MONTREAL — An NFT-focused startup co-founded by the former CEO of Bunz has become one of Canada’s most valuable independent gaming studios even though it’s still some distance from releasing a fully playable product. 

It’s part of a wave of investor enthusiasm for blockchain-based gaming, as major players from GameStop to Ubisoft explore ways to capitalize on the technology.

Parallel Studios, based in Toronto, is developing a science fiction-themed trading-card game akin to Magic: The Gathering or Hearthstone that will integrate non-fungible tokens (NFTs) and cryptocurrency rewards into its gameplay. The game’s story centres around five groups of humans, or “Parallels,” that have evolved separately after escaping a cataclysmic event on Earth.

In October, the company raised US$50 million at a US$500-million valuation in a round led by crypto investment firm Paradigm and that included participation from YouTube co-founder Chad Hurley, as well as Yunt Capital, a syndicate of pseudonymous crypto investors. The bet is that giving gamers the ability to have full ownership over their digital-card NFTs will offer a new spin on an otherwise traditional format.

“The Parallel TCG [trading-card game] represents an important innovation in game design, transcending the traditionally distinct worlds of physical and digital trading-card games,” the team behind Parallel wrote in a recent white paper. “Unlike other digital games, Parallel offers players ownership of their in-game assets, allowing them to convert their time, skill and investment into real-world value.” 

Parallel’s lofty valuation places it well ahead of other independent Canadian gaming studios like Phoenix Labs, which was reportedly acquired for more than US$150 million in 2020 by Singaporean gaming firm Garena. Vancouver-based A Thinking Ape was bought that same year by a subsidiary of Sweden’s Embracer for roughly US$105 million.

Yet Parallel is just one of several deals in the last few months involving Canadian startups focused on NFTs. In September 2021, Vancouver-based Dapper Labs, which developed the popular NFT collectible series NBA Top Shot, raised US$250 million in a funding round led by Coatue. The following month, Andreessen Horowitz announced an investment in Manifold, a new company launched by Eric Diep, A Thinking Ape’s founder. 

The Canadian deals represent just a tiny fraction of the venture funding that has poured into crypto and NFTs globally over the last year, as some of Silicon Valley’s most prestigious firms raise billions of dollars for funds devoted specifically to the new asset class.  

Sascha Mojtahedi, one of Parallel’s co-founders, was previously CEO of Bunz, a Toronto-based company that began as a bartering page on Facebook but faced turbulence after a failed bid to launch a cryptocurrency. His new startup includes at least two other employees who worked under him at Bunz. 

Parallel’s founders declined to be interviewed for this article, and investor Paradigm didn’t respond to a request for comment. “The best crypto games will be the ones that can go beyond first-party content and inspire a community of players and developers to build on the game itself,” Paradigm co-founder Matt Huang told TechCrunch in October. “We were impressed by Parallel‘s unique approach and fervent early community, and excited to support them for their next stage of growth.”

With the proceeds from its fundraising round, Parallel’s team has grown to include at least two dozen designers, engineers and other employees, roughly half of whom are based in Canada, according to LinkedIn.

Some of Parallel’s early team members include people who have worked in engineering roles at Canada’s major banks, as well as designers and artists at large gaming companies like Epic Games and Riot Games. Its leadership also has ties to Canada’s tech sector: Parallel’s chief operating officer, Paul Chan, is currently an advisor to both the MaRS Discovery District organization and Open Banking Initiative Canada, according to his LinkedIn profile. 

Aside from raising venture capital, Parallel has funded the project by issuing digital trading cards and other collectibles that investors will eventually be able to use in the game. Parallel sold the assets in exchange for Ether in various drop events throughout 2021, but the company also earns money through royalties whenever users resell them.

The Ethereum equivalent of more than $200 million worth of the items have changed hands on OpenSea, a popular NFT marketplace—a windfall for Parallel, which takes a 10 per cent cut of each resale. Five per cent of that will be used toward a prize pool for in-game competitions, while the remainder will fund the game’s development. 

In a format seen in some other crypto projects, the game’s creators will not have full control over how players can use the in-game assets. Much of the power for overseeing the game’s planned token, for example, falls to the Echelon Prime Foundation, a non-profit organization that will be led by 11 people elected from Parallel’s community of players and investors.

As of Feb. 22, the cheapest Parallel card on OpenSea sells for around 0.01 ether, or roughly $33, though certain rare collectibles are selling for around 19 ether, or around $63,000. The developers have said that the cards in circulation are special collectors’ editions, and that subsequent versions will be cheaper.

Parallel doesn’t yet have an exact launch date set for the game, which has been in development since mid-2021. “The developers are targeting 2022 for an initial playable version of some sort, be that a closed alpha, open beta or full release,” an FAQ section on its Discord server reads.

In light of investors’ appetite for digital collectibles, mainstream gaming companies in recent months have announced plans to enter the NFT market, alongside smaller upstarts like Parallel. In December 2021, the gaming giant Ubisoft Entertainment said it would launch a new platform for customers to buy digital items tied to NFTs on the Tezos network. GameStop has also been scaling up a division to build a marketplace for gamers to trade virtual items such as avatar outfits and weapons.

Still, despite the growing attention on gaming NFTs, many gamers have so far been resistant to the technology, which some see as a cash grab by studios that could be focusing their attention on building better games. In certain cases, as with Ubisoft, gaming companies said they misjudged how players would receive the announcements.

Parallel hopes to eventually eventually integrate the game’s narrative into other media beyond its game, such as comics or movies, according to its LinkedIn page. In January, the company tweeted a teaser of a Parallel-branded comic strip, hinting at some of its potential future plans. It also expects to integrate augmented reality elements into its gameplay, capitalizing on another trend that has galvanized the tech industry over the last year.

“With the glut of streaming services all searching for new and fresh content, I’d be shocked if we didn’t see a Parallel TV series in the coming years—especially given the appetite for well-produced science-fiction content,” said an investor at Yunt Capital who goes by the pseudonym Tilt.

Clarification: This story has been updated to clarify when Parallel expects to release its first fully playable product.