UPDATED 13:41 EDT / JUNE 28 2018

EMERGING TECH

High Fidelity raises $35M to develop blockchain economies for VR marketplaces

Looking to continue to push the envelope of virtual reality social platforms, High Fidelity Inc. announced today it has raised $35 million in a late-stage funding to continue developing its global infrastructure.

The open-source distributed VR platform received $20 million from digital ledger blockchain technology investment firm Galaxy Digital Ventures and from additional new investors including Blockchain Capital. The Series D round brings the total amount of money raised by High Fidelity to more than $70 million.

Focused on social interactions between VR users, High Fidelity expects the technology to grow to internet scale during the next decade and touch the lives of more than a billion people. In order to support this coming wave of interest, which company executives believe will generate a $1 trillion global economy of virtual goods and transactions, an underlying infrastructure for payments and transactions will need to be built.

“Virtual reality may be the first killer app for blockchain,” said Sam Englebardt, a founding partner of Galaxy Digital Ventures who’s joining High Fidelity’s board alongside the investment. “It’s a global phenomenon that fundamentally requires a trustless consensus mechanism for currency, property and identity.”

Philip Rosedale, High Fidelity’s co-founder and chief executive, also founded Second Life, the first mainstream virtual world with a highly liquid virtual currency, which has created an economy of more than $4 billion in virtual transactions.

“This blockchain isn’t just about money,” said Rosedale. “Digital assets that people own and trade across multiple virtual worlds can be uniquely certified and identified using the blockchain. The asset information in the blockchain will act as a proof of purchase and also verify the safety of interactive objects.”

With the use of blockchain technology, a distributed ledger system that can support digital transactions for virtual goods and identity systems, High Fidelity aims to make its network the vanguard infrastructure for the future of VR.

Such a system would need to provide the same scale and throughput already available by current payment processors and be able to withstand a consumer base of more than 1 billion users with a potential for more than 20,000 transactions per second.

“The dominant [payment systems] today are highly centralized and this creates the risk of data breaches at an unprecedented scale or even physical danger as VR grows to be used by everyone,” Rosedale said. “Trustless systems, including blockchains, offer an alternative to centralization today. However, the settlement times for blockchain systems won’t support 20,000 transactions a second, so we need a system that is decentralized but very fast.”

The High Fidelity blockchain is an open-source server platform running in the cloud being built by the company on a blockchain that will be maintained through trustless consensus. The network will become the central transaction log for every virtual item in its connected VR worlds, produce and maintain its own currency, and become the backbone for identity verification.

High Fidelity expects to fund itself by drawing revenue from currency growth, marketplace transactions and other global services.

The global VR market is expected to surpass $40 billion by 2020, according to Orbis Research. It is expected to be led by consumer VR experiences as well as retail marketplaces, including those that sell and trade in virtual items and entertainment. To capture this potential audience, payment processors have been making forays into VR, including live merchant processor firm Payscout Inc., with Payscout VR Commerce and Worldpay Inc., developer of a credit card-swiping app in VR.

Blockchain-based markets have also made a debut for virtual worlds with notable examples including DMarket, a distributed virtual item marketplace for gamers; BLOCKv, a blockchain marketplace for digital goods such as tickets, coupons, and other virtual items; and German video game developer Crytek GmbH and Crycash, a digital currency startup giving gamers the ability to trade items with tokens.

Jon “Neverdie” Jacobs, chief executive of Neverdie Studios, also announced the launch of a blockchain-based economy last year that would use virtual worlds and marketplaces to provide an infrastructure for digital currencies. His expectation was that virtual reality and blockchains would form the foundation for future jobs and economic growth.

“We will go to school, attend events, entertain each other, and build entirely new worlds together, all from within VR,” said Rosedale, speaking to the length and breadth that VR economy in the coming years. “To reach this scale and to deliver safely on such a promise, VR must be decentralized, including deeply using blockchain technology.”

Image: High Fidelity

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