In the latest episode of his Blockchain Gaming World podcast, editor-in-chief Jon Jordan talks to Animoca Brands’ chairman Yat Siu, in a wide-ranging conversation covering everything from John Locke and meme coins, to how Mocaverse helped the growth of Pixels, Animoca’s investment thesis, why web3 won’t become monopolistic, is ApeDAO a success or a failure plus updates on The Sandbox, Mocaverse, the REVV ecosystem and TOWER.
This interview has been edited for length and clarity.
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BlockchainGamer.biz: You wrote a great piece applying John Locke to the underlying philosophy of blockchain, so how do meme coins fit into this structure?
Yat Siu: I would disagree with the notion that meme coins are not the work of our minds, because I think they very much are the work of our minds in the sense that they are our stories and our culture. We may think of them as ridiculous, but if an alien came to planet Earth, they would look at a Gucci bag or a Louis Vuitton and they would say, ‘Why is this bag worth so much more than your backpack?’ And they would be puzzled. It comes from the fact they don’t understand the culture because context matters.
So in the same way that we ascribe ridiculous value to things that mean something to us – we’re both fans of Locke and the general philosophical construct of ownership and what it all means and the liberties attached to it – so we are free to create our own stories. And therefore, we are free to create our own narratives. Holding the share or token or whatever it is, is our story, is our community, is our collective. Now we can argue that many of the meme coins may not necessarily have a strong culture, right?
I think of it as a little bit like America. There’s America, the democratic institution, and there’s the meaning behind what it all is and it resists all sorts of change. There are many, many countries in the world, including European ones that have said, we’re gonna copy what America has done. We’re gonna take that culture and move it into our countries. And they tried it in Africa and they tried it in Asia. And you know what? In some places it worked and in many places it didn’t work.
This kind of disruptive chaotic energy only seems to work in the American democratic institution. They seem to be able to survive these heavily disruptive crazy changes and are still the most powerful economy and country in the world. Whereas others who have emulated that have failed. And so I think meme tokens are the same. So Pepe, Shiba and Doge, maybe those are the ones that stand the test of time because they’ve got the broader story alignment. Then all the other pretenders. Who knows where they’re going to be, but people are playing around them with the same mindset. Whether they succeed or not is anyone’s guess, right? So I do think they are the work of our minds very much so, and they’re owned by the community itself.
If you really go down at the root of it all, what is money itself? Money is a story that we tell ourselves. It’s a fiction that we told ourselves, that we agree as a consensus, as a community to say, I give you $10, and for that I receive some good or service. There’s some underlying promise that’s attached to it. But the problem is that promise is pretty flimsy. If everyone starts to have a run at the bank, that’s it for money. Money itself is a social construct and it is the work of our minds as well. The difference though is it’s the work of others that have told us the story, whereas I think meme tokens and tokens in web3 are stories we get to tell ourselves.
Is that the reason that Animoca has invested in so many web3 companies?
It’s worth talking about the philosophy of Animoca Brands – why are we investing in over 450 companies and continuing to invest? Even during the bear market, we made continuous investments in the space to grow the space. And that’s because we believe in this idea of a shared network in web3. We think that we’re building a shared network; it’s like a rising tide lifts all boats idea. The second thing is we think web3 is inherently anti-monopolistic, meaning that you can’t actually win as a monopoly in web3. It’s not possible. Now, it’s like saying, can you be a monopoly in open source? And the argument is, I would say, no, you cannot.
People can own the service providers or the marketplaces but the actual code is decentralized. It’s owned by the community, and value builds on top of value. The difference, though, is that in web1, it’s a barter trade. It’s a barter of our data. It’s a barter of our knowledge. It’s a barter of our code. But in web3, we can now enumerate these with value in the form of money or assets because of the fact that we have ownership and there’s a value construct. So as a result of this it means that if it’s anti-monopolistic, we can’t help grow the space by backing one big company. Instead, we have to back the entire ecosystem. We have invested in over 150 games.
When we decided on that strategy, which was deliberate in comparison to, say, entering the space, which was accidental, but when we started to understand better about digital property rights and freedom of ownership then by definition, there can’t be a platform that rules over us. Therefore, how do you grow an ecosystem and succeed in an ecosystem? It can’t be by creating walls. It has to be as open as possible, so that’s why we’ve invested in all these companies.
The problem we had in web1, was it was very decentralized in terms of information and data, so we needed web2 platforms to organize that data for us. And we willingly gave our information and data to the likes of Facebook and Amazon and Google because they put order in this. Now we’re saying how can you create a sense of order and participation in a decentralized manner and this is where the Mocaverse was born.
The idea that I own a Mocaverse NFT and now with Moca ID, which is the extension of that, I have sovereign ownership over the assets, which gives me growth of my reputation in the network, a validation of who I am, governance rights, like with Apecoin and a variety of other things in the network with proof that I can do today that I couldn’t do before in a decentralized manner. That’s really the idea behind Mocaverse. If you remember, the mint was given to people who were participants in the Animoca ecosystem. Either you held some of our tokens or you were a portfolio company or you worked for one of our businesses. That’s how you got an NFT.
If you’re going to build a community from the ground up then we should give it to them and help them build it for us. That’s exactly what happened with Mocaverse. I think it’s a great example of what happens when you create the right type of distribution in terms of participation, rather than necessarily either going for the highest bidder, which of course gives you revenue, but then you’re dealing with an owner and holder that has different expectations.
The flip side is that Mocaverse has risen in value. You will notice very few NFTs are actually on sale, because most of the people holding are actually owners, builders, the type of people who we’re trying to attract versus maybe some NFT collections that have much more liquidity, but also they’re held by a more degen community. You need both. I think for Mocaverse, we probably went a little bit too far on the builder side where a lot of the degens thought, this is past now so I won’t get involved. You need both types of people. I think companies like Sky Mavis have demonstrated with Axe Infinity and Ronin that you need a healthy mix of both to create a market.
What do you think is a healthy mix of degens and non-degens?
I would say 80-20 is not a bad mix. Maybe 90-10. Speculative should be the minority, but in terms of power, they probably represent 80% of the liquidity. Imagine if you have 80% that are speculating. You have game theory and very aggressive price pops up and down. In that environment, I think you’re inadvertently creating a casino. I don’t think people are necessarily out there intentionally saying we’re going to do this, but when you have 80% speculative activity, you’re creating an environment where people are playing against each other, which gives it volume, but it might not be the sort of volatile environment you want to have for your game.
In our case, we’re trying to create an environment where web2 gamers can go into web3 games, can experience the benefit of the liquidity, can experience the benefit of what ownership means without having to deal with the hyper-speculative nature that happened in 2021 and early 2022. We’re still trying to find the balance. I think all of us are.
The market does what the market does, right?
Correct. It’s the market. I think the big difference around web3 is that the successful projects react to the market in real time and recognize the market is a feature of what they do, not a bug. A lot of traditional web2 game companies that move into web3 treat the market like a bug, like literally a bug. It shouldn’t be like this. This is not what we want. We’ll reject it. We don’t want it. But I don’t think that works. If you want to build North Korea, go ahead. If you’re not open, you don’t have a market. But if you’re not open then why are you in web3 to begin with? There’s no point being in web3 if you’re building a closed ecosystem.
Coming back to your monopoly question, I wonder if the biggest blockchain games are the ones that are going to have the biggest and the deepest economies, the most liquidity, and hence we still get winner-takes-all?
I would disagree with this thesis, because we have the freedom of our own assets, as in we are able to move them from place to place, it actually forces the networks to be as good as possible to the end user. I’m not saying you can’t appeal to millions of customers, but I think as we’ve seen with human nature, we have a preference for multiple fashion brands and multiple gaming experiences and multiple other things. The issue we’ve had in the past is we couldn’t properly sustain them.
Because in web3, we can shift liquidity from place to place, the customer is broadly available. You can always do vampiric attacks. OpenSea is a great example. OpenSea could have maintained leadership if it had done right to the community. If it had enforced royalty rights, for instance, it would have maintained a certain set of community. My point is the customer base is not stuck with OpenSea, and that’s true for anything, DeFi, blockchain gaming, you can give rewards to anyone. If someone has a bunch of Axies, another game can give them a benefit because they think their game is more fun.
This furthers innovation. We all know that monopolies are the death of innovation. And this is the point. In web3, we’re creating a capitalist framework, which is open and one where you can’t have monopolies easily form monopolies.
What can you say about the Moca Foundation?
I can’t say too much, but it’s a foundation. It’s set up in a manner that is true to the spirit of decentralization. And Mocaverse will work very closely with it, but that’s all I can really say at this moment in time. Stay tuned, I guess.
More generally, I suppose you always need some structure until you get to decentralized governance?
This is one thing that people say, that the ApeCoin DAO was a failure but I disagree. It’s a $2.2 billion DAO, high liquidity, probably one of the highest active engagements. I agree that there’s many things that could be better but I would also say that when you think about the decision-making that’s taking place at Apecoin DAO, the level of information that comes through the review processes, it’s one of the most, if not the most, democratic NFT culture. It’s run by fully elected people. I was part of this original special council and I was one of the last ones to leave and now it’s completely decentralized, the people that are in the special council, in the working group. We’re not involved. Basically, it’s as decentralized as they come.
This is a feature of web3 that there’s a point where the more decentralized you become and the more community-owned you really are, the more valuable you become. Going back to our earlier comments around meme coins, what makes meme coins so interesting? Yes, which will succeed, but because they’re community-owned and because they are truly decentralized, the spirit of it, there’s a life that simply doesn’t extinguish because the community is the one that keeps it alive or not.
There is an interesting correlation, which I haven’t analyzed deeply, but an interesting correlation between decentralization and value formation and capital formation.
I want to talk now about some specific projects, starting with The Sandbox?
I think it’s very tactical, very tactical. Remember, Roblox and Minecraft took many, many years to get to the point where they had this community drive. The difference between Minecraft and Roblox, and in this case The Sandbox, is they are very much driven by user-generated content. That’s the heart of it. So it may not necessarily seem like the content is there in comparison to a game that’s centered around one particular experience like Axie or Pixels or Phantom Galaxies. But when the whole network effects start to form, they form much more rapidly.
It takes time to develop, because the network effects take more time. The Sandbox, however, is in a really strong position. The fact it’s built in a voxel model means that it is much more composable than probably any of the other metaverses. If you build a metaverse in high fidelity, it’s beautiful and it’s strong and it’s great but the ability to construct freely on top of it, in Lego-like ways is harder. That’s also the reason why The Sandbox was able to add more non-coding style tools because you have flexibility in the interface.
Also, at the end of the day, it’s something we’re familiar with, right? We look at The Sandbox and Roblox, Minecraft, we get it. It’s the social component that I think will become much more valuable in those networks because you play games to meet friends, to be with friends. Once The Sandbox finally gets out of its alpha period, and it’s all about the latency of network efficiency. This is one of the struggles when a game is not running permanently: you can’t build network effects on something that runs in seasons. You want to be able to let it develop and then grow naturally. That’s what’s missing, but when that happens, I think it’s going to be pretty explosive.
What is happening with the REVV ecosystem, which I guess is best known for F1 Delta Time. I don’t know if you call that a failure or not?
It’s okay, we can call it a failure. It is what it is, but you know, we didn’t die so it’s fine. It was also a strong lesson for us. We thought the agreement was pretty clear but if you don’t have consensus with the IP holder… We did the deal with F1 in 2018, 2019. We were ahead of our time. Back then, everyone was like, what’s NFTs? Let’s give it a go. We thought our agreement was pretty clear but license holders have their ways. When you have these big sponsorship deals and someone else wants those NFT rights too, suddenly you’re in the situation where you don’t have ownership rights, which is the whole point of web3.
Generally that’s why we’ve been backing web3 native projects, whether Bored Apes, or Mocaverse or Cool Cats. You own the IP. You have the freedom to do stuff. But we still use brands like MotoGP but generally the REVV ecosystem is where we’ve learned most of our lessons and those lessons are being applied throughout the rest of our ecosystem and in REVV itself.
Finally, what’s going on in the TOWER ecosystem?
To start, let me express that with TOWER, we never sold any tokens. It was a fair launch. We simply gave it to the community. Arguably it was an attempt to create a gaming meme. That’s the spirit of it. However, we learned that the TOWER community primarily consists of web2 gamers who have learned about web3 for the first time. So our lesson here is we need to bring in more web3 native folks into the ecosystem because these people are generally financially literate.
Because we ended up creating another web2 game that just has some web3 features, there was onchain traffic but not trading. No-one was doing web3 things because the web2 user doesn’t know what web3 is, they’re not financially literate. We forget sometimes that most people in the world don’t have a stock portfolio, don’t understand investing, don’t understand how money works. This is the vast majority of the world and so the vast majority of gamers.
If we say, ‘You have an asset, it might be worth something’, they act surprised and say ‘That looks like a scam’. They don’t think of it as something that could be an asset, which by the way, doesn’t have to be valuable. They think of it as something that’s expendable because they don’t value the items the way an investor does.
I think it’s also cultural. In Asia, for instance, we look at many things from the lens of investing because that’s just how we were brought up. Forty years ago, South Korea’s GDP was lower than North Korea. Property rights and capitalism, that works. That’s a reason why South Korea is I think the second largest market when it comes to token trading volume.
There is something that speaks to their particular native culture that understands why that’s important. Whereas in the West, we’ve gotten very comfortable. If you own a house, you’re never in fear of losing it. We are never concerned that our governments, despite all the instability in the democratic institutions, go away. You might say, maybe Trump gets elected, but nobody fears that the police will turn on them. Nobody fears their house will get taken away or that their money gets frozen. They don’t have those concerns. And so they take these things for granted.
That’s the lens. I think web2 gamers, who are rejecting NFTs and blockchain, what they’re actually rejecting is capitalism inside their digital ecosystems.
The thing I observe about western game designers versus, let’s call them more eastern game designers, is that many of them are quite socialist in their thinking. They’re very merit-based. They’re against the idea of if you pay money, then you should have more. It doesn’t have to necessarily be get given a level up. But in real life, it doesn’t work this way, right? If you have more money, you can live in a bigger house, you can travel more comfortably. But in gaming, it’s based on skill. If I happen to have better reflexes, faster in my game, if I’m more skillful, if I’m younger then I have an advantage.
This is a perception of a meritocratic approach, which I don’t think is meritocratic, because if gaming was only ever playable for those who played it well, our gaming industry would not be big. The biggest innovation that happened in mobile gaming wasn’t the fact that it was handheld because Game Boy did that way before. It’s the fact that through the swipe of a finger, I became a good gamer too. So we created a larger accessible ecosystem and expanded the space. The next class of people that are entering gaming are going to be capital holders, the ones who don’t have the time or maybe the skill to play, but they can participate through ownership.
In this sense, I think capital and money is an equalizer that creates more of a challenge. I don’t think of it as negative, but I can understand that with any ecosystem, people feel threatened by what they felt was comfortable and now something is coming in that might upset the balance. But in Asia, we don’t have this problem, which is why the growth is coming from this region for the time being.