Bankless - 96 - Web3 Gaming 101 | Amy Wu

Episode Date: December 13, 2021

What is Crypto Gaming? Why is it important? What about Gaming NFTs? This is what we explore in this episode with Amy Wu, partner at Lightspeed Venture Partners. This is Crypto Gaming 101. The Web3 Gaming space is emerging from all sorts of angles, from normies to hardcore gamers to crypto natives—and each has a role to play as the ecosystem matures. Here are the 5 questions to answer in this episode: 1. What is Crypto Gaming and why is it important? What about casual & mobile gaming? 2. How do you identify the next Axie Infinity? 3. Why are Guilds important? Are they a good investment? 4. How do you earn in Crypto Gaming? 5. Where does meaning, value, and identity come into play? What about fun? With the Crypto Gaming Revolution well under way, Amy walks us through the fundamentals of the space and how to approach the future. ----- 📣 METAMASK | YOUR HARDWARE WALLET'S BEST FRIEND https://bankless.cc/metamask-shows  ------ 🚀 SUBSCRIBE TO NEWSLETTER: https://newsletter.banklesshq.com/  🎙️ SUBSCRIBE TO PODCAST: http://podcast.banklesshq.com/  ------ BANKLESS SPONSOR TOOLS: 💰 GEMINI | FIAT & CRYPTO EXCHANGE https://bankless.cc/go-gemini​  💧LIDO | DECENTRALIZED STAKING https://bankless.cc/Lido  👻 AAVE | LEND & BORROW ASSETS https://bankless.cc/aave  🦄 UNISWAP | DECENTRALIZED FUNDING https://bankless.cc/UniGrants  ------ Topics Covered: 0:00 Intro 3:15 The Conference Experience 6:44 TradArt and NFTs 10:11 Metaverso 13:14 Crypto IRL 16:20 The Panel 19:40 FreeRoss DAO 21:38 The Panelists 24:28 The Potential of NFTs 29:00 More than Fractionalizing 33:45 Liquidity 39:33 Pricing Assets 46:50 Community 54:34 Regulatory Issues 1:00:22 Use Cases ----- Resources: Amy on Twitter https://twitter.com/amytongwu?s=20  Lightspeed Venture Partners https://twitter.com/lightspeedvp?s=20  The Crypto Gaming Revolution https://shows.banklesshq.com/p/the-crypto-gaming-revolution  The Rise of Axie https://shows.banklesshq.com/p/the-rise-of-axie-infinity-jeff-jiho  ----- Not financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This video is not tax advice. Talk to your accountant. Do your own research. Disclosure. From time-to-time I may add links in this newsletter to products I use. I may receive commission if you make a purchase through one of these links. Additionally, the Bankless writers hold crypto assets. See our investment disclosures here: https://newsletter.banklesshq.com/p/bankless-disclosures 

Welcome to bankless, where we explore the frontier of internet money and internet finance. This is how to get started, how to get better, how to front run the opportunity. I'm Ryan, Sean Adams. I'm here with David Hoffman, and we're here to help you become more bankless. Guys, super exciting episode of Amy Wu. This is Crypto Gaming 101. This is like your intro to crypto gaming, how to invest in crypto gaming, how to find the next Axi, Web3 gaming, NFTs, all of these things. We go over a few things. There's five things. I want you to look out for. The first is what crypto gaming is and why it's a big deal. Then why a casual crypto game, something on mobile might be the next thing.

We also get into how to identify the next Axi and Infinity, why guilds are a good investment, how to earn from games and not just invest in them. Finally, we talk about the importance of meaning, value, and identity in crypto gaming. Amy calls this fun, fulfillment. That's what sustains crypto games. David, fantastic conversation, man. What were some of your takeaways? Yeah, I've really liked the meaning and purpose conversation because Amy had a lot of thoughts about that.

And really, at the end of the day, all humans just want that. They just want meaning and purpose and what they do. And while the first part of this show is all about going from zero to 100 about crypto gaming, trying to answer some of the skeptics takes, what happens if we accidentally just suck the fun out of games, what really makes a crypto game playable in the long term, all of those basics. And then it leads into the conversation as, well, when we first, finally figure all this stuff out, what is the end result? And hopefully the idea is that the end result is we have these fantastically engaging high just like livelihood crypto communities that are

also gaming communities and they're all just playing games together. Some version of utopia, the future utopia that we're all trying to build just involves a bunch of people having a fun time in the metaverse. And so hopefully that's where crypto gaming takes us. And that's definitely where this conversation took us. This is another story of humanity digitizing. itself and the things that humans value in the analog worlds become the things that humans value in the digital world. And I think gaming is such a big part of that as we talk about it. But you know what? What I loved about this conversation too, David, is we dove right into the skeptics' criticisms. Okay? Pushback. And crypto gaming had a breakout year in 2021, absolutely massive year. And with that

comes skepticism. With that comes some haters. And much of this pushback, this blowback even, is from the traditional gaming industry, right? And so we have examples. which are going to talk about an episode of like traditional gamers basically pushing back on Ubisoft and saying like we don't actually want NFTs in our games. Stop foisting that on us. And so what are their criticisms? We got into those and why they made those criticisms. And one thing I love about the crypto space and doing this podcast with you, David, is like, I think crypto people just want to have a conversation, right? It's like I would love to bring on gaming skeptics on the podcast a bit more and have a conversation with them about why they're

skeptical because I think there's so much more common ground than there is things to divide us. One of those things is probably the populism. We all want bottom up movements. We all want community-led movements. And I think that can be a real possibility in gaming, in crypto gaming specifically. Maybe some traditional gamers aren't seeing it yet, but I believe they will. I think we want to win them over too. I think we can definitely pull a leaf out of Bitcoin's book, which is Bitcoin had the most haters from like its inception in 2008 till basically. basically until 2020, right? And now people really get like, okay, yeah, then the money printer went burn. I'm like, oh, I get it now. And I think crypto gaming is kind of in that same early stages where

there's a lot of conversations and potential about crypto gaming, but it's really not here yet. We had one big W as an industry with Axi Infinity. And even Axi Infinity is so unlike almost every game that you would see on Steam or Epic Games or Activision Blizzard. So it's really easy to critique it because there's nothing there. And so as soon as I think this industry actually gets built out and we actually start doing real stuff in the long term, perhaps, hopefully the skeptics kind of melt away because there's actually something here, there's something real, but it will take time. Like you always say, Ryan, crypto is a battle for hearts and minds and gamers are like really a picky set of people. And I think if we can win the gamers over, we can win everyone over. And we definitely have the tools

to do it. We just need to make sure that we do it right and get it done in the right ways. If we win the gamers, it's game over. That's the quest today. And guys, for you guys, if you're looking to invest in this space, you don't want to miss the next big thing. This is a fantastic episode for that. A lot of alpha that drops about investing in crypto gaming. If you like this episode, make sure you like, subscribe, review, tell a friend. Also, we're going to get right to the episode. But before we do, we want to tell you about these awesome tools from the bankless sponsors that made this possible. Gemini is the world's most trusted cryptocurrency exchange. I've been a customer of Gemini since I first. got into crypto in 2017, and it's been my main exchange of choice to make my crypto buys themselves. Gemini is available in all 50 states and in over 50 countries worldwide, and on Gemini, there are markets for over 30 various different crypto assets, including many of the hot defy tokens, and it's one of the few exchanges that has liquid dye markets. Gemini just launched their earn program, where you can earn up to 7.4% interest on 26 various crypto assets. If you're tired of paying

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Bankless Nation, we are super excited about our next guest and our next topic. This is an exciting one. Amy Wu is a partner at Lightspeed Adventure Capital, where she leads investments on consumer crypto and gaming, the triad there. These three things, I feel like, are becoming one. Maybe United, they become crypto gaming. That's what we're going to figure out. We're going to talk about how she invests in crypto gaming today on bankless. Amy, it's great to have you.

Welcome to Bankless. Thanks so much for having me on, guys. Okay, so here's what we're going to do today. I want to really orient ourselves and orient the audience, right? because look, if you're in crypto, you're listening to Bankless. Crypto's really fun, but it's also hard. And the reason it's hard is because this industry moves so quickly. So just when you feel like you wrap your head around Bitcoin and Ethereum, there's Defi.

And just when you feel like you figured out Defi, you got NFTs, and then you got Defi 2.0, and they got Layer 2s. Now you have crypto gaming. This happens at light speed. I guess that's why you guys are called Lightspeed Capital. But here's the thing. On bankless, we don't like missing the next big thing. And I feel like crypto is about, crypto gaming specifically, is about to become the next big thing. So we're looking for your help today, Amy.

Help us make sense of crypto gaming. Are you ready to help us do that? Absolutely. All right. Why don't we start with explaining crypto gaming? So I've had some of these conversations, you know, around the holidays. I expect to have more of them with all sorts of different people. You know, so let's explain it from three different vantage points, if you will.

Amy. So first, the normal person, okay, the normie. You know, your grandma, you're, maybe not grandma, your mom, your cousin, somebody you meet at the holidays, then we'll do from a gamer, somebody who's like played World of Warcraft, Eve online, these, you know, classic types of games. And then finally, we'll do it for maybe a typical bankless listener who is a crypto native. So first a normal person, then a gamer, then a crypto native. So let's explain it. First of all, I think it's really smart because, yeah, the vantage point is pretty different right now from those three. It makes the explanation totally different. So let's start with the normal person, the normie, we'll call them.

How do you explain crypto gaming to that person? Yeah, for the normie, I think they're actually wrapping their minds around what is crypto in general right now. And, you know, it's exciting. Some people seem to be making a lot of money. And for them, crypto gaming is you get to play a game and earn tokens and NFTs as well. So that's as simple as how you explain it. And what if they ask, okay, Amy, what are tokens and NFTs and why do I care? Like, why is that different from like a coin I used to collect in Super Mario?

That usually starts going down the rabbit hole. And it's a much longer conversation. I think a lot of interesting Thanksgiving dinner conversations for people in the U.S. This year. And but, you know, and you can take as academic of approach as you want there. But I think at the end of the day, I think, that, you know, what it is for a lot of people is that it's fun. It seems to be a big trend happening. You know, there's a lot of ideology around it. The world seems to be going that direction.

Certainly, a lot of consumer companies, you know, Facebook and Epic and otherwise are talking about it. And I don't want to miss this trend and the potential to make some money. Like, honestly, it comes down to to that for like a lot of, you know, people just learn. about crypto for the first time. Amy, I remember trying to explain defy to people thinking that defy is the way that crypto is going to go mainstream in 2019. And explaining defy took hours. And then NFTs came around. And sometimes you'd have to explain NFTs to people that really didn't get it. But a large amount of people just accepted NFTs at face value. It didn't really need to take any convincing. Yeah. And so like the trend has been like it's easier and easier to explain

these things. And do you see that maybe some people are like, oh yeah, crypto gaming. But when you pick up gold on the ground, you can actually sell it in this defy world. You can actually just like turn it into real money. Is it easier to explain gaming than you've seen with other crypto things in the past? I have found it easier. I mean, first, like, NFTs has been so much easier to explain than even tokens and certainly defy. You're right that people seem to just take NFTs at face value. And, um, and I think because it's just naturally fun, it's, uh, you know, people are like, oh, this is kind of like gambling a little bit, you know, but also they get emotional connection with owning one and they, aesthetically pleasing, it's fun or cute.

And also, yeah, they get, it's almost like membership to a, to a club with NFTs. And then on the gaming side, it's really an actual extension of that. Sometimes it's as much as just saying, oh, imagine if you can actually use those NFTs. Well, that's basically what, you know, buying NFTs and playing with that and the game is. And I mean, this kind of maybe shifts over to like what does it mean for a gamer, right? But on the NFT side, I would say that far more kind of like, quote-unquote normie or like friends just like learning crypto, like that asked me about NFTs than anything, any currency. And I've actually had very few people ask me about defy. So I mean, it's just like the power of NFTs, I think is an entry point for.

a lot of people into as a first step into crypto. Do you know what's hilarious? I totally feel like this is flipped, right? So in the older days, right, I 100% agree with David. The way I would go about explaining it is like, okay, first, let's start with Bitcoin. And let me tell you about digital scarcity. And then we talk about that. And then it moves to Ethereum and then it moves to DeFi.

And they're like, that's the trajectory. Now I feel like it can start to work from the other end. Yeah. And it's like, people are, oh, your first crypto experience was with a crypto game or with an NFT that you saw, and then you could work backwards and start to explain like Bitcoin at the other end of the spectrum because their first experience with digital scarcity might be these new things. It's totally different than the way it used to be. And I guess that is the benefit of having use cases. Use cases are the best education for the world, for sure. But let's talk about the gamer

then. And I'm talking about the typical gamer who's, you know, kind of grown up playing all sorts of games, you know, first person shooters, like the fortnights of the world, the Yvon Lines, the World of Warcrafts, all of these things. How do you explain the value of crypto gaming NFTs and digital property to the traditional gamer? Yeah. This is a really interesting question right now, obviously with Discord, Ubisoft News, because that answer is nuanced.

There's a few different buckets, right? I would say for your, there's your casual gamer and then, which honestly, I think has more overlap with how I would explain it to, you know, a friend who actually is getting to more recently. And then there's your hardcore gamer. You know, the community that we in sort of gaming investing, AAA gaming investing know very well. And the answer usually there is, I mean, you know, we've actually had this concept in gaming for the last 20 years is somewhat of an answer to that. And they're absolutely right to a certain extent. I think that the sort of OG MMO games like Yvon online and others actually really pioneered.

the idea of these open economies, digital economies, and actually have taken the concepts, like the philosophical concept of digital assets, like further than even a lot of play to earn games today, without actually using blockchain technology, right? I mean, for example, in Eve, you actually have, for example, bankers, like central bankers that actually are taking deposits

and, you know, it's like catching up with Hilmar, the CEO, and he was telling me about how some of these guilds or corporations, as they call it, have their own HR and IT teams to manage their guilds in Eve Online. And so that's why, like, when you look at these hardcore gaming communities, they've been, like, embraced this concept of digital assets for many, many years. And then if you think about, you know, even play to earn, right? the concept of gold farming in MMOs and, you know, and also just the concept of playing to earn, let's say like, you know, you're helping somebody actually level up a character and escape

from Targhoff has been around, again, for many, many years. And so for them, the skeptics, the skeptics are saying, well, what do I need blockchain technology? And by the way, all I see is like this ruining my Discord experience. And then there's also so many scams. And then you have the more bullish people, you know, community within kind of like the Web 3 believers in the hardcore gaming community who are like, it's pretty cool if I can do all of the above and I actually own my assets now in a much more open economy way. For them, it's about this like, while now there's like more liquidity. I like own this asset versus the game studio ultimately owning this assets. Right. So they actually really do embrace this concept of

ownership. Yeah. Well, that's what's interesting. And I almost wonder if that's what makes it harder, right? So like explaining defy sometimes to someone who's already in finance and kind of invested in the existing, you know, financial banking system can be a little bit harder sometimes because they say, why do we need stable coins when we have, you know, digital currencies inside of bank accounts, right? And I feel like the same sort of thing is happening with traditional gamers is like they've already basically invented all of these digital economies. You're talking about these guilds and eave online. Well, that's, isn't that a Dow? Right. That's like, that's what a Dow is a guild. It's more advanced than I think what a lot of Dow's are today. It totally is. And

they see that. And so they're looking at the present state of crypto gaming. They're saying like, oh, that's just a step backward. Like the graphics aren't as good. The gameplay isn't as good. I have a much more immersive experience in like the games I'm playing today. So is it a matter? Do you think of explaining why decentralization matters? And even using the term decentralization, I feel like eyes glaze over and you lose people. Yeah. I think so. more about like explaining open economies and what that can bring. Talk about that for us. Yeah, I have found that it's a really interesting time right now where you have, there's a strong segment of gamers, I would say, that is just without sort of being more open to learning,

equating crypto or specifically NFTs with scans and, you know, sort of environmental and friendliness, a lot of negative things. And I think that it originated with this. I think there's a few things that peel apart here. Gamers are very, very kind of possessive and defensive and serious about their games and the communities they build really similarly to Web3 communities, you know? And just like Web3 communities are, I think, very sensitive to,

whether it's institutional investors or others, sort of not disrespecting this concept of decentralization that we have all kind of in a space come to really um we're both very hardheaded and picky yeah um gamers have a similar protection instinct against people that are just trying to play a game to make money um and also and also just you know scams and um and otherwise and also the um the kind of like the how you know polished and sort of like well thought out the integrity of the actual game, right? The game experience community

is absolutely sort of like religious to them. So I think like they've kind of seen what are the earlier phases of like play to earn games. And one they've seen kind of just what they feel like are non-serious game developers that are creating these games and then with the intent of like making money from them, like from raising tokens and selling NFTs. And, you know, there's hundreds of blockchain gaming teams right now.

And there's definitely a large number that have probably thought out game mechanics a lot less than their tokenomic model, for example. And I think gamers see that. And they're like, well, they're losing side of what's actually important. And also, again, I'm going to come back to like the scams and the environmental concerns that they have and have decided to write off that, you know, Web 3 kind of entirely. And I would say that this mentality is very similar, and this has been brought up to the skepticism faced by mobile free-to-play studios when they first launched as well. And to this day, there are like many AAA developers and gamers that aren't casual mobile free-to-play players, even though, like, you know, we have the huge successes of Supercell and, you know, King and playwrights.

so many others, Gengen and Pax, Mihoyo. They're still like, you know, we believe in like hardcore kind of like triple A shooters and they're probably never going to change their minds. So I think that there's going to be a large segment of gamers that will not change their mind about Web 3. That Web 3 gaming will also kind of give birth to its own sort of like believers and people who really love and embrace the concepts of decentralization, ownership, whatever whatever you want to call it.

True open economy. And I'm really optimistic that that audience will eventually grow. And just like today, actually, mobile free-to-play players is the majority of the gaming audience today and is the fastest growing audience today. Like I think in the future that will happen with Web3 games as well. Amy, I feel like we've heard this story before. It seems to be like there's just something new comes about in the world of crypto that is similar to something that already exists pre-Crypto, and there's just a lot of resistance to change.

Humans just don't like change. A lot of people are just very comfy where they are and they see something shiny and new, and they're like, well, I'm comfy here. I don't want to change. Is that too reductive or is that kind of just what you're seeing here? I think that's part of it. But I also think in this case, they are also thinking about, like, well, how is this better? you know, how is it like a more authentic community? And I think part of that is like not really seeing, for example, like the Axy Infinity community and realizing that, yes, there's actually people just farming and making a lot of money from that, but there's a real like, you know, community there.

Otherwise, they wouldn't have the retention rights they do, right? Like I think something like over 40% like D90, which is just crazy in the gaming world. And yes, it's like a different use case, right? It's earning. But I think that skepticism is a big part of it. But also, I think we're in early stages, a very early stages of blockchain gaming. And some of these bigger or experienced studios will come out with a more like AAA gaming experience in embedding blockchain pretty natively and reinventing ways to use the technology. And I think that will also convert a lot of people as well.

Do you see this gaming world maybe perhaps like being strong? split behind the traditional hardliners that just want to play and then this new like asset powered gaming world? Do you think the concept of gaming is going to go like diverge into two different worlds? I think that it may be, it may follow a similar path to mobile free to play, which is that there's going to be a whole segment that you're totally right, like are not going to be ever believers. And, and actually like there's the converting the developer community and then there's converting the gamer community, right? And these are actually two separate, like, segments of stakeholders here that, at least in the

mobile free-to-play scenario, both needed to be convinced. And a lot of actually people in gaming industry have thought about this and have looked back to the mobile revolution to track how this evolves. And so there's a number of, for example, the King, one of the most successful mobile studios in the world, actually had its roots, for example, in browsers. gaming. And so they really understood this casual audience. And they actually never were in AAA gaming or were a force in that. And they basically evolved from mobile to essentially like trailblazing and creating new genres within like mobile free to play from browser free to play. And so I think that

the, I think that there might be some AAA sort of like game developers that make the switch as well. But not necessarily. We may actually be looking at a whole different category of people that are going to transform what this looks like. And I personally am probably most bullish around the casual audience embracing this first and also sort of mobile developers also looking at, you know, applications first, although there's some complexity there because the mobile platforms, the app stores like Apple and Google have in Android, you know, hasn't actually allowed direct crypto transactions, right?

And so that definitely adds a lot of friction in a gaming category that thrives on no friction in terms of, or like very little, like in terms of gaming. So that will need to be solved, but I think you'll see that. And so, yeah, I think you'll see us slintering. I want to highlight that for folks because possibly that's some alpha. What we game here for, Amy, is like, so, you know, your thought is that maybe casual gamers start and it's going to be sort of mobile first rather than these big massive games in crypto. And that's definitely something that we can watch in the future years. But for folks that aren't familiar, then the reason why we're camping on trying to explain crypto gaming to gamers is, I think if you're in, look, we're all in a bubble at some degree or

another, okay? I consume a lot of crypto culture, a lot of crypto content. And so I'm somewhat in that bubble, right? I try to break outside of my bubble whenever possible. And sometimes reality kind of catches up with me. And there's some recent news items that maybe we could talk about that exactly that happened. So there is one where the CEO of Discord, which is a chat app that everybody uses, but is also very popular in traditional in gaming circles, he's rolled out some features. He was talking about rolling out some features to integrate like Ethereum wallets and Medamask and Web3 Loggins, that sort of thing. He had such a backlash from just the screenshots of these features that he, two days later, not less than two days later, he went back and said,

oh, nope, just kidding. Like, we're not really doing that. This is just a, you know, a test. And we're not going to actually implement these Web3 features. Something similar happened just this week as we're recording this, Amy, with Ubisoft, which is a big traditional game publisher. And they announced that they were going to, first big game studio, I believe, to announce that they were going to incorporate NFTs in their games. They were going to use the Tesos blockchain to do this. And they released a teaser video.

Okay. Apparently what happened with this teaser video is that I got downloaded to hell, right? I'm talking to like 5% upvotes on YouTube and 95% down. And the comments on this thing were absolutely crazy. And I thought to myself, wow, like, I didn't realize so many people, not didn't know about NFTs, not like had sort of a neutral opinion on them, but like downright hated them, hated them in crypto gaming, so much so that Ubisoft actually pulled the YouTube video about this.

So this for me was like, oh my God, I got to figure out why. right? It's like, why do some of these traditional gamers seem to hate NFTs? And I think you talked about some of the surface reasons, right? Scams. Do you see it as many scams? I've also seen other things like environmental concerns, which of course crypto has an answer for. We stole their GPUs, apparently. That's been something raised. But there also seems to be these substance reasons too, Amy. And you were getting at some of them, I think. And the one, I guess, as I was researching some of this in the gaming community, which I'm not like intricate part of these. days. But the one thing that popped up that feels like something that is commonly shared, and I'm wondering if you can reflect on, is this feeling of populism. Okay? So what they didn't like is the Ubisofts of the world and the big corporate gaming interests of the world trying to force this upon the community. It was like top down. And the sentiment in the community was like, hey, they already manipulated us with like microtransactions and all of these. You these downloadable content costs.

And now this is just another way for them to milk the community. Okay? And very much because it was like top down rather than bottom up. And I resonate with that. Okay, because like what is crypto? Crypto is a bottom up populist movement. I'm like, I'm on board. I hear you guys when you say that.

And I'm wondering what you think about that sentiment. And if you think, does that make you bullish on more new game studios and more like bottom up sort of crypto native type experiences? rise to the top? Or do you even sort of reject that? Do you think this like populist narratives is not a real reason that traditional gamers are just so anti-NFTs? What are your thoughts on this? I mean, Ryan, you brought up a lot of nuanced topics. And obviously, we're still thinking through that. But I think a couple of things. It was pretty brave for, you know, Discord and, and Ubisoft, certainly Ubisoft to take the first step. I mean, Ubisoft was the first AAA studio to do that.

and, you know, I think the world had been waiting to see what would happen. And, like, I mean, to be honest, like, I thought that they had launched, I mean, they had announced the rollout, the NFTs very thoughtfully. It was a plagiarment type of, you know, type of launch. You know, the NFTs are free to, to earn, right? Instead of, like, costing a lot of money, which is one of the concerns, by the way, for a lot of people. But certainly that didn't, that didn't kind of quell a lot of the negative, you know, sort of

lashback from from a lot of the players and we had a first taste of that with the discord announcement. And, you know, I don't, I'm not an investor, so I don't know exactly what happened, but it seems like a combination of employees and, you know, customers were taken by surprise and very, and had a very negative reaction. And I think that is probably one thing that the two announcements had in common, which was not necessarily, or at least not that I saw, right? Like having this kind of grassroots bottom up, let's actually discuss with the community on what this means and, and then get their feedback, explain it in a way that's not scary and in a way that's very player friendly and take it from there. And I think even if they had done that, to be honest, there probably

still will be a lot of negative feedback. But perhaps it would have been a little bit, you know, more, like, easier to understand. Instead, I think, and I also looked at so many of the comments, and a lot of the comments around, like, you know, players being taken surprise by surprise by Ubisoft's announcement. And then also, and also just, they obviously had, had put out some disclaimers around, you know, well, FYI, we're using Tezos. And by the way, like, you know, these are the transactions that may, these are the things that may happen and we don't have responsibility for them. And I think, you know, gamers not understanding anything, they don't know, they don't know what Tazos is, they don't understand blockchain. Seeing that for the first time is

honestly pretty scary. And so I think all of that was probably kind of not, yeah, not the most positive reaction led to that. But there's also a lot of just a lot of gamers basically immediately equating NFT being bad and without even going any further from there. Right. And so, I think there's like probably two sets of people that need to be spoken to. And I think that not every gaming community has sort of had that reaction. So, for example, our first blockchain game investment was Mini Royale. And they, it's founded by Alex Paley and Dennis Zedinoff. They're longtime game makers, you know, over a decade of experience in mobile free-to-play.

Most recently as co-GMs at S. Copley. and their game mini-royal, Faraway Games, they had actually a, you know, Discord community and the tens of thousands, very passionate about their game mini-royal. And they took a very different bottoms up approach. You know, they did Discord sort of community chats. They really explained this concept of open economy

and ownership to their community without using kind of scary crypto terms, I would say. And they have actually, the majority of their NFTs will actually be sort of play to mince rather than pay for for drops. And, uh, and I think like so far the community has been really positive about it. In fact, I think when they publish their white paper in the next week, some of their discord members immediately translated to other languages, um, which was amazing to see. So I, I see that and I'm still very optimistic that there are ways to have like,

you know, a Web3 approach to this. Involve your community. what it is that you're trying to do, which is to actually allow a player to own their game assets, right? And actually help them, you know, play a fun game, but also have fun with like tokens and FTs. Explain the fun, explain the ownership part. And I'm so optimistic that you'll be able to convert at least like the core segment to the gamers. And there will be a lot of gamers that are never going to like this concept. And by the way, gamers revolt and react against changes to the game all the time. And this is like something that we've all known.

For example, just back to Eve, you know, they actually tweak their monetization. I think they were rebalancing like something in the game. And there's currently minor strikes going on like in the game, right? And so I, this is like, you know, gamers are, and this is just testament to how passionate they are about preserving the sanctity of their game. I like love that. That's one of the reasons why people just love gaming so much just to see how much passion there is. But of course, that also means that people will react negatively if they're, if they feel

like they're being harmed or misled, miscommunicated to and surprised. I'm reminded of every single time back in like middle school and high school that like Facebook would change its layout. Just the entire Facebook like community would just like say, oh, God, we all hate it. And then later we just like, oh, wait, no, this is actually way better. It's always the reaction to change. Like people just don't like change. Amy, after talking with Gio and also Ariana Simpson from A16Z,

we kind of had this aha moment where the incentives of game studios changes when it goes from trad gaming in its current form to Web3 gaming in hopefully its future form where the business model previously was how much revenue can we extract from our users. And now we kind of think that the new business models, is how much value and wealth can we create inside of our game that our users can therefore access, right? It's not how much can we extract, it's how much wealth that we can create. And that's why all the crypto natives are so bullish on the concept of crypto gaming in general. It's just there's more alignment behind the developers and the users. And so maybe if there's any developers

that are listening to this, maybe the takeaway, I want to get your thoughts on this, maybe the takeaway is not like what the users are fearful of, which is, hey, come buy our NFTs, it's your new skin, it's exactly what you said, which is, hey, come earn these NFTs. They have monetary value. You get them by playing the game. And so it's much more bottom up rather than like, hey, here's a new product that we can sell to our fan base. It's more of a, hey, here's new value that our fan base can earn by playing our game. Yeah. Is that kind of the takeaway that we should run with? I think it is one of them, but there's, I have a slightly different take on that, which is, I think people who maybe have spent less time in the gaming industry immediately,

like in Web 3, go to this decentralization and earning. However, gamers have poured, you know, it's like thousands of dollars and, you know, tens of thousands of dollars in their lifetime and hours into the game with the expectation of zero earnings, right? That's the baseline. And at the core of this, there is a whole segment, you know, hundreds and hundreds of millions of gamers at least that are, that love this industry for the game and the community. And the earning actually comes way after that. And so I think just actually explaining, oh, you can earn money.

A gamer would be like, that's not why I'm playing. You know, I don't know, like a thousand hours of like, you know, Fortnite. And yes, it's cool. and, you know, like, if I have the opportunity to earn some tokens and maybe make a bunch of money from it, or it's essentially like a gambling kind of mechanic, right? Like maybe I'll, I could, if I play this game, maybe I'll make a million bucks or something. Then. But Amy, is this maybe where we're also talking about different gamer demographics here too? Yeah. Because this is what's interesting. So when I asked the community, hey, like, how come gamers hate NFTs and a lot of different responses. But one of the

responses was actually, hey, I'm from the Philippines. Someone else says, I'm from Indonesia. We love NFTs. I don't know what you guys are talking about in the U.S. Maybe U.S. gamers, European gamers, maybe they're sort of behind. It seems like it's taking off in other areas of the world, or maybe your other segmentation was not among the hardcore gamers yet, but the casual gamers? Can you talk about that at all? Is this like just a demographic difference, do you think? I do think so. This goes back to, I think that some of the casual gamers are just more embracing of new concepts and, you know, having fun. Your core kind of consumer audience, actually, which is basically the casual gamer one. And yeah, I think the hardcore AAA gamers are a pretty distinct

segment, very large segments and traditionally actually more revenue driving than from Western markets, right than the rest of world. But actually it turns out if the rest of worlds combined is like, course, there are orders of magnitude actually more people. You don't need to actually monetize them as deeply with that, and have like an amazing business model, but also, you know, and also, you know, this concept of like earning as well, right? So absolutely, I do agree with you.

I think that you'll find different populations and segments of people embracing, play to earn, web three games. And this, though, is like a separate concept of are some of these game economies sustainable, by the way. And so I want to separate the two. But certainly, I think, you know, Asia, for example, even in traditional gaming have always, like, led a lot of the trends in terms of free-to-play dynamics. And you see, like, studios in Korea and China and Japan actually being some of the most inventive around monetization, game economics. mechanics, et cetera, because their audiences are much more open to experimentation. And then actually a lot of Western studios then look at that and copy some of the mechanics.

And we're like followers in some cases, right? And it's like, you know, for example, Mihoi, right, one of the leading, I think, experimental gaming companies in World Against and Impact. And I think this is where you will see some of the biggest innovations in Web3 as well from both developer mentality and gamer adoption. I am hugely bullish on Korea, for example, as a market where you have the intersection of that. Game development talent and an open, you know, added to towards Web 3 and crypto combined is going to probably bring a ton. And then, of course, like Southeast Asia is one of the biggest, the fastest growing markets in gaming.

Obviously, green is their free fire, one of the biggest games in the world. You know, they also recently led the Forte round. Also, you know, investing in other crypto companies. see this more openness to Web 3 from that region. So 100% agree with you. When you shop for plane tickets, you probably use Kayak, Expedia, or Google to compare ticket prices. So why would you limit yourself to just one exchange when you trade crypto?

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The example I always use is once upon a time, still to this day, that Magic the Gathering is a huge trading card game and you own your own cards. You buy the cards and you get to keep them. You get to trade them with other people. If you want to sell them on eBay, you can. But the drawback is that Magic the Gathering, those are physical card. You've got to be right next to the person, right? You lose some of the digital coolness that's something like Harthstone has.

Harstone, a great Blizzard game, kind of the same model. There's a lot of cool game mechanics that exist because it's in the digital world. But when you buy Harthstone cards from Blizzard, you don't own them. You just have access to them bestowed by you inside of the Blizzard app. Harstow players funnel hundreds and hundreds to thousands of dollars into Harthstone to purchase these cards. And then Blizzard just like mince more expansion packs. They lose their power inside the game and they never were even able to like actually sell them like they were with Magic the Gathering. Yeah. That's really an example of that. I was actually playing Magic just last night.

Because there's a couple of things that I'll say, Magic the Gathering is actually like a bigger business than Heartstone. I think Harstown is the most successful TCG game, trading card game digitally. But actually Magic the Gathering is probably bigger yesterday than, sorry, last year than. has been previously. It's actually growing and not like shrinking as an audience from like a DAU daily active user perspective is bigger than than Hardstone today. They probably have something like and they call it like 15 million or so like active players even today and from a revenue perspective is significantly larger today. And like and so I think people don't realize how big magic is. And actually I think it's a great.

of why I actually think the gamers will embrace the concept of ownership because in magic, you own the cards, right? And magic is like the OG collectible sort of, and almost like a progenitor of like what NFTs are because right, you know, these days, some of the magic cards are worth literally hundreds of thousands of dollars, if not more like each. And the ownership of it actually means a lot to people and is why one of the reasons why it's so, it's like both like amazing monetization and also has this massive audience because people are still buying the cars and they're very proud of like showing off like the cars that they have from like, you know, older sets.

And so yeah, I actually think that this concept is one of the reasons why I'm so bullish that over time gamers in the digital world will embrace owning the items that they have cared so much for, played so many hours with, and as soon as they kind of wrap their mind around some of what this all is. You know, we're still trying to explain crypto gaming to traditional gamers, but this one last area that I wanted to cover here, and this is an area of interest, maybe back a little bit to that theme of populism, but something else, like above when you dig down and you get above the surface issues, what are the substance issues that the traditional gamers have?

And one is this question of like, how many people use games? as escapism from real life, right? It's like they wouldn't use the term escapeism. It's just where I go to have fun. I work my day job. It's a dead end. I'm in a cubicle all day. You know, I'm whatever doing something I don't love doing during the day.

But at night, I'm transformed into this alternate world where I have my people, my tribe, my guild. I'm a badass there. I'm like level 60, right? People think I'm a big deal. I'm good at this game, all right? Different world. Now, when you inject real world economies into this type of environment, all right, you inject all the cruft from the real world, all of the wealth inequality that we have previously.

And now suddenly, I'm fighting against, you know, three arrows capital for my dragon armor, right? Yeah. Like, I have to bid against them and they can buy their way in. And so I get all the outside gaming economics that have just invaded this world. And I don't like that. Not only I don't like change, it's just like, you're ruining the thing that I had. The one place I could go wasn't affected by all of these real world troubles. What do you think about that?

Maybe that's a like a bigger kind of picture thing, but does this sort of wreck some of the value proposition for traditional gamers? Yeah, absolutely. It does. And basically you're touching on the concept of pay to win. And actually the huge amount, I mean, I say the majority of the gaming population, really don't like this idea of paying to win. In fact, some of the most passionate communities, whether it's, you know, Guild Wars or some of the biggest MMOs

are not pay to win for a reason, which is very different from pay for power, I would say. Like, you know, if somebody wants to spend like $10,000 and, you know, decking their characters out with skins and also maybe speeding up some of the progression and order to get certain items, then they should be able to, right? It's an open economy,

and many of the top games have actually embedded this kind of dynamic into their game. But at a certain point, even if you spent, I don't know, a million dollars or something into a game, you will still not be able to beat out, somebody who is more skilled. And the best, like, I would say,

PPP competitive games in the world, balances this out very, very well. And I think in the future, I think a great Web3 game is going to need this similar balance. Otherwise, they will not reach the scale or longevity of another game that actually has figured this out. Because if you're competing against three arrows or a fund, maybe you're competing for certain skins and rarity of skins. And by the way, that happens today, too, is like, you know, really rare gaming skins will also cost tens of thousands or maybe even hundreds of thousands of dollars. but if I feel like with that item, a fun can beat me in the game, well, then the game basically loses all fun. And so, like, I think that what Web3 game developers really need to do is think about balance.

And, you know, how do you make it so that at some point, it doesn't matter how much money you spend. Like, you're still playing the game on an equal basis, whether I'm playing free to play and have never spent a dime in the game, but I'm just really great at it. Or if I spend, you know, like, I don't know, a thousand dollars in the game. We need gaming economists is what it sounds like to go figure out these wealth inequality issues for us in game. Maybe we could export some of that to the real world too. Maybe we'll learn a few things in these digital worlds. Game economists are actually very, very essential to the most complex games, whether it's like an RPG or MMRPG and other like complex games. And it's not like you set up the economy once.

it's a it's totally a live operated skill set right like for example a you know a game economist or a game designer is introducing a new economy into the game a new market into the game which is a new item or something like that it impacts the behavior of you know how people react and they'll change their behavior they'll they'll have an they'll have a assumption our hypothesis around how it impact it but then they will start like tweaking the levers of the of like the game in order to balance that right maybe one item is way too powerful and therefore it is really ruining the competitive dynamics of the game. Well, then they'll balance it. And usually, you know, if somebody had really grind a lot of hours or I paid money for a certain item,

yeah, they'll be pretty upset for a short period time. But ultimately, if the players trust that the game developers is trying to just optimize for the best experience for the player and that trust is something oftentimes built over a long period of time, then they will, you know, accept these changes. one of the challenges of Web3 and introducing NFTs is that this cycle is vastly accelerated because any imbalance in the game is immediately essentially taken advantage of, just like arbitrages are immediately taking advantage of in defy. And so therefore, and some sorts of these changes might actually be irreversible, right?

There are some, I think, providers out there of blockchains that offer reversibility and sort of private blockchains. And I mean, to that, I truly question, well, what is the difference between that and an internal ledger? That is actually not like Web 3. And I think some game developers may not understand that nuance yet. But I think over time, hopefully they will. And because I think over time, gamers will realize that if you do that, then you actually

won't actually own the item. And so then what was the point of adopting that quote unquote blockchain slash internal legend in the first place. But it does create like game design challenges that I think game developers will need to figure out. Yeah, I'm all about bring on the game economists, right? Bring on the game central bankers. So long as we preserve the right to fork them if they mess things up, that is important for decentralization. Okay, so we promised three explanations here. And that was the gamer explanation. The last and final one is for the crypto native. Crypto-native knows all about NFTs. This is the value proposition of digital.

Scarcy knows all about decentralization. I think generally the crypto native is pretty excited when you tell that person about crypto gaming because they're like, oh my God, bring on the metaverse. This is what I've been waiting for. I understand digital scarcity. Like so. 100%. Yeah.

These will be the early, these have already been the early adopters. I don't know a single person I think who have embraced Web3 that haven't been excited about gaming and Web3 because I think they've already embraced the concept of decentralization, more ownership, more governance and control, like for the creator and the end user versus the centralized, you know, sort of stakeholders. And so it's almost like, yeah, I don't even need to do any explaining. Yeah, you don't. I mean, people in this space, we've long felt that gaming and, you know, maybe like social tokens and things have been are the best use case. And actually will give utility for NFTs and actually will just drive the next adoption wave of them.

And because, I mean, there's still like very few, I mean, call it like maybe hundreds of thousands of people that have bought NFTs right now. There's like the next 100 million billion people to onboard. And so and of course, like we in Web 3, we're like the minority, right? And so we're really excited to find like people to Red Pill and bring on board. And but I would say, I would really say that for us in the community, it's important to have patience. There's a lot of jargon. There's a lot of, I think, I think, like, you know, elitism and, and I think for people who kind of experience that and some of the toxicity, I would say, they kind of react against that as well. And, you know, we are in the minority here. You know, it's on us to actually provide a very friendly, open, inclusive environment to bring on people onto sort of this platform. So, Amy, say somebody is listening to this and is like, I'm sold. I want to go play some crypto games. I think they might be a little bit disappointed about what the current world of crypto gaming has to currently offer them.

Axi Infinity has a bigillion players, but as far as what people are used to, it's very, very off the beaten path. It's a new kind of game. The graphics just are very rudimentary. It doesn't feel like Fortnite. It doesn't feel like Heartstone. What would you say is really holding back the current state of crypto games that we really need to work on as an industry? You know, first, calling out, I mean, Axi Infinity basically was the first to go mainstream. And so I think everyone is learning from what they've done, right?

The things they've done right, the things they've made mistakes on. And the team is super open about the things that they're working on, the challenges with the game. But the reality is that games take years to develop. And I think Valoran took seven years. And even some of the best free-to-play mobile games that are more casual in nature to take a couple of years to develop. And therefore, some of these games that are going to be super exciting to play, or I would say most of them are still in development and will probably not come out for a couple of years.

I think that there's certain genres. For example, browser games as a genre, I think, are making a comeback right now. They were big, call it 15 years ago. And then mobile took over in the last 10 years. And because of the red ocean competitiveness of user acquisition in the space, browser is slowly coming back. That's why we invested in fairway games.

And so I think, you know, people are really excited to see, what that might feel like. They can play mini royale. And it's live today, right? Not with all of the blockchain components, of course, but over time, it will launch. And so I always say, I always tell gamers to be patient, you know, like, and, you know, if they're really excited about the concept, they should tell their developers the game that they would love to see and hear more about what they're thinking about in blockchain. Be involved in the conversation that is the spirit of Web 3. And it starts there. We often like to say on bank lists that crypto is speed running the history of money and finance.

And then we've also added on that DAWS are speed running the history of human governance systems. And there's just a lot of previous stuff that humans have already done that crypto is redoing once again. And when you tell me that like browser-based games are making a comeback, I remember spending hours on like arcadgames.com or miniclip.com when I was a kid. Do you feel like we could, are we kind of following the same pattern? and like crypto gaming is speed running the history of gaming once again? Yeah, well, I mean, I do think that the constant of like these distributed ledgers and decentralization is quite new and exciting. I mean, I guess it's not new.

I mean, it's been around for probably like eight years now and finally taking mainstream adoption. So really it's more around, you know, like just like browser games, finally, some of the leading developers are re, kind of rediscovering it and moving over and creating like these great consumer experiences as that happens in crypto, right? I've always thought, like, what will bring on the next, like, billion users will be an amazing consumer experience in application form, whether it is a financial services app or, you know, a game or social network, et cetera. And this audience is much larger than financial services as like, you know,

in defy as a use case, even though, even if that's like a deeper sort of use case from an asset, total asset perspective. Okay, so here's what the crypto native is going to want to know. You know, the traditional gamers may be going to want to know, what games can I play? The crypto native want to know, okay, what do I buy? How do I get exposure to the space? Right? Tell me what to ape into, this sort of thing. And on bank lists, we don't get into the details of these things. But I will remind audience listeners, okay? We're talking about Axi infinity last year at this time when no one else was. A lot of people weren't ignoring it. Market cap, $32 million for the AXS token, all right?

This was one year ago as we're recording this, looking on coin market cap. It's at $6.8 billion at the time of recording today. This is how fast these markets can move and the opportunity cost of missing something, right? Which is why, partially, Amy, we're having this podcast. We want to try to identify what's next. But give us a sense of if somebody wants to you, if a crypto native wants to get exposure into crypto gaming, what do they do? because it's different than like just do I buy a token? Do I buy an item? Do I buy digital property? Do I get equity exposure?

there's a game I was looking at as kind of a loot fork. It's called Dope Wars. I was looking at Dope Wars and I didn't know whether to buy their in-game currency. It's called paper or like the Royals Royce loot item. It's like, what's going to appreciate more? Should I buy the collectible, the item or should I buy the currency itself? Do you have any guidance on how to get exposure, how you evaluate things as a venture capitalist on do I buy token? Do I buy item? Do I buy some property? Do I get equity exposure? Are they all equal? Does it depend? Give us a sense. Yeah, I think there's a few different ways to think about it. First of all, I think AAA Web3 Gaming will be one segment in the gaming, but play to earn is just actually another segment in Web3 gaming. I don't think it's going to go away anytime soon. First and foremost, because these guilds that have come up with which, you know, YG is leading right now, but there's at this point thousands of guilds in the world, which are, I think, essentially like a yield farm fund. have actually raised vast amounts of money at this point,

accumulata capital that now needs to be deployed into these games, which will sustain sort of like the next generation of play to earn games. And in that world, I actually don't think the game needs to fun. And I think what needs to happen is a really keen sense of tokenomics, because I think of them as essentially like defy means gaming. And I think that there's a few different places to invest, as you mentioned. You can invest in a play-der-earned games governance token, in-game currency, assets, as land assets, items, et cetera.

And then there's also a game studio themselves. And then there's also the guilds, right? And so the thing with these games is that the majority of them will go through, I think, a fairly short cycle, like kind of like, you know, you have kind of hyper casual gaming dynamics there where you're usually, you're actually using incentivization to bring people in, bring them into the assets. And so getting in early is very, very important. And when they stop incentivizing the asset value appreciation, whether it's a token or the NFT, the thing is that there will be essentially like hundreds and hundreds of these. And so therefore, the rational thing is that guilt and then also

players will move to the place where they're going to get the most return, which is probably going to be another new play to earn game that is heavily incentivizing new users. It's not unlike a lot of defy apps, right, have the same mechanism where you see this huge drop off as soon as they stop doing, you know, air drops and yield incentives. And so I think there's a couple of nuance. How the token is structured in the game economy is really important. And therefore, for an you should probably read the white paper and understand exactly how the economy is structured. Because, for example, if the governance token is actually utilized as part of a soft currency, so the soft currency in a play to earn game, right, has unlimited supply.

And so they will continue to print it. And therefore, it's never going to experience like long-term sort of huge increase in value. Because the point is that that is used as almost like a stable coin. or that's the hope way to like to pay out earners, right? However, for example, if there are breeding mechanisms or that involve the in-game governance token as part of the fees to do so, and that is a fixed supply, then it basically is a naturally built-in like value accumulations, you know, mechanism into the governance token. And so kind of like, at least in the short to medium term, it's going to increase until the,

until the game studio decides to start air dropping and releasing the token from their own treasury. And so there's, and so I think if you're like a savvy trader and that, I would really look at how the token is structured, because you can use that to predict like token appreciation, at least in a short term, depending on what the game studio does. And then on the asset value side of it, because like, there's, there's so much money in these guilds to be buying these assets, you'll also likely see a lot of accumulation of these assets. And so there it's like, look to see where does a play to earn game have accumulated a lot of community?

And that's where the guilds will be looking to see where they actually make their next investments as well. And, you know, if you are able to get on these asset sales early, then, you know, that's like, I mean, there's a lot of ways to find returns there. And I think you've seen that play out with these like very, you know, very public land sales and also appreciation of these like NFT assets. I actually think in-game NFTs, like some of these games are starting to realize that quickly appreciating in-game asset NFTs are detrimental, directly detrimental to the retention of players because they quickly become unaffordable. right? And so therefore, like there's new mechanics around plagiariments, you know, releasing potentially millions of these items and trying to keep these asset prices down, which is beneficial

for gameplay, but maybe like not as beneficial if you're an investor looking for appreciation of asset value. Yeah, it's really interesting. I guess there's no clean answer to the question of do I do tokens, do items, do I do property or do I invest in a guild here and it really depends. But if you're evaluating a game, right, you definitely need to look at the token economic behind the token itself. But like, what do you guys do when you go? Do you ever buy items? Or is it primarily like tokens and, you know, investing in the equity of the game studio, that sort of thing? And then maybe is the idea behind investing in a guild? Is that like, well, you get exposure to a wide set of games. So that's sort of an indexed fund type of investment. Any thoughts on that?

Yeah. For sure. So we're not traders. And so when we invest in a game studio, which we have, we're really investing in equity and then the governance token with the expectation that we will be investing a studio in the long term. I think that there's like a trading strategy around play to earn games, but then there's like a long term investment one and we're very squarely in the ladder. And that's why we do equity and governance token deals with these games studios. And then I absolutely do think that the guilds are an interesting part of the value chain because like I mentioned, these titles will rise and fall. And I actually think of Play to Earners. for a lot of them, like in a pretty short time frame.

And however, if you're a guild, you send and you command over time a distribution of tens of thousands, hundreds of thousands, eventually millions of players, right, in these emerging markets. Then you, that is the moat, right? First, you need, they have accumulated a lot of capital in order to buy assets to then accumulate the distribution. And once they have the distribution, they essentially can move players from one game to another. They're almost like kingmakers. they can actually produce, like, you know, probably like at least jumpstart a lot of these games as well.

And therefore, it has not been lost on a lot of investors that guilds are an interesting part of the ecosystem. I think the challenge right now is that, as you have mentioned, there just aren't that many, like, live play to earn games. And so therefore, while guilds have been trying to diversify their treasury into a lot of different gaming assets, you know, most of them are still heavily invested in AXE, because there's just not that many other live games right now, right? And so I think there's going to be a time when there's a lot of concentration of these guilds in that one game.

So a lot of the Web3 community is definitely interested in just like, oh, how do I get exposure? The whole play-to-earn movement, it's not about buying, it's about playing. So a lot of these assets, you're supposed to play the game in order to earn them. I know we really just only have Axi Infinity and maybe a few other examples to really know what that really means. but in theory, what are the different vehicles in which people that don't want to invest their capital, but rather instead they want to play the game to get upside? What's the generalized model? How do people actually make money playing the game?

Yeah, people making money playing the game. I mean, I personally think kind of in the future, my hypothesis is that there's going to be this classic play to earn gaming model, which will cater to, which will cater to. sort of like the emerging market where actually like the replacement for income is just much lower than in a Western audience. Right. And so there's that's going to be a thing. And, you know, if and that's more of like a trading mentality I think of it is like, you know, I think Western traders will look at that and find our opportunities and and otherwise. And and and but a gamer looking to earn maybe like, you know, play and earn at the same time. Let's say like, you know, I can be playing like cod,

you know, call of duty. But then I can also play something like that. but also earn some tokens and have fun doing that, I don't think it's going to become like a replacement for income ever. In fact, I think if it is, then that actually will, that is not sort of correlated with longevity of that game. And so in that kind of segment, you're most likely going to play and earn. You know, you can probably earn some tokens of some people,

some thousands of hours in these games. So they'll probably earn maybe like a substantial amount of value in NFTs and tokens from doing so. And because there's like, and I think a lot of these AAA games will actually incorporate a mechanic in which I, you know, there's a possibility of actually earning a lot of very valuable assets, just like that mechanic exists today, except that you can actually go out and sell, for example, a rare skin for like a million dollars or something. And I think that will be a component to it as well. And that sort of almost like a gambling mentality will potentially also be a drive for a bunch of gamers. to play some of these Web3 games. One of the favorite things in my mind about both gaming and crypto is that everything is really, really community-based. And we're seeing overall the whole entire world move closer and closer towards communities,

towards tribes. People are finding their tribe in the Metaverse, in wherever they identify with themselves. And the Web3 world definitely runs on communities. Gaming has run on communities since day one. And now we are seeing the intersection of the Web3 communities and the gaming communities. Amy, can you just talk about it? the role that you see community playing when we talk about the world of crypto gaming that's coming? Oh, yeah. I mean, I think communities already play a vital role in Web3 gaming, and it will

absolutely continue to. And I'm very hopeful that they will also come together. You know, gaming community and Web3 communities finding a common ground. And we're honestly just not seeing very much of that right now. They're very separate today. And in these, like, so when I look at acting community, like, you know, these communities love that game, right? And they help each other on board and teach and teach each other sort of like how, what are the best strategies to earn and win matches, et cetera. And I think, say what you will about like sort of like the pros and cons and the mistakes and how they manage their economy. However, the community was with that game from day one. And it's one of the key reasons as to why that platter and game was so successful. And any plattern

game developer who don't realize, that, I don't think we'll have a success, you know, a success case anywhere near that of AXE. And so the community is absolutely key, especially because even in traditional gaming, there has been the biggest trend in that has been the convergence of gaming and social. And, you know, browser is one of the subtrends with that because, you know, they're instantly shared, you know, and so theoretically you can go on a social network and share a link and potentially get tens of thousands of people playing one instance in a browser game immediately. but also if you look at the rise of Roblox and, you know, the core use case of Roblox is kids going to a library,

like playing as friends and playing hours in, I don't know, one of their, you know, what is like actually very basic fidelity games, but just super fun social games, right? Like, again, you don't need high fidelity like Ballarat to have essentially hundreds of millions of people playing your game. It turns out that people are going to games, like the bigger population is going because it's fun to play with friends. today, mostly friends in real life that they bring in, but in the future, like, friends that they meet actually in the game environment. And so because of that, I think the concept of a community is already growing in significance in traditional gaming and already important in Web3. And so this trend will just continue. I think I'd like to remind listeners that the Web 1 and Web 2 world

both came out of social use cases. Like the Web 1 world was people wanted to chat on forums with like-minded, like-interested people. And then the Web 2 world just supercharged that with social media platforms. So the growth of the internet always kind of seems to be trending towards just how do we make things more social? How do we make more communities and how do we enable them to exist? Amy, when it comes to all of these, you know, play-to-earned games, and you talk about how there's the potential for people to earn more than a living wage when it comes to playing these games. What about the concept of like meaning and purpose and career when it comes to working in these Web3 games? People always want to discover meaning and think that they are working towards

some sort of bigger purpose when they do their labor, when they do their work. That's why it keeps them going. Yeah. How does that role fit into the world of crypto gaming? Yeah, I love that concept. In my opinion, I think that is the most important core of a future metaverse, you know, this idea that people are spending substantial amounts of time in like a digital world, well, they won't do that unless they derive significant meaning, value, and identity from that. And I think people talk a lot about the form factor of that digital world, but actually it's sort of like if you think about a person's, a human's needs and this need to belong and find meaning, it actually is the core concept of it. And honestly, like when I think about some of the

greatest like MMO designers of our era like that's honestly what they think about all day long. And so I think, you know, I love like Yvon Online and, you know, some of their largest guilds or corporations have literally like 10,000 people in it. And, you know, I've spoken, and the CEO has often said that players over the last 20 years, just how long this game has been around have come to him and be like, I actually derive more meaning and learnings from this game in my role in that than I do in real life or I'm porting learnings from the game into real life. And, you know, I am somebody in this game very important, whereas, you know, I don't find as much meaning in my day-to-day job, you know, and that's why they have spent

like so much their time, energy love and also like, you know, money into this game. And this is, and so, you know, these are these are guilds in which there's like leadership, there's a CEO. There's, Again, like I mentioned, IT departments and HR and people have jobs. And all within this digital world, I think it's the OG, honestly, like, Metaverse. And so therefore, like this concept of meaning and value, but also this concept of scarcity and potential loss, the things that are actually really important to a person sort of in real life is actually what will drive how they spend their time. And so if there is going to be future metaverses, this is going to be core to that.

So once upon a time, I absolutely loved going to the gym and I'd be in the gym every single day. And then I became a personal trainer and it just sucks the fun right out of it. And I just did not want to be in the gym at all. And I'm kind of worried that everyone wants to play games. And then as soon as you put money and assets into games, people think that's a great idea. But then it goes from like fun into work and it kind of just sucks the fun out of it. Do you have this fear that like crypto gaming will just kind of suck the fun out of gaming and just make it more like work? I think that meaning and value creates fun.

This concept of fun is a pretty like, you know, like a nebulous one. And this is one that I've sort of debated a lot with people as well. If you were tasked in an MMO guilds with just grinding like in the like dungeon crawler levels to create a certain amount of goals so that the guilds can, you know, buy certain resources to to like, in their next battle or whatever. Like, is that, is that work or is that fun? Or is that somewhere in the middle? Or is it fun because that person feels like they're adding a lot of value to their guilt? And so therefore, I think that the lines are blurry.

And more important is that meaning and connectivity and social creates fun. And that's sort of, and like, and that's like a more kind of, direct tie than necessarily like, okay, this is a beautiful sort of like first person shooter experience and that creates fun. Actually, I always argue that the social experience, but then also like the fun of going through the game mechanics and the level combined, create fun. You mentioned earlier, Amy, that it's been one criticism that some of these crypto games are unsustainable. What's required to make a crypto game sustainable? Is it that fun element that we talk about? And realizing the term fun, again, is you said nebulous, but it's also

very broad, right? It's like, what are we kind of optimizing for in life if you boil it all down, right? It's like there's money, this is stuff you have to do. And there's also fun. When I say fun, it's like leisure. It's like stuff you want to do. It's the life fulfillment stuff. So money and fun, these are the two optimizations. Is fun required to make crypto games sustainable? So again, I have a very broad definition of fun, right? And so when I say the game has to be fun, I actually mean like a bunch of different things. And I don't mean necessarily the graphic fidelity of the game, et cetera. I mean, you know, does the game create value and social?

It's like fulfillment, right? I think that's what you're saying. Yeah, and fulfillment. Yeah. And fun, kind of in the classic sense. You know, the gameplay is super fun and addictive. So I'm just going to play it. And that translates to retention of the player wanting to actually come in.

You know, we talk about the concept of like the thousand hour game, right? What does the game need to have in order for somebody to play for a thousand-hour game? hours. It's difficult. I mean, we have really short attention spans. We don't do a lot of things more than like, I don't know, a couple of hours, maybe time to fun in a game, right? You have three minutes to basically get somebody into and engaged and willing to invest time into a game or something like that. And so all of these concepts are really important. And when I mean sustainability, I mean definitely the fun has to be there in this broad definition. And I think social elements will really help that, potentially competitive elements.

You know, PPP will help that as well. But also what takes away from sustainability is also this optimization for quickly appreciating assets. Basically, what happens then, if you have guilds and investors, basically investing in all of the early assets in the game that then appreciates a thousand X and then the normal, the normie players come in and they're buying these assets a lot more expensive after the tokens launch. it's already worth like billions of dollars of FDV,

then essentially you are setting these people up for significant, I would say disappointment when inevitably once you stop, once the game maker stops incentivizing them and asset value comes down, then you have a player that otherwise may have actually wanted to play the game, but it's actually sitting on, like having lost a lot of money and assets, and they're going to basically, and it's going to destroy the trust between that player and the, the game. And that's like a really, that's a really subpar experience and leads to unsustainability.

And so when I say sustainability, it is kind of like both like the, like the positive and the negative side of that and really taking care. This is what makes investing in this space kind of tricky. And it's easy to say like, hey, Amy, tell us what the next axi is, but it's actually hard like to identify what that's going to be. But a few of the things I feel like you mentioned are community. Hey, community is super important. Token economics are actually important. finding the right balance is important, making sure the gameplay is fun, the broad definition of the word fun, meaning fulfilling. Lots of other things, I'm sure, but what else do you really look for? So when you're looking at, hey, I'm trying to invest in the next big crypto game thing, what are you

looking for beyond the things we've already discussed in this episode? I think a lot of that. But I also think that some of the most brilliant game makers are still thinking through how to reinvent like the embedding of blockchain technology into the game to solely enhance the player experience. You know, for example, you know, like some of the best game makers in the world, whether they're at Riot or Supercell or, you know, Epic and otherwise are thinking through this. And I'm actually super excited to see what these game makers will invent in this genre. And some of these. And it may well come from indie studios as well, right?

But I am bullish that it will come from new games created with native blockchain, you know, sort of integration. And whether that's happening within a large gaming publisher or an indie studio, rather than necessarily just porting over an existing huge franchise to blockchain, I mean, it could happen if it's done really thoughtfully. But I think that we have yet to see. a lot of really creative mechanisms that have yet to be invented. So it comes down to the common denominator we always talk about on bankless where it's back

to the teams. You're kind of investing in individual people because they're the ones that are trying to navigate this uncertainty. Just two more things, Amy. The first is this question of timing, right? So you'd be right about the thesis of crypto gaming, but get the timing wrong. And it feels like now there's a lot of, I guess, excitement about crypto gaming on the back of Axi. Excitment we didn't see, frankly, at this time last year. And I almost wonder if some of that

might be overextended or overhyped. Kyle Simani from Multicoin said, yeah, there's a lot of crypto funds turning into gaming VCs right now and it's not going to end well. According to the block, roughly 42% of the last $3.8 billion worth of VC funds that was from November went into crypto gaming. Do you feel like the market's maybe a little bit frothy now, or does this feel like a right size and what does this mean for how you think about this as an investor? Yeah, I think the market is absolutely frothy. I would agree with Kyle on his, on his prediction, but actually kind of the cycles of gaming investing has been, has happened far before Web 3, where you have these cycles of a lot of enthusiasm from non-gaming investors coming in and not quite realizing.

I think how title sensitive like success is. There is, I don't, I'm not sure there is like a more power law, you know, sort of distribution of success industry than then in gaming where actually, you know, the vast majority of the success accrues to the top. It's possible we won't see another play to earn game as successful as Axi. Like it wouldn't surprise me. I wouldn't be surprised otherwise as well. And so what happens even in traditional gaming is a bunch of people come in and get super excited, drive up like game asset value.

And then the reality is when they launch, probably 99.9% will fail. And as a reminder, there's basically 100,000 games launched on, you know, I think like on mobile, on like a monthly basis for something like that. I mean, it is a massively competitive field. And so the, and so, I mean, the vast majority of these games will fail in the longer terms. And that's just the distribution of gaming. I think in Web 3, you might see some of them reach, like, initial success from like token value, defined by token appreciation as they're incentivizing. But if you don't have retention, like, you will not get these, like, long, you won't get long term success. And, but, but as an early stage investor, right?

you're hopefully the game studios are locking us in for kind of like two, three, four year time horizon, which will long extend beyond that initial period. And so therefore, I agree with Kyle. I think that the majority of the games will see today will fail because that's also just the natural distribution of title success and failure in gaming in general. And so therefore, you know, I believe in the portfolio construction of game title investing. And, and, you know, this is, only a growing industry. And so I still remain incredibly bullish myself in terms of finding the right teams to back in the space. Our best not financial advice for the casual investor in this space is like, go find something you love to play. Go find the game that's fun. That's giving you fulfillment.

And chances are if it does that for you, it's going to do that for thousands, maybe millions of others. That is a fail-safe way. And that's the real alpha. That's the alpha right there. Amy. Yeah, invest in what you know. Exactly, exactly. It's a, you know, it's a Buffett thing, but it's actually true. And I don't think Buffett plays video games. Let's talk about 2022. Getting ready to close out the year, Amy, feels like 2021 has been a breakout year for crypto gaming. What can we expect in 2022? Is this going to be another up only year? Are you bullish on specific categories? I know you mentioned casual mobile crypto games. Is that one? Are there others? Tell us about 2022 and the outlook.

So, yeah, I mean, we're very excited about. crypto in different categories in the very long term. Absolutely nobody can predict the crypto markets. I think even on like a very short time frame horizon the next week, right? I mean, Sam Bankman Free can't predict it. Nobody can predict it. And so, but I think that's why as venture investors, we think in much longer arcs. And, you know, we're really bullish about the space kind of, you know, if there's a

bear market next year, if there's a bull market next year. But some of the, I think the trends that I'm super excited about are certainly Web 3. I think that will be massive. I think we will see multiple launches of social networks in decentralized social networks next year. And some of them are in development now and we'll see more. More creative use cases and deployments of token and NFTs and blockchain in games and also in social consumer companies. And then also kind of on other sides, I think that we will continue seeing like the next iterations of defy, right?

How do you tap into non-collateralized lending? These are areas that, you know, teams like AVE are innovating on. And I think a big category that will arise is infrastructure in crypto. And I would include security as part of that. You know, there's so much rock pulling and hacks in the space. You know, how do you prevent it with interesting? kind of like decentralized, reimagination of like security protocols in crypto, but then also insurance. And also how do you make building applications significantly easier for, for developers?

So DevOps tooling and, you know, built on top of blockchains. These are all super interesting categories that we're excited about. Amy Wu, thanks for taking us down the crypto gaming rabbit hole today. We definitely appreciate it. I think listeners will feel like this gave them a zero to 100 course in the space of about 60 to 90 minutes. So thank you so much for spending time with us. Thank you so much for having me on, guys. Super fun of conversation. Action items for you today. Bankless listeners, we have a sister episode that is also very good. It's called the Crypto Gaming Revolution with Ariana Simpson. You can listen to that. We'll include a link in the show notes. Also, the rise of Axi Infinity, that Axi Infinity

story. We got Gio from Axi to tell us about that over the summer. And that is a fantastic story as well. That'll get your mind wrapped around the biggest crypto gaming success story we've seen so far. Third and finally, guess what just happened? Bankless got to the fourth largest investing podcast on the list, on the charts, Apple iTunes in the US, okay? Dave Ramsey's number one, all right? Imagine the real flippinging is when bankless flippins Dave Ramsey. And I think that's going to happen, maybe sometime in 2022. And that's only going to happen. You have to go like and subscribe and review on iTunes because we want to flip absolutely everything crypto is taking over the world. So if you want to help bank this become the number one podcast in investing, please go like and

subscribe and rate and review wherever you listen to podcasts. Let's make David Hoffman the Dave Ramsey of crypto guys. Come on, we can make it happen. Thanks so much for listening. The better Dave. As always, risks and disclaimers, crypto gaming is risky. ETH is risky. Bitcoin is risky. So is defy. You could definitely lose what you put in. But we are headed west. This is the frontier. It's not for everyone. But we're glad you're waiting. us on the bankless journey. Thanks a lot.