Pic: FunFair’s new offices in Camden, London courtesy of Atrium/LABS
We’ve been hard at work developing the FunFair gaming platform, protocol and suite of launch games and you’ll be glad to hear that things are going well and are on schedule.
We’re now a team of 22 and growing fast.
The breakdown of job functions right now looks like this:
Management: Jez (CEO), Jeremy (CTO), Rob (PM), James (Commercial/Ops)
Leads: Oli (Lead Tech Dev), Paul (Lead Games Dev), Laurence (Lead Art)
Marcomms: Alex (marketing & community), Cecile (PR and community), Dan (marketing, web and content), Louise (brand marketing)
Tech devs: Dane, Mark, Will
Games devs: Steve, Jase, Mark (audio), Joe (art), Kim (art), Dave (art), Natalie (art)
In addition, we have outside contractors:
PR: Spark PR (Eric, Katie, Kathryn, Emma)
Token Advisers: New Alchemy (JC, Ted, Dennis, Phil, Peter), Element (Stan Miroshnik)
We’re rapidly expanding in all areas, especially games development and tech, and soon we’ll be expanding the marketing, business development and admin roles in the company. If you’re interested in joining the FunFair team, keep an eye on the Careers page or drop us an email at [email protected] and tell us how you can help!
Our London office was already a tight squeeze in the beginning, so we have now moved to larger offices in Camden Market, surrounded by other cutting edge startups and successful digital organisations. That collective sense of being in the vanguard of tech progress will be a useful boost for the team during the long days ahead. Coincidentally the building is owned by Teddy Sagi’s new company Market Tech. Teddy was previously the founder of PlayTech, one of several companies we’re modelling FunFair on. We like to think FunFair could be the disruptive crypto version.
As you probably heard back in June, the Phase 1 FUN Token Presale raised $26m in crypto at the time. Much of it came from institutions in the days preceding the launch. The bulk of the funds raised were in Ether (ETH), which promptly dropped in value almost immediately after our token event, before we had the chance to sell any into fiat ($ or €). Almost every cryptocurrency except Bitcoin (BTC) dropped during this mini-crash.
As a result, a few weeks after the 22 June token event – when ETH had been at $325, BTC at $2565 and BAT at $0.017 (of which we received $2.4m, and whose price then halved) – our initial $26m ‘token sale’ holdings dropped in value to as low as $15m.
Although some investors believed we should have immediately sold all of the crypto into fiat to de-risk our position entirely, we didn’t get the chance. Also, it wouldn’t have been good value and we’d have taken a substantial loss had we done that at June/July prices.
We decided on a treasury policy that would slowly sell down the crypto into fiat and take advantage of de-risking opportunities whenever they arose. We were fairly confident that ETH would return to its previous heights in due course so we focused on selling the other cryptocurrencies that were at or close to their price at the time of our token sale event, or close to an all-time high (ATH).
BTC had just hit an ATH of nearly $3000 and was hovering around the token event price, allowing us to sell a portion. After the hard fork BTC went on a rally and recently passed $4500 offering us the chance to sell more BTC on the way up, effectively raising a little more fiat than we expected given our BTC holdings at the time of the token sale.
BAT had also dropped significantly in price after the token event but eventually returned to and rose above the initial price. We felt that holding a large amount of BAT was a risk we weren’t comfortable taking, so we intended to liquidate our entire BAT holdings as soon as practicable. That is now achieved – we managed to liquidate all of our BAT holdings at an advantageous rate when the price spiked, and we’re now holding that same value in BTC which we see as a lower risk.
We also liquidated the other alt coins we were holding, which weren’t of significant value but it streamlines and simplifies our holdings into just BTC, ETH, and Cash. After the BTC fork we also sold our Bitcoin Cash (BCH), a little of which we had on an exchange and sold at $500, though most of it was sold between $200-300. We sold the remaining BCH at around $600 in the last few days.
In general we think we’ve optimised the sale of our crypto holdings and sold at close to and in some cases above the prices set at the time of our token event. We have yet to sell any of our ETH holdings as we think it will rise further over the coming months, with some major milestones being the Metropolis release, Devcon3 and other exciting infrastructure developments like Raiden and Plasma. Also, some big token sales (Bancor, Status, Tezos, EOS) are out of the way and there appears to be a bit of calm as smaller token sales have become the norm this last month or so.
Almost all of our costs are in fiat – salaries, rent, hardware, legal and professional advisers etc – so it’s important for us to maintain a healthy fiat cash balance.
As of today (31 August 2017), we’re holding around $6m USD in cash (mostly in Euros) which will keep the lights on for many months. At our current size it would last more than two years but we’re rapidly expanding our team so the monthly burn goes up. At all times we intend to hold at least six months’ runway in fiat and will continue to sell our crypto assets as needed, or whenever there are good opportunities to sell well.
Thus total holdings – today – are approximately:
BTC: 1500 ($7m)
ETH: 50,000 ETH ($19m)
That gives us a de-risked cash flow in the business plus a healthy value in unspent crypto above and beyond the value raised at ICO. We also note that that to date the company has yet to spend a penny of cash and the entire running costs of the business to date have been borrowed from shareholders that are about to be repaid (circa $1m). This was because it took the company a long time to get a bank account opened (KYC these days is quite onerous for new companies).
We have a top co in Singapore called FunFair Private Limited that created and issued the FUN tokens and sold them in the initial token presale. Singapore is a blockchain-friendly but not gaming-friendly jurisdiction so our Singapore HQ remains solely a holding company and investment vehicle and not a trading company. FunFair Private Limited owns foreign companies that invest in and execute IP licensing of the games and technologies. FunFair has several middle co’s that hold IP, contract work out and do licensing. These are in Malta, Gibraltar and Guernsey, all gaming friendly jurisdictions. We have a bottom co in the UK that does actual development work under contract for the middle co’s and does not do licensing or any other function. We may have other dev co’s in the future.
We believe this corporate structure serves our needs, is flexible and adheres to local laws and regulations. We continue to fine-tune to get best results and stay the right side of regulations, despite being bleeding-edge on the legal front of both blockchain and gaming, so we have to maintain continued legal advice in those areas especially well.
Work on adding test-FUN tokens to the existing games has started and will be part of a soon-to-be-released update that will allow the use of FUN tokens to better test the systems. As always, we don’t run on the main net because we aren’t a casino operator and wish to remain legal – both from a gaming as well as blockchain point of view. The next few major updates will include elements of provably fair gaming (dispute resolution, proof of individual games etc) and peer to peer gaming (incentives, bonds, slashing etc). Metropolis will be good for token based economies like FunFair’s, allowing the contract – not the games player – to pay for the gas (coming in Constantinople).
In the coming weeks, our CTO Jeremy will be writing a technical blog with a more detailed update.
At present there are eight games on the showcase that are running today. They are all experimental prototype games that will continue to be enhanced before release. They’re already pretty competitive with what’s out there, but they will get immeasurably better before release.
Four are slots – with Alien, Pirates, Classic and Fairy Tale themes – which show not only different graphics and audio sets but also different gameplay and bonus games.
We have four table games; Baccarat, Roulette, Blackjack and Craps. With the first eight games built, these represent something like 80% of the revenue that a typical online casino would generate in revenue terms, with Slots being the dominant game in the west and Baccarat being dominant in the east.
We’ve almost completed our prototype Video Poker game (which is looking deliciously retro!) and we know this category of game has a dedicated following so we cant wait to hear what they think! We will also try our hand at an ole’ fashioned blockchain ‘dice’ game. Some (yes, including me) have joked that all we have to do is strip out all the graphics, gameplay, audio and Fun from any of our other games, and introduce some slow delays and wait for a few blocks to be mined for every roll, and voila! – we have a blockchain dice game that’s competitive with the others. But that’s a little cruel 😉 !
So we will actually try and create the best damn dice game we can muster. We’re going to try and interpret the brief a little differently than the rest and add some of FunFair’s special sauce and see what happens. We don’t believe a dice game has to be underwhelmingly text-based and slow to be successful 😉 I can’t wait to see what our devs come up with.
Our strategy for the games is to be able to launch the FunFair gaming platform with a suite of games that are highly competitive with anything that’s out there in the big wide world of online gaming and to largely ignore what’s going on from the current crop of existing blockchain games, which are not particularly competitive and offer little value other than the fact they take cryptocurrency as an input, which is hardly rocket science.
In terms of production and entertainment value, many existing blockchain games are lacking and we intend to change all that. We want to show that blockchain games don’t have to suck and that players can have access to the best possible games yet still play in crypto and get all the benefits the blockchain and smart contracts bring to the table such as player protection (no deposit into casino custody), provably fair gameplay (not only the RNG, but also the entire gameplay in transparent smart contracts), etc.
Our view on existing blockchain games is that they mostly survive because they have no blockchain competition. ‘No Natural Predators’, if you will. If you were to compare them with their online gaming equivalents, they are unprofessional, low quality game experiences that offer little if any entertainment value and would not fly if they were not in crypto. In many cases, they are operated by anonymous owners, have high gas costs that are uneconomic in the real world, and have created little or any tech or IP of value, some of them outsourcing their tech to third party providers so they have little ownership or IP to their own solutions.
Open Source strategy
We take a commercial and pragmatic view on what and when we should open source. In the first instance, we have delayed open sourcing anything we’ve developed for mostly short term commercial reasons. Why give away the farm when we don’t have to? We’ve built everything ourselves and invented the tech we needed to accomplish our goal. As we see it, there’s a few big problems with open sourcing prematurely.
As witnessed by the huge number of scams operating in this space, anytime you have a real money application that’s open sourced – like a wallet – you give the ability for scammers to fork the code and make it easy to do lookalike sites that steal peoples’ money or their private keys. This is the most common form of scam in Ethereum and has been suffered by the very excellent MyEtherWallet (which we love!) amongst others. Our FunFair game platform is all about bringing absolute trust to the online gaming market for the very first time, and it wouldn’t serve anyone’s interest if we help the scammers get on board early in our life cycle. This issue of scammers forking code and scamming people needs to be solved somehow, but in the meantime, whilst we as a community have no real solution to this issue, we don’t feel it serves the community or the players, to open source our code at this time. It helps the scammers much more than it helps the community.
2. Commercially sensitive information
FunFair has created its own tech and IP. We have not been waiting for anyone else to solve our problems for us. In measurable ways this has put FunFair ahead of the competition in delivering practical solutions to online gaming on the blockchain and we feel it is the first commercially competitive solution that has a good chance at competing with incumbent (debit/credit card) online gaming markets. Our games tech is much more FUN (..Fast and Fair) than other blockchain alternatives in part because we control the quality of the experience from end to end to ensure we have a platform that delivers the best possible gaming experience to the player (and suppliers and operators) in the ecosystem. Why would we serve this up on a silver platter to our competitors? We would prefer to let them do the work themselves, like we had to do. We put hard work and inventiveness into this solution. Our token holders will expect us to deliver a successful business and we achieve this by commercialising the Tech and Games that we’ve built.
Helping the competition get a huge leg up seems unnecessary, but we think its likely they will get there in the end. We probably won’t have our Fate Channel technology all to ourselves forever but we’ve had a generous head start by inventing it ourselves and we’ll keep evolving the tech development and intend to continue creating technologically advanced and practical solutions to deliver gaming to the mass market. There’s a very good reason the competition has tried to nail us for not being open source on Reddit and other forums – it’s simply so they can see how it works for themselves and copy or learn from it, whilst simultaneously pretending they didn’t need our form of State Channels anyway. If they want advanced real time gaming, we think they’ll have to do something similar for themselves and not rely on others to do it for them.
3. Timing & IP
We do intend eventually – to make large parts of our tech open source, but the timing of when is the right time to do this is flexible as the platform isn’t live (to the public) yet. We plan to open source the parts that we need to, well before the public release, so that we can do security audits and allow those that want to satisfy themselves that the games are provably fair to poke them as much as they want (and we’ll do bug bounties and audits at that point) – But there are also parts of what we’re creating that we don’t expect to be able to open source because they contain creative IP like graphics, art, design, gameplay elements etc. These are the special sauce that make one game different/better than another in a highly competitive market. Compare our blackjack to their blackjack. Compare our craps to theirs… or our roulette.. or our Slots. Our games are highly competitive and we intend to keep it that way and not give away the special sauce.
4. Third parties
We’re creating a platform for games suppliers and developers to be able to publish their content for the gaming community, and we don’t expect they will want to open source their games (apart from the parts that need to be provably fair).
5. State Channels
Working on our own form of State Channels has given us optimum solutions for gaming that deliver what we need in terms of performance, cost and capability which will also scale appropriately to our long term needs. We called them Fate Channels, because everyone who creates their own State or Payment channels gets to name their own versions uniquely. The Lightning Network, Thunder Network, Flare, etc… are all Bitcoin-related payment channels while in Ethereum we have Raiden, Plasma etc. They are ALL different yet similar.
What we’ve built isn’t the same as Raiden, far from it. As we understand it, Raiden is great at sending tokens from place to place in a network via multiple hops. It’s perfect for something like a real time token exchange (and RaidEX is coming and we can’t wait for that). But at this time, Raiden doesn’t support generic state. We need more from our State Channels than just micro-payments. We don’t need multi hops at this time but we do need to share random seeds and deliver random numbers in real time to the games when they need them in a provably fair way, which is where our Fate Channels name came from. We also need to have player interactions sent back and forth between the player and ‘house’. And when we move (soon) to fully peer to peer gaming with untrusted parties, we’ll have carrots and sticks for good and bad behaviour.
Our solution is optimised for gaming and especially for real money gaming in real-time. We haven’t seen anything that helps us deliver this as yet so we had to build it ourselves. The closest generic solution to what we need is coming, with Plasma, and we’ll be evaluating it carefully and hope it’ll be helpful to us in the future. But we think that might be a ways off being able to support our needs, and meanwhile we’ll keep evolving Fate Channels to continue being an optimum gaming solution.
As stated in our original White Paper, we’re on a track to deliver the first release of the FunFair gaming platform, as well as a series of launch games to seed the market, by year end (2017). In some ways we’re ahead of schedule, especially on the prototype games development front.
We’ve already started early discussions with both game suppliers and casino operators and we intend to start signing licenses up around the time we finish the platform. We don’t want to sign anyone up too far in advance as the platform is not yet fully featured and we’ve got work we need to do before it hits that point. Signing up game suppliers or operators in advance of having a fully working platform would just be a PR puff piece and quite hollow. We don’t believe we should be doing that. When we’re ready to sign real licensees up, we’ll be doing it for commercial reasons, not PR.
The FunFair brand is still in its infancy, and although we’re proud of our unique identity so far, we want to continue to evolve. So we’re working on something which says more about who we are and stands the test of time. We’re also building a more effective website which can speak to the various audiences that need this gaming platform, and which can also inspire a new wave of FunFairers. We’re close to completing this part of the puzzle and you’ll see the results very soon.
Exchanges and token liquidity
As most of you know, the FUN token started trading on EtherDelta literally within seconds of the token being issued, and not much later was trading on Bittrex. These first two exchanges have served the token holders’ needs of being able to trade the token. The FUN token is currently listed on a few exchanges like Bittrex, EtherDelta, ShapeShift and CoinSpot.
According to CoinMarketCap, token liquidity has to date been in the ballpark of $0.5m – $1m traded each day, sometimes more. This week the token price has been in the range of $0.025-0.03. We may see liquidity improve as FUN becomes listed on more exchanges, which is likely to happen in the very near future. Expect news on additional exchange listings in the coming days and weeks. Long term we expect to see other exchanges list the token especially as they overcome their initial concerns that FunFair is a Casino Operator (it isn’t and will never be!) and appreciate that FunFair is a pure developer of the technology and games and is in the licensing business. The company expects to pass all legal and compliance checks.
We have also tried hard to design the token mechanism to be close to the textbook definition of an App (utility) token, in that the token is used to play the games, and that all parts of the ecosystem utilise the FUN token (players, game suppliers, affiliates, casino operators, random number generation fees etc). We realise life could’ve been easier if we had allowed people to play for ETH (cash) and then paid dividends from the profits to token holders, but our lawyers rightly warned us not to do this as it would’ve risked us being classed as an unregistered security (like some of our peers). We designed the token mechanism carefully with good legal advice to be compliant with where the SEC and MAS would eventually draw their practical lines in the sand. We hope to always be the right side of the lines and will take steps to keep it that way and will evolve the token usage and business model to ensure we stay legal and compliant at all times.
Phase 2 token sale – ongoing strategic planning
Originally we considered doing a two-phase raise with Phase 1 being a presale that brought us most of the funds we needed to develop the technology and games, and Phase 2 bringing us the funding required for a large marketing budget to be able to build a consumer facing worldwide brand. Our gaming lawyers have since recommended that we focus on the development of the platform, tech and protocol, and leave the consumer-facing marketing to a multitude of casino operators and affiliates. With this new focus on tech development and less on the consumer market, we can lower our sights for fundraising and this changes our strategy entirely for Phase 2, compared to our original intentions as mentioned in the white paper and other publications.
In the Phase 1 Token Sale, FunFair Pte Ltd initially sold 3.8B tokens, raising $26m USD. Founders retained an additional 2.2B tokens (37.5%) on an 18 month lockup that’s released slowly. FunFair also reserved 11B tokens for the Phase 2 raise which at the token presale price would have been worth $110m USD. Originally we had intended to sell most of those 11B tokens to new buyers and then distribute any unused tokens back to Phase 1 holders, but this no longer makes any sense and is no longer the plan.
Under the original premise, most of the tokens would be sold and a small number would be left unused and distributed, but now that we’ve put to rest thoughts of a massive consumer brand building marketing spend, we no longer have the requirement for such a large Phase 2 raise. Also, if we were left with a large number of unused tokens, we would not be able to distribute them due to legal, tax and market reasons (which are probably all obvious). Apart from all the other reasons, if a lot of tokens got distributed, there’d be a mass exodus and a lot of tokens sold on the markets, crashing the price and we don’t want to do anything that harms token value. Quite the opposite…
Instead we expect to burn a substantial amount of tokens to reduce the number of outstanding tokens, and we will sell a much smaller number in a highly targeted Phase 2 token sale that will be optimised to raise awareness and open up new markets (in Asia, etc). The rising value of our existing crypto holdings due to BTC/ETH price increases and the reduced requirements for funds in Phase 2 have enabled us to find more efficient ways to deal with the current overhang of tokens and better protect token value which benefits all holders equally.
We’re working on a final strategy for the Phase 2 token sale right now with our professional advisers and intend to share details in the coming weeks. These things take a long time to plan, especially as the token markets are affected by guidance from regulators and a fluid situation regarding liquidity and exchanges etc. We currently aim to announce Phase 2 plans in September and execute the new more modest Phase 2 token sale most likely in October. We will also be spending time in Asia this month ahead of the token sale.
That’s all for now, we’ll be back soon with a more detailed technical update. If you haven’t played any of our games yet, why not?! Head to our Showcase and tell us what you think. If you have any questions or want to stay in touch on a more regular basis, join our Discord or Telegram groups .
Thanks for reading!
Jez San & the FunFair Team