“Immutable aims to be a global pipeline connecting every buyer and seller who wants to trade these forms of” [digital] value, whether it’s a term deposit, whether it’s a loan, whether it’s an item in a video game, or a digital sneaker for your character in the metaverse. And the reason that’s so important is that we empower people to own stuff. And we give them the best possible price to trade it at.”
Ahead of the blockchain buzz
The two youngest sons of the former Macquarie investment banker Tony Ferguson and Robin Ferguson, a doctor, have always been close. Growing up in Pymble, their bedrooms were constantly spawning ideas and plans for businesses.
They would try all sorts of things like a machine learning ecommerce platform, trying to make a better Shopify and a private blockchain crypto trading platform. It was an afterthought, as they were both full-time students at the time. For the most part, Robbie was in high school.
Tinkering with technology didn’t mean dropping their grades. In his final year at Knox Grammar, Robbie would achieve the highest possible ATAR (99.95) and be crowned dux. They were both going to go to the University of Sydney. James holds a double degree in commerce and law. He remembers sitting in a corporate law class while he and his fellow students were trying to figure out if a particular company had bought too much from a publicly traded company. Was there a violation of the disclosure laws?
“I was thinking, these stocks themselves should be programmable on a blockchain, so that instead of wasting all that money on lawyers, judges, and arbitrators, it could just be one line of code that could be named.” It was an early insight into the power of blockchain, years before the buzz.
Rather than follow his father into investment banking, James decided he wanted to build technology companies. And if he did, he would have to study something that his business and law degrees didn’t offer: coding. So he took a year off from college, traveled to San Francisco and learned to code.
Meanwhile, Robbie was finishing his HSC. Bitcoin was still in its infancy and ethereal, the open-source blockchain software Immutable built its business on, didn’t even exist yet. That would come the following year, in July 2015.
“We saw bitcoin and it was quite interesting,” James says. “But, like a lot of people, I think there was some skepticism at first, what is this digital gold nonsense? But when we saw ethereum, it was immediately clear to us how this technology was going to change everything.
“It was crystal clear from the moment we saw it. Our imagination ran wild.”
A game unleashed
In 2020, the sales volumes in non-replaceable tokens were $95 million dollars. Last year they reached $24.9 billion, according to DappRadar, which collects data across 10 different blockchains. The blockchains are crucial because it is the transparent ledgers that record who owns what. Now a generation is eager to get their hands on everything from video game characters and video clips to artwork and even cartoon monkeys.
But as demand rises, blockchains are flooded with computers around the world looking to record transactions in the digital ledger. As a result, transaction prices rise. It’s a bit like the Uber price hikes.
James and Robbie experienced this firsthand, and early on. A video game they developed in 2018, Gods unleashed, became so popular that they needed $20 million to expand with Ethereum. Continuing to expand would have sucked up all their computing power for three months.
They went looking for a solution. There was a better way, right? They read an academic article about something that a zero-knowledge roll-up, which takes hundreds of transactions and bundles them into a single transaction. From there, they followed a team in Israel developing the technology. Then they put their entire company on it.
Six months later, ethereum co-founder Vitalik Buterin declared zero-knowledge roll-ups the future for blockchain. Immutable was the first to use it to build a platform for NFTs. The brothers were delighted.
Called Immutable X, the platform allows anyone using ethereum to build out their games and trade NFTs without being plagued with “gas fees”. These are the fees you have to pay to account for the amount of computational energy required to process and validate your transactions on the blockchain. When demand peaks, gas prices can reach thousands of dollars.
Immutable found a way to build scale without sucking up so much computing power. It started in April last year and proudly declared itself CO2 neutral (less computing power means less energy consumption). Before supplying the trading platform, it clips the ticket on the trades, taking a small cut in value. The more people use it and transact with it, the more revenue they collect.
The Ferguson brothers’ swift-footedness can be demonstrated by the computer games they built pre-Immutable. It was early 2018 and they were buoyed by the success of their first big hit: a collectible fighting game called Etherbots, which they say was the world’s first blockchain multiplayer game.
That game made $1 million in revenue in its first week and provided them with a platform to seek outside investment for the first time. They wanted to build a newer and more popular game (it would be called later) Gods unleashed†
“When we were raising money for it, one of the investors we spoke to laughed at us,” James recalls. “They said it was a good idea, but they had just supported another team, based in North America, and they were going to crush us. They were supposed to launch it in September, and we were way too late.”
They were fearless. “We decided we should raise money and then work like maniacs.” They raised $1.75 million from investors, including CoinBase Ventures, and told their small team they had about eight weeks to get the job done.
“That led to a lot of night owls and sleeping under the desk in the office on the hard wood floor,” James says. Robbie remembers that the heating unit was broken, leaving them working in the winter and wishing they had brought blankets.
In the trenches with them was Alex Connolly, one of three people in Robbie’s cohort who studied computer science combined with law at the University of Sydney. He, like Robbie, never made it to third year and instead joined the Ferguson brothers to build Immutable as a co-founder. He is now also the company’s chief technology officer.
Gods unleashed, a digitized trading card game, eventually went crazy. In the first year, sales shot to eight digits. There are now over 25 million cards, more NFTs than any other blockchain game on ethereum combined. Its early success came even though it was released in a cryptocurrency bear market (the third in crypto’s 10-year history).
“It’s one of the best things that ever happened to the company,” James says. “The company could have made a lot more money initially if we could have launched it in one of those giant bull runs. But the fact that it was a bear run meant that the entire company had to be 100 percent laser-focused on building something of quality, and whether we were really developing value.”
An inherently volatile sector
James knows that he and his brother are tech bros in the purest, literal sense. But he’s not a nerd without a sense of humor. He jokes about how he likes “non-nerdy stuff,” such as bridge, a game most often associated with retirees.
He became addicted while in college when a friend suggested he try himself for the youth team. He made the cut, toured Australia and later progressed to worldwide tournaments competing against people more than twice his age.
“I still play a little bridge, but I don’t have that much time right now. It’s a shame it went out of style, because it’s a brilliant, brilliant game.” When asked if he likes bridge, Robbie simply says “never”.
James speaks quickly, jumping to questions and dominating the conversation. He is clearly the friendlier of the two. Robbie says that if his brother doesn’t know something, he’s going to read a book about it, learn it, and then apply global best practices. “James is also imperturbable. He is very calm when making decisions. Together, those things are very useful.”
Robbie, who spent his high school gap year studying programming, may not dominate the discussion. But when he speaks, it comes from a deep thought. He is passionate about the company providing a service that reduces computing power churn and thus is better for the environment.
He is frustrated that the Australian education system is leading the brightest young people to law and investment banking, and he is an NFT evangelist. NFTs can reform everything from seizing carbon credits to reforming finance, he says. “It will take time, and vertical after vertical it will happen. I don’t expect you to buy NFT houses in the next ten years. But I think you’ll be buying NFT insurance contract or term deposits or financial instruments pretty soon. Goldman Sachs is looking at tokenizing real assets.”
Maybe that explains why he’s a bull out of the gate. “He’s everything, ‘let’s do this now,'” says James. “It’s fast, fast, go, go, go now. It’s really important to learn fast and keep that pace and Robbie is the big driving force for that. He has a knack for understanding the space and incredible insight into how to get to the things that matter externally in crypto markets.
Pace is important. Both know they are in an inherently volatile sector. Fortunes fall almost as quickly as they are built. There are whipsaw machinations as markets swing between boom and bust.
So, which companies are going the far? Who is going to win? Robbie says, “The main thing that sets crypto apart from the rest of technology is that the pace at which you have to make decisions and innovate is much, much faster.
“The most successful companies are the ones that are able to keep the long-term focus on a unified goal or vision, but be able to innovate all the different strategies you need to get there.”
They may be young, but they seek advice from all quarters. And there’s some advice American tech entrepreneur Justin Waldron gave them that resonates with James.
“When we started chatting with him, he told us something that has stayed with me forever,” James says. “Whoever learns the fastest wins. I think in crypto, in terms of who will do well and who won’t, that’s doubly true.”
Find out who the richest people in Australia are in the Financial overview Rich list 2022 out on Friday, May 27.
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