Twitch Cofounder Justin Kan Shares Outlook, Advice

  • Justin Kan cofounded gaming-focused NFT marketplace Fractal, which secured a $ 35 million seed round.
  • Blockchain gaming activity has increased 2,000% since 2021, per DappRadar.
  • The 38-year-old entrepreneur explains the risks in pouring too much money into speculative assets.

Non-fungible tokens, or NFTs, have made a splash in the multi-billion-dollar gaming industry this year.

In the past four months, companies like GameStop have partnered with NFT-scaling startup Immutable to launch a $ 100 million fund while Words With Friends creator Zynga announced an upcoming NFT-based game. Venture capitalists and other investors, additionally, poured over $ 2.5 billion into blockchain-based games and their related infrastructure, per a Blockchain Game Alliance report.

But it’s not stopping there, Justin Kahn, the cofounder of livestreaming platform


Twitch

told Insider.

Kan said that the crypto assets will revolutionize the industry’s entire business model.

“It will be the future business model of gaming for sure,” he told Insider. “I think it’s a question mark on whether this will include existing NFT projects or if it will be new ones. It will probably be a mix of both.”

For the uninitiated, an NFT is a unique certificate of ownership of an asset, which can be verified on the blockchain. But how do these work in gaming?

Currently, players can buy virtual cosmetics or skins for their characters – a market that generates roughly $ 40 billion per year in revenue, according to the DMarket trading platform. This is a key monetization element in


Epic Games

‘Fortnite, which takes home more than a billion dollars per year from the in-game assets.

But Fortnite skins don’t belong to the buyer, Kan said, which makes NFTs an attractive alternative to the current monetization strategy.

“So what’s happened with the advent of blockchain games is that now those virtual goods and items can be put on-chain and you can have actual ownership of that,” he said. “The only difference is that these companies themselves are giving up control and what they get in exchange is a more robust economy.”

This is the distinction, Kan said, between what he calls a “closed economy” and an “open economy” in gaming.

“People are willing to invest in your ecosystem and build experiences in those games if this happens,” he added.

The 38-year-old tech entrepreneur cofounded gaming-focused NFT marketplace Fractal, which secured a $ 35 million seed round earlier this month. Kan is also a general partner at VC firm Goat Capital, where he invest in early-stage startups.

Don’t ‘YOLO your 401k’ into NFTs

If investors are purely looking for returns, Kan said, gaming NFTs may note be the answer.

“I don’t endorse putting a substantial amount of your money into any sort of highly speculative asset,” Kan said, citing NFTs along with baseball cards and other collectibles. “I wouldn’t be ‘YOLOing’ your 401k into it at this point.”

If you’re going to invest, Kan said, pick the projects that will be able to endure various market conditions. Often, there are factors that investors cannot predict such as founders breaking up or the players not resonating with the gameplay.

“You should look for which teams are going to create projects and IP that’s going to be durable,” Kan added. “If you do want to invest in this new gaming model, you really want to be investing in a more diversified portfolio to see your thesis play out.”

With any emerging technology or new asset class like NFT gaming, however, there are risks.

Last month, a hacker breached Axie Infinity’s Ronin Network for $ 625 million. Cofounder Trung Nguyen acknowledged that the team made some trade-offs while trying to take the mainstream project which left them vulnerable to security risks.

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