FungyProof, a startup that provides quality assurance report cards for nonfungible tokens, announced Thursday that it has raised $1 million in pre-seed funding to develop its platform further and hire more staff.

Investors in the company included Cadenza Ventures, Hypersphere Ventures, ZMT Capital, Red Beard Ventures and HanDAO, a creator-focused decentralized organization.

Nonfungible tokens are a type of blockchain asset that represent the ownership of virtual items such as artwork, music, venue tickets and video game items. Creators can easily mint NFTs and then sell them where they can be bought, sold and traded on online marketplaces.

FungyProof’s platform provides buyers a chance to see a report card on NFTs before they buy so that they can make better decisions about their purchases.

Interest in NFTs generated a massive online market for NFTs, which rose to $41 billion in 2021, up from $100 million in 2020. This surge in popularity also led to the proliferation of numerous marketplaces where the artwork is traded such as OpenSea, Rarible and SuperRare. But that has also led to a tremendous amount of fraud and plagiarism related to NFTs.

For example, OpenSea announced that users could “mint,” or create, NFTs without cost as a promotion to bring in new users. That led to the discovery that more than 80% of the NFTs created for free on the marketplace were plagiarized or were scams.

“Filtering through [the] noise to identify high-quality NFTs is complicated — requiring significant time and technical know-how,” said Mike Roth, chief executive of FungyProof.

Many people purchase NFTs for fun or as investments and they can cost as little as a few dollars to thousands or more. Knowing if an NFT or collection is legitimate can go a long way toward protecting buyers from risk.

To do this, FungyProof provides easy-to-read report cards for NFTs that grade them on a number of different metrics, including potential security flaws, metadata, images and energy efficiency. The algorithm covers more than 30 different data points in order to provide the best possible overview of the NFT.

“Our grade combines crowd-sourced reviews with technical data analysis to assess the credibility of a project’s team and community, as well as token attributes like permanence, tokenomics, energy efficiency and market integrity,” said Roth.

A “community review” portion for reports is coming soon, said Roth. These reviews will focus on the quality of the team behind NFTs, their legitimacy and other elements of the project’s health. By adding this element to the report cards, FungyProof will be giving a better overall picture as to if the NFT collection has a viable lifetime.

FungyProof’s reports are available via the website and a Chrome browser extension that will annotate any NFT visible on the OpenSea marketplace. Users install it into Chrome, visit OpenSea and take a look at what the report cards have to say.

Roth said the new funding will be used to build up the startup’s current team and expand its product offering to help NFT owners and investors with superior report cards. The company also has version two of its services in the works and plans to announce information about that soon.

Image: FungyProof