Chris Laurent was having dinner at a Chinese restaurant in the Hunter Valley, NSW, a few years ago, when he saw an advertisement for a horse available for stud.
He mistook it for a horse for sale, but the ad was actually offering the owner of a female horse the opportunity to breed their mare with it for tens of thousands of dollars.
It sparked an idea in him.
He'd been trying to come up with a new innovation using the then-emerging blockchain – the 'distributed ledger' technology that underpins cryptocurrencies like Bitcoin – with a background in marketing, gaming, and the gambling industry.
He had come across Cryptokitties, a 2017 internet craze widely regarded as the origin of what are now known as NFTs, or non-fungible tokens, during his research. He combined the two ideas to create what is now one of the most talked-about trends in the crypto world.
Zed Run is a digital horse racing platform where users can buy, race, breed, and sell horses that have been minted on the blockchain and thus have immutable qualities. Most importantly, the user has the opportunity 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 most prominent venture capitalists and has emerged as a rising star in the world of crypto-powered gaming.
The horses' characteristics are determined by code that runs on the blockchain and is known as smart contracts.
"The traits are baked into the smart contract - like genetics," says Geoff Wellman, co-founder of Virtually Human, the Sydney-based studio behind Zed Run.
"It's not completely revealed until the horse starts racing," he told Yahoo Finance.
To some extent, the horse's success is determined by how the owner uses it.
"It's not based solely on the horse; it's based on the user understanding the horse's capabilities as quickly as possible," Wellman explained.
A horse, for example, may prefer sprinting over a certain distance.
"The sooner you figure out what its preferences are, the sooner you can pick which races are better suited to it and give it the best chance of winning."
Users earn money by winning races, which vary in cost, or by breeding or selling horses in their stable with other players.
When it comes to races, the platform employs an algorithm that generates 10,000 random outcomes and chooses one as the race conditions.
The emergence of 'breathing NFTs'
Unlike NFT artworks, which have recently received attention for some eye-watering sales, Zed Run combines gamification with its "animated" or "breathing NFTs." The formula is proving to be extremely popular.
Zed Run had fewer than 500 active users a year ago. According to the company, on its best days near the end of 2021, it could hit 30,000 in a single day.
That growth was undoubtedly fueled by a New York Times article headlined "Digital horses are the talk of the crypto world" in May of last year.
Jonathan, a 34-year-old sustainability consultant from Sydney, began investing in Zed Run with two friends in August of last year.
They have invested A$27,000 in their stable and made approximately $9,000 in race profits between the three of them – one in Canberra, one in Sydney, and one in New York.
"A friend of mine recently purchased a horse and sent me a video... "It just seemed really interesting," Jonathan explained to Yahoo Finance.
"I had some Ethereum (the cryptocurrency used in Zed Run) and figured, 'Why not?'"
SkyWhalePapa, named after Canberra's famous hot air balloon, is the trio's stable, which has about eight horses that are still tied to the market price of Ethereum.
"The continued exposure to the Ethereum price and the potential for horses to increase in value appeared to be a win-win... which they sometimes aren't," Jonathan admits.
The trio initially had success breeding their horses by focusing on a limited breed on the platform, earning about $1,300 each time a foal was born (there are limits to how much a horse can breed).
However, it is a strategy that has since lost the necessary demand in the Zed Run market.
"There may be new strategies, or attitudes towards breeds may change," Jonathan speculated.
The metaverse's version of horse racing
Wellman, whose Twitter bio describes himself as a "Metaverse contributor," sees the studio as part of a growing wave of companies pursuing the digital future envisioned by Facebook's Mark Zuckerberg.
The metaverse is described as the next evolution of the internet and is loosely imagined as a network of distributed 3D online worlds where people can connect as if they were talking in real life.
It probably has as many detractors as supporters, but there's no denying its growing allure in the tech world.
According to The New York Times, established tech companies like Google and Apple are increasingly concerned about losing talent to Web3 crypto start-ups.
Brian Roberts, Lyft's chief financial officer, has left the ride-hailing company to join OpenSea, a cryptocurrency marketplace where Zed Run horses and other NFTs can be bought and sold.
"I've seen enough cycles and paradigm shifts to be aware when something this significant is just emerging," he told The New York Times last month.
"In terms of NFTs and their impact, we are on Day 1."
Meanwhile, Apple employees are tweeting about leaving the tech behemoth to focus solely on their crypto projects.
Much of this blockchain-backed craze is still in its early stages, including Zed Run, which is still in beta.
"When we look at Zed Run and the state of the ecosystem, we know there is so much more to do," the company said on New Year's Eve in a blog post.
While Zed Run initially took a cut of the race fees, it is transitioning to a sponsorship and advertising model – similar to real-world racing – as it expands the platform. And, thanks to some serious financial backing, it has a long runway to realise that dream.
It announced in July that it had raised $27 million from venture capitalists, including funding from Silicon Valley heavyweight Andreessen Horowitz.
This week, Virtually Human Studio announced the acquisition of Spectre Studios, one of Australia's leading virtual production companies, on Tuesday.
"Our vision is unrivalled and unwavering," said founder Chris Laurent on social media at the end of 2021.
The race has only just begun for Zed Run – and, arguably, the world of NFTs.
