Voice of Crypto, a podcast about everything web3, got a hold of Yat Siu. Host Abhishek Singh enabled us to gain valuable insights into the larger vision behind Animoca Brands’ agressive investment strategy in blockchain, and the direction that web3 gaming is moving towards.
Yat Siu is the co-founder behind Animoca Brands, with a large investment portfolio of over 450 investments in blockchain games, traditional games, and web3 infrastructure.
Back in 2011 it all started as Animoca, with prior experience and successes in gaming. In the 2017 Cryptokitties craze, one of the team members helped construct Cryptokitties. When Cryptokitties took of, it initiated the foundation for them to become Dapper labs, in which Animoca invested not much later on. That was the beginning for Animoca in the NFT space, it didn’t really start with Bitcoin or ICOs. It really comes from the fundamental difference and understanding that gamers should own their digital assets.
The original name Animoca came from a virtual avatar builder project from around 2006 or 2007. The name Animoca was a mix of ’emoticon’ and ‘anime’ to reflect its anime aesthetics. However, due to the lack of interest in virtual avatars at that time, the project didn’t take off and the domain name, animoca.com, was shelved.
Fast forward to 2011, the team found success in mobile games and needed a unique brand name. They decided to utilize the dormant domain name, animoca.com, which had a catchy and unique sound, plus encompassed the .net, .org, and .com domains.
Later, they added “Brands” to their name, becoming Animoca Brands, as they started to form brand partnerships and work with big intellectual properties (IP) like Moto GP, Formula E, Garfield, Astro Boy, and others. Thus, the current Animoca Brands was born.
Years later Animoca Brands holds investments or even acquired influential brands in the space, including The Sandbox. What is the idea or thought process behind building this whole ecosystem?
In the burgeoning world of Web3, Animoca Brands has carved out a unique position. Embracing an unconventional yet forward-thinking philosophy, the company aims to democratize participation in the network. The company’s co-founder, Yat Siu, explained how the firm’s approach aligns with the principles of Web3.
“Web3 is all about aligning incentives. Every participant in the network has a stake, creating a shared network in which everyone can benefit from the ecosystem’s growth and development, regardless of their direct contribution,” said Siu.
Siu draws a parallel between the Web3 process and the growth of a successful real-world economy. He likens the experience to a district that thrives due to a flourishing business. The residents, though not necessarily shareholders, are part of a network that benefits from the business’s growth. He attributes this phenomenon to ‘network effects,’ which he believes play a crucial role in the Web3 ecosystem as well.
The Web3 paradigm, according to Siu, allows anyone to tap into the network, whether they’re building on Ethereum, Polygon, or Flow. He adds that by owning part of the network through tokens, not only do participants benefit, but they also contribute to the ecosystem’s success.
“Whether you’re building an Ethereum or a Polygon, by owning a part of the network, you’re adding value and sharing in the success of the ecosystem. When CryptoKitties became popular, it led to the creation of more games and the expansion of network effects,” Siu explained.
Animoca Brands has always championed a multi-chain future, rejecting the notion of ‘one chain to rule them all.’ The company believes diversity in the network is key to creating and sustaining it. Their strategy aligns with this view, aiming to build not just one business, but ideally thousands of companies. This is demonstrated by their involvement in over 450 investments across various fields, of which more than 130 in games alone.
The company’s investment strategy includes a broad spectrum of entities, including gaming guilds, DeFi, lending protocols, and infrastructure risks. They also invest in L1 and L2 solutions, always looking for anything that can enhance digital property rights. According to Siu, businesses can be built merely because one owns something, a trend currently seen with boarding experiences or land in The Sandbox.
Today, with the proliferation of mobile games, the definition of a “gamer” has been transformed, as noted by Yat Siu, co-founder of Align Ventures. In a recent interview, he tackled the question about what it means to be a gamer today and how it has evolved from the traditional stereotype.
“The stereotype of gamers as a man or boy with no life or the geek type is no longer valid. In fact, around 3.4 billion people play games today out of the five billion people online in total. This means the majority of the world are gamers, and they do not fit into the conventional image people have of gamers,”Yat Siu
He pointed out that the perception of gamers comes from a cultural-generational lens. Those in the older generation, or even individuals from his generation who don’t play games, might harbor such stereotypical views. However, these individuals are now the minority.
According to Siu, gaming has evolved into a unique culture in itself. The terminologies, lifestyle choices, and behaviors within the world of gaming are pervasive. Gaming has birthed a culture that has transcended from a purely digital construct and made its impact in the physical world.
“Gaming itself is a $200+ billion industry, larger than music and movies combined. It’s how the younger generation consumes culture. The way we learn about the world, interact with others, or understand traditions is increasingly through the lens of gaming. And because of this, gaming has been one of the first industries that was digital-first but effectively impacted the physical world,” Siu stated.Yat Siu
He further explained how gaming, a digital presence, experience, and brand, has influenced the physical world to such an extent that it has catalyzed the creation of products like the PlayStation, Xbox, Nvidia GPUs, and curved screens. Gaming, being an entirely virtual experience, has influenced the way we see the world.
“The influence of gaming is so significant that it has arguably become one of the most powerful cultural influences in the world today,” Siu concluded.Yat Siu
In a discussion about the global distribution of gamers, Yat Siu shared some insightful observations. He pointed out that Asia, unsurprisingly, is currently the largest market for gaming, due to its high population.
“Generally, where world population is high and there is substantial internet and technology penetration, we see a high proportion of gamers. That’s universal. However, beyond regions like Japan, Korea, China, and Southeast Asia that are growing rapidly, the US also remains a significant market, with Europe not far behind,” Siu explained.
He also pointed out that some markets are growing faster due to increasing access to games, highlighting the Middle East as a region of interest. Despite not being a producer of games, countries such as Saudi Arabia are becoming significant consumers in the gaming market.
“In terms of Average Revenue Per User (ARPU), Saudi Arabia is one of the top gaming markets in the world. They consume games as part of their culture, which is a trend we see in other Middle Eastern countries and even places like India,” said Siu.
He further highlighted the unique position of India, which, despite not having the kind of AAA studios that most people might be familiar with, has a vibrant casual gaming side and a local gaming culture embedded in its cultural context.
“Every region has its gaming presence, and we see this universal interest in gaming play out across different cultures and contexts,” Siu concluded.
Yat Siu, co-founder of Align Ventures and a fervent advocate for digital property rights, spoke passionately about the importance of ownership in the digital realm. His focus is not just on gaming, but more broadly on how our virtual experiences can contribute to a sense of identity and personal sovereignty.
“In games, we have a kind of a metaverse experience where we meet friends, have items, and buy stuff. The problem is, in traditional games, we don’t own any of this. We don’t have sovereignty over our identity. When people buy skins in games like Fortnite, they’re creating part of their identity. However, in the gaming world, you can never truly own these digital items,” Siu said.
He explained that users should own everything they pay for, especially considering the billions of dollars spent on virtual goods. This shift to user ownership also creates new opportunities for companies to build experiences based on users’ ownership.
“When you own a virtual good, other companies can start creating experiences based on your ownership. If hypothetically, Fortnite was on the blockchain, and each skin was an NFT, thousands of game companies could start creating experiences around ownership of these skins. This would not only add value for the skin owners through network effects but also make the game more valuable due to the increased utility of the skins,” Siu argued.
He emphasized the misalignment of incentives in traditional gaming, where game companies control all the data and assets, offering no real incentive for user ownership.
“Traditional game companies are like kingdoms controlling all the data and assets. There’s no incentive for user ownership because they control and profit from everything,” he explained.
By advocating for true digital property rights, Siu aims to raise awareness about the importance of owning one’s digital assets. This concept can be confusing for many people who readily accept the ownership of physical properties but struggle to understand the value of owning digital assets.
“People often don’t understand why they should own their digital assets. But every single human on this planet creates valuable data. This data has led to the creation of platforms like Facebook, Amazon, Google, and even AI technologies like chatbots. But who owns this data? It belongs to the platforms, while the creators of this data never get a penny,” Siu pointed out.
Siu believes that changing this perspective can start within the gaming world, where the concept of ownership is more tangible and easier to understand.
“When you say to a gamer, ‘you should own your skins,’ their first reaction is, ‘I already own it.’ But when they realize they don’t, that’s when the switch happens. Understanding true digital property rights lays the foundation for our own digital self-sovereignty,” Siu concluded.
During the discussion, the speaker highlighted the natural connection between gaming and the concept of digital property rights, stating that gaming provides an easier mental model for understanding digital ownership.
“In games, we already use virtual currencies, so introducing concepts like crypto doesn’t seem alien to gamers. People go out of their way to get Robux or V-bucks because they value these virtual currencies. They’ve built up ecosystems where they spend these currencies on items like skins, creating a virtual economy. However, this is a closed-loop economy, unlike the open, free market principles that Web3 provides,” the speaker noted.
The speaker underscored that the potential impact of true digital property rights in gaming is enormous due to the massive reach of the industry.
“With around two-thirds of the world playing games, the industry’s reach extends to about 3.4 billion people. There aren’t many industries with a similar parallel to virtual identities. Crypto and Web3 are entirely digital constructs, and gaming can serve as a digitally native champion for these concepts,” they explained.
While the speaker acknowledged the value of applying digital property rights to physical assets, they pointed out that this approach isn’t as natural or mainstream as gaming.
“People talk about fractionalizing real assets or making connections with the physical world, and while these are valuable efforts, they’re not as natural as gaming. Fractionalizing real estate isn’t as mainstream as playing a game, which is why we believe gaming is such a natural conduit for understanding digital property rights,”Yat Siu
In response to the the prospects and challenges of the burgeoning Web3 gaming landscape, Yat Siu, a leading voice in the field, outlined three key factors for long-term success. The first factor centers on the understanding that network effects in the world of gaming are not restricted to one’s game, pushing against the mindset often found in Web 2.5 models.
Siu explained that successful founders understand the balance between the simplicity of Web 2 and the value-driven nature of Web 3, but many fall into the trap of leaning too heavily towards the former. They’re lured by the lucrative possibilities of Web 3 but still cling to the control typical of Web 2 models. He stressed that this dichotomy can limit network effects, infringing upon the principles of digital property rights and freedom of assets. “If I can’t take the asset and offer a service to a customer… then it’s no different than just running a game on a private database,” Siu remarked.
Web2-native founders sometimes fail to comprehend the intrinsic value of assets that are allowed to move freely across the blockchain, limiting their potential and the scope of network effects. For long-term success, a shift in mindset towards a more Web3-native approach is necessary.
The second factor pertains to the founder’s ethos. Siu insisted that having a strong Web 3 ethos—believing in shared networks, appreciating incentive alignment, and envisioning a future where everyone is a stakeholder—is paramount for a successful transition into the Web3 gaming sphere. “In Web 3, by owning tokens or NFTs, you effectively become a stakeholder in the network. If you help make the network valuable through activity, you share in that value,” he added.
The third and final point from Siu stressed the importance of financial literacy. He underscored that a successful Web3 game demands an audience that understands the financial world, as Web3 structures open up a vast financial infrastructure for everyone to see.
He recalled how they opened millions of wallets in their early games, but due to the financial illiteracy of many gamers, these wallets remained unused. Siu called the lack of financial understanding in the current gaming community, particularly in the US, a tragedy. However, he also sees it as an opportunity: “If we succeed in onboarding people into Web 3 in a mass way, we will have also succeeded in creating more financial literacy in the world,” he concluded optimistically.
In a captivating exploration of the future of the internet, Yat Siu envisions a world where Web3 is central, and every individual has a stake in the network. He believes that this evolution is not only desirable but vital given the current state of capitalism.
“The current setup of capitalism is broken,” Siu asserted, expressing his concerns about the escalating wealth disparity and the lack of capital accumulation by many. According to him, many people fail to invest and build capital due to their fixation on labor as their primary income source. This myopia, he believes, has significantly contributed to the socio-economic issues we face today.
“The wealth distribution is probably the worst it’s ever been… people didn’t invest, they didn’t build capital because they were still living this labor life. They didn’t understand that yes, you can make money with labor, but you better invest it or do something that builds equity for you,” he reflected.
With Web3, Siu hopes for a future where financial literacy is commonplace, providing a solid basis for people to understand and leverage the principles of investment and capital formation. “If children can learn algebra, they can learn economics,” he noted, indicating that a basic understanding of financial principles isn’t as daunting as it’s often portrayed.
He highlighted the significance of education as the best defense against financial abuse, particularly within the realm of cryptocurrencies. If we can achieve widespread financial literacy, Siu is convinced that the network will be more self-protective and resistant to financial abuses.
Discussing the possibilities of the future, he dismissed the idea of universal basic income, expressing concerns about its socialist implications. Instead, Siu advocates for universal basic equity, arguing that as data creators, individuals already contribute to the network and should therefore have a stake in it.
“We as creators of data are actually creating a part of that network already and so we should own stakes… in that system, it has a nice capitalist framework because you want to create better data so that you can get more value from it,” Siu explained. He sees this as a more equitable solution that doesn’t exclude those who may not actively contribute more to the network.
Looking ten years ahead, Siu hopes to witness these concepts come to fruition, setting a new norm for the internet and the world of digital economy.