The Breakdown - Why New York City Might Be the Right Model for the Metaverse, Feat. Mathieu Nouzareth

Starting point is 00:00:04 Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world. The breakdown is sponsored by nexus.io, near NFTX, and produced and distributed by CoinDesk. What's going on, guys? It is Sunday, June 12th, and today we continue our series of interviews recorded during consensus. This was recorded at the CoinDesk podcast studio, which is presented by Oak Network. A big thanks again to Oak for their support. Before we get into this interview, however, if you are enjoying the breakdown, please go subscribe to it, give it a rating, give it a review, or if you want to dive deeper into the conversation,

Starting point is 00:00:46 come join us in the Breakers Discord. You can find a link in the show notes or go to bit.ly slash breakdown pod. Lastly, a disclosure as always. In addition to them being a sponsor of the show, I also work with FTX. My guest today is Matthew Nazareth, the CEO of the Sandbox, which is one of the leading metaverse platforms today. Matthew is a serial entrepreneur with deep roots in the gaming space, which colors his take on the metaverse in some interesting ways.

Starting point is 00:01:11 We talked today about how the metaverse does or doesn't align with the larger crypto market cycle, what it needs to improve, and what the key catalyst for growth will be. Without any further ado, let's dive in. All right, Matthew, welcome to the breakdown. How are you, sir? Hey, hi. Super happy to be here. Thank you for having me.

Starting point is 00:01:30 Yeah, thank you for taking some time out of what's, I'm sure, a busy consensus. So I wanted to start with kind of just a little bit of history for people who are, you know, maybe know the sandbox but don't know kind of its origin story. It has kind of a long history. So I'd love if you could guide it. Give us a little bit of background and how it kind of transitioned into the form that it finds itself today. Yeah, the sandbox is an overnight success that took actually 10 years in the making. And we started in 2011, 2012 by making a mobile game called the Sandbox.

Starting point is 00:01:56 Then the company was sold to Alimoka in 2018. And after the sale, we did a spinoff of the company into the new sandbox. in 2018, and this is when we started what is today known as the sandbox, the blockchain game that we know of. So a very long, very long time, and we started at the very bottom of the crypto winter in 2018. Crypto gaming wasn't even a thing at the time. And the good thing is that now we've been working on this for the past four years, and we have a massive headstock against a lot of other metavers being built as we speak.

Starting point is 00:02:29 So how would you describe kind of the sandbox today? How do you guys visualize what it actually is? So the sandbox is this virtual space, avatar-driven. It's a social space. You just log in and we can wander around with your avatar. You can make friends. You can play games. It looks a little bit like Minecraft, if you will, build on the blockchain.

Starting point is 00:02:51 If you want to visualize it, what it looks like, we have this voxel look and feel. But as time goes by, we realize we're more than gaming. We're opening new types of experiences than players and users can do. So we're doing entertainment. we're doing digital fashion. And eventually we are going even further and we're going to do shopping. We're going to do,

Starting point is 00:03:09 I think eventually even people are going to be working in the sandbox. So, you know, I think everything you see in the real life eventually you have some kind of version of it inside the sandbox. Not right now, but I think it's going to happen. Okay, so 2018, you guys start building

Starting point is 00:03:24 kind of spin out and do this new version. 2019, we're still in the depths of crypto winter. 2020, obviously COVID hits, the world shuts down. Crypto starts to show signs of life. You know, you have Defi Summer and then all of a sudden top shots and NFTs start to become a thing. When did you guys kind of along that path as we started to get into the bull market start to see some really different things starting to happen either within the sandbox or also just around it in terms of NFTs? You know, kind of when did you know that there was something different starting to go on?

Starting point is 00:03:53 I think there was about a year ago, maybe last summer, when things, all of us started to really come together. And we launched out the very first season of the game, actually, November last year. And we saw for the first time, we had real users, real traction, real money, you know, being spent in the game. Also in 2021 is when we sold a lot of, you know, virtual lands. We are virtual-based metaverse, and the numbers were going through the roof. And we knew at the time, yes, we're into something very, very big. Let's double down. How did the connection with Snoop come together?

Starting point is 00:04:28 Because obviously, he's been a huge advocate of the platform. It's just, you know, through introduction, meetings in Los Angeles, and you're right, Snoop is very much into the crypto space. And our ambition is really also to bring culture into the metaverse. And music is a very big part of culture. So we hit it off very, very quickly. And he's been a tremendous partner since then. He even released a song specifically about the sandbox in his latest album. His latest music video is done with the sandbox.

Starting point is 00:04:57 So he loves us and we love him. That's great. So obviously, you know, we're kind of coming off of peak highs, at least in terms of prices in crypto. How are you seeing, if at all, kind of behaviors change or interest change or what people want to do in the space change? You know, what does it look like today versus, you know, six months ago maybe? We are not seeing any changes at all as far as the sandbox is concerned. We're still working very, very hard to improve the products, launching more content, attracting more users. and I think it's not the first downturn market, it's not the last, and, you know, business as usual for us.

Starting point is 00:05:35 Do you think it's a little bit different for you guys because you're an ecosystem based on experiences versus just based on whether a token price goes up or down? Exactly. And also I think we are at hot water gaming company, and I think gaming companies are less impacted by macroeconomic environment like the war in Ukraine, you know, inflation, interest rates, maybe recession coming. So I think we're good. Yeah, I think you could almost argue that gaming companies are, it's like alcohol companies or something, it's like countercyclical, right? Where it's like there's this sort of different kind of space and need. I guess even within that, though, you know, for kind of the broader crypto industry, bare markets are always a time to reflect on, you know, what needs to get built, what needs to get done.

Starting point is 00:06:17 What do you think is important in terms of Metaverse infrastructure, either for you guys or just kind of, you know, the surrounding world of NFTs and Metaverse? I think the most important thing for us is to make the crypto industry in general and the sandbox in particular more accessible easier. The onboarding is there's too much friction for everybody, to be honest today. So I think collectively we have to do a better job at making it easier for ordinary people to really use crypto and play in the sandbox and go on other metaverse as well. That's our priority number one. How do you see sort of the metaverse space evolving? Is it the type of thing where network effects means there's a small handful of winners?

Starting point is 00:06:56 Is it the future of interoperability with lots of different kind of metaverses that you can connect? How do you guys think about that? I think we're going to have a small number of generalist metaverse that covers a lot of different experiences. And the reason we're not going to have millions or even hundreds of thousands is because just purely from a technical perspective, from an infrastructure perspective, building a metaverse is a very, very big and ambitious project. It's not like a small team which can do that. We are 300 in the company today growing fast, and we still have a very, very ambitious roadmap for the next two years.

Starting point is 00:07:30 So building a metaverse is really not for the faint of heart. It's really big. That being said, I think we can see a lot of maybe small niche metaverse eventually, and we're also very big believers in being interpretable between metaverse. And actually that's one thing that really differentiates Web3 project from Web2 project is that it's not a zero-sum game. I was doing mobile game before, and in mobile gaming, we're always trying to steal gamers from other gaming companies

Starting point is 00:07:56 with buying advertising in our competitors' game to try to lure people into our game. Web 3, I think, is different, because it's being interpretable, create more value for everybody, including our competitors, but including for us as well. And I see that as a main difference between Web 2 and Web 3.

Starting point is 00:08:12 It's interesting. I completely agree. I think part of that is the ethos of the people who are building. But I also think part of it is sort of a rational sense of, like the economics of user attention, where it seems like users don't want to be captured and locked into an ecosystem. That's kind of the whole idea, right? So you sort of have this new design constraint where it's what you expect users to want,

Starting point is 00:08:36 and so that's what you're trying to build. Yeah, and I think people are fed up with big tech. And, I mean, if we're not careful, I mean, it's possible, like, one big tech company might own the metaverse, and I hope it's not going to happen. I don't want to be living this dystoppian nightmare and maybe could be a very big company like Mela for example and I hope not. And that's why I think as an industry we have to really work hard to work together,

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Starting point is 00:10:43 I do think that Facebook slash meta did the Web3 and Metaverse space a favor by perfectly articulating what a metaverse. that owns by Facebook would actually look like. I mean, it's crazy to me how little they tried to conceal the webtoonis of their approach in terms of like the take rates from creators, in terms of like the fake NFTs. And, you know, all of, like, there's just glaringly bald, like, don't care. They're betting on, you know, I don't know what they're betting on. Consumer lock-in already from their platform.

Starting point is 00:11:18 Like, you know, but it's crazy to me. I think, you know, it's not that they don't care. They can't do anything else. I mean, the company, and that's a problem with most webtoe companies, Even if they want to move to Web 3, I think they are so entrenched in processes, culture, the people working there and their business more. They just can't really change the Web 2 engine and replace it with the Web 2 engine overnight, especially publicly traded company.

Starting point is 00:11:41 And they're selling advertising or they're selling data. Their tech rate is very big. Our tech rate at the sandbox is only 5%. It's very small. We don't sell data. We don't sell advertising. We're only focusing on trying to provide the best platform from creators and users. That's it.

Starting point is 00:11:56 Do you think that another part of this for why Web3 companies are less competitive with each other is that there's not the same sort of zero-sum belief of competition for attention, right? So, like, you were talking about gaming companies. Gaming companies kind of see it like, you know, people game for X hours per week. We want to get those X hours. And that's all you get versus the Metaverse where kind of the bet is that a growing and, you know, complex set of human experiences are going to happen in these platforms. so it's not really sure what the total addressable market is, but it seems just so big that no one can go after it all. I mean, is that a fair characterization?

Starting point is 00:12:33 Yeah, we think the time, as we call it, the total addressable market is in the trillions. Because as I was saying, everything you do in the real life, you'll have some form of it inside the metaverse, so it's really, really massive. And at the sandbox, we're not trying to be the only metaverse in town. We just want to be the most exciting place,

Starting point is 00:12:49 the most exciting metaverse. And that's why we're working so hard to bring in our brands like Gucci or artists like Snoop Dog into the metaverse because we want to attract the best brands, the best businesses, the most exciting people. We very much compare ourselves to maybe like a city like New York or Los Angeles or London, which is a concentration of, you know, exciting stuff to do. And at the same time, we're working with others. So we're working, for example, with World of Women.

Starting point is 00:13:13 If you have a PFP for World of Women, you can, you know, without doing anything. If your PFP is on your Menabas wallet, you can automatically convert that into a 3D Voxel avatar for your sandbox. So, yeah, working with others is very important for us. And I think it creates values for us, for our creators, and for the users. It's super interesting to hear you compare yourselves to cities versus other companies. I mean, is that something that's sort of like intentional and kind of widely spread across the company? Yeah, I think so. And also cities, you have less of a top-down approach.

Starting point is 00:13:42 You have a mayor. You have some people working in City Hall. But at the end of the day, the value in cities is created by businesses, by people coming in, not by the top management. And that's really what we're trying to do. and I think it's in line with the way of the ethos of being decentralized. I love it. Super interesting analogy. I don't want to kind of bring up the competitive side of things,

Starting point is 00:14:02 but are there any things that you think that the sandbox thinks differently about than other emergent metaverse platforms? I mean, there are a handful of existing metaverse. I think the big difference between us and others is that we are deeply rooted in game, as opposed to others which are a bit more focusing on purely the social experience. So for us, it's either about game, or at least having a gamified experience.

Starting point is 00:14:25 So we have quests, a leaderboard and challenges. And I'd rather be, you know, Minecraft rather than second life, basically, at the end of the day. So this is really the big difference between us and others is the route in gaming and 10 years of gaming experiences. Do you think that that's going to be a big part of onboarding the next set of users is that they're coming for a game-type experience versus having to preemptively know that they just want to hang out in some virtual world? Yeah, you know, come for the game. and stay for the Play 2 and Rewards and stay for building a community, meet friends,

Starting point is 00:14:58 you know, or live even beyond gaming experiences. You know, for example, we are going to do a concert with Snoop Docks soon in the Metaverse. And also it's not up to us, not to the company to decide what kind of experiences they can leave. It's going to be up to the creators. And I think we're going to be blown away by they will come up with.

Starting point is 00:15:16 Is there anything that worries you in terms of sort of like the next phase of Web 3 or Metaverse building, Anything that, you know, could you rail this set of experiments? I think we need more diversity inside crypto. It's a lot of white dudes, to be honest. And the more people we bring in, the better. And it has to do with also making it easier for people to be onboarded.

Starting point is 00:15:39 It's still too difficult. You have to go to Coinbase, wait seven days, buy something, install a, you know, a Metamask from extension, send it to 12 seats freight. It's still a bit too difficult. So it really worries me that we're not going fast enough in making it. it, where is for ordinary people to use crypto in general? I mean, listen, also, going back to this metaphor of the city, what makes cities have the palpable energy that they have

Starting point is 00:16:06 is that they are just, their collision factories for heterogeneous people and heterogeneous experiences where there's sort of this great meld that happens, you know, and that's what makes the magic. So I think it makes sense that, you know, as you're thinking about the metaverse and you want to have a place for culture and all these things, That comes from lots of different types of people budding up against one another. Yeah, lots of different businesses right now.

Starting point is 00:16:29 The most active types of businesses in the metaverse or fashion and luxury companies, surprisingly, and Gucci's and many others, entertainment, art with NFTs and gaming. And I think those type of companies, they are very early because they usually have a good sense of the new trends. They are very accustomed to understanding where the trends are going. But eventually, I think we are seeing interest from all types of businesses, all types of people.

Starting point is 00:16:53 So I think it's this melting pot of different background that's going to make the Menaverse and the Sandbox a very valuable place. Do you have any predictions for how the next call it six to 12 months play out or develop as it relates to the Metaverse? I don't know if we're going to see a lot of competitors coming because I know a lot of people are raising money for building Melaverse. If you raise money now, if you raise money six months ago,

Starting point is 00:17:15 I think it's going to be at least three or four years until you have a very good and polished product. It's really that long. So I see you'll see us, you know, hopefully still be the leading metaverse. And we are working hard to bringing more features, more content. I'm very excited to see what the other side is going to do. You know, we also, it's almost like a cousin company. We have the same shareholder.

Starting point is 00:17:37 Animoca is invested in Iran, and Enimoka owns the sandbox. So we're super excited to see what they're doing, and we're looking forward to working with them. Awesome. Well, listen, it's been so good talking. I think it's obviously such a fascinating frontier. space. I appreciate you taking the time to share your thoughts on it. Thank you for having me. One of the things that I loved about that discussion is this notion of the Metaverse as analogous to a city. I think many, me included, would look to social networks or games as the proxies for Web3

Starting point is 00:18:07 or the Metaverse, but given that we're talking here about literal virtual space, looking at real world geographic and social environments as a model makes tons of sense to me. Thinking about it this way creates a totally new set of pathways and priorities one might consider when designing metaverses. Now, of course, the analogy isn't perfect. If only in that, you have to live somewhere, and you don't have to live in the metaverse. But still, I think it's a really interesting and potentially profitable area to explore from, so I'm really glad Matthew brought up that framework and shared it today. I want to say thanks again to my sponsors, nexo.io, near and FtX. And thanks to you guys for listening. Until tomorrow, be safe and take care of each other. Peace.

The Breakdown - Why New York City Might Be the Right Model for the Metaverse, Feat. Mathieu Nouzareth

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