRYPTO: Discord CEO hints at integrating Ethereum via wallets such as MetaMask (link here)
DEFI: DeFi liquidity provider WOO Network raises $30 million in Series A round (link here)
Analysis: Plaid's payments ecosystem & Affirm's decoupled debit card reveal embedded finance Trojan Horse (link here)
How is Plaid positioning itself as the de facto money intermediation network and how does this interlink with Affirm’s decoupled debit offering?
In this analysis, we want to update the discussion of card networks, money movement, and the potential existential threat — or perhaps evolution — to existing infrastructure. It continues the thread on articles like Is Plaid cheap at $5.3 billion for $500 billion Visa? and Marqeta's $300MM of revenue & Ethereum's $20B in ann. transaction fees highlight opportunity and industry structure, and Who are the customers of Embedded Finance, and what do they reveal about Stripe, Affirm, DriveWealth, and Green Dot?, and more generally in this research section. We map Plaid’s progress in building out a payments ecosystem, and highlight Affirm’s debit card product powered in a novel manner through open banking. The analysis visualizes a likely evolution of the space with the introduction of Web3, and highlights a couple of early symptoms.
Podcast Conversation: DAOs 101, with SharkDAO, PartyDAO, and Juicebox contributor Nicholas (link here)
In this conversation, we chat with Nicholas – an NFT developer and a contributor to Juicebox, which is an awesome DAO enablement software, as well as SharkDAO and PartyDAO. Nicholas is active in the Web3 ecosystem, has a solidity podcast called Solidity Galaxy Brain, and is a collaborator with NFT artists.
We touch on the philosophy behind programming and coding, what a decentralized autonomous organization (DAO) truly is and what it is comprised of, various successful examples of DAOs that Nicholas has been involved in, the concept of community and the value that DAOs serve in this respect, how DAOs leverage tools to achieve their purpose, and so so much more!
“Yeah, I think one of the first things that appeal to me about DAOs as well as, PartyDAO for instance, I was able to collect talent that really otherwise would never have joined together in order to create a piece of software for some centralized organizations. So, already from that story, we have a bit of a hint at what's interesting about DAOs, which is a different pattern of work. In the DAOs that I've been a part of, maybe PartyDAO a little bit less, and this is kind of the other thing DAOs, it's really a whole ecology of possibilities and the best practices are yet to be forged. People are a little bit too confident when they talk about NFTs and saying that they are collectibles or they are a form of art or their relationship to the art market is sort of their ultimate destiny.”
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