Solana is trying to break out into the mainstream. It needs a killer app. Could NFT gaming make it happen?
Justin Kan, who co-founded game-streaming startup Twitch and sold it to Amazon for $970 million, could help. He now runs Fractal, a curated NFT gaming marketplace for gamers to buy and sell items for these games. He’s betting on Solana, an up-and-coming blockchain protocol that claims faster transactions and lower costs than Ethereum.
In NFT-based gaming, players often need multiple NFTs for a game and conduct many transactions in the course of ordinary play, so Solana is a better option, Kan said.
Getting more users is a challenge for Solana as it seeks to take on larger blockchains. Solana has been touted for its fast transaction speed, which has drawn investment firms such as Jump Capital into building projects like Pyth. But it has also faced challenges with usability and downtime. Gaming is a consumer-friendly application that could help.
If NFT gaming on an upstart blockchain sounds wild, Kan is known for taking a zany idea and turning it into a big business. In 2007, he co-founded Y Combinator startup Justin.tv, his self-named livestreaming site, which eventually turned into Twitch.
Despite the issues with bridges and other obstacles, it’s gotten easier for consumers to use Solana through tools like the Phantom wallet, Kan said.
Fractal, which launched in late December and has raised $35 million in seed funding led by Paradigm and Multicoin Capital, vets the games and then partners with games that agree to have their NFTs trade on Fractal by marketing games to gamers, through its Discord (100,000 members), Twitter, podcasts and giveaways. Fractal takes a 2% transaction fee on secondary sales on its marketplace. Fractal’s CEO is David Wurtz, who Kan knew because they were both early Y Combinator participants, and is credited as a co-creator of Google Drive.
The game developers are a mix of crypto-natives trying to figure out gaming and gaming industry people with startups, as well as some existing larger gaming companies jumping into crypto. One game, Tiny Colony, raised $2 million from its NFT sale in less than 24 hours. Another game, Cinder, is made by gaming veterans who made Animal Jam and also sold its NFTs. “It's kind of a race of: Will crypto-native people figure out how to make games first or will game people figure out how to do crypto first?” Kan said.
Kan envisions gaming as just one of a broader set of vertical markets for NFTs across a range of sectors, such as music, tickets, events. “NFTs are now digital items across not just gaming,” he said. “People are doing events and ticketing, membership clubs, obviously, digital art, music and eventually the space will evolve where OpenSea’s like eBay, but eventually they're all these different stores.”
But will gamers move to NFT-based games? Kan believes that just as free-to-play games were dismissed at first then took over, NFT-based games will be the future of gaming, because users will feel more confident investing their time and money in a game than in other types of games.
“If you buy a bunch of skins in a [traditional] game, then the game goes away or you stop playing or get bored, you lose all that money in your investment,” he said. “Whereas if it's a game where you know you're gonna own this thing, and you can sell it over time, you can borrow against it. Maybe you can use them in different experiences. That's something that gives you more confidence to invest in that game.”
Fractal is working on a kind of digital passport or wallet that users could take with them to show their in-game achievements across various games.
While he believes in NFT games, Kan is not a fan of play-to-earn games in which users play games just to make income. “More and more games are pivoting away from that to where it's more about a fun experience and then incidentally, you might get something of value inside the game,” he said. “Because otherwise it requires this continual flow of new capital, of people coming in and putting capital in to play the game and usually that happens when there's higher speculation of assets.”