Blockchain-based games are growing in popularity, but playing them is getting expensive. While pay-to-play games such as StepN require players to purchase NFTs before participating, other crypto video games offer users expensive upgrades such as virtual avatars and special skins or costumes.
Holiday, a startup founded by Akshay Malhotra and Griffin Dunaif last November, is building a “buy now, pay later” type of financing product aimed at gamers who want to pay for in-game purchases over time.
“It’s amazing that video games, these virtual worlds, now have a completely market economy. In these worlds, you have digital assets, digital ownership, and real-world valuables. One thing that struck us was that these things have real-world value so it can be very difficult to find and own them, and one of the fundamental principles of blockchain is ownership,” CTO Dunaif told TechCrunch in an interview. .
As is the case with many traditional BNPL providers like Klarna and AfterPay, the Holiday product will be interest-free for consumers, said CEO Malhotra, who previously worked in the hedge fund space.
Unlike traditional BNPL providers, however, Halliday does not charge a penalty to users who default on their payments, Malhotra explained.
Instead, Halliday described it as a “repo” product. Players can purchase in-game property with the Holiday extension and use it immediately, but the property will be stored in Holiday until it is fully paid for, Malhotra said. Once the payment is made, Halliday will transfer custody of the property to the player, he added.
If a player doesn’t pay what’s owed on time, instead of reporting the default to a credit agency, Halliday will take back control of the digital asset, Malhotra said. Halliday has developed its own smart contracts that “wrap” NFTs, meaning that players with those wrapped NFTs can use the underlying but cannot sell, transfer, or own the rights to the NFT itself. Game developers also often have their own internal access mechanisms that prevent users from accessing virtual resources if they are not authorized to do so, he added.
Halliday stage concept art Image Credits: Halliday
While Halliday plans to charge customers an upfront fee to cover the product’s startup costs, Malhotra hopes to eliminate the fee over time as his goal is to keep the product as low-cost as possible for gamers. The founders did not share any further details on their monetization plans, noting that they are still focused on building the product.
One big consideration for Halliday is how to frame the risk associated with the loan, since the company will prepay game developers for digital assets on behalf of its users.
“There aren’t that many benchmarks for how to model this type of risk, so that’s where our team has been working to come up with new, innovative approaches,” Malhotra said.
As for the timeframe, Malhotra explained that players will ultimately be able to decide how long they want to pay for their Holiday purchases. The founders think average terms to launch will be around 1-3 months, he said.
The six-person team plans to launch the product in a few weeks in a beta partnership with League of Kings, Malhotra said. A full public launch is expected to take place shortly after the beta, he added.
In preparation for launch, Halliday has raised $6 million in seed funding led by a16z crypto, with participation from Hashed, a_capital, SV Angel, Immersion Partners, Sabrina Hahn and others, the company said.
Already, many video games with in-game purchases allow players to rent virtual objects. But Malhotra and Dunaif argue that a product like Halliday’s that enables ownership is still needed.
“If you look at comparable, real-world, economic markets, like cars, like housing, you’ll always see there’s rentals, rentals and ownership — but there’s a huge preference for owning,” Malhotra said. “If there’s a way to own and get all the benefits associated with ownership, like the emotional connection, the emotional benefits, the economic benefits, everything else, and there’s a solution to that, there’s got to be an interest in it.
