Although nft sales volume continues to decline by 88% Off 2022 all-time highs (and a 38% year-to-date drop), Pallet Exchange is building a new type of nft marketplace focused on user retention. And it's doing it on a blockchain less known for nft trading: Sei.
Co-founders Kelvin Wang and Davy Li have convinced investors that there is still enough future in NFTs beyond silly social media profile pictures (PFPs) to have raised $2.5 million in a round of private financing with the participation of Spartan Group, Symbolic Capital, Cypher. Angel and equity investors from Coinbase, MoonPay and more, TechCrunch has learned exclusively.
Wang and Li are probably best known for creating The lighthouse, one of the most popular web3 games on Arbitrum, a layer 2 blockchain built on top of ethereum. “That was the initial push, we saw the gaming landscape and thought we could make a better game and we had a vision for it,” Li said about why they then built an nft marketplace.
They see great promise in the future of NFTs due to human behavior. “The fundamental appeal of a user to trade and sell is very human in nature,” Wang said. “We've seen it with collectibles, cars and toys.”
While developing The Beacon, they saw market-level friction with speed, transaction time and user experience, so they decided to build a marketplace that was faster and easier to use, Wang said.
In crypto, platforms are usually very focused on all things financial.
“It's great that there are a lot of financial innovations happening, but at the same time we saw that there are pain points in the user experience,” Li said. “It's hard for beginners to jump into the game and be affected by numbers and dashboards. Imagine throwing a beginner who has never touched stocks into the Bloomberg terminal. It's like that.”
Still, making money is a key factor for cryptocurrency enthusiasts (and many fail, for what it's worth).
And Pallet's founders say they recognize that in a bear market, like the most recent one, when it's much harder to make money, especially for a newbie, new marketplaces like theirs will have a harder time retaining customers. “That's the piece we wanted to experiment with and innovate in liquidity and retention mechanisms.”
So, even in cases where “the number doesn't always increase,” the market wants users to feel like they are making progress and doing meaningful and fun things with their nft collections. It is using social media tactics, such as in-app messages, that allow people interested in the same nft collections to interact with each other on its marketplace.
“Imagine the moment you buy an nft, you are added to a group chat with other holders and there is a community aspect to it,” Li said. “We want to implement certain clans where friends can collaborate and we are trying to take a page from the live trading games we see and (create) an improved system compared to the pure points that many markets use” to gamify the experience in the nft market.
All in all, Pallet wants to be a “good trading experience for regular people,” Wang said. “We want to create a platform that brings liquidity and crypto people and regular users through the gamification of social features.”
But when it comes to the largest blockchains in the nft space, ethereum, bitcoin, and Solana lead the pack with over $1.3 billion in sales volume over the past 30 days, according to CryptoSlam. data. So why build a marketplace on a blockchain with less traction?
Well, Sei's layer 1 blockchain is extremely fast in 12,500 transactions per second and has low gas fees, also known as transaction costs. And the team believes there are opportunities in its less authoritative territory.
“We saw it as a parallel to the early days of Solana. “We made a leveraged bet: this will be the chain of the future because it allows something that Solana couldn't do: access the EVM liquidity market naturally,” Wang said.
Additionally, the creators of the Sei blockchain are working to attract ethereum Virtual Machine (EVM)-based developers by creating a technology called The Parallel Stack, something that hopes to make ethereum faster and less expensive. .
Sei's work at EVM has convinced Pallet that Sei's overlords will “grow the pie here,” Wang says.
Betting on Sei, its social aspects and its friendly user interface has paid off so far. Pallet is one of the fastest growing nft marketplaces by volume on all blockchains.
Pallet launched in September and experienced a “boom” in December, Wang said. That's when Seiyanos, a Sei-based nft collection fueled by meme culture, capitulated the new blockchain and new market into the talk of the cryptocurrency world. Seiyans NFTs can be bought and sold on Pallet.
Today, it has around 99% of the nft market share on Sei and has done over $20 million in trading volume so far this year, with over 2 million users visiting its platform last year and It has between 40,000 and 50,000 daily users, Wang said. Its revenue model includes charging a 2% fee on transactions, bringing its annual run rate to $2 million or more, Wang said. “It's a great start for us”.
In recent weeks, Wang says there has been growing interest in artistic NFTs, collectibles that are not throwbacks to the Bored Apes PFP phenomenon, although PFPs have their fans too. In the future, Pallet plans to work with large partners in the art market and create a separate marketplace for those creators. “We don't want to put an individual artist with a bunch of PFP, we want to create unique experiences for both,” Wang said.
