NFTs are forcing their way into video games, whether gamers want them or not.
Fractal, a startup from Twitch co-founder Justin Kan that operates a marketplace for gaming-related NFTs, raised $35 million Friday in a seed round led by Paradigm and Multicoin Capital.
The latest funding round also attracted participation from Andreessen Horowitz (a16z), Solana Labs, Animoca, Coinbase Ventures, Play Ventures, Position Ventures and Zynga founder Mark Pincus, among others.
"Streaming on Twitch upended the gaming industry’s business model a decade ago," Kan wrote in a blog post. "Introducing blockchain based assets will be an even bigger change. I’m excited to jump in and build in the gaming space again."
Essentially the company's platform enables users to buy and sell unique virtual items that can be used in video games like Tiny Colony and House of Sparta. The game items are minted as NFTs, or nonfungible tokens, and encoded on the blockchain to verify authenticity and ownership. Fractal reported it sold over $2 million in NFTs minted for Tiny Colony.
These types of games are attempting to drive enthusiasm around NFTs by giving the technology an actual use. The NFTs can be actually used as items in the game — making the games easier to win or an avatar look cooler — and then traded to other players.
"It’s better for game studios, because as they will find out, when they make their economies and assets open and programmable by putting them on the blockchain, they will create ecosystems that other people are much more willing to invest in with their time and money," Kan wrote. "We will see the biggest games become open economies that support other developers building businesses on top of."
Fractal wasn't the only NFT gaming startup to raise money recently. Battlebound announced it raised $4.8 million from Andreessen Horowitz this week, while last week we wrote about Block Tackle, a studio making an NFT-based skateboarding game, raising $5 million.
Investors are throwing money at this space despite its vulnerability to cyber threats, like the recent hack on the blockchain game Axie Infinity during which $625 million in digital currency was stolen.