IPO 2.0
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IPO 2.0

Dapper Labs Flow

Dapper Labs’ Flow, an NFT platform, could be the next frontier of the blockchain revolution focusing on the consumer space.

NFTs create new digital opportunities

Blockchain is going to fundamentally alter the financial industry and have a major impact on consumers and their behaviors. While cryptocurrencies like Bitcoin and Ether are getting more popular and widely accepted, NFTs (non-fungible tokens) are solving a compelling use case of owning rare digital assets.

Unlike Bitcoin, NFTs are used to create verifiable digital scare assets that are not mutually interchangeable. Unlike currency, NFTs can represent specific original artworks or rare collectibles in online games. With this technology, consumers can own something scares that is secured and verified by a decentralized network (blockchains).

According to Roham Gharegozlou, the founder and CEO of Dapper Labs, “blockchains are public computers. They are infrastructure that you pay to use in the form of a token rather than paying dollars to Amazon or Google to run your operations.” These decentralized networks allow the creation of scare digital assets that are more secure than the real-world counterparts.

Consumer Demand for digital memorabilia rises

According to Forbes, the estimated size of the global collectibles market is around $370 billion. Trading cards take the dominant lead in sports collector interest with over 98% of all sports collectors having collected these cards at some point. This market will be also disrupted more and more by digital collectibles.

As the world is being more financialized, digital memorabilia represent a compelling asset class that allows customers and investors to participate in an alternative market. Well-known brands will be able to tokenize their experiences and sell them to their communities and fans.

As the world moves increasingly online, so has consumers’ desire for discovering and collecting digital memorabilia that brings them one step closer to their favorite athletes, musicians, and iconic characters,” (Roham Gharegozlou).

Dapper Labs

Dapper Labs’ Flow is a blockchain built from the ground up to support high-performance ecosystems of apps and games. While Bitcoin and Ethereum show how crypto can make the world of finance more open and transparent, Flow aims to do the same for consumers of entertainment and culture.

Dapper Labs has recently raised $250M+ at a $2B valuation led by Coatue Management. It has raised previously over $50M in funding from investors such as Venrock, Andreessen Horowitz, Union Square Ventures, Union Square Ventures, Coinbase Ventures, and Warner Music Group.

Investors [Credit: Dapper Labs]

The latest round comes amid a period of rapid growth for its NBA Top Shot NFT product. Dapper Labs’ NBA Top Shop project is now the most popular non-fungible token (NFT) series by volume after being launched in October 2020. The firm has generated almost $100 million in NFT sales.

NBA Top Shot is a platform that enables users to collect and trade digitized “moments” from various games. Users can buy or sell these digital collectibles for real money.

According to the CEO Roham Gharegozlou, Dapper Labs will use its newly secured funds of $250M+ to work on additional projects, including its partnerships with Warner Music Group, Dr. Seuss Enterprises, and the Ultimate Fighting Championship (UFC).

Partners [Credit: Dapper Labs]

Flow’s Architecture

In 2017, the team around Roham Gharegozlou have encountered major issues with its game CryptoKitties that was developed on the Ethereum platform. In its short lifespan, CryptoKitties has grown to make up 20 percent of all Ethereum computations, which contributed to the network congestion.

In order to create and maintain multiple decentralized apps (dapps) such as NBA Top Shot, the Flow blockchain employs a multi-node, multi-role architecture. Put another way, Flow has divided the validation stages of a transaction into four different categories, dividing the responsibilities of each node:

  • Collection Nodes — Enhance network connectivity and data availability for dapps
  • Consensus Nodes — Decide the presence and order of transactions
  • Execution Nodes — Perform computation associated with each transaction. These nodes do not have any decision-making powers
  • Verification Nodes — Double check the work done by the Execution Nodes.
Flow’s Architecture [Credit: Dapper Labs]

Flow’s Ownership Structure

Flow is still highly concentrated by Dapper Labs (20%), its development team (18%), and large investors (11.1%) and small investors (8.9%). This could be a red flag when it comes to the decentralization of the network but could this could change in the future with further dilution and other community sales.

Flow’s Token Distribution [Credit: Dapper Labs]
Largest Flow Backers [Credit: Dapper Labs]

Outlook

NFTs are on the rise and are offering to create many tokenized brands. With the recent fundraising, Dapper Labs will be able to work with Warner Music Group, Dr. Seuss Enterprises, and the Ultimate Fighting Championship (UFC) to create new experiences.

It will be interesting to follow what developers will build next with the blockchain Flow from Dapper Labs.

Disclaimer: I’m long FLOW

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