Stolen artwork, frozen assets, lawsuits and plunging values. It might be officially summertime but many of the building blocks of web3 are experiencing a so-called winter. Except that investors don't seem to mind.
More than $3 billion has been invested in all sorts of NFT-related startups globally since the beginning of the year, according to Crunchbase, including nearly $250 million in the Bay Area.
Half of that was raised by a single company, Magic Eden.
The San Francisco company is building an NFT marketplace for assets on the Solana blockchain.
By contrast, the largest NFT marketplace, OpenSea, primarily supports the Ethereum blockchain and token, though it has a beta program for Solana, as well.
Magic Eden announced a $130 million Series B on Tuesday just three months after its Series A when it was valued at $50 million in March. The company is now valued at $1.6 billion, according to PitchBook.
Quite the jump for a business that's less than a year old.
Greylock Partners and Electric Capital led the company's latest round, and other investors included Kindred Ventures, Lightspeed Venture Partners, Paradigm and Sequoia.
"NFTs are the future of community, expression and ownership" and "are the best bridge to bring people into Web3," Magic Eden's co-founder and CEO Jack Lu tweeted on Tuesday.
The industry has had some early stumbles, though.
Actor Seth Green recently recovered a Bored Ape NFT that had apparently been stolen (or perhaps kidnapped?) by a mysterious collector known as "Mr. Cheese." Green eventually recovered the asset after paying the anonymous account over $300,000, as Buzzfeed News reported.
In September, TechCrunch reported that an OpenSea executive was being accused of insider trading — not in a way that would trigger an SEC investigation, but it was a breach of trust for the New York company's users.
And one of the central premises of web3 — decentralization — is already breaking down.
OpenSea has tried to tamp down on theft and fraud. It's too little too late for some users, like this owner of a Bored Ape who the New York Times reported was fleeced when his million dollar NFT was surreptitiously bought for 30% of the purchase price. For others, any interference by OpenSea, even for anti-fraud purposes, is the antithesis of web3.
And cryptocurrencies have been having a very bad year. Bitcoin has lost 60% of its value this year, dipping as low as $17,601. The stablecoin Terra and a related token, Luna, crashed in May, wiping out $45 billion in market value. Another so-called stablecoin that trades under the symbol USDD started dropping below $1 earlier this week — it's supposed to stay pegged to the US dollar.
Despite all this, Magic Eden and other NFT marketplaces have continued to raise money.
"NFTs have been the most popular onramp of new consumers into crypto," Greylock partner Mike Duboe wrote in a blog post about the firm's investment in Magic Eden.
Duboe sees a future that includes more than just jpegs on a blockchain for Twitter profile photos.
"We believe NFT technology will see many applications in coming years – from loyalty/membership programs and wallet-aware promotions for brands, to ticketing and royalties for artists, to virtual land ownership, and gaming," Duboe wrote. "This team has braved previous crypto winters… and is thoughtfully building its team through this one."
Other NFT marketplaces have recently announced funding rounds, according to PitchBook, including:
- Zoop, a marketplace for digital avatars of celebrities that can be bought, traded and used in gaming. It's being created by OnlyFans founder and former CEO Tim Stokely.
- Hypermint, an NFT marketplace that is launching in partnership with Universal Pictures, Fox Corporation and Snoop Dogg's Death Row Records.
- Astaria, an NFT lending platform.
- Outland, an NFT platform for art.
