Blockchain Gaming with the Web3 OG, Shahaf Bar Geffen

all right uh welcome welcome everybody to the deconstructor fun podcast my guest today is uh shahaf bar geffen uh from from multiple different places from koti from frequent from uncaged so um for people who don't know you and there's only few of them can you tell a little bit more about yourself sure great uh what a great introduction uh yeah man i'm on cage um we are web 3 gaming studio uh with the first release monkey league coming to your closest metaverse this year uh but yeah look i've been in crypto since 2015. um it was right after i sold the company believe it or not called web3 which i started back in 2006. uh it was a media company did really well and then uh co-founded a company called positive mobile that was later on

acquired by uh by brightcomb uh and yeah i've been in crypto since 2015 you know when i joined i thought i was so late because you know everybody was already there right uh but yeah seven seven years later i still think we're very early on um yeah okay so uh the first thing i did was in 2017 um solid kodi kodi is a it's deep deck it's uh what is called layer one layer ones are protocols like ethereum solana cardano luna and such uh and what cody does it it helps enterprises and central banks uh build digital money so this is what uh cody is doing and doing good well um frequents so frequents uh is a again a tech company that builds algorithms to trade the crypto markets okay um it now manages uh the algo manages about

250 million dollars mostly it's prop trading uh and it and it has done tremendously well in terms of uh returns uh but uh the secret sauce is that it has a very low drawdown meaning you can be exposed to the crypto markets uh that can be very volatile and enjoy a lot of upside but with a very reduced risk and um everything was developed by dr niralani my partner who is the smarter smartest person i know you know maybe side by side with uh charles soskinson the founder of uh cardano and and ethereum uh but this is not what this conversation is all about no uh it's about uncaged which i uh which i share um and yeah as i've mentioned it's it's a one three gaming studio and it twines you know great expertise uh both in in web web three and crypto

with uh deep expertise of gaming uh as the co-founder of of uncaged is raz friedman who is known as employee number one in platika and their uh mythical cpo yeah and we'll have a specific episode coming in more about uncaged but then this one i wanted to bring you on because you're when people ask like who's the og of blockchain who's the crypto og that's shahaf shah was the like when when the crypto bros get together they whisper the the name so so you're you're the you're the uh you're the mack daddy of of crypto and i wanted to get you on and really discuss about the evolution where we are right now and where we're going to be in a few years i wanted to call this podcast originally as how to make how to be a crypto millionaire in one year uh but we recorded that on the side and

that will be published once i am a crypto millionaire in one year uh so we will not be releasing that podcast unless you're a subscriber and um and have and and own the the dof meta card so it's only only for them the nft the utility nft of course if you don't have the dof uh nft meta card you will not hear this podcast and you will not be uh a crypto millionaire but anyway and it only costs 900 000 so there's an arbitrage there just just find it on openc it is what it is but um but let's jump in into into like i have a bunch of questions for you and um and i don't know a better person to to discuss these so so starting off with the first one it's like why did the blockchain and crypto became mainstream in 2021 because i remember vividly that that um about a year or so the nfts kind of became a thing people were writing about first like bankers in hong kong or was

it singapore they're buying these gpags and paying a lot of money from it and i thought that this is like the the uh well the world was already going insane like we were on lockdown and everybody was a covet expert and the stock prices were soaring which made no sense to what was happening on the ground like everything was crazy inflation was crazy governments were printing money so of course people will start spending enormous amounts of money on g-packs drawn in paint like that would be just just a logical thing at that point but but kind of like can you really talk about like why the 2021 was the uh the sort of a um unveiling moment for the mainstream audience uh yes uh look well first of all it's not mainstream yet right even i mean yeah there are hundreds of millions of people out there with with crypto uh you know out of the billions uh out there so it's it's hardly mainstream i think there are also like 10 2 billion people

that don't even have internet yet right so we're very early on in in in that sense but i think what what happens you know with lockdowns and everything is that you know web 3 right as as an idea kind of reaches a boiling point right now and um because the tech and and the cultural context collide for the first time and um you know it said i think chris dixon said it is that what geeks are doing in the weekends uh people will be doing throughout the week in five years from now and you know it's nfts are not new right they've been around for like i think it's a standard maybe two three years or so maybe off by a bit um and it's not just uh jpegs right uh it's digital scar city and then and what does it mean it means property on the internet we didn't use to to have that uh you know with bitcoin we may have money on the internet or gold in the

internet but we didn't have property and nfcs can actually do that and they can be anything from you know utility uh nfts uh like the meta card and themed off to access they can be they can be game assets right like like what we do in uncaged uh they can be home ownership uh they can even be your social profile or your social identity that you can get that you can own and then move you know between networks uh uh with it uh you know anything that is unique and uh and and scars and i i mean i totally get why jpegs on paint seems uh worthless and it and mostly it is by the way uh but it kind of misses the point because i mean if you were to describe the mona lisa right as uh oil on on paper you will be right in a way but but but you'll be missing the point right um and i think

uh that's what it is it's it's scarcity and just you know looking into the future just look what kids are doing right now for them uh you know buying a skin in uh in fortnight is much more important than wearing a branded shirt and in reality it's the same thing it's it's the flex right we have a flex in uh you know in the midverse where we hang out you can wear a designer shirt it has uh very little utility compared to any other shirt uh but you can spend that money prove that you can spend that energy on something that is that has the same utility as something that costs a lot less because it's a flex uh and in a world going digital and you know just circling back to where you started with uh with the lockdowns and everything the world has gone much more digital and online having the ability to flex in digital space or in the so-called metaverse

becomes important this is how people can can you know get access to things or brag or be included in something so this is what the phenomena actually represents and like with every hype cycles a lot of things are you know complete nonsense most of them you can tell right away um but some of it is not and the the idea itself and the technology are you know far from uh from useless uh and and we're hearing more and more about it because it's getting more and more interesting and more mainstream my mainstream i mean it's been out in um in jimmy fallon it's you know like all these talk shows and it's essentially discussed everywhere so that that's how i mean mainstream is like you know your mom and pop are hearing about nfts and and bored apes and stuff like that yeah so i saw i saw someone on twitter said uh i've been uh blocking web3 content even before it was popular to block web 3.0 yeah exactly so

uh so talking about a little bit about the history and you mentioned scarcity and that's uh that's a that's an important point with nfts because during the time as the nfts became in 2021 as they became more prominent during the same time we saw prices of rolex's blow up we saw the prices for different kind of like physical baseball cards blow up so everything that was scarce was getting you know was blowing up essentially in terms of price because there was inflation people were just looking to put their money somewhere and rare wines or whatever it is and through that like you can find rare images of stumps and so nfts and that kind of wrote the same way of scarcity so i understand that from economical perspective but going back in the history were there previously points where blockchain was becoming mainstream um i was kind of like i've been looking at the prices of uh cryptocurrency especially bitcoin um having owned some from since 2014

i remember 2017 was was really high then it kind of went down and by really highman was like 18k and then in 2021 when nfts broke out that's when also the uh the blockchain prices were just bananas like there were 60k in in march there was also 60k in november so kind of like during those same peaks we also saw the the peaks for uh for nfts so my question is kind of like were there moments like in for example in 2017 where where like is there a correlation between all this blockchain um you know blockchain elements like nfts and later on blockchain gaming and the price of blockchain currencies well yes obviously i mean it's because it's the same people that uh saw you know their their portfolio rise a lot that will later on go and and buy um you know board apes right it's it's the same people uh because they've been in this

space so early on like you by the way 2014 uh so they can uh they can afford it right and flex with it uh in in an environment that is kind of like them right um like i know someone wanted like a very rich folk who wanted to be in in wanted started building in the nft space as an investor right and he needed a name for himself like he needed to be recognized and but how do you do that in a space that is all shadow anonymous all with digital identities so it just went on to buy a very expensive board ape connected to its profile and now he's in the game right now everybody recognizes them and and again it's the same thing as showing up to a trendy place wearing the right clothes with the right watch it's it's all the same it shouldn't it shouldn't surprise you uh uh at all but this is just the tip of the iceberg

right what we're seeing uh uh right now and uh and and in fact like with with games right it's uh it started back in in 2018 with uh axe infinity paving the way for everything uh uh afterwards uh they they've revolutionized the model that has come to known as play to earn um which is actually something that personally i i don't like and this is not what we're doing in in uncaged uh because you don't like exploitation i don't think everybody anybody is exploited there but yeah first of all no i do not like exploitation what i also don't like is uh um games should not be about just about rewards right maybe professional players can play for rewards but a game is a game right it should be fun entertainment and it's entertainment right and it's okay

to pay for entertainment uh but getting paid for entertainment means that you know you may be sacrificing something like something uh doesn't add up yeah it's very much growth it's gamified finance that's what it is like you're playing a game with with real people kind of working for you and you're reaping the you're like a renter class in digital space in a game so so that's what i mean exploitation it's like you're it's a game of like a renter class playing with uh with uh with a working class kind of like i totally get it and uh because and what like one of the things that we've decided early on in uncaged is uh what we you know the test what is the test for us is if you had money lots of money would you still play this game yeah yeah like if you if you don't if you don't then we missed the point if you have a lot of money and all you want to do is to play the game because now you have money you don't you have no worries and this is all you want

to do this is the sort of game we want to develop yeah right and for the listeners by the way who don't understand what we're talking about so in axiom infinity uh the popular way to quote unquote play it is that you own a bunch of nfts which are these axes and then you rent them out uh to people in happy countries like venezuela and philippines and and i don't know uh like you know not not the most uh top of the list in in the uh in the top grossing charts if you will uh but anyways you rent these nfts out and they essentially play for you and they farm for you various resources that you can that allow you to meet more of these nfts so essentially you don't have to play the game the others play for you you earn more for it and and through that that's what i mean by being a renter uh yeah yeah well what you're talking about is as um is the guilds yeah uh where they it's a collective of people that bought a lot of assets and now

they're rented to two players but this is not actually how it started right it started off as as just as a game like a battle game and uh and and if you play and you win then you win rewards the rewards are crypto and you can sell them in the market if if you want or buy more assets and play more but because it succeeded and you know axia is paved away right uh i think it's it's kind of popular to bash axey right now but to be honest uh they started it all um and they've definitely proven that if you let players own big parts of the economy it has a potential to be a massive success and they did really well for all those involved right uh because it changes how marketing is done it's essentially it's self-marketing because everybody owns a token everybody wants to for this to succeed um you can have different game constructs or or layout of the game uh and you can be very creative in how you build things so it's it's a total paradigm shift and

to begin with it started off very nicely it grew um the success was also the reason that the price to start playing became very expensive because you need to own all these nfts and they're expensive and then the guilds came along to solve this uh uh problem in uncaged we just as a second wave of gaming we just you know we have the second mover advantage to um see this and and reverse engineer everything and say okay maybe there's a better way to build all of that in a more sustainable way and and this is what we're doing you know entwining ideas from free to play and raz uh the co-founder has kind of revolutionized this space 12 years ago so he can tell you all about it um and and mix it with player owned economies to create something that is you know far more sustainable that that has high production value that the games are fun to to play and they can be

massively adopted if if we get it right so so actually infinity kind of kicked off this this whole blockchain gaming thing and it was really in 2021 that's why i remember these misleading articles about how much money uh the axi is making and they have the monster round with uh by the way i don't mean to dog on axi infinity i i it's just it's a it's an example of of a massive rise and there were some issues as a as a first mover and they are dealing with those issues and they are launching more games and then they are definitely learning and others are learning from them so i'm just using it as an example for one of the most successful games in this and in the first mover just like farm will want if you will so um i wanted to ask like why are investors so bullish about blockchain gaming and i have a theory and this theory is is that investors were able to raise crypto funds you know additional fund of x amount

and they are incentivized i mean all in investors is always incentivized to raise a fund because they get a carry for raising a fund a percentage of the money that they raise they will get to themselves to spend on whatever investors spend it on on expensive uh vests and um and apple watches and oh that's actually even more uh so anyways because there's a clear incentive to raise a fund and there's an ability to raise a fund because crypto is being hot blockchain's being hot everybody wants you to invest into it now they give you money for your new fund you get this fund and at the same time everybody is getting these funds and and the funds are big because we're living the hype of the hypes in 2021 there's a lot of liquidity there's a lot of money being printed so everybody's trying to invest everywhere i've even heard the situations during 2021 where companies were unable to raise like

billion of dollar in extra funding because the banks didn't want to take a billion dollars because the banks didn't know where to put that money and they're like you could do whatever but we're not taking that 1 billion like don't put it on our account that's how crazy 2021 was anyways so there's a lot of liquidity a lot of money going in crypto's the new hotness money goes into crypto the funds get raised now investors have to deploy this capital and they're competing against other funds and there's tons of funds and everybody has their crypto funds so they're so as they're competing and they're competing against new companies because they're not many existing blockchain companies so they have to pump up bigger and bigger rounds and you could you saw even companies raising subsequent funds uh subsequential raises from like seed to a to b to c while the product was still in alpha nothing really happened but companies just wanted to pour in money now um because of that the uh the the the rounds increased the valuation

increased and um and essentially the funding rounds got out of hand um and and i have you know plenty of people i know who were able to raise like 10 million dollar seeds with just a presentation of a blockchain game maybe a couple of images that they did maybe even not but but but the problem that i'm seeing is it pushes the valuations really really high and i don't even know what the exit strategy for investors are in blockchain gaming because the uh the valuations are so high and uh anyways like like why do you think investors are so hot on on on the on the blockchain game well look it can be a mix of of everything that that you said right uh and probably is the story for some of the fund or some of the investments but it doesn't tell you the the entire store right it's you know hype cycles are hype cycles but they do come for a reason right the the collective smells that something is is going on they fill it uh and you know some of the folks and and the funds are really

forward-looking thinkers they work with a thesis it's not that they uh um just spread around money they can spread it on anything and blockchain happens to be there it's not it's not in the entire story um they're not stupid i mean you remember that part in uh in um train spotting where they said you know take the best orgasm you ever had multiple multiplied by 10 000 and you're still nowhere near it i mean this is why we do herring you know we're not stupid we have a reason um and i think the reason and is you know when is when is the last time you had a chance to be early on in a revolution right so you had an opportunity with the internet uh you had another one you know when the internet turned to web 2 with you know really write user generated content vr no ar that may happen

in mobile right mobile yeah you could be early on in mobile like we did with positive mobile and now web3 it's it's a massive opportunity i mean hype cycles aside everything if if anyone listening thinks that ah this web web 3 thing i don't see this turning into something he'll be he's denying reality right now so you can talk about valuations and everything but the basis is is strong with this and and and yes you know um [Music] you know i personally have been waiting for this opportunity for years and early investors embrace risk this is what they do and um and if they feel that in their thesis this is where the where things are going uh they should uh definitely take a position right that's their that's their duty uh and and we are on the cusp of of a massive paradigm shift um and it can definitely do to web 2

what web 2 did to web one you know think wikipedia think about all these sort of things um and i think this is this is what is happening um it's not unique to uh blockchain games uh it's not even unique to games right uh uh i saw in 2021 a lot of folks just leaving web 2 gaming companies uh with a deck with the team raising the 10 million dollar seed i know a few of them it's not unique to to blockchain but yeah so i think this is this is why it's happening uh just try to make sure that the noise that is happening from the hype cycle does not distract you from from the fundamental change that is indeed happening with web 3 and web 3 games are just a part of it kind of like you know video content uh was to web too it's not the only thing but it's a big thing and i think this is

what excites uh investors and yes competition is fierce valuations are high uh but it's far more expensive to miss out on what maybe you know some of the winners out there what's the fundamental change like um i mean it's i think it's important to i think you said an important thing like it doesn't matter what you do this is going to happen and we kind of see it because there's such a strong force behind this i mean even facebook changing its name to meta and and everybody is is embracing that that it almost like has to happen like there's no there's no ifs and buts but what are the sort of a fundamental elements that people need to be focusing on rather than looking at all the craziness looking at all the hype and just saying like well this is crazy this will never be anything because this is so ludicrous that's true but what are the sort of fundamental elements that we should be watching that um well it's probably important because i

guess you know some some will be listening and thinking you know whispering to their wives later on tonight everybody's talking about web3 i don't know what it means yeah exactly i use this word a lot but i don't know what it means so the straightforward definition web one was read it's kind of it kind of you know morphed what the paper was doing and now you have this content and you can read it by the way massive uh it was massive right and it was governed by the protocol the internet protocol tcp easy then you know someday uh we had web 2. and web 2 was read right people can write content in the website it wasn't only the case i guess some of the boomers will be listening and say yes i remember when you know you couldn't write in the internet but yes that was a it used to be that way and now you can read write and things like user generated content youtube or wikipedia that i've mentioned uh came along right

so web one is britannica you can read the encyclopedia as as written by the top paid editors uh and then nobody believes that a bunch of collective people can can write wikipedia why would it ever make sense and then it comes along because this is a web too what is happening with web3 i think is even bigger because it's read right own the fact that you can introduce tokens doesn't matter if it's fungible or non-fungible if it's you know nfts or or basic crypto means that you can share the ownership around what is being created and incentivize everybody in a way uh that that empowers a collective of people to do something instead of uh centralized entity whether it's a company government doesn't really matter that is incentivized by its profits to do something when you do that a lot of you know actually amazing things

can happen and again it's it's you you don't need to be a dystopian or maximalist believing in a in a decentralized anarchist world to realize that you know a lot of amazing things can happen if it's games you know the fact that players own their gay in-game assets and can you know um uh improve the import and trade them sell them um do it in different platforms uh have different roles that are created by the collective entire marketing funnel changes because everybody owns a piece of it and now they want this to to succeed and you know a lot of the things we don't even know because uh it's it's very easy to try and think in the terms of okay so i take this web to website tokens what happens now usually you'll be wrong it's it's usually the wrong assumption to assume that you know the next technology is is just kind of like evolutionized the previous one it's not always the case sometimes it's a complete

revolution and new constructs are being created and you could never have thought about them uh when when you started and the fact that the technology is now mature enough means that we'll see a lot of things uh happening but the idea is that you log into a website you connect with your wallet your wallet is your identity and it's also your assets and the fact that you can start transferring value over the internet instead of just information and start transferring ownership around and take part of everything that is being built and be rewarded that way means a massive shift in how we work in the future um what we own how we own how we are incentivized and if you ask kids about it it makes total sense for them because they already live in the future yeah that's that's uh that's a really well put on on on the uh on the revolution what

is happening a really simple way owning things um regarding regarding owning uh part of owning is always exiting uh so you want to make some money and i kind of want to pull it this back towards the uh the investor's perspective now as we're seeing a lot of very very high evaluations for a lot of existing blockchain gaming i mean let's focus on gaming because that's closest to the audience so a lot of uh very high valuation for for block game blockchain gaming projects um i'm curious on how how do investors look at the exit because there's a there's a funny thing where i talk to multiple different investors in the space and um every one of them is kind of saying that 99 of all these projects that we're seeing right now will go to zero that they're just too hyped up it's too crazy but there's gonna be that one percent just like with the uh dot-com bubble and that one percent is going to be gigantic

we're gonna see the amazons kind of rise up from the ashes of these games the facebooks now regarding this uh as investors are looking at at that's of course the long-term view that's how you can validate that maybe the vc model but another thing that i've been seeing in the funding is token so tokens being part of the round um how does that work like there's there's there's a lot of misconceptions that i hear when when talking to different founders about the role of tokens in funding um and and i'm very curious of what it what are the sort of upsides and downsides we're using tokens because in my perspective if there's tokens that are part of the round then that allows investors to kind of exit earlier by selling those those tokens and they're not that tied to the sky high valuation of the company that's a that's a positive sign but i mean you know better you you've gone through your through your multiple rounds or at least one round that i know of that is not public yet uh but will be at some point

sure um okay so let's let's um no first principles let's talk about revenue right which is uh people in crypto don't usually like to talk about revenue but um web3 gaming studios do generate revenue so how does it all happen um you know the studio can sell assets essentially selling fts we sold nfts it's in the million of millions of dollars that's revenue then you have fees fees can be anything from secondary market sales of these assets to um you know breeding fees when people create new nfts to in-store fees everything around around fees um that's revenue but there is also the creation of economies so you launched the game uh you created uh the in-game currency um eventually the players will own you know

maybe 50 of it um and maybe early backers will own you know 20 of it um and the developer can own you know another 20 for instance um over time these bunch of tokens uh that that are you know that are definitely on your balance sheet can worth a lot of money right for the first game in uncaged this is this is serious money um and this is unique right because with the current state of things when you uh in a web 2 gaming company there is just a revenue and it's a sub-zero game right whatever the players pay the studio collects and this you actually you hope that the players will own tokens that are worth a lot of money because then it means that your part of the economy is also is also worth a lot of money so in that sense you're aligned with your community a lot more and they are aligned with you and everybody's

kind of pushing the same direction it's not a zero-sum game and again it's great to pay for entertainment i have no issues with that i pay for entertainment all the time but this is different right this is you and players trying to create something that is worth more and more um every day now chicken and eggs the tokens can be the eggs uh and the eggs are very liquid right uh they they launch in in on an exchange for instance they can be sold every day uh once you know the vesting schedule is done that is high liquidity it's very volatile but it's also very liquid and you don't get that when you invest in other forms of companies you have your equity uh you're with the founders for as long as it takes maybe there is an exit maybe there's an ipo maybe there's a secondary sale uh maybe a private equity will buy you but as we know like in most cases uh it

doesn't happen right uh with tokens tokens are out they're liquid maybe the volume is not amazing but they are out there in liquid so that's a like a very good hedge for the vcs that invest in this space the equity is actually the chicken in this example because if you own part of the studio in fact you are um part of the value creation system right so when the studio creates the next game and for instance in uncaged so we're creating this esport franchise called monkey league but we're also partnering with a triple a studio to create another game and that game will have its own economy right so that so here you go new types of eggs uh out there so how does it all align as as the founder of things i want to be aligned completely with my backers i want us to have the same incentives otherwise a conflict of interest will rise and it's

like a cancer in a company i want to be very aligned so like when we did a round we did it uh the one we're doing is is equity in tokens same thing whatever i as a founder have you'll have the same uh thing um and yeah maybe the equity can be on the high side in terms of valuation but you are getting tokens as well and that gives you a very good hedge which you normally don't get in a company so this is how it uh works i know some studios don't do that and it's only tokens i think it's it's okay by the way as long as the backer knows that he's buying the egg it's not the chicken maybe it's fine maybe all he wants is an omelet and wants to have this liquidity and it's great uh but if you want to be very aligned and if you're thinking about this long term probably equity in tokens is the best way to go yeah and then there's no dilution when you're doing the uh the tokens so that's um that's that's also a good part for the

founder yeah and also look tokens but what is actually the illusion right if you have the right backers you want them in it's fine like i believe that when this investor has bought in you know 10 of the company uh it's now worth more not less my 90 is now more valuable so i'm i'm great with it i i never feel the illusion uh if it's with the right uh backers i'm looking you know on the grand scheme of things uh and being diluted by the wrong investors is never right um but yeah with tokens look tokens is great we did our first round was purely tokens to be honest everybody made lots of money uh and it's and it's awesome and it's great uh and and you know we've been observing the behavior of those who got tokens we know uh who was right and who is right for us in when we look long term when we do equity in tokens and these other sort

of people that will participate in in the next round and when you did your first round in token so essentially you how does it work you minted your tokens and then sold part of it to different investors and they were able to hold through the tokens as you release your nfts and the nfts kind of set a new value for the tokens depending on how desired the nfts were is that how it works no no actually it's well the first part is right you have this um so when you're building this sort of economies you say uh okay there will be a set amount of tokens these are the in-game currency um if the game is popular lots of people will play it it has a fixed amount there'll be demand the price will rise right this is the the speculation uh behind it plus players though that know ahead of time that they want to play the game uh make sense for them to buy this early on when it's still on the low side you carve out some

of this allocation and you say look i need this to worth something the only way to make sure that something is valuable is to put it in the market and get uh you know do a price discovery with supply and demand right so you start off by uh offering this to a bunch of private backers and this is what they do this is uh this is the mandate that they have so with this round you know the first one we had great participation with all you know from all the the the best in the space then you take it to the public and you listed on on an exchange for in our case it was ftx and then the market decides what what's what's the value of this because you know it immediately balances supply and demand desks and bids and now the price is set and it's set under the understanding that you know this will be the in currency of a game and if we think the game is popular then

the price should appreciate accordingly to um how much supply is out there and how much we want to play and this is how and if you got it right this is how the early backers uh can um [Music] can turn it into profits obviously uh and in our case it went on pretty it was wild that's a wild is good the y is good so so talk a little bit about the impact of all the negative elements that that are not not the negative elements but the negative occurrences in blockchain gaming as of late so i mean what i what i mean by that is companies are always naturally more than than happy to inform about their record transaction days and and some of this stuff has been as i said borderlining misinformation because they've been titles like again i'm saying x infinity but x infinity uh 1.2 billion annualized revenue overtakes

candy crush in 2020. i remember vividly seeing this this is what i first heard about axe infinity i'm like what is going on like what is this game that is making more money than candy crush and um and and then what also doesn't happen is there's rare rare like there's rarely a follow-up on like what it is today like what happened since that peak day and that kind of creates this sort of um it adds to this how would i put it like the negative perspective on on blockchain gaming is like you only inform us about the good news but you're never here to tell us like what happened after that it's like almost like record like reporting you're in free to play reporting your um sales revenue like when you run a sale that one day sale and and you get 5x6x7x higher revenue and then on your normal day but you but you would report only about that but not how the game is doing as a whole so that kind of brings a lot of skepticism uh and a lot of these shark fins that we can see in in

the success or lack of sustained success in these games like what's your perspective on them and how does that influence your decision making uh well first it boils down to sustainability right and and again this is not unique to web3 everything that is growth dependent um will need to find profitability at some point and by the way uh axi made lots of money i mean the tokens they're peak traded and i think the fully diluted value was 27 billion with you know turnovers um like trading volumes of like a billion a day it means that if you had axs for instance uh you definitely made lots of money full stop right it's not funny internet money it's it's very it's very real and yes you know these companies uh are not regulated they're not uh at a at a stock exchange they don't not need to report in the same way that you know a traded

company like you know maybe latica needs to to report and uh and it means that you know they they see things as they're going on a date right they put on their their best shirt and and they did and make up and they don't need to tell you about you know the shitty parts as well um but they did make uh uh um nicely but again as as second movers we need to think about sustainability right so um we're thinking about this let's say like we created this digital nation right and we need to make sure that it can run for years it can't be like this we created this country and now uh two years later it's completely like how do we make this sustainable um and you know again first principles right uh some if you want not everybody can win you know some will need to lose over time uh some need to we need to sponsor the other so we've taken a few things into considerations

uh we've taken you know ideas from free to play mixed them with uh play around economies to create different game loops that are far more sustainable uh we we're thinking about monetary policy like when is the time to inflate when is the time to deflate thinking about nfts uh they can't be like uncontrolled growth of nfts because then it dilutes everybody else uh how do we control this like so we've added a few more levers how does how do you know nfts involve over time what's the ten-year vision to this uh how do we how do we see it that way um [Music] and and and i guess you know a lot of it is is is that and and there is also you know circling back to valuations and how this whole thing is is being perceived um and as i've mentioned i i think valuation doesn't matter that much uh as as an investor again and then i'm

i'm investing as well in the space for years it's not about valuations it's about picking winners yes the the amazons and the googles uh of the dot-com but it was the same thing in in 2017 right with the ico bubble a lot of it was complete nonsense and like we knew being there that's complete nonsense but you know but you could have invested in in ethereum as well right back then so the fundamentals still matter and and some deals cannot be cheap enough to to support the the fact that the quality is so low um and high quality can be very expensive can it be too expensive maybe but look the competition is so fierce that if an investor will not pay this valuation someone else will pick it up yeah definitely the investor the entrepreneur may compromise on the identity of the investors but he will

find money so i think the opportunity in web 3 is so grand that over time if you picked winners it doesn't matter how much you paid in terms of valuation what's more important is just making sure that you got a proper allocation more than anything uh uh else and yes everybody believes that they found the one percent and yeah yeah i've even heard they've heard things from investors like well also sometimes when they invest into web3 they invest in a team that can pivot out of web3 if need be look it makes sense i think if if i was i will never invest in someone says that you can pivot out of web 3 right now i'm uh um i believe you know in burning the ships when you bought the island right plus this is like if you if if you're doubtful of web 3 then you don't get it you're either not you're either underinformed or or even worse uh you don't get it you

can pivot within it a lot right maybe this economical model doesn't make sense maybe esport doesn't make sense all of that i get completely yeah but if you're thinking you know i'm building my internet startup but you know there maybe just maybe we'll we'll pivot back to publishing it on paper uh because i hear people make money with in in newspapers you don't get it right so i will definitely not invest in in something uh uh like that yeah um okay you mentioned another thing that was very interesting because you're investing a lot in this space uh you said that if the fundamentals are there and you have to pick winners so and doesn't really matter what the price is as long as you get proper allocation as long as you find those winners how do you find winners in this insane blockchain space like what do you look at because because traditionally in in when investing in blockchain like let's talk only about gaming traditionally investing into gaming like

you can have multiple different things but in the invest in the end investors is like well let's just look at the funding team that's the only correlation we've been able to define with success and even that is often not true so it's like if the team makes sense then i guess something will happen out of it yeah the classical uh the jockey not the horse right but it's not the whole story but uh um i'll tell you what like how we build things and and how we invest in things uh you know the three core things right are timing and timing has been scientifically been found as uh the most important parameter of all right the great the an amazing team with amazing product at the wrong timing will not make any impact at all uh where if you are in the right place in the right time something mediocre may may work as well so timing team

product core things and in this order of importance so in terms of timing i think you know i think i've said it enough like the timing for web three is is now we're still early on it's undeniable um so timing i think is is right team at least when it comes to web 3 games i think and again i'm speaking out of our position but i think people will agree the team needs to be very well informed and expert both in web 3 and in gaming it needs to be native in both if you take a bunch of crypto bros and let them run again you'll end up with something that is completely outsourced doesn't make sense and nobody would want to play it and because and yeah this may have been a nice play in 2019 2020 uh but with all the games coming out you can't win with that so it can be just crypto bros and it can't be just the gaming folks thinking hey you know what let's just

throw in a few nfts and we're now in crypto well you're not right you don't get half of it um and we've seen this sort of thing you know kind of not succeeding so i think the team needs to be native in in both this is how we've built on cage and i think it's critical lastly of course is is product right it's still important um our fundamentals is i want to see teams and what we are building is play to play the game needs to have its own merit it can't be just crypto it needs to have high production value to distinguish it from everything else it needs to be very accessible crypto is complicated there are a few million players that can that can do that right now there will be a bit more if when this grows um how we build things on you know unity and separating crypto aspects from the gaming aspect makes it very accessible to mobile consoles and everything else and lastly sustainability it can't be

a game where you just create this money out of thin air reward everybody and and hope they'll stick around because they leave as the rewards end because everything else does not work so it's not easy but we think that this is um what we've built i also think that a strong technological fundamental is important in our case we've built a robust platform that we can scale on and build games on you know technology is still a big part of it um and i think you know lastly uh quality is something that you can identify and i think this is why you know a lot of a lot of these cases investors just go on with a team that makes sense because they they can spot quality they don't know about the future what will be created sometimes they don't get the space well enough so all they can bet on is is the team and again

team is critical yeah but quality is something that you can sense um so this is these are the things i'll be looking at and i'm trying to get and timing team and product and then deeper into how native they are in both how do you and then nativeness in crypto you just basically have discussions with them and if they can reply in a in a smart way then that means they understand what they're doing that's that's essentially it yeah look i can ask them all the tough questions right and i don't i don't want i don't expect people to know everything because you know we don't know everything right uh but i do want to see the sort of critical thinking and and what they get what they don't get the concepts when are they just you know quoting stuff and you know even quoting stuff is okay but like have the context have you know get it and look there are so many talented people in this space i i'm so average myself right uh but you know you need to surround yourself with people that

uh that are very well informed and understand where this is going and predict things not just people that can tell you hey you know this is where the ball is bouncing right now let's do this no no no you need to figure out where it's heading you need to be there ready to get it when it's there so this is the sort of things that makes sense and why is it so that a lot of companies um they they want to talk about the blockchain that they've chosen the wallets the smart contracts why do they feel that it's so important to communicate that or like some of the things that i was thinking are they communicating these elements because they don't have much to communicate about their game like it's it's it's weird that you communicate so many technical aspects that are not really that important to the audience yeah it's funny you know it kind of reminds me right now like uh i hit uh uh you know obviously iphones right it was amazing shift right from in in

mobile iphones and uh uh you know with every early on like every new model like brought in like this cool thing you can do yeah and it seems like the past you know few models i don't know maybe the last five or six of them we're just talking about process stores and how many uh the lens itself and that and like someone smart she told me like you know when companies start talking about the tech spec i immediately get frustrated because it seems that they don't have anything left in terms of innovation right so i i totally get what you mean but look the these cycles always begin with technology and then business it's technology first technology and science are what are you know the things that actually push our universe forward right um so this is how it begins uh hopefully this is not where it ends um but you know a lot of a lot of the

the game developers out there are crypto pros and as i've mentioned this is what they get and this is what they'll talk about because this is where they feel this is their comfort zone uh and the technology is undeniably critical uh in these games but it's not it's not that you know having the proper unity or team in in your game is not important but it's kind of trivial right now um but in this space because it's so early on people discuss it uh a lot but you know when when the technology is right and when the technology is good it's like magic you have no idea how it happens in the back end but it just works like exactly you leave an uber and you don't need to worry about payment right nobody ever talks about how payment is done in uber because it's so good you don't need to worry about it you don't need to talk about how processing gateways work and who cares right it works it's amazing it's so good i don't even need to talk about it um

it's different in our studio i think ninety percent uh of the people in the studio are gaming experts and we're very much uh game focused and uh and if it's not necessary to use blockchain in any aspect of the game then we just don't we're not maximalists at all um and i mean just look at the stuff that we publish out there most of it is is game related it's not hey we're doing this cool thing on solana right now and you can do that without storing your keys and i get that on people and then and i think it's it's almost like off-putting like we don't like we don't see any other game marketing being done of like this i mean maybe one when unity first came in and people were kind of talking about this game is done in unity it's like i don't care i i really don't i really don't care what back-end solution you use what engine it's built and uh what attribution platform you use what marketing channels did you use like those are like such nuances that might

be interesting in a deep dive podcast for a specific audience but then i'm not gonna i'm not gonna call ea and tell him hey what look i've just noticed you're not doing this on unity and i just wanted to ask why yeah exactly like we need to call this out or or even even like things of like what like it almost adds too much um too much weight on like which blockchain layer two you've chosen like avalanches did you go without would you go with avalanche like who gives a it was a good deal they took it that's it so move on but um anyways like like and that's that's true like in order to be more accessible in order to be more mainstream in order to be adapted more i think it's i i agree that the production quality and quality overall needs to go up and i think the focus as you said needs to go into the game like you need to be selling the game if the game is interesting and there and the blockchain aspect of

it is used in a smart way where the players can actually own something that is very interesting to own uh and they're not owning just to rent it out and make money off some venice poor venezuelans then then these are these are very interesting things these are the you're you're creating a new new news style of new way of entertainment so that's that that would be that's the important message there not not what blockchain layer two you're using that should not be even said anywhere like that's your business yeah yeah but but again look right now like one of the i think the first question we asked last year was let's decide right now are we a crypto company building a game or are we our gaming company an entertainment company using web3 and crypto as part of what we build and and you know either way is fine

but it's like a very different strategy and to be honest most chose to say i am a crypto company building a game because then i have all the crypto folks behind me and around me they are the folks right now with all the cryptos so let's uh let's be there it makes total sense but over time i think we will win because we are a gaming company using crypto and not the other way around so the beginning can be tougher and it's not by the way because we are crypto native as well but over time it's entertainment and you're not competing against other crypto games you are competing against um any other way that people like to be entertained you are competing against netflix and apple tv uh and uh a soccer game uh at the backyard with my kid uh against a restaurant against how i against my sleep against how i spend my free time yeah and if you don't get that

this is where you're competing and you're just trying to beat the other crypto game uh you may have some short wins you can even make money out of it but this this is not what gets us excited this is not where we are uh this is not why we're building something big yeah and that's that's a big challenge for a lot of companies like whether it's ubisoft or square enix or you name it jam cities and other ones where where their c staff their leadership has been openly talking about their interest towards blockchain gaming and then at the same time you see the whole company not not only not embracing it but most of the company just being detractors towards the whole blockchain gaming because they don't they don't understand it there's they don't see what the leadership sees and i think that leads to a very dangerous situation where where the leadership might be like this is the path i believe in this i want to change this towards it but the staff doesn't want to do it and it's kind of either forced either they will leave or they're kind of forced to do it and that's never

a good way or a sound way to build something sustainable oh look it's a classic uh innovator's dilemma right um and and over time it has been proven that most in most cases this will be grassroots it will not be an offspin of a company that is so trenched in they're very successful model whether it's free-to-play or subscription to uh abandon that to it's it's like you know it's uh it's it's always been discussed in strategy meetings hey let's be our own competitor and like but nobody's actually ever doing that they're not incentivized to do that uh at all but i think if and you know things have been difficult in in mobile lately in like you know web 2 games right of course um and and i think um maybe some will see this whole web 3 thing crypto games as a

threat but it's a major opportunity it's a major major opportunity maybe not the best way for these giants is to you know let's just steer the uh the cruiser 30 degrees right and and do something completely different uh but they can figure out a few ideas of how to make sure that they're not left behind in in the space and uh because it did over time it was proven that it's innovators that do not come from these companies that actually build the next big thing uh but not always and the opportunity and look we've been openly discussing this with a few of the studios that you can think of and uh and i like their approach of hey let's do this together you know we we'd rather have this done a bit outside but a bit inside in a way so that you know we don't completely de-focus ourselves uh but we do stay relevant

yeah it's i think the the important part there is context like you need to give people context of why do you believe in it have an open open conversation uh explain your reasoning behind it you you might know you may also need to explain the difficulties in your current business model which of course raises stress for a lot of people because they don't know the business realities of the world they have no clue they have no understanding of the market and i think it's it's important to share that context so that people can arrive to the same conclusion but oftentimes the executives are afraid to give the same context that they have and instead they give these polished half stories or stories that everybody senses is kind of and then through that they turn against them so so if you want to if you want to turn the ship tell people about the iceberg ahead and if you but don't ask them to to row to a different direction if they don't know why like they won't do it uh or they do it haphazardly so so that's that's really my my two cents

there but anyways um i wanted to ask you the last question before i let you go um let's say somebody's raising fun some like people are listening to this and they're getting curious and they have been curious about blockchain gaming and they're thinking about um raising for it and we're not talking about raising a precede or a seed we're talking about an existing company that say has passed those stages maybe he's in post series a maybe has a has a live game but they're looking into venturing into blockchain gaming uh what will be the way to get um to get the funds for it essentially what's the best way to create the fomo to get investors on your side assuming they have handled the timing it's a good timing right now they got the team they've been studying blockchain gaming they are experts in making gaming and they have proven ability to build sustainable high quality products with great technology sure so well probably you know one of

the things that they will be missing is the the web3 expertise as you've mentioned if if they've created this massive expertise in gaming they couldn't physically create the same thing in web 3 at the same time not the same people at least like if you're not native you know you will always have this accent right and and the space you know the web free space is so cynical in a way uh and i'm one of the most cynical people and i always i'm embarrassed in how cynical this space can be uh they get it right away and they will push you out right you need to to to make sure that you on board native folks or you know partner up with folks that know what they're doing uh uh in this space um look i'm not an expert in building fomo i'm a builder not a not a banker when it comes to to fundraising uh the reality is that you can't fake these things and

if you can you can do it forever you can't half do it uh you need to decide that this is what you do usually it even doesn't make sense to take a game that you already have and say let's let's make it uh let's turn this into a web three game now if you maybe i i haven't seen everything but from what we've observed from you know the studios that came in to us hey we have this game it's not doing amazing let's make it a crypto game and then it will make lots of money it's not the case that's not how it goes right you need to figure out the mechanisms behind it the constructs that make sense uh unless if you don't do that you're part of a hype cycle you will crash and burn at at some point you need to really innovate uh you need to you know think in first principles always and how this how everything orchestrated together with the tokens with the nft with the game with the players with this entire

ecosystem so again no silver bullets just a lot of lead bullets with this um but look i'm talk to us will help yeah so so essentially either bring a new web3 expert on site or partner up with a company that has web3 expertise have your clear vision what kind of a game you want to make how do you want to use blockchain as a part of that game that makes the game better yes partner up with somebody to give you advice and then bring that forward and there's plenty of companies that are even the ones that are investing into blockchain gaming that are more than happy to to discuss with the studio that is interesting in it and help them with the transition so you don't have to come in with with uh with your tokenomics plans up there yeah everything is is you know in that beautiful pie chart everything is is tokened out and and you're already building your trading platform in the web yeah by the way this is very important

um but you just mentioned because everybody thinks about the white paper and that they you know now we have these nice platforms out there like ftx gaming and forte that can help you you know launch the first thing uh but this is the this is only the beginning right and even if you have this everything figured out and you can mint nfts and and create uh spl tokens and you can this is really really really just the beginnings these are the tools now you need to get uh to work so for instance when we thought about our platform the idea was not let's do another forte or ftx games the idea was how do we support this over time how do we handle liveops in a web3 environment yes nobody has figured this thing out we need to figure it out and and we need to build it ourselves because nobody will build it because who has these expertise right now nobody so we need to build the game launch it on the platform figure it out we understand

how it goes in in other gaming uh uh endeavors let's figure it out how does that work on web3 uh tokenomics great you have this plan right uh and you launch it and then a month later something happens in the economy that you haven't predicted because nobody is able to predict everything uh how do you actually react like what does this mean this advisor gave you this you know recipe pie chart of investors is 20 communities 50 okay that's great but like okay so what what happens to emissions if you uh the game does really well the first 30 days what happens to emissions if it doesn't um when do you launch your governance token and what at what point what does it actually mean so a lot of these things are ongoing you can't just take a recipe or do a me too and and uh because even if you are able to launch even raise funds great

what happens later it's not about the nine months of pregnancy it's actually about raising kids yes exactly um what is forte i understand i know what forte um what do they do uh it's it's a platform that allows you to uh launch on uh like a web three game i mean just the the assets of it wallet uh ftx is a platform as well um ftx gaming the they they've built one uh dapper labs have something called flow which is like a layer one for it uh all amazing things i'm i'm very happy that that that this is uh the level of technology that we now have in the space um but i think people ran to build picks and shovels too fast without the expertise of what it actually means and i get it and they

have crazy evaluations and they're awesome we love them but um we felt that as builders for us like in our level of expertise this is too generic we need to build our own tools right we are settlers in in the new land that nobody's ever seen i can't expect people sending me hammers from the us and this will work in this new world and generic generic cameras that would work with everybody with every kind of company with every i have my i always have my sort of um i don't know spidey sense going on when somebody's building a platform because i respect the uh not respect i respect everybody but especially i think a smart strategy for any kind of platform like unreal is really smart they have their own game they make their own games and they build a platform to support games like that and uh yeah you know and it's a it's a very clear choice and you know that they're not making any kind of because they actually have an internal team internal teams that are

using the same engine so they have an internal client not only external clients so so it's this is our play uh as well the unreal play yes the uncaged the uncaged the unk is the new unreal all right well on that note on that note um we can talk forever and we do chat quite often uh thank you so much for for joining the podcast a lot of a lot of questions answered that were particularly interesting to myself and for everybody listening just keep sending more questions about web3 and what do you want to hear because we'll keep on having great guests like shahoff or we will have back as a guest to answer more of these these questions because he's a true og in the uh in the web three i mean web three you had the web three uh email not email but uh web address in like 2005 right six 2006 yeah see yeah 2006 yeah yeah yeah but it's it's it's

overstated for sure but i did have that domain in 2000 receipts just facts so anyway uh everybody thank you for listening and um catch us on the next episode thanks thank you [Music] thank you for listening to the whole episode if you like this podcast please do leave a comment and share the episode if you want to access the deconstructor of fun community with hundreds of senior games folk go to our website and apply to the slack group and if you want to get notified of all the new content we have coming out every week do subscribe to the weekly deconstructor of fun newsletter finally do remember we love you guys and we appreciate you guys catch you next time