Venture Capital Multicoin: Why We Bet on the NFT Platform REALY

Author: Mable Jiang, Partner at Multicoin Capital

Note: This article was published in April this year

In 2017, CryptoKitties was born as the first digital collectible represented by NFTs on Ethereum. However, its popularity was largely limited to participants within the crypto ecosystem. Earlier this year, with the launch of NBA Top Shot, we saw another breakthrough success from Dapper Labs, the company that created CryptoKitties. NBA Top Shot is a collectibles platform that commemorates moments from NBA games in tradable NFTs. Since its launch, it has captured the imagination of countless members of the public and celebrities.

Why was NBA Top Shot, built by the exact same team as CryptoKitties, able to achieve mainstream success while CryptoKitties did not?

The most important difference lies in brand value. Unlike the crypto-native brand CryptoKitties, Top Shot leverages the brand equity of the NBA. The NBA is a massive brand with tens of millions of passionate fans worldwide. These fans are deeply obsessed with the NBA and are willing to pay for brand-related products.

Compared to CryptoKitties, Top Shot is built on existing brand recognition. This brand value is largely why Top Shot attracts more people rather than a new brand. Top Shot has proven that NFTs can accelerate mainstream acceptance based on widely loved and recognized brands.

REALY is an NFT ecosystem that effectively utilizes this strategy. They focus on streetwear brands and Chinese celebrities and well-known creators, which are built on brands and celebrities with large and highly engaged fan bases.

Streetwear brands (like Travis Scott's fashion products) and designer toys (like Be@rbrick) are highly sought after among China's Gen Z demographic. However, due to their popularity, counterfeit goods are a huge problem, and fans lack a trustworthy place to purchase authentic designer collectibles. The transaction friction for buying and selling a pair of Yeezy sneakers is also high: professional sneaker investors must trade with sales receipts, and sometimes a third-party verifier is needed when buyers are unsure about the authenticity of a pair of second-hand shoes.

REALY elegantly addresses these issues through a differentiated product strategy and a gamified system that incentivizes creators to share the success of brand creators (i.e., their sales performance) with the fan community.

1. NFT Application Platform with a Vertical Brand Matrix

REALY has a series of mobile applications featuring designer brands and celebrity merchandise, including REALY Global, Mars Space Station, Micron Station, Revenge, and SHINE. REALY Global provides an online shopping marketplace for designer brands and designer toys, while Mars Space Station offers collectibles exclusively issued by Chinese superstar Hua Chenyu. Although each application is tailored to its respective community, they are all supported by the REALY platform. Trendy brands can list directly in the marketplace (i.e., REALY Global) or collaborate with REALY to design applications based on fan communities, such as Mars Space Station.

REALY binds each collectible listed with a unique NFT issued by the creator by adding embedded chips to the items sold on the platform. This helps collectors avoid purchasing counterfeits and allows them to track the provenance and sales history of each item they purchase. It also helps speculative traders of trendy brands (like sneaker flippers) reduce transaction friction; they can now simply trade NFTs on the blockchain without exchanging physical receipts.

2. Two Additional Aspects of the Product Marketing Strategy to Emphasize:

This creator-focused platform model is optimized to quickly find market-fit products, especially in China. As I mentioned in a previous article, China is a mobile-first market. People are accustomed to shopping on their mobile applications and often prefer it. REALY actively leverages this culture to gain an advantage.

The user interface of each application is individually customized for specific users and super fan groups. While Hua Chenyu's fans may also be collectors of designer brands by Edison Chen or large collectors of Yeezy sneakers, they do not necessarily always overlap. In other words, REALY customizes each NFT marketplace for super fans and different users. The product (and platform) strategy is optimized for what Chris Dixon calls "loyal fans," creating vertical markets for those who actively want to collaborate with creators and brands and wish to purchase products first.

REALY launched their products on the Binance Smart Chain and will also deploy on Solana, further reducing transaction costs. REALY also allows application operators to pay transaction fees for users, making the shopping experience smoother for non-crypto consumers.

3. The Token Economy of REAL

REAL is the token of the REALY ecosystem. Fans earn REAL tokens by purchasing collectibles from designer brands within the ecosystem's various applications.

The REALY network captures 10% of all sales across the entire REALY ecosystem as transaction fees. Fans holding REAL tokens earn xREAL (inspired by xSUSHI) by staking REAL tokens, which qualifies them to receive transaction fees from the entire ecosystem. This gives fans and collector investors the opportunity to capture the growth value of the entire REALY ecosystem.

Additionally, creators (i.e., designer brands) can establish designer brand pools that share revenue with fans. Fans can stake their REAL in these brand pools, where they can earn 9% of the creator's sales revenue (this is not an additional extraction but comes from the 10% fee charged by the REALY platform). This provides fans with a way to bet on their favorite creators and capture the rising value of the brand (assuming the brand becomes more popular and successful). General speculative traders will also love this platform as it provides a more systematic way to bet on the future potential of a brand or the entire ecosystem without requiring speculators to make specific choices about individual collectibles.

4. About the REALY Team

George Yang, the CEO of REALY, is a serial entrepreneur in the street fashion industry. Before REALY, George was a co-founder of INNERSECT, a streetwear exhibition platform founded in 2016, backed by the designer brand created by Edison Chen. As a co-founder of the brand, he expanded sales to over $30 million by introducing various global designer brands, toy collectibles, and artists to the platform. Before running fashion-related businesses at INNERSECT, George was an investor at a private equity firm in China, focusing on new consumption and new energy sectors.

As an operator and investor, George has deep insights into the consumer retail market. We are excited to support George and his team and help them explore the intersection of real-world collectibles and Web 3.0 ownership!