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Rare Bits has raised $6 million on the way to becoming cryptocurrency's answer to eBay

  • Rare Bits, which launched in February, allows users to transact digital assets in cryptocurrencies.
  • Billing itself as an eBay-like platform, Rare Bits raised $6 million from a star-studded round of investors.
Rare bits, crypto asset market place
Rare bits, crypto asset market place

Startup Rare Bits is positioning itself to be the go-to site for cryptocurrency enthusiasts — or beginners — who want to buy digital assets.

The platform, which launched in February and allows users to buy, sell and search for virtual assets denominated in cryptocurrency, just raised a $6 million dollar series A round. Investors included big names in the space, like Spark Capital, First Round Capital, Twitch CEO Emmett Shear and founder and former CEO Justin Kan.

Rare Bits, which bills itself as eBay for the blockchain set, comes on the heels of the surprising success of CryptoKitties, a game where users buy and sell digital kittens with contracts based in Ethereum.

Rare Bits acts as a platform and a matchmaker for sellers and buyers, and makes its money by taking a cut of a developer's revenue, if that individual creates a viable market for his or her assets. In its first month, the company said it processed more than $100,000 in transactions.

Yet unlike cryptocurrency exchanges or wallets, Rare Bits focuses on crypto-based products, but doesn't sell actual cryptocurrencies. Similar to buying an item on eBay, users surf a catalog of more than half a million digital items Rare Bits currently offers, identifying which one they'd like to purchase.

Rare Bits Co-founder Amitt Mahajan who is also the co-creator of Farmville, created the company with two Zynga alumni, which grounds them in how to run large virtual economies.

For now, Rare Bits focuses on consumers that are familiar with cryptocurrencies, and feel comfortable using them. However, even with all the hype surrounding cryptocurrencies, and the growing number of people dabbling in the sector, Mahajan suggested it can be daunting for newcomers.

"The issue with this today is, if I have nothing to do with Ethereum, I don't know anything about it and I've never thought about it, why would I ever go out of my way to buy Ethereum and get involved in this ecosystem?" Mahajan told CNBC.

Still, there's ample room for people to get on board, he said — with the right incentives. "Imagine if a celebrity like Beyonce or someone really well known were to release ten backstage passes on the blockchain, how many millions of people do you think would go out of their way to acquire one of those things?" he asked.

"In the final version of our product, we may not even mention the fact that we're using Ethereum or using the blockchain," he added. "In an ideal world, you come to the site, you buy something you want, you exchange it, trade it [or] use it, but you don't care or even need to know that the underlying technology is crypto-based."

In the future, Rare Bits' platform could expand to other services like real estate, software or music licensing, Mahajan said. Already, the company is already working on verticals like Fan Bits, which would help social media influencers and content producers sell memorabilia directly to fans.

"Our goal is to bring people in who have never used crypto before and, without them even knowing it, help onboard them and get them to a place where they're buying and owning stuff on the blockchain," Mahajan said.