In the latest episode of his Blockchain Gaming World podcast, editor-in-chief Jon Jordan talks to Yield Guild Games’ co-founder Gabby Dizon and its recent strategic investor Shi Khai Wei from LongHash Ventures about the future of the gaming guild model.
From the scholarship model at the height of the Axie Infinity play-to-earn movement, YGG has now evolved into what Dizon calls a Guild as Protocol model; something also cited by LongHash in its investment thesis.
This interview has been edited for length and clarity.
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BlockchainGamer.biz: Shi Kai, can you give us some background on yourself and LongHash?
Shi Khai: LongHash started in 2017, as an accelerator. Now we run two funds. We specialize in bootstrapping ecosystems. Over the years, our thesis has been adapting based on what we feel that the space needs to push forward. So we started with the application wave and then looking at DeFi Summer, and throughout the bear market, we looked at a lot of infrastructure that’s needed to adapt, to scale, to improve user experience. Now the focus has now shifted back to consumer and user adoption and what is going to bring forth the next wave. And, of course, that’s why we’re here to discuss games and guilds.
Why did you invest in YGG?
Shi Khai: So when we start to move from infrastructure back to consumer adoption, one of the first questions is, where are the users going to come from? And what are they going to do onchain? What’s going to bring them into the ecosystem? And if we look at the breakout applications over the last year or so, I think it’s very clearly gaming and social.
How do you invest in this trend if you believe that these two verticals will bring on board a lot of users? Sure, you can go to specific game studios and titles. You can go to various social apps. But it’s actually much harder to invest in those if you are not deep in the weeds. I myself am a hardcore gamer, be it from casual all the way to PC and console, but it is still very difficult for us to pick out those individual titles, while we have some very high conviction bets there.
It is much easier to actually work with a player that is almost like the social layer, almost like the index of the entire vertical of gaming social. So when we started looking into YGG, we realized that, hey, we’re not just talking about a gaming guild, we’re talking about the social layer for consumer crypto. And YGG has been one of the few players that has persisted through the bear market and continued to nurture community, build out quests, integrate directly into games, platforms, and that has laid a very strong foundation to capture this explosive growth, which we predict will come this year.
For you Gabby, how much has your thesis changed since 2021?
Gabby Dizon: To go back to the original thesis, we wanted to aggregate communities to be able to play together and have ownerships in these crypto networks. If you look at a lot of these games that have ownership represented in either tokens or NFTs, the idea is that you could bootstrap and grow these networks via tokens. And what we do, aggregating people, helping them play together, helping them to own these tokens, has still very much remained the same.
So what’s changed? One of the things that the market has missed especially in the last two years was that they conflated the guild model with the scholarship model which was very popular and explosive back then. But even in 2021 we were moving into the next phase of our vision. We released the first soulbound token for YGG in July 2021, even before we released the YGG token. We had started working on our questing system, the Guild Advancement Program. The idea was that you wanted people to build reputation by doing things in different games, in different crypto networks. And that reputation could be represented in non-tradable soulbound tokens. So that as someone contributes to a network, whether you’re doing it in a game, in a DAO, in a guild like YGG, people could note what your contributions are and your value to the network. And you would be able to get an opportunity accordingly whether it’s early access to a game or being able to earn better or maybe a game offering you more rewards because you’re a top player in a certain genre right.
And this is what you mean by ‘guild as a protocol’?
Gabby Dizon: A guild protocol specifically for what we’re doing is that we’re aggregating people, players, and putting their group identity onchain, allowing them to have group treasury, group reputation, and allowing them to do actions or go on quests together as a group, and then be recognized or get rewards from our group level. So if you think about having a World of Warcraft guild and then putting that structure onchain, that is where we’re headed with everything that we’re building for the last few years.
Does ‘guild as a protocol’ mean YGG launches its own blockchain?
Gabby Dizon: Honestly, I think it’s really stupid that everyone is looking to pivot to their own L2 or L3. Everyone is trying to sell their own block space. We’re not selling any block space. We’re looking to fill up block space with people and with actions going onchain. So no, we’re not making our own game and no, we don’t have our own blockchain. What we do is we bring the human layer, the social, the group layer onchain. We get people to form groups together and then do things, do actions together, play games together onchain.
As an investor, how does LongHash see YGG’s growth in the coming years?
Shi Khai: First I’ll talk about the positioning and how that sets us up to scale and then paint a longer term vision of where we might be headed. So the first thing on the positioning, it is very difficult if you are trying to form your own social group. I think the traditional concept of I bring all these friends together and we play games together inside our own little community, it’s very hard to scale that social connection, right? Just because of things like Dunbar’s number, needing to have these relationships with everybody. That’s why I think every single guild is trying to figure out how do we move down the stack or expand the scope?
Of course, many of them have transitioned to become L2s, L3s. I think where YGG is going is really interesting with the guild protocol. It’s not a guild, it’s the guild of guilds. We want to onboard each regional localized community to come and build on the YGG guild protocol. That already unlocks the skill potential. And secondly, this interesting strategic choice to not have our own chain keeps us agnostic to all of the games and to all of the chains.
The moment you launch your own chain, sure, there’s a repricing or a markup in terms of your valuation, but there’s also the trade-off that you’re locking in your own ecosystem. Your token will likely need to live on your chain as well. As we see with YGG, we can be on Ethereum and then we have a very good relationship with Ronin and we can be on Ronin too. And if there’s a good chain that comes on, then we can go ahead and expand there. If there’s a good gamewe can go there as well and we can activate the local communities, be it like the more hardcore players, let’s say in the very competitive games or more mass adoption for a casual game. We can form localized or specialized guilds for those games and for those regions.
I think that sets us up to scale across the entire ecosystem and also expand into web2 as well. What’s the scale for that? If you think one blockchain, maybe you’re thinking of 100,000s, millions of users. But if you can think about a social layer that spans across all of the chains and all of the games, that’s when I can start to imagine tens of millions, hundreds of millions, maybe a billion users because you’re not constrained by things like block space and what kind of applications are on there.
Gabby Dizon: To add to what Shi Khai said, it’s always been one of our principles that we want to bring players to where the best games are, no matter what chain. We’ve been on Ronin for a long time. There are games on Base; Parallel for example, something that we’ve supported heavily. We’re starting to work with games on Immutable like Guild of Guardians. So we have the ability to match players’ interests with the games that interest them and then create the incentive structure for groups to come together, do quests, tournaments and just play with the games that they like.
Lots of guilds are very active in Pixels, which we’ve been working with very closely. We have the number one guild in Axie Infinity with YGG Esports, and YGG Esports is also very active in Parallel. So there is definitely a matching between what players like and what games they’re playing.
YGG’s regional subDAOs were a big thing in 2022. Have you moved away from that now?
Gabby Dizon: When we did the SubDAO model, rather than create country versions of YGG, we thought that we would invest in founders who were local and then figure out what the best way to evolve the YGG model was. That turned out to be a good approach because the bear market was really hard and everyone had to find a way to survive and evolve the model. So YGG Southeast Asia has now evolved to WeGG, IndiGG is now KGen (Kratos Generation), OlaGG is still very strong with a very strong esports focus in Latam so it was us saying we didn’t really know what the best way to approach those markets was and investing in strong local founders with high alignment to YGG’s mission was the best way for us to do it. I think it’s still a very early innings. They’re still around. They’re still bringing players to these games with maybe a different kind of focus in terms of which games or how they’re going to market or how they’re reaching local communities. But the thesis still stands strong, although of course we’ve really yet to see what they can do at scale.
Can YGG itself go global?
Gabby Dizon: I absolutely have massive confidence in the growth of not only guilds, but web3 gaming as well. What I look at is how free-to-play grew first in Asia. The model was invented in Korea and then extended to southeast Asia. It didn’t really catch on in the west until you started seeing on the PC side League of Legends and then on the mobile side, more western native free-to-play titles like Clash of Clans and Candy Crush.
I think the same thing is going to happen. Some of the best web3 games right now are being created in places like South Korea and Vietnam, though we do have very strong game developers from the west as well, right? Like some of them, like Gabe Leydon, one of the pioneers of free-to-play. Some of them are coming from a more crypto native background like Pixels. So I do think it will catch on maybe later in the west because western gamers are more resistant to changes in business models and they want to see a game that is attuned for western markets succeed first before accepting it. But I do think that apart from southeast Asia, it’ll grow in the rest of Asia in the next couple of years.
How is what you’re doing with the Guild Achievement Model different to social farming and engagement activity we’re seeing from the likes of Mon Protocol, Mocaverse, Forge, Carv etc?
Shi Khai: I know Gabby has a lot of thoughts here, but I’ll start off. We have been seeing more and more people trying to tackle the problem of distribution. There are many kinds of ways to spin it, so firstly, that’s great validation that this problem is a huge pain point. And we definitely need people to come and address it. What YYG has done, and this is from the culture that Gabby has set, is one that’s inclusive and welcoming and generous. I see sometimes that certain founders can be quite competitive and they’d be like, no, no, we’re the best. But from what I can see with YGG and Gabby, it’s let’s work together and find a way to grow the pie. Web3 has a certain culture of this composability and openness, right? It is the players who build the strongest goodwill, reputation, branding that will succeed in the space.
There’s also a certain kind of Lindy effect for founders who have persisted through the cycles. Whereas hey, there’s this new distribution platform, you can farm these many points, get this many airdrops. How sustainable is that? How do you know what the motives of these founders are? Whereas you can see that YYG has persisted, has been working alongside the games, the communities, and will continue to build throughout the years, so there’s a certain kind of comfort and stability there.
Gabby Dizon: I can talk about this all day. First of all, I’m an investor in Forge, in Mocaverse, and Mon Protocol, and a few others like that, so I have a lot of thoughts on these. One of the core principles that I’ve been tracking is that quests are web3-native ad networks. That’s a very basic thesis, which you can see not just in the YGG, not just in these three protocols that you mentioned, but a lot of other kinds of engagement networks as well.
If you think about what the core web2 ads are, you have the display ad. You have the Facebook install ad or a search ad is basically a blurb or an image and then click something and then get to install. In crypto, the native ad unit is you do something and you get a reward – you do X, get Y. That means everyone has to do some kind of engagement network to get distribution.
There’s going to be different ways in which these networks will do distribution. For example, YGG wants to aggregate groups and then bring them to games together and then specialize in different types of work or tasks and then note that into reputation. Someone like Forge is trying to aggregate what your web2 gamer data looks like and then try to match that with web3 games. So there’s a different approach and the beauty of what all of these do in aggregate and what Shi Khai was saying is the interoperability. This is why we’re a big believer of soulbound tokens.
We think of soulbound tokens as the web3 cookies. It’s players putting their things that they’ve done onchain, in a wallet that they own and showing the reputation they want to show. It’s not just your reputation with YGG that matters. You can take a look at the reputation from different games. You can take a look at reputation in DAOs in different protocols. That gives a very good overview of what kind of player you are in the web3 space. That also gives other protocols, whether it’s games or others a picture of who you are. Do we want to acquire you as a user? What do we want to offer you to go into our protocol?
I think this is where the space is heading, reputation starts to matter more, especially if you’ve seen different types of airdrop campaigns with different quality, different success rates. What’s been lacking is reputation. Now you can see airdrops being targeted towards certain communities. I think you’ll be seeing them targeted towards more specific actions, more specific reputation.
If I put my VC hat on, don’t I then say YGG is an ad network pretending to be a guild, so maybe we should get rid of some of the guild stuff and just become a social ad network?
Gabby Dizon: There’s something you touch upon there – an ad network pretending to be a guild. I would like to think of ourselves as a very human-centric ad network, someone who values individuals and cares about them not as a faceless daily active user, but someone who has a reputation, who’s part of a group, who likes something, who has certain skills. I think that’s what the future of ad networks should be, is valuing people for who they are and what they’ve done. Maybe the term ad network is the incorrect one and all ad networks will want to become guilds because guilds are the self-owned decentralized ad network, the future of ad networks.
Isn’t that the problem with web2 in particular, that they’ve reduced humans to faceless metrics? If you’re thinking about Facebook or Google, you’re only thinking about cohorts or even whole countries as an aggregate. A person is reduced to what’s your retention? What’s your LTV? What’s your car? In web3, what we’d like to do is bring back some of that face by asking what have you done? What have you accomplished? What skills do you have? And then matching that to your interests.
The value exchange is still the same business model as an ad network. An ad network is basically matching someone who wants to do something and someone who wants to pay for it. And that’s the guild’s business model as well. But now we’re grouping people into interests, into skills, into reputation sets, and then bringing that into places where they can use it because people are willing to pay for it.
Can you talk a bit about how YGG has worked with Pixels?
Gabby Dizon: We started engaging with Pixels when they were still on the Polygon network. The way we identified them was because our players constantly mention Pixels as a game that they want to put in our Guild Advancement Program. We worked with them and brought some quests over for two seasons of GAP. Our guilds were already active in Pixels around maybe six to eight months before the move to Ronin.
The guilds that were working with us had an advantage because they were already familiar with the game. They had some built-in reputation and assets and that enabled them to speed up the process once it was on Ronin. A lot of our communities already had Ronin wallets. Once Pixels got on Ronin, the usage really lined up. There’s a high fit between its gameplay and the community base of Ronin, which is strong in emerging markets. The game is highly accessible and easy-to-play. You don’t need any complicated tutorials to get started. Second, you don’t need to download an app. You can play from a mobile browser. It’s also a very social game. Pixels recently released their guilds and YGG is featured, teaching people to join Pixels’ guilds. We collaborated with them to teach people the value of guilds within Pixels. I think it will probably be one of the leading, but not the only game that’s leading web3 adoption in this cycle.
Shi Khai: If I may add to that, I think there’s more to the secret of the success of Pixels. They are one of the most crypto-native and also actively composable games out there. They actively integrated dozens of PFPs, be it on Ronin, outside Ronin, other games like Treeverse, PFPs like CyberKongz. Mocaverse is there as well. You can use meme tokens like PEPE to buy stuff in-game. When other games launch, they have these little side quests, so Mocaverse had their own little side quests, CyberKongz had their own map. Pixels is actively embracing the ecosystem of web3. It’s not like, I’m building my own little game on my own little island. It almost makes Pixels feel like the hangout space of all the other games and crypto and I think we’re missing that kind of casual MMO hangout space. Pixels might start to become that.
Find out what YGG gets up to via its website.