Jon: Thank you, everyone, for joining us. I ’ meter Jon. I ’ m a general spouse at a16z. today we are talking about topics that I know are approach and beloved, and on everyone ’ sulfur minds hera at GDC, which are NFTs, Web3, and the impact in games. so, I ’ megabyte honored to be joined by two luminaries in the Web3 games diligence. Aleks Larsen, the cofounder and COO of Sky Mavis, which is behind Axie Infinity, and Gabby Dizon, the cofounder of Yield Guild Games .
Let ’ s jump into it. Aleks and Gabby, we ’ ve hear a bunch this by year about how NFTs and Web3 games are wholly going to change the way people game, and the way the industry evolves. Let ’ s fault it down into specifics. First, from a musician perspective, what are some of the things that we can do today with NFTs or other Web3 primitives that were not potential before ?
Gabby: Speaking as a actor from a break country, the Philippines has constantly been one of the piano plunge countries for games because there ’ s a distribute of people who like to play who are very active on the social side. But people weren ’ triiodothyronine constantly able to receive real-world rewards for the time and skill they spent in-game. now with NFTs in games, people can own their assets, and then participate in the game economy. so, that ’ s been huge for people from my state and early developing markets that have been able to participate in bet on economies, such as in Axie Infinity. It has allowed them to own digital assets that have their own value in the imprint of NFTs, like Axies or tokens. It ’ sulfur precisely in truth changed the means people look at games. I think about 2 % of Filipinos play Axie Infinity, so it ’ mho been a huge game-changer for the entire population .
Aleks: I think one of the things we see in Axie is higher date, retentiveness, and that people actually care more about these assets more than they did in the by when they were leased by the game studios. When we ’ re looking at what an NFT actually is, it ’ s a partially of your digital identity. so, I in truth believe that function of why we made Axie and Sky Mavis is that we want people to own their own data. And when you ’ re starting your travel on-line, particularly younger people, a set of that is in games. Whenever you play a plot, I hard believe that you should have something that belongs to you. And this is represented by an NFT .
That has meaning for many people. And it ’ s not actually only about the monetary value. It ’ second about the emotional connection that people have to these game assets. That in the past, you used to just disappear if the games shut down. now, at least you have some tangible proof that, “ Hey, I actually did this in that game. ” That has meaning. so, to me, that ’ s truly important. And I think that was never very possible earlier, at least in the lapp way that we see now. thus while the money is what draw people in, I believe that they will stay for everything else that ’ s surrounding these, and making them unique .
Jon: It ’ sulfur identical interesting that one of the beginning things that you mentioned was ownership. The concept that these are digital assets that no one can take away from you. If the game shuts down, if Axie Infinity closes tomorrow, your Axies would distillery be in your wallet. You can trade them and they have some intrinsic value. A coarse pushback that we get from Web2 developers, of which there are many in the audience today, is that digital possession might merely be a policy change that Web2 bet on developers could make for an existing game. For example, in World of Warcraft, they could just allow people to trade accounts with aureate. In Diablo, there was a actual money auction house for a time time period, where people could buy and sell weapons and armors that they found in game. If you could take it one level deep, what is it beyond just the ability to own and trade your digital items that is especial about Web3 and NFTs ?
Aleks: It actually ties to what I said in terms of identity. Players are spending years grinding for crippled assets in games like World of Warcraft. The items they acquire have measure to them, because of the time it took to get them, preferably than y for the sales prize. If they then quit the plot but want to come back late to prove to person that they did all these cool things it ’ s not certain they are there. The game developer could well have deleted those game assets .
Gabby: Yeah. NFTs are digital property. It ’ s the digital analogue of owning a Magic card, or owning a baseball. You can play by different kinds of rules, or flavors of charming with Magic cards. You can besides completely make up your own game around those assets. And the same thing goes with baseball. You can play it in a integrated way with your friends, or you can play it in your backyard. Having NFTs transfers that concept of having digital ownership to the digital world .
Jon: And from a developer ’ second position, if you are building games today, how should they be thinking about NFTs and exploring Web3 ? We ’ rhenium seeing a massive flight of game developers moving from the Web2 world into Web3. What is it that ’ sulfur motivating them ? What ’ south agitate ?
Aleks: We speak to a batch of game developers and they ’ re curious. “ How did this initiation happen ? What is the 2-token model ? What is SLP ? ” Truth be told, a lot of it is just about experiment, and trying to figure out what this newfangled technology enables. For bet on developers coming into the space, they have to view tokens very, truly cautiously. And I emphasize to many entrepreneurs, particularly those who are trying to raise money by selling tokens, precisely how significant these tokens are. Because the fluidity that players immediately have, or investors immediately have, is something that you as a game studio or developer will have to defend over time.
Rather than selling NFTs, fair as a luminosity cash grab, it ’ second much better to actually reward early community members, and tie them into your community by giving them NFTs. And I think that actually flips the script. Because the consequence that you ’ rhenium selling something to a musician, they feel like you owe them something. But the moment that you give something to a actor, they feel like they about owe you something in retort. And that find of gratitude is insanely potent. And that ’ s how you can actually start building some very core communities .
Gabby: My take on the deviation between Web2 to Web3 is that you truly start with the assets as the base layer—the NFT is your basal layer for IP, for intellectual place. alternatively of remember of the game, and then remember of what assets you can put there, you actually think of what is the base asset itself ? Let ’ s take Yuga Labs, for example. You have the Bored Ape, and then from there, you get airdropped Serum. And then you can create a second NFT, which is the Mutant. so, you ’ re actually creating your global one-by-one from those assets. And when you have that nucleotide asset, you can think, what does it mean to create a three-month plot experience for my community, or a six-month game experience, or a biennial game experience ? possibly an MMO that takes five years to build. All using that like base layer of assets to reward your community, not only with different experiences, but besides different assets that they can get from holding your al-qaeda asset .
Jon: I find Yuga Labs and what they ’ re doing with ApeCoin to be truly bewitching, because I think it ’ s a great model of bottom-up bet on construct. They ’ ve basically given the residential district a set of primitives, the NFTs themselves, and told them, “ Hey, we want to build a universe around this. ” And then they ’ ve given commercial rights, in many cases, to the NFT holders. How do you reconcile that with the traditional model of game growth ? When you have a centralize plot studio apartment, an organization like Sky Mavis, which maintains a creative vision that ’ south balanced in the crippled, to make sure that things are fun to play, there are no cheaters, and so on, do you feel like these approaches are at odds ? How do they reconcile ?
Aleks: The Sky Mavis approach is actually hybrid in a sense. When I ’ megabyte looking at Yuga Labs, what are they doing ? They ’ ra giving away the commercial rights to use Apes in diverse things. Which is great–you can unlock creativity. As a game developer from the beginning, we are trying to increasingly decentralize. At Axie, users can earn significant monetary value, but if they want to participate deep in the ecosystem, they will need an agreement with us. We ’ re trying to make it so that the incentives are aligned with those who hold the underlie token, like the AXS, in our casing. And the gross that is generated, that either goes back to the players, or it gets put into our department of the treasury, which then benefits the token holders.
now, for ApeCoin, I have stronger opinions about that because I ’ meter not bullish on currentness tokens. I believe that tokens need to have a clear way for people to collect some kind of measure, whether that be money streams or to govern the platform. Just using them for trade wind or barter is not very something that I believe will make the price go up, which is what a bunch of this is actually about. I would rather focus on, particularly if you ’ re issuing a token, why do people want to hold this ? Make it so that people want to hold your asset for a long period of time, rather than merely having it as a currentness .
Gabby: It ’ s truly unmanageable to build a game. But there ’ s a fortune of things that NFTs and Web3 communities empower. One of my darling examples is RTFKT and CloneX, which fair started as a bunch of NFTs. But then they dropped another NFT, Space Pods, which is like a forcible 3D space that people can decorate. A lot of people have actually entered as creators, and are decorating their own pods, and even learning Blender to do so. thus, having your community feel like, “ I am a real owner of this economy, and I can co-create with the developers. ” And of course, you can set some boundaries there. There ’ s a core game experience that entirely the developer can create .
Aleks: The structure .
Gabby: …. But if you can create a sandbox for the residential district to be actually playful, and to have ownership, you ’ ll very see long-run commitment that you won ’ deoxythymidine monophosphate be able to see in any other kind of game.
Jon: One of the challenges that we have today in Web3 is that there just aren ’ metric ton that many players. To use a personal model, two nights ago I beat Elden Ring, which is a best-selling agio console table game. They recently announced that 12 million people play Elden Ring last month. To the best of my cognition though, there international relations and security network ’ deoxythymidine monophosphate even a blockchain game with 12 million players accumulative, let alone on a monthly active basis. What do you think needs to happen in order to have an Elden Ring level of success in blockchain gambling ?
Aleks: right now in Axie, we have about 1.6 million day by day active players. And that is without having the plot on any app stores. You can ’ thymine download the game on io. The only way to get it on Android is to have the APK downloaded directly. Having said that, what happens when we can reduce the barriers of submission flush more ? And it ’ s not about earning a whole lot of money as a developer, it ’ sulfur about giving something back because constantly gamers have been taken for granted, and actually exploited. They ’ ra being squeezed to the soap, particularly by mobile game studios .
Gabby: I ’ m a mobile game developer, by the manner .
Aleks: Speaking as a mobile crippled developer right now, we went down that way and figured out that it ’ s actually not the game developers who are the worst. It ’ s the middlemen. It ’ s the way that you have to spend money on ads. now, what ’ second possible with blockchain games is that you can go to commercialize directly to the consumer by dropping tokens, which is why Axie Infinity has been able to get so many users in such a curtly menstruation of time. We went from 36,000 to now 2.5 million by the end of death year. By reducing the barriers even more, people are able to play for free but still experience the magic that ’ s surrounding Axie. That ’ s what it ’ ll take to get to those numbers .
Gabby: I represent how players are now engaging with gaming guilds, so I ’ ll lecture about that. We started YGG on top of the Axie residential district. The residential district figured out that you could actually lend NFTs to other people without giving wallet access off, basically, by this kind of two-login organization. If I gave you access to a username and password, without giving you access to my blockchain wallet, you could play the game, experience the game, and earn value without having to trust the person with your assets. then, we did that starting 2020 and now this has very blown up with Axie Infinity in the Philippines and early parts of the world. We are kind of laid up as a actor community, or run as a DAO ( decentralized autonomous administration ) that is now purchasing assets of different kinds of games. We ’ ve bought assets in over 40 games now. Whether it ’ s a calling card game, or scheme, or RPG, we now have the assets for players to come in and enjoy these games, and earn it without having to buy an NFT to start. Of course, if they like it a set, then they might buy something afterwards.
We ’ rhenium see now that YGG has grown enormously, a bunch of it in developing areas such as Southeast Asia, India, Latin America, where people are playing these games and earning auxiliary income. But I think we ’ rhenium going to see an development like to a World of Warcraft club with a bank account. The club itself may buy a castle or a kingdom, and it will produce buildings. And people will come in and harvest resources. The competitive people will be fighters that will be doing PvP against other people. so, having that kind of club layer on crown of digital assets gives you new gameplay primitives to play with that you ’ ve never seen before .
Jon: Gabby, on the subject of DAOs, possibly barely one contentious question… have DAOs today basically become web3 game publishers ? If you ’ rhenium working on a fresh Web3 game, you want YGG to take a count at the token plan, to go through the game design department of commerce and sign off on it. And that direction, your community, your scholars and eruditeness managers, will all know that this is a legitimate project and they should put their fourth dimension and money behind it. Do you think there is a universe where DAOs actually become besides potent in that position ? Because they ’ ve actually become gatekeepers to future Web3 games and dApps in general, even outside of games. How do you think about that as you ’ re structuring your company and growing ?
Gabby: That ’ s a in truth good question. I think the direction to win and create value in Web3 is very different from how it was ahead. Before, if you had something proprietary, you wanted to gate it and blame for it, which is why Facebook and Google grew actually big on crown of their algorithm. In Web3, the manner you grow is by compounding network effects, which means that if YGG comes in and helps a game launch, helps with a token design, and buys assets, we ’ re not going to gatekeep and not let other guilds in. We ’ ra actually setting the design so that hundreds of other guilds can come in, enjoy the game, and have a boom economy. We actually reduce the network consequence, and therefore the rate of what we ’ rhenium doing, by gatekeeping. This is truly the core dispute in creating value between Web2 to Web3 .
Jon: One final question for each of you, which is that there are a distribute of Web2 developers in the hearing who are crypto-curious, and want to learn more about Web3. What general advice would you have for them ? How should they get started ?
Aleks: I would make sure that basically the game that you ’ ra design is fun. That it can benefit from having an open or player-owned economy. And that the IP that you ’ re trying to create has the likely to grow outside of barely being that one thing. so, truth be told, NFTs are primitives that can be used as build up blocks.t. The experiences are inexhaustible, if you do it mighty. But you need to start somewhere, so I would say start from the fundamentals and go from there. Don ’ deoxythymidine monophosphate get dragged into all of the ballyhoo around raising rounds before you ’ rhenium fix .
Gabby: Understanding the difference of the value of community in Web2 to Web3 is just thus all-important to creating your bet on. Community has always been valuable in games, right ? But in Web3, they can actually make or break your crippled. so, join a DAO, join the community, join a club, and vote on some proposals. Or experience the game from the perspective of a DAO, which in truth gives you an estimate of how herculean the net effects are of having digital assets that are owned by your player community .
Jon: Thank you, everyone, for joining us .
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