NFT spinoff from SCMP newspaper is being funded to tokenize historical artifacts

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When an NFT series commemorating the handover of Hong Kong from Britain to China generated $260,000 in sales, Artifact Labs, the startup that launched the collection, saw the long-term potential of tokenizing historical artifacts and making them immutable and accessible to the public.

Artifact was born out of the South China Morning Post, Hong Kong’s flagship English newspaper bought by Alibaba for $262 million back in 2015. Its first project involved non-fungible token versions of SCMP’s front pages from 1997, the year of Hong Kong’s handover, with each the item’s rarity level is determined by the significance of a particular day’s events.

The NFT issuer has embarked on an independent journey since leaving the parent company last year. Artifact announced today that it has raised its first external funding of $3.25 million led by Hong Kong-based hedge fund manager Blue Pool Capital with prolific web3 investment firm Animoca Ventures participating.

From a strategic point of view, “Animoca is obviously heavily invested in web3 and believes that NFTs and digital asset ownership is the future, so we fill a very nice part of that around collectibles,” company CEO Philip Pon told TechCrunch in a interview.

SCMP remains a “major” shareholder after the funding round, Pon said.

Technical lift

Artifact works with a handful of third-party partners to power its NFT transactions. The 1997 collection was minted – the process of creating a token on the blockchain – on Flow using Blocto wallets, but it is also capable of minting NFTs across other chains, including Ethereum, Polygon and BSC.

In addition, the company has received grants from Dapper Labs, the creator of the popular NFT series NBA Top Shot, and Filecoin, a decentralized storage solution.

The start-up also increases the internal technical stack. It recently acquired the source code of Refinable, an NFT infrastructure provider, for an undisclosed amount. The acquisition, according to an announcement, would allow Artifact to develop a decentralized NFT marketplace. The company will also use the seed funding to increase the technical number of employees.

Despite going down the market lane, Artifact does not see itself as a challenger to Opensea, as the focus is more on traditional institutions. “We are building a marketplace for museums and cultural institutions. While we admire OpenSea, we are probably a bit more niche, said Pon.

In the nascent crypto industry where the basic pieces are still taking shape, developers and projects are actively making improvements in the field. In terms of on-chain preservation efforts, Artifact outlined a new metadata standard in a proposal for Ethereum.

“Artifact Labs is taking a leadership role in this domain, through its innovative integration of blockchain technology, and their recently proposed EIP-6596, which we believe will be an important standard for museums and cultural managers going forward,” said James Ho, head of Animoca Ventures.

Hong Kong as domicile

Artifact is geographically positioned to tap a potentially large collection of collectors. Thanks to its favorable tax system, Hong Kong has long been the Asian hub for the art trade. In 2020, the city overtook London as the second largest art auction market behind New York.

It comes as no surprise that Artifact plans to work with other types of cultural institutions beyond its tokenizing newspaper origins. So far it has partnered with RMS Titanic Inc, the company has given the rights to salvage the wrecked ocean liner; Hong Kong’s popular homegrown brand GOD; and the Hong Kong Philharmonic Orchestra, which is jointly designing a metaverse-style virtual concert with Artifact.

The company is also in confidential talks with several major museums in Hong Kong and other parts of Asia to help create chain versions of their collections. Long-standing multinational companies are also the target customers.

To date, Artifact has around 17,000 members in the Discord community. It makes money by charging project fees from its institutional and IP partners and will explore a revenue-sharing model with its clients in future NFT sales, according to Pon.

The timing seems ripe for Artifact and other web3 companies in Hong Kong. The city recently announced plans to legalize crypto retail over licensed exchanges, providing the necessary infrastructure for everyday consumers to buy and sell digital assets.

The company has a team of around 16 employees, mainly based in Hong Kong. Its geographic expansion plan will follow the cultural centers of the world, with major museum hubs such as New York, London and Paris likely to be the next stops, the CEO said.