The Breakdown - Crypto Daily 3@3 - 8.8 | Gaming, Mass Adoption and FUD Fighting

Episode Date: August 8, 2019

You've heard of the PayPal Mafia, but what about the Magic the Gathering Mafia? Both SkyWeaver and Gods Unchained have serious ex-Wizards of the Coast talent in their ranks. Does this mean blockchain gaming can succeed? Also in the realm of mass adoption, Robinhood was just approved to bring its stock and crypto-buying experience to the UK. Finally, Messari takes a critical look at the FUD from earlier this week that North Korea had hacked $2B from exchanges and financial institutions.  Watch: https://www.youtube.com/nathanielwhittemorecrypto

Welcome back to another crypto daily 3 at 3. All right. So today we're going to talk about first Fudd Fighting North Korea, a story about a big crypto hack or sequence of hacks that allowed them to fund nuclear programs. Two, we're going to talk about Robin Hood, UK. Robin Hood gets its UK operating license and what that might mean for mass adoption of crypto. And three, we're going to look at the magic Wizards of the Coast roots of some blockchain gaming projects. So let's dive into Fudd fighting on North Korea. So the last couple days, there's been a lot of conversations of hacks, right?

Yesterday we talked about the Binance KYC hack where a hacker was basically threatening to make public a huge amount of KYC data from Binance. Theoretically, I guess, acquired in the same hack that we heard about a few months ago. We talked about that for a little bit. And we talked about how we didn't know exactly all the details yet, that it was still kind of being revealed, right? A couple days before that, I guess, the story came out, I think it was originally Reuters, that said North Korea is funding its weapons of mass destruction with cryptocurrency and fiat stolen from banks and exchanges. So basically, this story was that North Korea had been hacking exchanges over the last several years

and other financial institutions getting, you know, cryptoactivity and other, or getting access to cryptocurrency in order to fund its illicit weapons programs, basically. So when this came out, obviously, a lot of the folks who were in this space, you know, sigh to big sigh, grown to big groan, because it's yet another example of kind of the crypto is just for crime narrative. However, it's more than that, right? Like we've seen over the course of the last few months how a number of kind of the biggest opponents of crypto in the U.S. regulatory system, for example, have said that all it will take

is one big attack, using, you know, financed by cryptocurrency for the American public to lose their interest in it. And regardless of whether you think that that's true or not, it's an important point that these regulators are explicitly using that. I think Brad Sherman said this at the last congressional hearing that he was a part of. And so Masari yesterday, on their unquestionation, qualified opinions, newsletter, dug into this a little bit. I think it was their analyst, Jack Purdy, who's been writing some really great stuff. He dug into this, he makes the same point, right? He says, not a great headline for Bitcoin. While crypto is starting to gain more widespread attention, the vast majority of people have little knowledge of the space and are

easily influenced by these sort of media-driven narratives. This particular narrative, crypto as a means for terrorist regimes to skirt sanctions and find nukes, is, um, bad. Right? I think we can all agree on this. So the thing is, uh, he pointed out that, that if you actually start to add up, we analyze every crypto hack on exchanges as well as other services such as cloud mining over the past decade and found a total of 1.7 billion has been stolen with the bulk coming from major hacks

such as Mount Gox and Coincheck. In other words, the total amount ever stolen is still less than what has been reported to have been stolen by North Korea. And of course, this leaves aside the possibility that they held or held on to all that money that they had acquired, which kind of means they could have just been investing

instead of attacking. And so really what he's pointing out is that this is a, you know, cryptocurrency has currency as a narrative and a crime narrative with the media. And that's something that we have to fight. So I think it's worth pointing out. I think it's worth pointing out also the counter-fud. It's really important that we, in the crypto industry,

take these things head on, don't just dismiss the people putting them, but use them as a chance to actually educate and hopefully focus on other narratives, which are much more interesting. With that, let's move. on speaking of to something that is more interesting and that is a much more positive narrative, which is Robin Hood moving to the UK. So Robin Hood is, obviously it started off just as a

stock trading app. It branched out into crypto pretty recently, or not too recently, I guess, but like a year ago. And that's really exciting, right? Because for a lot of the folks who are just, you know, your average consumer, you're not spending your time on Bitcoin, Twitter, you're not spending your time on Reddit or whatever, learning about cryptocurrencies. To the extent that you hear about them, you're hearing about them either because, one, they're in the media. And until recently, that usually hadn't been a good thing. And or two, the places where you're already spending your time and you're spending your money

are introducing you to them in some way. And so when Robin Hood came out and started supporting cryptocurrency, it was a big deal. And so earlier this year in January, Robin Hood got its bit license, and then, which means, means if it's able to operate in New York. And then this is kind of like the next step where they're now able to operate in the UK. So what does this actually mean? It doesn't necessarily mean that there is huge adoption right around the corner. Obviously, there's a difference between offering a product and it actually having traction. However, it does mean that there's going to be one more easy on-ramp for people to buy at least mainstream assets like Bitcoin. And that's really

exciting. And, you know, there's a lot to be said for these, these kind of money apps and these latter-day almost mini-bank type apps that are selling Bitcoin and crypto. So obviously Square is probably the best known Squares Cash app for buying and selling crypto from kind of a mainstream perspective in the U.S. And boy, are people buying, right? So a couple of months ago, or I guess a couple, just last week, rather, a number of people sort of know. notice that on the Square earnings call, the results of their Bitcoin sales were really, really encouraging. So Kevin Rupert points out, Square customers bought $125 million in Bitcoin last quarter. That's five straight quarters of accelerating revenue growth for Square's Bitcoin business and

273% growth year over year. You can see the chart. It's really taking off. On the call, on the earnings call, Jack Dorsey actually said, we love you Bitcoin. So there's clearly big business, right, for people who are wanting to dabble in crypto and want an easy, you know, experience in actually getting on boarded into that space. This is something that's incredibly important and honestly in some ways can't be overstated. People don't have this asset, they don't really get, they don't have an investment in it, literally or figuratively. So I think that these moves, although they seem small individually, are in aggregate really, really positive for the space. And speaking of, let's move to one more area that's that's really exciting and

dynamic in the crypto space. Blockchain gaming. So I'm watching blockchain gaming with interest. I think that if you kind of look historically at where new technologies emerge, gaming is one of the key areas. Gaming,

gambling, pornography, these are the spaces where new technologies, new systems often take their roots. And so it's interesting to see whether that will happen at all in and around crypto. And there's lots and lots of folks who are interested and excited about the idea of NFT,

non-fundable tokens, which theoretically provide sort of an actual, a true digital ownership, right? So instead of other digital assets where you don't have them, they're subject to kind of confiscation or just irrelevance by the centralized game designer, the idea of these, of NFTs and true ownership is that you actually own them. You can do things with them, including sell. them on secondary markets, which creates whole new different types of interesting opportunities. You can imagine a scenario where as more and more people watch e-sports, the exact item that was used to win some big e-sports victory becomes a collectible.

And for those who seem far-fetched, esports tournaments are already bigger from a viewership perspective than almost all sporting tournaments, you know, terrestrial sporting tournaments. So this is a huge growth space outside of crypto entirely, just from a cultural perspective. And so the question is what part of that might come over to blockchain-based gaming? And so, you know, a couple of the areas that I'm watching most closely is the collectible card game space. It's in some ways it provides the most obvious parallels where people are used to this kind of experience between Heartstone and the OG of the space, Magic the Gathering, of, you know,

playing these card games, building decks, competing against people. And the idea of true ownership of cards is really easy. It's not hard for a Magic player to say, oh, I actually get that card and I could pull it out of the Magic Online ecosystem or the arena ecosystem or wherever they're playing. Of course, the question is, are these games good? Are they going to be fun? Are they going to actually attract people away from these properties, right? Magic's Arena is doing incredibly well. Hasbro just had its best quarter for a really long time, led by strong performance from the Magic space.

Heartstone continues to be a powerhouse in the space. And so really the question is, can these games? actually attract people and it's not the same as attracting users that's the real test but one of the things that I've been watching is to what extent these games will be able to attract talent right if you look at the top talent in any given industry and they're choosing to spend their time in a space that is kind of crypto or blockchain adjacent rather than working on whatever the leading properties the leading titles are or just different paradigms of building that's really

interesting and that says something and so two reasons and pieces of news that I think are interesting. The first is just from today, from God's Unchained. It was announced that they had hired Chris Clay, who was the director, basically, who brought Magic the Gathering Arena online. So for those of you who don't play Magic a lot, Magic has had an online client since 2002, I think, for a really long time, but it's very kind of old and clunky. And it's a very faithful representation of the paper game, but it doesn't take any advantage of what you can do from a user interface perspective online. And Magic Arena is kind of the opposite. It's a beautiful, like fun to use program that has really gotten new people into the game because it feels like a commensurate

kind of e-sports experience. You're seeing streamers shift over. Streamers who had left Magic for Harthstone coming back to Magic because of it. So this is, it's a very successful product. Let's put it that way. So the fact that the first leader of that product has left the company and jumped into God's Unchained is really interesting for them. So I haven't dug that much into kind of how he's thinking about it or what they're doing. They're doing an AMA. It looks like tomorrow at noon Eastern 9 a.m. PST. So that's pretty interesting. And then speaking of magic talent, I saw Alexis O'Hanian. He announced a couple weeks ago that his firm initialized was an investor in Skyweaver, which is another sort of similar TCG-CG-type experience. I've seen a lot of folks in the

crypto space, who've tried it, had really good things to say about it. He's playing with the game's lead designer, John Lauchs. John Lauchs is another Wizards of the Coast alumni, Wizards of the Coast being the company that makes Magic the Gathering. He also was one of the original hosts of the largest, most popular podcast in the Magic the Gathering space, which is called Limited Resources. So what you're seeing is this cool kind of payfile mafia thing, where talent from Wizards of the Coast from Magic the Gathering, which has a 25-year history of as a collectible card game, as a trading card game, actually now moving into other gaming spaces, and in particular, into kind of these blockchain-based spaces. So that's going to be really fun to watch. I actually know of at least

one other project that is still quiet and kind of in stealth mode, but has a ton of, you know, really prominent names from that Magic the Gathering community as well there. So really cool to just kind of watch and see, again, at the end of the day, adoption, adoption, adoption, adoption is everything. And when it comes to gaming, I think it's going to be largely about playability and unique experiences. You could have the best secondary economy opportunity in the world, but if your game is boring, no one's going to care. So that's the real thing to watch, but still it is meaningful, I think, that you're seeing at least part one, which is the talent from some of these leading properties moving into the blockchain gaming space. So with that,

I will wrap. That's the Crypto Daily 3 at 3 for Thursday, August 8th. I will be back tomorrow as always. I think we're going to wrap up and talk a little bit about the week, the week from a macro perspective. We kicked it off with trade war intrigue and Bitcoin going up when everything else went down. So we're going to circle back on that and see, see that how that played out this week. But anyways, for now, guys, thanks for hanging out. We can chat more in the comments, and I will see you tomorrow. Peace.