Epicenter - Learn about Crypto, Blockchain, Ethereum, Bitcoin and Distributed Technologies - Robbie Ferguson: Immutable - The Web3 Gaming one-stop-shop

Episode Date: September 16, 2023

Apart from its numerous financial applications, blockchain technology could also disrupt the gaming industry, causing a paradigm shift towards true digital ownership, one that would create new incentive models for both players, as well as developers. Up until recently, technological barriers seemed cumbersome for most game developers, but the advancements of layer 2 scaling solutions made on-chain integrations viable. Immutable set out to create an all-in-one platform for developers, empowering them to create a lush gaming ecosystem to seamlessly onboard Web2 players.We were joined by Robbie Ferguson, co-founder of Immutable, to discuss the state of Web3 gaming and Immutable's contribution to this paradigm shift.Topics covered in this episode:Robbie’s background and founding ImmutableThe pitfalls of centralised in-game asset marketplacesWeb3 game development challengesOnboarding the Web2 gaming sceneImmutable’s value propIntegrating Polygon’s zkEVM with the STARK-powered Immutable XImmutable SDK & DevExAppStore’s Web3 policiesImmutable PassportEnforceable royalties$IMXEpisode links:Robbie Ferguson on TwitterImmutable on TwitterGods Unchained on TwitterGuild of Guardians on TwitterThis episode is hosted by Sebastien Couture. Show notes and listening options: epicenter.tv/511

Welcome to Epicenter. The show which talks about the technologies, projects, and people driving decentralization and the blockchain revolution. I'm Sebastian Quirutio, and today I'm joined by Robbie Ferguson. He's co-founder at Immutable. Mutable is a platform for building Web3 games. And we're going to talk about Web3 gaming today. We're going to talk about the gaming market.

We're going to discuss also Immutable, their whole developer platform and some of their products and understanding where we're going to talk about the gaming market. where Web3 gaming is going generally. So Robbie, thanks for joining me today. Thanks for having me, Zep. Pleasure to be here. So, yeah, tell me a bit about your background and how you came to want to focus on Web3 gaming.

Yeah, of course. So I've been building technology startups for the last decade as a software engineer originally self-taught, and most of these I built with my brother and my co-founder James. In fact, we actually started out by building a League of Legends betting application where you could automatically wager on your own matches.

So I think we had, you know, we were massive grameries growing up. I think we had this thesis pretty early on that games were incredibly important, that the assets inside these games could be valuable and that there was something that was being locked away from gamers. You know, back then we didn't know the technical architecture of that. But I remember even playing Roonscape on a shared account I had with my brother.

And one day, I decided to attack his account hadn't the wilderness, I think he had a full dragon, and I scald and I lost all as items. And I felt so bad that I went online and I spent all my pocket money and I bought in-game gold so that I could buy his items back. And the next day, the account was banned for real-world trading. Six months later, Jagex rolled out first-party support for real-world trading as long as the issuance was centralized and controlled through them. And so I think it was pretty obvious the, you know, the impunity with which people regarded these economies and made changes to them,

even though they were incredibly important to people's lives. And to some extent, their financial livelihoods, even in Web 2 economies, where it was limited to a database. In fact, you make arguments that the first ever sort of, you know, real world trading of digital assets was probably world of Warcraft. And indeed, you know, Counterstrike go through this essentially steam, database today did $32 billion in volume over the last few years. So I think it's obvious that there's a problem and also that there's a need. There's a demand analog in the real world over these assets being traded or wanting to be traded and they're really not being a good solution or infrastructure for it. So we started building no more tech companies. We got into the

crypto space in 2014 with Bitcoin. We basically just got exposure financially. I thought it was kind of interesting. I wasn't super obsessed. But when Ethereum came out, I became a, you know, a believer. I remember using etherol and just becoming obsessed with this idea that someone could take what, you know, a gambling company spends billions of dollars or the government does, ensuring that the payouts on slot machines are compliant, that they have the probabilities rated between what their payout ratios are, 80 to 92 cents here in Australia, and they literally heuristically test this. They have to air gap in machines. And then someone built this little app called Etherol. It did all of that in 200 lines of code. And then it did something that the companies and the

government could never do. It took the revenue streams from this institution or this enterprise, and it gave it to every single person who used the protocol through tokens. And I was just obsessed for this idea of decentralizing and making companies cooperatives. I thought it was the way that capitalist incentives could finally solve some of the inherent problems. in society. I was sold by this idea of a decentralized Uber where all the riders could co-in the network. Now, turns out that did happen. It just happened with on-chain financial products because the friction was much low arcs and you already have native product market fit with these 100,000 defy traders slash airdrop farmers slash early users of WebRE today as kind of

your core whales who are moving money around. And we basically started building trading bots for a few years on top of Polonex initially and then on decentralized exchanges. But we always wanted to build something. And so at the start of 2017, my brother and I wrote a white paper called the Distributed Autonomous Bank, or DAP, which was effectively compound. And we hadn't solved all of the collateralization problems of lending protocols. I don't think they are solved today even, but we were about to launch it when five ICOs went to 50, went to 200, and we just got very cold feet about the space from a, a reg and compliance perspective. We thought a bunch of people were going to jail. And we wanted to

build something that would be long term feasible and that we would be happy to grow incredibly large without having the SEC knock on at all when it gets to a sufficient scale. And so we scrapped that, but seredipitously at the same time, the first ever NFTs came out in this idea of a crypto punk. And we saw these and we said, this will be how gamers are in-game items. And actually the way we started was we built the first ever multiplayer game on any longer. blockchain. It was fully on chain logic. It came out in December of 2017. It was called Etherbots. And you could basically battle robots and win real NFTs by having your machines win. They were composable of 4 A.R.C. 721s. You got a fully on chain perk tree. You can play a game today and it'll

cost you hundreds of dollars, but it can never go down. And so I think we learned pretty early on, you know, watch your goal on chain versus watch it off. And that really formed the thesis of how we started to build a mutable, which was build first-party content, much in the same way that Steam or Valve started out with Counter Strike Go, and then we're able to leverage that knowledge and that sort of beach heard from the content perspective into building a platform that everyone could use, and that really solved core needs. And so, you know, Immutable today, we're nearly 300 people around the world, much more if you include the contracting on game development. We have hundreds of games building on us. We had more than a billion dollars invested in games, building on us just,

last year. And we've significantly increased our market share since then with this Oligon partnership. And we've raised, you know, hundreds of millions from everyone from Temasek to 10 cents first investment in the space. And our whole mission is how do we deliver on this promise to web through gamers and to gamers worldwide on true digital asset ownership? You said something in the beginning, which, you know, kind of struck me as interesting, is that you said that you were, I think it was League of Legends, that you had bought this gold. and then ended up buying some assets to sort of make good on having lost your brother's assets and that that account was banned for real world trading.

Why do gaming platforms and game publishers prohibit or you'll want to prohibit or keep, or in the case of this game, having then allowed real word trading, why do they want to keep that sort of centralized within their platform? So I think before now, the technology hasn't existed. I think it's impossible to do with databases. The availability of being able to change something means that companies will, and that means you can't form third-party trusted ecosystem. Even if the current CEO wants to make a trusted third-party ecosystem,

people can't trust the incentives and financials enough to actually build real enterprises. You saw this with Opskits, which is a $300 billion third-party marketplace for CSGO skins, that basically went belly up when Valve implemented trade locks and they limited skins from being created more frequently than once a week. And so I think there's actually just this technological impossibility and political impossibility with everything that doesn't rely on, you know, open, trustless immutable architecture such as NFTs. But isn't that a design issue though?

I mean, so there may be the technology issue, but there's also like the design aspect. So whether you're building an centralized database or you're building in a blockchain, The designers of, say, the smart contract or the, and maybe this is getting a little bit in the weeds here sort of early on, but the design essentially is in the hands of the developer or the issue of that game. And so, I mean, couldn't you build a similar sort of design in the game where you have like an admin key and that admin key gets to decide who is able to trade or what the trading mechanisms might be? You can. So I think the technology is only one half of the tick shop. And the answer to that in Web 3 is, I mean, if you work really hard, you can make things properly

trustless and in general they're much more trustless. For instance, if someone does a change they don't like, you know, people can kind of fork those assets or we'll find out some other ways to bring value to them. But in general, what we're relying on is incentive alignment, which means that the publishers have an incentive to grow the value of that ecosystem and grow the value of those assets because they now have access to things like royalties and secondary market. fees, rather than having to rely on this old model of I sell stuff, I deprecate that and make them more useless by releasing more powerful stuff that people want to buy every year. And so I think it's a fair point, and it's certainly not, you're sort of overnight solved, unless you're doing fully on-chain classless games, which, you know, I certainly not this cycle.

I think we're seeing some interesting experiments, but it's web 2.5 games that are going to go made sure first. But the second question in the probably much more important one is just, you know, economics and incentives. I think this model hasn't existed before. I think it's difficult for the games companies to see how they can, you know, for a long time, actually succeed off growing the value of these economies. And you have to remember as well, like, in-game items being the biggest portion of spend is also a reasonably new phenomenon. Free to play gaming only came out in the late 2010. And that's when you had in-game items as even something that was really important

as a vast majority of monetization. The majority of monetization is now in-game items. And we're sort of seeing this pressure towards, well, how do we actually create better economic standards and better property rights for games because of this? But 20 years ago, this was completely irrelevant because these sort of economies were increasingly small and didn't have that much relevance to players. So I think the answer now is it's a bit of both. It's how can we prove out to developers this is a better and more aligned business model, while at the same time you just have innovative. dilemma. People are going to be disrupted. The goal we're going for is we want gamers to demand property rights. If they play a game and they give them something in a database, that should be not good enough. And that's the point of which it's no longer sort of market to have a game that

runs on a database rather than on open property systems. Yeah, interesting. We can get a little bit more to this a little bit later, but I just want to pull and I throw a little bit. You know, what is it that people, like maybe take a snap back here. Like what is it that people understand the least about game development? You know, there's this whole, there's this whole kind of narrative around web three games and how web three games are inherently better than the traditional model. But like game development is a really, I mean, it's a huge industry. It's like a 200 billion dollar industry games. And game development is expensive. And like there's all these, there's all these considerations around like licensing and publishers and distribution and it's a very complex

industry. What is it that people understand the least about it that bears understanding if they're going to be building a Web 3 game or if they want to go sort of in this direction? I think the first thing is probably timelines and how they get produced. The reason that Defi Bull Runs correlated so quickly with Defy Innovation is Andre Cronier can put together a test smart contract and call it a production spot contract in a week, right? Like you can build defy applications very, very quickly. They're all open source. They're highly composable. People can fork and sort of remix things. Building a game is not at all like that. It's like building a movie. You have a budget of roughly minimum $5 million for anything reasonable unless you're looking at truly India ads,

all the way up into the hundreds of millions of dollars for sort of, you know, Bethesda quality games. And even then, you will not be able to produce a Bethesda game unless you have the capability and processes of Bethesda. There are very few studios with sort of that internal capability and risk tolerance. And the time it takes it a lot longer. And then you combine that with the power law of gaming, which is that gaming, particularly free-to-play games, conform to a power law, which means that the biggest game will have more revenue or more players and more volume

than number two and to the end. And the second biggest game will have more than number three and so on to the end. And what that means, actually, is when you look at why we haven't had a hit yet or the one hit we've had was sort of AXE, which was sort of medium sustainability, obviously, had a sharp drop-hoss, is there simply hasn't been enough shots on goal, and one hit is going to dwarf everything else combined. You see this already in Web 2, Counter-Strike Go, doing $32 billion in volume over the last three years, or in revenues, you see that same topology.

Axi then is roughly, what, $5 or $6 billion, and everything else is lower than that combined. And I think we're going to see that, but the failure rates are going to be incredibly high to start with, 90 to 95%. And so the reason we have such a broad platform play is we know there are going to be so many shots on goal. And all that matters is they have sufficient funding to be one of those hits. And then we just have to make everyone as successful as possible and sort of focus on those top 100, top 200 opportunities. And what are the biggest challenges then? I mean, like you said there's like 100 games on Immutable and we've seen other games like Axi and there's a whole like sandbox ecosystem. What have we learned so far about Web3 games that we've identified as like the biggest challenges to like hitting those shots on goal and like really demonstrating that this new sort of infrastructure and this new paradigm of gaming is inherently better and making suppositions here?

than traditional games. I think there's probably five big problems blocking successful games being ready now and available. And we think about this problem a lot. And our goal is immutable is to be the one-stop shop that we can solve everything for a mainstream developer if they want to build something. I'll go through and I'll say where I think the market is app today. So I think the five problems are security and choice of technical architecture to user experience for onboarding mainstream players. Three, developer experience for mainstream developers to build a successful blockchain game without having to touch things like solidity. Fourth, having a sustainable and

easily built economy. And five, the game design itself and the actual game production quality kind of getting live. And that's the one we have the least control over. That takes time. It takes game studios being built. And we had a lot of that investment. So that's kind of in progress and we're things, stuff start to go live and we'll start to pick up the pace increasingly over the next 12 months. As the rest of the ball, I think we've actually made massive progress. So the first one's security, I think this is basically now solved. This was always something we were never happy to compromise on. It's the reason we didn't go down the path of side chains, even though that was the most

favorite sort of VC thesis for how you should build a valuable company, was building an ETHKILA or an ETH alternative. We always wanted to build on the thing that already had liquidity and had the best security. and we wanted to do so inheriting that security, which is why we're basically, you know, the first ZK wall up for NFTs, why we chose this architecture from day one. The second is user experience,

and this was in a really bad place. By the way, on security, if you make the wrong choice, your platform is dead, and you lose all brand sort of security and trust with your customers. So this is a non-violable condition that companies have to be incredibly careful about.

And it doesn't just extend to inherit blockchain security, it's also the quality of your wallets. Are they self-custodial, et cetera, et cetera? So I think that's really important decision. Second is user experience. This is probably honestly the most basic, but also the most important. If you ask a mainstream gamer, I even think friend tech is a perfect example of this.

It was able to go viral within crypto and no further. Because as soon as you have that viral coefficient, which might have been just above one within Web3, you cut it down to like point one as soon as you require anyone to go through Web3 onboarding. If you're required to learn what a wallet is, to bridge, you lose a huge amount of your users, 90 to 95% of your users. And so we need a way of making this like downloading a game in the app store and pay.

And I think we've come a very long way here. We have Fiat on ramps and off ramps, entering maturity. We have things like a mutable passport where you can literally sign up to a wallet that's self-custodial in another five seconds, sign on with Apple, sign on with Google, sign on with email. And that's kind of our view for the long term, is this has to be completely invisible. to the end use of, while still maintaining self-custody as the default. Otherwise, again, we're just building a glorified database. Number three, I think developer experience is really interesting and has been overlooked by the vast majority of platforms and blockchains. A lot of people

have invested in better frameworks for writing smart contracts, EVM compatibility. They are important, but they really service a hardcore use case of defy builders and people building right now. what our belief is is 95% of developers will just want to build using APIs like Stripe. And I think without that usability, it's incredibly hard for this thing to take off. I mean, even you have like co-finance, advanced builders using an early version of Viper and then having a re-entrancy bug that was not even really auditable. And so it's terrifying to build stuff using open smart contracts. You have brand new security concepts that do not exist in Web2, things like reentrency,

which are literally not sort of concepts that you encounter in conventional programming, and then on top of everything, you have immutability in financial contracts that inherently deal with money, which I think is just terrifying as somebody who was originally a Web2 engineer and obviously had to learn solidity and build on chain products. The fourth is economies, and this one is really interesting, because I think that had AXI had a sustainable economy, Webthrough gaming would already be mainstream, because what you have in every shift in gaming is,

And there's been three major shifts in gaming over the last couple of decades. You have the free to play shift, the social shift, and the mobile shift. And then within that, you have different game designs emerging based on each form of distribution. But with each form of distribution, basically you have early hypothesis, a few people taking bets. And as soon as someone has a mainstream success, there are a thousand copycats. That becomes a new default form of distribution, huge informs of investment. And it basically becomes a commodity, how to build a successful game design for that game distribution. or genre. You saw this with Farmville. You know, Farmville spawned the social game genre. You had

Mafia Wars, also graded by Zinger, skin into 15 different games that were literally the Mafia Wars code under the hood. They just had, you know, its skin for teenage girls with like a beauty salon, or lots of different other modes. And that's actually what we need in Web 3. If Axi had a sustainable economy, I'm not throwing shade on Axi here, I'm just saying the reality of it was it was a bet that became extremely viral and then failed. But if that was sustainable, suddenly we'd have all the copycats, step in, seeing sustained success. And I think that's what we need. It's why we build immutable studios is that we have to force ourselves to think through from first principles how to design an economy to be sustainable and work with things like, you know,

the natural growth curves or churn of different games. That's incredibly important and that needs to be just super simple. Games should not have to go and have to hire like five PhD economists to succeed in where it has to be like, oh, cool, I'm building a gacha game. Here's like the open source template for building a gacha game, I might add some tweaks and make it hit like Genshin Impact, but really I'm innovating on cool gameplay loops and retention, not like some really intractable stuff around economies. And five, actually, I didn't even touch on this, but like liquidity fragmentation is also a huge problem. I realize I'm talking a lot, but obviously there's something I'm passionate about. There's a great price. So liquidity

fragmentation is like the hidden demon of the blockchain today. It's the reason behind the fact we even have East Killers is because everyone says, the fantastic article, Chain link God, chain rotation thesis, you know, you have a bull run,

Ethereum hits congestion. Congestion creates the narrative for someone to create an ETH competitor saying E doesn't scale. They raise cash because they need to bootstrap liquidity from scratch for that alternative blockchain and then they are able to seed defy and create sort of artificial metrics

on that new blockchain in order to seed some interest. And we've seen that happen time and time again with every single bull there, cycle. The difference with the next cycle is we now have L2s and L3s that can scale Ethereum, the most secure and most liquid blockchain in the world. And our vision is, well, how do we just remove fragmentation whatsoever? How do we make it so no matter what L2 or L3 are using, no matter what wallet are using, no matter what marketplace you're trading on, no matter what game you're trading in, you can trade completely atomically, completely seamlessly with any other trade

in the world. And I think that's incredibly important because everything I just said, marketplaces, roll-ups, wallets, and user funds, they're each fragmented to whatever particular product you're using that particular in time. And so we're having no network value created from everyone depositing. And like, this is what Apple does. Everyone thinks it's really easy to pay for things in the app store is, but at one point, you actually had to sign off and give them your credit card details. You had to KYC, you had to register your username. That's why you can double click with your face. And you have to do that for a million different times. for a million different like liquidity-moted onboarding platforms in Web3,

when we just need everyone to come onto a single source and start to be able to use their funds everywhere. I think that's kind of the really important underlying network that every bit of value has to be accruing to. So those are the five things we think about. I think the majority of these are either solved or will be sold in the next six months. So we're finally at the point where games are actually capable of succeeding,

purely based on the infrastructure that they're using. So all these points, like these five challenges you cited, when you were going through them, to me, they just seem like the same challenges. They're crypto challenges. They're not just crypto gaming challenges. They're the challenges for any crypto adoption, whether that's social networks,

whether that's defy, whether that's whatever application you want to build on crypto. And I think some of these are getting solved, right? onboarding is getting solved, security is getting solved. Liquidity fragmentation, I think we're in the early stages of solving that with trust-minimized bridging and stuff like that. I really think that that's going to be one of the big leaps ahead in the next cycle, the next four to five years.

Developer experience. And we're doing quite a lot of work here, I think, on a couple of things, which is our global orderbook, which basically aggregates and propagates liquidity to every marketplace that integrates with a wallet, which is self-custodial, but doesn't lock your liquidity per game, which is what the majority of other sort of, you know, easy sign-on bullets do as well. Yeah, I want to talk about the wallet a little bit to Passport. But so I read on one of your blog articles that it says that immutable, so you guys sort of expect that 40% of the $200 billion gaming industry will shift to wet three in two to two and a half years.

That, I read that and I was like, that is a very bold claim. Do you think that in two to two to five years, all of these problems will be solved and there will be enough incentive for 40% of the gaming market, essentially, to drop what they're doing and move to Web 3? I personally think this, this claim is a little bit optimistic. Yeah, I don't actually, I don't necessarily agree with that claim, except I think a timelines are a bit of aggressive on that. But it could be referring to, you know, 40% of the market being sort of the minimum buyer of the amount which are in-game items. And, you know, our conviction is certainly that's going to

shift. I think you'd take a decade to shift for the whole thing. But I think we'll start to see it snowball as soon as you have. Like, I think the key inflection point is there's probably two coming up, right? The first hit that says sustainable. And then second is this ability to go to customers in web two and say, here's a much more effective model for running your games. And suddenly we're not just choosing out of people interested in building web free games. This becomes something you can pitch to everyone. And it's like pitching them, hey, you should also launch your game on consoles, not just PC, because this is now a thing that makes you way more money and is a way more successful way of doing games. You guys were just at a games con in

Kowloong. So for those who don't know, like GamesCon is like the, it's like the devcon of games, right? It's this massive conference that happens in Kulong every year. Actually, I was surprised to find out that it's more like a BDC conference than a B2B conference, which I find it's interesting. But basically it's like, you know, the biggest games conference in the world. All the game developers are there. All the big publishing houses that the entire industry is there. I'd like to get a sense from you, like, because I asked a friend who was there. Like we're just down the street from Ubisoft here.

Like I have a couple of friends who work there. And so I was asking your friend like, hey, like, you know, were there a lot of web three games there? and his sense was that there weren't that many or like he didn't get a feel that a sense that it was a big part of like the narrative at the conference this year. So I'm curious if you like echo that sentiment and what is the general approach that incumbents like Ubisoft like 2K like EA like these big game publishers, you know, how do they look at Web 3?

Are they adopting it? I guess my question is like, is it. similar to the way finance looks at Defi, they're a little bit reluctant to adopt it. They think it's a little bit scammy, or are they like wholeheartedly sort of like throwing a lot of resources

than this so that they can really sort of like be at the forefront of this tech? There's certainly a big difference, I think, in the promotional activities around Web 3 games, just in terms of how much of a splash they're looking to make versus last year. There was so much hype last year.

People were trying to launch a lot of tokens and do a lot of speculity up on primary sales, which meant a lot of noise. I think people are now more focused on building games that have rowers. So can they profitably grow and can they have sustainable economies? I vastly prefer that. I think this is a very healthy shift in the industry. The game developers we have applying to us today are a very different profile or composition than a year ago. A year ago is mostly defy-debs or people who have been able to raise cash who were trying to build a game on top of it. And some of them will succeed, but most of them don't have the experience

and build, like, unless you've shipped a game to, you know, 10 million people, we're not that interested in, in sort of, or we rate our confidence of you succeeding a lot lower, which I think is, you know, just to inherit back the game. It's a very specialist job is sort of shipping successful games. The majority of people building today are now people who have successfully built things before who are incorporating Web 3 into their economies. And we must prefer that. And I think their goal of sort of how do they drum up as much fanfare pre-launch as possible is less. The data point we see, said, is, you know, the last four months, which we call a cycle, we've onboarded more games than any other cycle in the Mutables history, more than the peak run,

et cetera. And obviously, part of this is the increase in market share, but we are still seeing a very healthy flow of sort of credible Web2 developers. In terms of how we think about the market and sort of incumbents approaching it, I think there's two things. One is, you know, some of the names you mentioned are already building a Web3, they've already launched projects. I think the West will have a sort of buy-build partner analysis approach, which is how do they hedge the risk in the future of knowing how to build successfully in Web 3 without throwing all their eggs in the basket right now?

Because it doesn't make sense that the beneficiaries of the current model, they are the incumbents who are able to sell $100 billion of digital assets without ever having to back the value of those assets as a liability in the future, without having any ongoing obligations. So of course it's a model that they're a fan of. And these are risk minimizing enterprises. But that being said, out of the top 20 Western developers, you think in the world, a team would have full-time large teams staff to look at Web3 Gaming. Whether it's now, whether it's longer term. You just had Zinger announced Sugartown.

And obviously some of these with Asian roots. But I think that kind of leads into how we see the large studios in Asia approach this. And you literally have in Korea next on, one of the largest gaming studios in the world, putting their flagship IP, Maple Story on the blockchain. You have Fumio Kishida, the Japanese prime minister, saying Web3 is the new form of capitalism and identifying NFTs and Web3 gaming as one of five core areas of national interest. You have MUFG Mitsubishi Group investing in Web3 gaming.

So we see really interesting leading metrics from Asia. And this makes sense because Japan and Korea have always been at the vanguard of shifts in distribution, rather than reacting to it. They were the ones who ushered in the free-to-play new game design genres. They were the ones who helped to usher in a lot of social gaming. And I think they see themselves as,

hey, if we can, you know, if we can win on this, this will be a huge boon, and this is a really important experimentation for players' benefits. The final note I'll just say on all of this, is like, I really believe Web 3,

you know, Web 2's margin is Web 3's opportunity. And that's the case in gaming. So the people who will be most motivated are not number one. It's number two. It's the underdog. And in gaming, there's many of these and they're reasonable sizes, but we think it's going to be, just going to light some back here.

We think it's going to be companies who want to compete with the biggest incumbent to the world by leveraging the growth strategies of Web 3. And we've just seen, in my opinion, the most interesting real world of example of this of token-driven user acquisition ever play out, which is with WorldCoyne, where they were able to effectively

like bootstrap from nothing, a giant token, and then leverage the paper FDV to incentivize 20 million people to scan their redness. Like, say what you will about whether you think is a dystopian or utopian. It's an incredibly effective way to essentially do a vampire attack in real life and have massive incentives while giving people ownership of the online network. Cool. Well, this is really interesting. And I'd love to spend more time kind of like asking, talking about the market and where you think this is going.

But I do want to talk about the tech a little bit and talking about immutable as a developer platform. you guys are doing some really interesting things there and have just announced the ZK EVM on Polygon. It just happens we had Sandip on last week or two weeks ago to talk about the Polygons work in ZK. So yeah, what is immutable as a product? Who is this product for? Talk about the different aspects of this product

and how they're useful for people who want to get into Web3 gaming, either new web three developers that are looking to build a game or existing gaming developers. that want to shift to your Web3 economies. For sure. So Ameetable is, we describe it as the one-stop shop for Web3 games.

If they want to build anything, we can service it. Everything from having an incredibly easy wallet to onboard their customers, to having the entire blockchain design done for them to be able to use any marketplace instantly via our global orderbook. So if you list an asset for sale on Amutable, it lists on every marketplace that integrates immutable, which means you're vastly increasing your volume, and it's a much better platform for marketplaces

because they have much more volume that they can take visa. We have things like enforceable royalties and mints so that you can easily buy a primary sale, or you can easily take ongoing clips of assets no matter where they trade, if that's a really important part of your business model, like it is for Digidacu or some of these bigger games moving in from Web 2. And all of this kind of comes back to we're trying to operate at the most important layer of the stack where we can help unify what would otherwise be six different technical choices.

And this is a really important reason behind why we did this Polygon partnership. You know, at the end of last year, Polygon was by far our biggest competitive for gaming. We both had roughly 40% market share. We were both competing pretty viciously in market and, you know, grand pricing was going up astronomically for top deals. We had this vision of saying, well, actually there's no reason for us to have to compete. We could have it so that players can use the immutable platform. And under the hood, they could be using the immutable ZKVM, which leverages polygons, ZKVM technology. And by far they are the best developers of this in the world right now.

They're the closest to production. Vitalik has said this a couple of months ago. And by combining the two, we just simplified the developer choice hugely. I think that's why our wind rate has essentially doubled over the last six months since launching as partnership and why we've been able to have such success in the market. And the reason I like that is it means these games spend less time wasting around what technical infrastructure do I use and more time building quality games. And then the final really important part to immutable, and I think probably what resonates

to these game developers the most, is we are gamers and we build games. I think the reason why, even though we started out with far less funding than any major blockchain in market, you know, and we pretty much until early last year didn't have any war chest that was akin to these and obviously we now have a pretty sizable war chest and the reason we are able to compete and gain this market share is the salinas the world the EOS's whoever was relevant back then

they cared about everything they cared about winning defi PFPs collectibles gaming RWA's all we cared about was winning gaming and helping to usher in real property rights for the 3.1 billion games around the world We had built several games internally. We're now publishing three more. And I think that radical focus meant that we built a product that was fundamentally designed for this use case,

but that we also understood things on the economic side. If they were struggling with the app store, we were struggling with the app store, because we were also at the cold face building things with them. And I think that's been really essential to the sort of DNA of our product and product teams today as well. Let's talk about the underlying platform here. So I learned that there is basically two roll-ups, right? There's Immutable X that's built on Starkware, and you guys just launched this ZKAVM on Polygon. Why did you shift to Polygon?

What was the impetus to do that? And what will, is the idea for Immutable X to be phased out? Or are there still sort of like some types of customers that are the one we use Immutable X? Both are continuing to run. We maintain and upgrade both of them continuously. Obviously, I think Starkex is an exceptional technology as well. Ultimately, we needed to solve a couple of things. We needed to solve an EVM-compatible offering.

So before then, the only ZK technology, and we wanted to go with ZK for security reasons, was an app-specific roll-up, which meant you couldn't just use solidity or copy-paste your contracts from email one. And that was the choice that we had to make. I'm very happy with that choice. But now we have the first ZK-EBMs coming on market. and it's essential for us to have this product offering. Ultimately, we still think 90% of developers will build using APIs. But the people building now, and a lot of the hardcore, more advanced game development

companies, or defy companies want to build with their own smart contracts, which means EVM compatibility makes this a lot easier for them. But the second thing was more pragmatic, which was sort of by partnering with Polygon with their SKVM technology, we were able to. provide this joint offering to game developers, which was this endgame tech stack and also this end game commercial stack, where they could find it much easier rather than having to choose between Polyon or immutable, they could simply have a unified solution. And I think that's pretty much everyone who's originally deciding between the two has come to us and said,

it's so much easier now, like we find this much better, we get support from both, we're able to be much more successful in market. So I think partially a product decision, I think that and ZK Aviam technology is exceptional. They obviously had what I think is one of the most successful examples of M&A and the Web 3 is 3, buying 3CK teams two years ago for roughly a billion dollars all up. And those teams have now turned into the kind of CK technologies by using today. But also on the commercial side, it just makes a ton of sense. How is this going to improve the developer experience?

And I guess, you know, for let's say like a traditional game developer who wants to, incorporate Web 3 aspects into their game. They might choose something like immutable. What's the learning curve for that developer to have to learn to build EVM smart contracts, all the concepts that that introduces security, re-entry and see, like all these things, right, that takes people years to learn. How does that fare for traditional gaming developers that are

entering the immutable ecosystem? The cool thing is that you can use smart contracts if you want to, but you don't have to. And in fact, you can sign up and create a Web3 game while never writing a smart contract. You can use APIs for minting and for trading. You can basically use our template contracts and soon to be sort of almost entirely automated

for deployment of collections and manage them via APIs. It much more to share here with a mutable hub, where eventually you can manage all of this to a GUI. And I think that is incredibly important. So our vision has always been, make this as dead simple as possible for developers. We have a very high NBS on that, but we're sort of working continuously to make that develop, to make that easier. And I think as soon as we hit this inflection point from this being a really interesting

sort of heavily funded niche of game design to being a horizontal, because this is not a vertical, right? Web3 gaming is not going to be a category. Web3 is going to be the way you own assets and multiplayer games. And at that point, this has to be just be like building incredibly easily on Unity SDK or in Unreal or with Stripe-like APIs. And so a lot of what we also do is our ecosystem integrations. We have integrations coming out of the box from day one, ZKVM Mainnet, for Unity and for Unreal, where you could basically leverage our SDK from day one.

Interesting. And so talk about the SDK and like what's possible to do with the SDK. Like, you know, so you're building a game. would you want to start using the NSDK early on? Or is it possible to take like an existing game and sort of like strap on the SDK in order to incorporate some Web 3 mechanics? Yeah.

So look, the majority of the stuff right now is initiating things like transfers, trades, mints, even things like forging. So you take, say, five assets, you destroy them and you mince something that it's required input output. And that's like upgrading, say, you know, five common alluvials and for rare allude. Five common gods and chain cards.

And we've even launched things like permissioning, where you can basically have this done automatically under the hood up to a certain value threshold, which is how we think about decentralization. So users can always set kind of almost the parameters for how much they're happy for the game to sign on their behalf, and then they can kind of say, well, I want to specifically approve or sign things above a certain value threshold, which to me makes a ton of sense.

And at the right balance between the two, as long as they're always the ones in control, and the technology is architectured to be self-custodial. So the vision is you'll be able to initiate all of this incredibly easily through like SDKs we expose through pretty much every version of Unreal, of Unity, and obviously trying to work with the app stores as well. What's it like working with the app stores? Because I realize it's probably, well, one of the big challenges for the Web 3 gaming space is some of the barriers of having the work, particularly with Apple or. having Apple sort of approve certain types of applications. Is that getting better, do you think, or are we still sort of in the same place we were a couple of years ago? So the trend is toward more open permissions for app stores for digital assets and lower fees. We will see exactly

how that plays out. And I don't have a crystal ball. But here's some really interesting things. One, you have a lot of increasing economic pressure. There are more alternative. alternatives, people to download things. You have the EU forcing side loading within the EU, which is a really big deal of apps. So you should be able to download apps through any app store, not just the one provided on the device. You have Google basically allowing NFTs inside of their apps, which I think was a pretty landmark announcement. And that provided just a ton of sort of compliance clarity to a lot of people building. And now a lot of people are building for sort of Android first onboarding.

You have Epic Store, which is very pro-Web3 as well. You have already, I think, 20 Web3 games live on there. Gods and Chain went live on there in the last few months, which is a massive source of distribution. So I think there's this really interesting sort of pressure mounting on the biggest incumbents as to how they can actually clarify permissions and fees. Ultimately, you can use, say, the iOS store today if you do two things. One is off-platform NFTs, not used or usable the utility inside the game.

And the second is you pay clips on these assets. And you just kind of pay the Apple tax. It's very tricky, obviously, with secondary market to sort of add a tax onto it. So I'm pretty bullish on where this is going to get to over the next few years. I think there's already sufficient clarity for people to launch mobile first games, where I suddenly focusing on it at this point, I think maybe the first ones to mainstream success. But that is kind of the billion or trillion dollar question is how will app store roles interact with this open ecosystem? So I'd like to also talk about Passport, which is your, I guess, like non-custodial sign-in or identity solution.

Yeah, what is Passport and what technology is it leveraging MPC? Yeah, how does that work? It does. So Passport is our easy onboard wallet that is completely self-custodial and is your universal wallet for every single game or marketplace or wallop you interact with. And this is our vision of the full passport, the only easy onboarding wallets you had, used a single-state NPC system where in order to both maintain security but also have easy user experience, they basically generated a new wallet per user per game.

They could give that game escalated privileges for transactions because it was localized to that game's ecosystem, but it meant that for security reasons, you can't expand that to your general funds. And this is obviously terrible. If a user plays 10 games, you have 10 different wallets, and there is no unified liquidity or network value being created. If I'm onboarding into Web 3, I can't use that cash to go buy assets from, you know, another game. If you can't counterstrike go, I can't trade with someone in legal. particularly easily. And so our vision with Passport was to solve that problem while not compromising on self-custody and while not compromising on user experience.

And the way we sold this is with a multi-seek architecture system. It averages two MBCs, what is in immutable's custody. And we actually act as basically a guardian. So we basically will refuse to sign transactions that don't comply with either the economic missions that you've set or a general set of sort of heuristics we use to analyze bad behavior. And of course, the other one is the user self-custody, which is held in cloud storage in their legal self-custody via MPC. And the multi-sigarchitecture, and they can sort of opt out at a certain point, means you

can default to self-custody while still letting them sign up in under five seconds. We've just run AB tests. This converts 250% better than, you know, your default wallet. and we're looking to increase this drastically. And that's already huge. So you're already spending less than a third in user acquisition costs if you use passport versus a traditional wallet today for onboardy. So you say it's fully self-guesty. I mean, I'd say it's more of a hybrid custody because immutable does have like another piece of that shard.

So technically immutable could if it wanted to withhold or censor transactions or, I mean, I guess probably not because you can't see the actual transaction, you can just see the signature request, right? Precisely, and they can always remove us, unilaterally. So there's no ability for us to say, censor transactions if we really wanted to. Okay, the user can remove you from the MPC. So it's an opt-out system. Right, okay. And are there, because I mean, we're dealing with, like, users that are, you know,

fairly, you know, not like necessarily super technical. are there ways for the user to recover their, like are the recovery mechanisms, say the user loses access to their, is it like an email login or like how does it work on the user site? Yeah, so we use Oathademite. So you can log in with Apple, you can log in with Google, you can log in with your email. Exactly. And it's fantastic to your address. Okay. And so the user then sort of like backs up their shard in any number.

of cloud providers, it's encrypted with a password, I guess. Yes, ultimately, that's automatically saved in the MPC database associated with your email. If you can access your email, you can access that wallet. But our vision here is really, we're taking it to like zero to $100 or $200 of value. If you want to store large chunks of value, we think that's the point you say, well, hey, here's the options available to you. through the risks associated with each. I think that's kind of the way it needs to be done. Okay. And are there options? I mean, can you also decide, like, I don't want to use Passport.

Like, I have a ledger. I have, like, some other custody solution. I might use, like, an MPC wallet or, like, a custody solution. She can log in with that as well. Yeah, absolutely. We support everything out of the box. Passport is just the offering that we have. I think the nice thing with Passport is because it integrates in a vertically integrated manner with our control of, say, like, the ZK technology and the orderbook and the wallet, we can do things like, say, you know, shared sequencing or cross-roll-up liquidity in really seamless ways, but other platforms can't because they only have one layer in the stack. And so our vision is, no matter what asset you're trading on any marketplace, on any game, on any roller, using any wallet,

you could do so atomically and seamlessly with no loss in insecurity or sort of custody with anyone else. And this is this vision of this sort of universal liquidity for digital value. Yeah, talk a little bit more about you, we talked about this before the show, the enforceable royalties.

What's that about? Yeah, so this is obviously pretty topical. You have the marketplace wars over the last couple of years. First, as you had the blurs and the X2, Y, choose of the world, basically say, hey, we're not going to respect royalties and suddenly so got a huge chunk of pro-trading

volume. Then you have OpenC come up with some solutions and sort of contracts people use to make sure that they can only be traded these collections on royalty respecting marketplaces and smart contracts. I think this is all indicative of the fact that this really has to be sold at a product layer. Just to kind of understand the problem here, the problem is that when you have assets that are tied to royalty, so I create some suite of assets. I put those out on, say, OpenC, unless that contract has royalties built into it at the contract level, you're sort of trusting the platform to extract and deliver the royalties.

And that's sort of the issue where if you take those assets somewhere else, if you just send them to someone, those royalties are not being perceived by the, sort of the creator. Precisely. So basically, it's really hard. to enforce royalties with traditional NFT smart contracts and NFC marketplaces. There have been various attempts at solving this, but ultimately it appears as though the game theory, particularly on Ethereum layer one, is to converge toward a zero or no royalties world

because that's the world in which you have to be in order to have any meaningful market share as a marketplace. All these pro traders who are in the vast majority of volume today. Our approach has kind of been, from day one, make this enforceable at the protocol level, which we can do due to sort of, you know, a couple of things we're designed on immutable exits because, you know, we have a single sequencer. We can kind of enforce these royalties from day one with immutable CKVM. It's going to be more of a decentralized solution where, you know, we're actually sort of engineering the ways that smart contracts respect royalties and people can opt it. But I think both the principles are, we firmly believe that

enforceable royalties have to be available protocol wide in order to the marketable. places to be able to fairly compete and gain their market share and game developers to be rewarded. And the thesis is quite simple, which is, you know, if you have counter strike go or Magic the Gathering, Madden the Gathering has an estimated secondary market cap of $10 to $20 billion of cards. But every year they've got to make new, more impressive cards than everything else in existence, making them less bad. I guess I sell my old magic cards. Yeah, like they're tremendously valuable, right?

But MTG, the company, has no way of tapping into the value of what they've created. That's why they have to basically dump on everyone else every year by creating this new, more powerful stuff. And so suddenly we can have a business model that doesn't rely on that. That's like, hey, magic just gets 5% of every trade. Magic's only incentive would be increased volume, which might mean make new cards that make the game better and grow the player base. It might mean throwing more tournaments, might mean creating an e-sports league, whatever they can do to increase the value to players of that are economy. And so you have complete incentive alignment, even though it can be an incredibly profitable system. So that's why I've been so passionate about it, is it actually enables a much better,

more incentive-aligned business model that we must protect in order to, you know, essentially not have adverse selection or this kind of, you know, tragedy where we do a short-term benefit to players by giving them cheaper trades. And then there's no incentive for game developers to build or to build based on this much better business model. So why is it that this is not enforceable at the smart contract level? I mean, couldn't we just build like a better EURC 721 kind of contract or that would enforce royalties? Is that possible? It is, but it's just very hard to enforce if the collections themselves aren't originally

A, sort of, and written to be opt into those smart contracts. And so a lot of the volumes say in the NFTs has been a legacy collections, which were incorporated into this. So I think that's partially what is driven this decision with OpenC. but B, the kind of more simple solution is if it's relying on individual, say, marketplaces or individual collections to make this position, it's just going to be an incredibly fraud debate. The answer just has to be sort of protocol-wide. This is an available standard that can be enforced. Okay. So you guys enforce this by having a sequencer include the sort of the royalty or like extract the royalty when building the block. Precisely. So that's on a mutable X, on StarkX, an absolute rule-up, but we can do that on a mutual ZKVM.

We're going to have a slightly different approach. I think we'll be showing more details soon. Okay, cool. So I want to talk a little bit about the token. So this IMX token, which is actually like, yeah, trading today. And, you know, I checked, there's like $13 million of trading volume somewhere around that. And, you know, actually, I found the token price, like, you know, over time has stayed, I guess, like, pretty consistent in except for, you know, one peak where I guess probably during the bull market, but hasn't lost a lot of its value compared to, I guess, like, when it was initially launched. So I guess that's a good thing, I guess. How much you think of that volume is speculators and how much is tied to actual platform activity? I guess maybe a precursor to that question. What's the token use? What's the utility of the token?

Yeah, look, so the token's utility is basically, Immutable operates very differently to most of the blockchains in terms of our business model. Rather than having, say, sort of this L1 chain thesis around value occurring to the token of the chains. And we will, obviously, IMX is going to be the call gas currency of immutable ZKBM. I think we're now, you know, capturing a lot of that narrative, which is really interesting. But our philosophy has always been, we think, a much better and much more aligned business model is to make the most liquid value-add platform possible for web through games and take 2% of every trade. And this way we can build something that has completely aligned incentives with developers when they make money or when users trades, we're making money.

And every single time those assets are traded, 20% of the fees must be paid for an IMX. And so IMX actually has sort of clear fundamental utility, which I think is, you know, people can sort of look at that and sort of build their utility models around rather than sort of alternatives in market. So that's our utility. That's been the clear goal since day one is to really have this integral into the product whole and how we add value to every single trade. And then, yeah, the volume, how much of the volume you think is, or do you have a sense of is that something you're trying? somehow, I mean, like how much of that is tied to actual activity on the platform and how much of it is speculative. Well, the vast majority would be people trading based on, you know, what they sort of perceive the utility to be. I wouldn't necessarily call that speculative.

But, you know, I can, up to the reader's interpretation, I think the most important thing is this thing has a clear utility, right? kind of that we've set in stone since day one. And our vision is to construct really to some the most sensible tokenomics in the world. So the few things that really excite me about the token, obviously immutable doesn't generate this. This is run by the Digital World's Foundation, but is one, every single person who trades on Immutable can own part of the protocol. And that's because every single time to trade, you're earning IMX tokens. And the vision of this is really cool because you have 3.1 billion gamers. If this takes off, everyone can own a part of this open ecosystem

of what the future of digital property ownership is going to be. That's probably my favorite thing. And the second thing, you know, you talked about how the price has been quite stable. Obviously, you know, not hit a comment on prices. But the circulating supply is much higher than most alternatives. It's sort of used a lot more. And we've been able to maintain that ranking or improve that ranking from 150 to 50 over the last year in circulation.

30 supply, even despite everything unlocking. I think that's because of sort of the utility and the long-term alignment we have from hauls today. And then the final thing I'd say is that, obviously, the vast majority of IMX allocated to ecosystem grants, the vast majority of these grants, all of which are issued by the foundation, are almost completely underwritten. So we don't just give them out to games in exchange for grants. The games actually have to deliver volume to the protocol in order to earn those grants. And right now, in order for roughly 180 million of tokens which have been allocated, over $12 billion in protocol volume has to be achieved, in order of them to even be given out.

So in terms of ecosystem allocations, we run, you know, the recommendations here are incredibly efficient in terms of how they're structured for grants versus returns. And game developers love it because they know that ultimately, you know, there's no supply just going out there, no value being brought. Everyone has to contribute to the ecosystem in order to sort of end up owning part of the protocol, which I think is really important. Very cool. Yeah, I mean, maybe to wrap up here, what is the, yeah, what's the roadmap and what should people be looking into when it comes to immutable? How can people follow the protocol also in the project? And yeah, any final thoughts? Yeah, look, TestNet just went live two weeks ago.

We have pretty much every game on the platform signed up to Passport. We've just done our biggest quarter of onboarding games ever in the company's history off the back of this polygon announcement, basically increasing our win rate by 75%. We've got over four years of runway. We're here for the long term, whether it takes a year to get that hit before, we're here to change digital ownership for good. And the thing I'd say is, look, coming up, we have main net in quarter four. We've got God's Unchang going mobile end of this year,

Build of Guardians, Shardbound, Infinite Victory, all immutable titles being published under this year. And we've got a ton of our biggest games on the platform on the rise. Across the Ages, number one in France, strategy game in an Australia. You have Alluvium going out of their open beta, imminently, probably one of the most hyped games in Web 3 right now. We're really just excited by the continued raise of the caliber of quality

of games right now. And as I said, you can't wait a magic one on the timelines, but it's pretty clear that a single hit is going to pull gasoline on everything and catalyze what has already been a very heavily invested in category. So personally, we're actually thrilled with the pace and progress of things. I think it's just continued to build through despair and help people get to these hits faster, more profitably and more sustainably. Great. Robbie, thanks for coming on and telling us all about immutable

and also, I mean, I've learned a ton about about web through gaming. So this has been great. Thank you. Thanks, Deb. Thanks for having me. Pleasure. Thank you for joining us on this week's episode.

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