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Crypto world's latest craze and the Sydney studio behind it

·Assistant News Editor
·6-min read
A stylised image showing several virtual horses in the starting gates before a race.
Zed Run became a global sensation in the crypto world in 2021. (Source: Supplied)

A few years ago, Chris Laurent was getting dinner at a Chinese restaurant in the Hunter Valley, NSW, when he saw an advertisement for a horse that was available for stud.

He thought it was a horse for sale, but the ad was actually offering the chance – for tens of thousands of dollars – for the owner of a female horse to breed their mare with it.

It gave him an idea.

With a background in marketing, gaming and the gambling industry, he’d been trying to dream up a new innovation with the then-emerging blockchain – the 'distributed ledger' technology that underpins cryptocurrencies like Bitcoin.

In his research he had come across Cryptokitties, a 2017 internet craze widely seen as the origin of what are now known as NFTs, or non-fungible tokens. He paired the two ideas together to create what is today one of the buzziest trends in the crypto world. 

Called Zed Run, it’s a digital horse racing platform where users can buy, race, breed and sell horses that are minted on the blockchain, giving them immutable qualities. And most importantly, from the user perspective, the potential to strike it rich if their horse turns out to be a world-beater (the most lucrative sale of a Zed Run horse fetched US$420,000).

The company is backed by some of Silicon Valley's elite venture capitalists and has become a rising star of the crypto-powered gaming world. 

The founders of Sydney-based studio Virtually Human, Chris Ebeling, Chris Laurent and Geoff Wellman.
The founders of Sydney-based studio Virtually Human, Chris Ebeling, Chris Laurent and Geoff Wellman. (Source: Supplied)

Code that executes on the blockchain – known as smart contracts – gives the horses their attributes.

“The characteristics are baked into the smart contract, like it’s genetics,” says Geoff Wellman, co-founder of Virtually Human, the Sydney-based studio behind Zed Run.

“It’s not completely revealed until you start racing the horse,” he told Yahoo Finance.

To a degree, the success of the horse depends on how the owner deploys it.

“It’s not based off the horse exclusively, it’s based off the user understanding the horse’s capabilities as quickly as possible,” Wellman said.

For example, a horse might have a preference for sprinting over a certain distance. “The quicker you’re able to figure out what its preferences are, the sooner you can more strategically pick which races are better suited to it to give it the best chance of winning.”

Users make money by winning races – which cost varying amounts to enter – or by breeding or selling horses in their stable with other players.

When it comes to races, the platform uses an algorithm that runs 10,000 random outcomes and selects one as the conditions for the race. 

The rise of 'breathing NFTs'

Unlike NFT artworks, which have drawn global attention for some eye-watering sales recently, Zed Run blends a type of gamification with its “animated” or "breathing NFTs" and the formula is proving very popular.

A year ago, Zed Run had fewer than 500 active users. On its best days towards the end of 2021, it would hit as many as 30,000 in a day, the company said.

A graphic showing three virtual horses.
Zed Run saw an explosion in popularity in 2021. (Source OpenSea)

That growth was no doubt propelled by a New York Times article in May last year, headlined: “Digital horses are the talk of the crypto world.”

One user, Jonathan, a 34-year-old sustainability consultant who lives in Sydney, began investing in Zed Run in August last year along with two mates.

Between the three of them – one in Canberra, one in Sydney and one in New York – they have invested A$27,000 into their stable and made roughly $9,000 in race profits.

“A friend of mine bought a horse and sent me a video … It just looked really interesting,” Jonathan told Yahoo Finance.

“I had some Ethereum (the cryptocurrency used in Zed Run) so I thought, 'Why not?'”

The trio's stable, named SkyWhalePapa after Canberra's famous hot air balloon, boasts about eight horses, which remain tied to the market price of Ethereum.

“The continued exposure to the Ethereum price and the potential for horses to increase in value seemed like a win-win ... which sometimes they do not,” Jonathan admits.

The trio initially had success in breeding their horses by focusing on a breed that was finite on the platform, making about $1,300 each time it produced a foal (there are limits to how much a horse can breed). 

But it's a strategy that has since lost the required demand in the Zed Run market place.

"There can be new strategies, or sentiments can change about breeds," Jonathan said.

Horse racing in the metaverse

Wellman, whose Twitter bio describes himself as a “Metaverse contributor”, very much sees the studio as part of a surging wave of companies creating the digital future most famously touted by Facebook's Mark Zuckerberg.

Known as the metaverse, it's described as the next evolution of the internet and is loosely imagined as comprising of distributed 3D online worlds where people can connect as if they were talking to each other in real life.

It probably has as many detractors as it has true believers, but there's no denying the growing allure it has in the tech world. 

According to The New York Times, established tech companies such as Google and Apple are increasingly concerned about losing talent to crypto start-ups working on Web3

For instance, Brian Roberts, the former chief financial officer of Lyft, left the ride-hailing giant to join OpenSea, a crpyto marketplace company where Zed Run horses and other NFTs are bought and sold.

“I’ve seen enough cycles and paradigm shifts to be cognisant when something this big is just emerging,” he told The Times last month. 

“We are Day 1 in terms of NFTs and their impact.”

Meanwhile Apple employees are tweeting about leaving the tech giant to work full time on their crypto projects. 

A stylised image showing virtual horses racing towards the finish line.
Zed Run sees itselt as part of a burgeoning group of compaines creating the 'metaverse'. (Source: Supplied)

It's still very early days for much of this blockchain-backed craze, including Zed Run which is still in the beta stage. 

"When we look at Zed Run and the state of the ecosystem, we know there is so much more to do," the company wrote in a blog post on New Year's Eve. 

While Zed Run began by taking a cut of the race fees, it is moving towards a sponsorship and advertising model – much like real-world racing – as it continues to build out the platform. And it has a long runway to build that dream thanks to some serious financial backing. 

In July, it announced it had raised $27 million from venture capitalists, including funding from Silicon Valley royalty Andreessen Horowitz. 

On Tuesday this week, Virtually Human Studio announced it had acquired Spectre Studios, one of Australia’s leading virtual production companies. 

"Our vision is unmatched and steadfast," founder Chris Laurent posted on social media at the end of 2021. 

For Zed Run – and arguably the world of NFTs – the race has only just begun.

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