The Collapse of the Terra Ecosystem Explained

welcome friends it's time for another tokenomics and we've got as always some very dramatic news to talk about this week so this week we've got anton bachman principal at play ventures hello hello special guest ken wreck uh very finnish last name i will not try and pronounce a general partner at play future fund what is your last name it's the guy groaning and then it's it's dutch but uh close enough dutch my fat american tongue can't even come close to saying it right uh and then we've got uh myself ethan levy executive producer of legendary heroes unchained at network uh today we're gonna hear talk about and explain the story i'm sure you've all read plenty about the dramatic collapse of the terra ecosystem all that and more on today's tokenomics excited about nfts in the metaverse ready to be part of the future of gaming recur is looking for talented producers

product managers game designers economy designers and engineers ricker is building branded nft collectibles and games with top ip including college sports paramount star trek nickelodeon sanrio and more using its best in the industry technology platform recurs platform streamlines the nft collecting experience no crypto or third-party wallets required simply buy an nft with your credit card or apple pay and recur's robust gamification system creates infinite collecting and gameplay possibilities from which to make compelling planner and experiences recur is backed by some of the biggest names in crypto and nfts including billionaire stephen cohen garyvee and gemini among others join us now and get ready to ride a rocket ship let's go all right let's uh start since kenrick since you're a new voice on the podcast could you begin by uh introducing yourself and telling us a little bit about your background sure thanks for having me ethan um yeah i'm kendrick as i mentioned i'm dutch

originally but been in singapore for the past 11 years used to work and a number of startups here primarily on the digital marketing side including the ua in the gaming space i used to work with henrik one of the founding partners of play at his gaming startup back back in the day and nonstop games before we got acquired by king and then later started a small crypto venture fund in singapore that was called lunex um as part of another vc here we invested in crypto financial infrastructure so wallets kyc aml custodians exchanges d5 protocols and terra was one of our investments at the time as well so we set that up in 2017 2018 and last year rejoined henrik and the partners and anton at play to race the new funds that we just launched at the end of last year which is to play future fund so that's the fun that anton and myself are running investing in all things web

3 crypto gaming both the studios as well as the infrastructure place so we've done a number of studios we've done some guilds we've done borrowing and lending protocols nfd marketplaces uh across the whole stack basically so that's what we're currently doing well thanks for coming on and as kind of an early investor in tara i thought you'd be a a perfect voice to help us explain what's happened and and how to think about it so um let me let me set the stage uh if you're listening you've likely seen the headlines about the collapse of token value of luna and ust the two primary tokens in the terra ecosystem um from their website terra is a public blockchain protocol deploying a suite of algorithmic decentralized stable coins which underpin a thriving ecosystem that brings d5 to the masses so um if i understand it correctly terra was an l1 chain and it had two

uh tokens luna and ust uh ust is marketed as a stable coin and it was an algorithmic stable coin which meant they weren't saying for every um uh ust we issue there's a one dollar usd worth of gold in a bank vault and if you redeem your ust you can always get that dollar back it wasn't backed by fiat assets at any point it was backed by an algorithm and the claim was that ust would stay pegged to a dollar and luna would be a store of value and they could sell if i understand correctly when to to keep that price pegged they could always sell luna uh in order to uh increase uh buy and increase the price of ust or they could um use their uh holdings from the luna guard

foundation which owned billions in bitcoin to prop up that price um so the idea was that they would they would keep ust pegged using algorithms and the backing of other tokens and then another important part of this ecosystem was the anchor protocol which was a staking protocol which i believe was uh providing uh 20 percent return on staked do you guys know was it you at stake ust staked luna or both i i actually forgot usda maybe i'll run through the background of terra that gives you a clearer picture of how we kind of arrived at this point so basically when i started in 2018 um the original idea and vision was very much to power real world payments or e-commerce payments so they were looking to do integrations with carousel which is a an online marketplace here in singapore

they had a chai payments app in korea and so the idea was really to facilitate the transfer of value um with fiat like on their network so somebody makes a payment and that transfers and uh gets gets paid so the the biggest stable coin in the beginning was actually krt the korean one um and later they had a couple of other ones mnc and usd was only came later but basically the way that it works is very simple um the dollar that is usd is basically backed by the equity value of the luna network so you could always redeem up until very recently you could always release one ust for one dollar and the way that mechanism works is basically you redeem one ust and the protocol mints an additional luna or number of lunas and sells that into the

market towards the value of one dollar so i think at the end the total outstanding supply of ust was 19 billion u.s dollars and the total network value or the market cap if you like of luna was 40 billion dollars so you would think you know like if you just look at it that way that usd was backed by the network value but obviously market cap is not the same as like you can't sell 40 billion dollars on that market and then have you know all those dollars doesn't work work like that there's slippage um there's just not enough demand to to prop that up so when it started off um it made sense they used this sceneridge basically to give discounts to them to them to the merchants or to the end consumer purchasing stuff from the merchants and seniors is basically the same way that uh our fiat system works in that um money is basically created out of thin

air but then in the fiat system there's demand for that money for through paying taxes you need to pay your all oil bills in in u.s dollars the government has a monopoly on violence basically you have to use this coin in our payment system but for usc that's obviously not the case so i think over time things got a little bit out of hand because you can do this in smaller quantities and doses so if you have a 40 billion dollar market cap and you issue one two three four five billion of ust on top of that the market could absorb that right like if you sell a billion into a 40 billion market cap and i don't know what the exact ratio is what works or what stops working at some point but the point is that humans being humans obviously get a little bit too greedy too far ahead of themselves um and start to issue too much money and then it becomes an unsustainable

value proposition basically so that's what happened over time and basically anchor was just used to to lock usd in the protocol um very successful until people started withdrawing it and this is what happened basically right so and just and just maybe adding to that kind of maybe a quick taxonomy on on the main models for stable coins so so we have we have the algorithmic one uh as as can request we're describing so there is no collateral behind it it's mainly mainly based on on incentives keeping it together and then you have then you have currencies like like tether or usdt that that are fiat backed and have so for each usdt there's a there's a us dollar somewhere in the bank account uh and um and then a bit a bit in the same uh same league you have uh also the crypto backed stable

coin so so maker and die being an example where people over collateralize they lock in a certain amount of ether for example and then they receive a certain understable coin and that over collateralization aims to aims to keep keep the price steady and then the third one here here and one other one other way to think about this is they all have different risk tradeoffs so the risk rate off for ust was pretty clear now the risk trader for usdt is that it's being run by an offshore organization tether which is semi-audited and we think there's probably some collateral there but we don't know exactly what it is or how much it is right yeah the trade-off for the trade over usdc is very much that the u.s government could freeze your money because it's controlled by circle financial which sits in the u.s so you have regulatory risk on that one and then die basically which is backed by ether or other assets in that protocol you have smart contract and protocol risk from the maker protocol so they're all different and they have different risk

parameters and trade-offs i think usdc is the safest followed by usdt um but yeah they're all slightly different yeah so when you originally invested in tara this wasn't a project or a protocol that was generated specifically for the facilitation of game economies that's something that came as one of the uh uses of the network over time originally it sounds like uh facilitating the buying and selling of goods through the use the the generation of these uh stable digital currencies that was the purpose of tara originally yeah exactly that's why they started with this this the chai payment app in korea they made a push for like online platforms to use these payment rails but i think and i think what happened over time is that it just became a lot easier to offer stable coins within d5 because that's growing a lot faster you don't need to

do a lot of work to integrate your solution with real world businesses you can just basically print more money if you like and use it in these anchor protocols or other defy kind of solutions and i think that's what got the better of them in the end the idea itself could potentially still have work but again i think it's it just got too greedy yeah all right so you know 30 days ago the the price of luna was 81.45 now it's uh less than two ten thousandths of a cent and ust which was a dollar uh 30 days ago at the start of the recording was 8.4 cents essentially um and i know that it's not completely known yet uh what happened or kind of what uh caused the attack but like at a high

level i the best i can understand it is that ust the stable coin became unpegged from a dollar and that so somebody did something that like knocked it off a dollar and then people panicked and and started selling off at both luna and ust and panic caused more panic and it got into a death spiral and yeah along the way the the luna foundation guard sold or swapped billions of dollars worth of bitcoin to try and keep that ust uh price pegged at a dollar and that effort failed and they've basically spent or gotten gotten rid of you know i it was like billions of dollars of uh of bitcoin is that is that an accurate description am i you know is like bank run the right metaphor with which to think about this how how

would you guys uh explain the the collapse and value of these two tokens yeah i think so i think it was a a combination of like almost like a perfect storm that came together it was not a single issue um there were a number of different ones obviously people kind of knew this that there was always a risk um and without commenting whether this was a specifically an attack or just an unfortunate kind of combining of circumstances we don't know we don't know it almost it doesn't matter for the outcome right for the outcome it doesn't really matter but it happens when um there's a there's a big d5 protocol called curve on which uh stable coin swaps happen and there's a lot of liquidity on there um and at some point last week somebody removed a whole bunch of liquidity from the pool where you can swap your us ust

that caused the pack to go off a little bit um with that you get more people noticing this you get a few more people trying to exit it um with that you get luna printing basically right because that's the redemption mechanism um which then tanks the lunar price and this is all in a macro environment where crypto prices are already going down so the collateral that's part of the luna foundation uh which was bitcoin avalanche a couple of other tokens was also going to think yeah was also going down at the same point and you get to a point where there's enough people who lose trust and because of the mechanism and i think they made one crucial mistake actually the ust was going off pack already and what they should have done is kind of limit the redemption because i think there was a cap on total usd redemption per day and instead of saying we're going to limit this and

slow the redemption over time it doubled down on it and said like we need to get back to the pack faster which basically hyper-inflated luna so many tokens were printed that the order books entirely disappeared so you couldn't sell luna anymore because the there was no bit like on ftx the entire market just went to the smallest tick which is like 0.001 or whatever and that's where all the asks were sitting you cannot place a bid at zero dollars right like no there's no mechanism for that so that you can't sell the luna anymore pack breaks everything breaks hyperinflates and yeah that's that's essentially essentially a very similar to a bank run where um kind of customers lose faith that the bank is going to remain solvent and then everybody kind of speeds up to to to withdraw their assets from the bank at the same time which then eventually

causes the collapse now i saw i read a couple of working theories on kind of how how this one was set up um i think some of them were aligned around this this idea of this attacker that that reacted to so uh to to to lunas lunas or the foundations um intends to to purchase more bitcoin as they as they announced that in in march uh and then this attacker went on to to borrow a large large quantity of bitcoin that they then started selling uh against against luna's buy orders uh and then then later on while while this kind of so they were they were switching liquidity from one of the curve pools to another uh and that's when when they kind of saw the window of opportunity of of attacking it when it was when it was vulnerable and that that was one of the

kind of moments where where the death spiral then started and then the rest basically was panicking as as kendrick mentioned yeah i think you know the thing i i want to say is like my i mean my hearts go out to the people who lost their life savings their stories and i don't know if they're confirmed or not of people losing their life savings of people uh committing suicide and this this causing you know the majority or many of the losses are just paper losses right or losses among um investor class but part of the danger uh potential financial financial danger of crypto is that it's extremely volatile it's extremely risky and i think that a lot of people are not used to um thinking about money or even stocks in this way like i think especially if you're listening to the if you're listening to this podcast you're probably in a in a

country with fairly stable currency value and you don't think about that that currency is uh propped up only by faith that like money is a technology that humans use to aid in commerce but it's not a it's not a real thing and uh cryptocurrency is no different and if anything it's so early and experimental like this this sort of stuff keeps happening and it'll happen for a long time and uh you know it's it's this is this is not financial advice but like when i make an investment generally i'm investing you know like when i bought into the initial iron source listing after it's back right part my brain goes well this is a couple hundred dollars and in 30 years it might be worth nothing and it might be worth a lot more and i think it's more likely than not

that it'll be worth a lot more over time and so that's why i'm willing to make this bet and i'm willing to lose this money completely and i think a lot of the hype and discourse especially around cryptocurrency like completely ignores these ideas of the volatility and the riskiness of the bets and that you should never invest money that you're not willing to completely lose due to the riskiness of it i i think that you know both between governments providing currency stability and then business stability in times of crisis people are not used to the um true uh implications of capitalism that it's almost evolutionary that things are bound bound to fail um so uh i guess uh my point is i really empathize for anybody who experienced real and painful losses as a result of this unwinding and you know as always do do your own

research make the choices that are right for you um based on your personal uh risk profile um so you know given that like uh in in hindsight what are the it's it seems like there were some obvious mistakes along the way or there were some mistakes along the way right not not spotting that this collapse was happening and taking more uh preventative measures do you feel like that was is the decentralization of of terror or similar networks does that fight against the ability to take action in time of crisis um i think with terra it's a very specific kind of example in the way that it that it was designed with this kind of dual dual token system most other networks do not uh do not

have this um bitcoin is a is a hard asset it is a hard asset like the protocol itself doesn't have this redemption or issuing mechanisms of two assets so i think this was very specific to uh to terra unfortunately yes i think something they they could have uh or something that i think i felt they get a lot they got a lot of criticism for uh after these events started unfolding uh and and there started being hysteria is that some of these accounts on twitter like the founder as well as the the foundation guard uh went relatively silent uh weren't providing too many updates on kind of where where where things are going in the war room uh and uh taking preventative measures what's happening with the lfg and then it was um just announced like or clear a couple of days later that the

that the lfg reserve was empty or they were they were all being used already right uh and um which led to obviously a lot of just like free speculation about not knowing what's going on in within the core team uh behind uh behind the project so more transparency could have helped with the faith aspect of it and along with what you said previously about um slowing down at least as a part of the probably at least as part of the damage control kind of post post as well because now now the founder is is again participating in the discourse but he's not in a very good light and um not getting too much not getting too much love at the moment some even suggest i guess i guess my takeaway is still if you put humans in charge of these systems uh at one point or another they're going to mess it up

you want to have very robust systems i i see it really as an analogy to our kind of fiat system which is also not sustainable but again because governments are behind it we can draw this out over much longer periods of time but it's it's by no means different then i think this is uh some of the arguments that a lot of the uh the crypto bros as you guys uh love to refer uh to them is are making is that you need a monetary system that's actually backed by a hard asset or by an asset you know that's not being controlled by humans like the us dollar or ust was um but whether that's in bitcoin or ethereum or whatever it just has a fixed supply and that's transparent and that's issued by the protocol uh and there's no you know like ambiguity um difficult word for me uh you know what i mean i'm big witty and yeah that one see now you go wrong as well

in in the issuance of that it's very fixed like we know what's what's there take humans out of the equation i think builds more robust systems over time and again it was human error here at the end and not kind of the protocol worked flawlessly as designed uh it was it just had a number of design flaws yeah got it so kendrick you you were an early investor in tara what originally drew you to the this project in this protocol yeah i think at the time in in 2018 um there was not a lot of real world adoption of crypto itself right there was we just had like the ico phase and kind of real early stuff but people weren't really using it in the real world and this was one of the kind of pitch propositions of terra is that they were going to integrate with e-commerce

players and they're going to make online payments easier and better and you get discounts for for users and stuff like that so i think that's that's a valuable uh kind of goal that they that they had in mind um [Music] and a lot of stuff was experimental at the time and their model worked but again we actually exited this position early 2021 when we saw kind of how usd issue is going uh going slightly exponential um and it just diverged from the original thesis that the company had or the protocol had and i think that's one of the interesting parts of of tokens or um yeah protocols is that you can change your mind over time if it diverges from what it originally set out to do you can actually sell your investments right if you had had a pure stock investment and there was no public market and no purchasers you would have

been uh probably wiped out i mean seems like that's how history is going in terms of this investment but you as a if i'm understanding right as an investor you said hey i invested in this with the specific uh use case and theory and and risk profile and the behaviors they're taking are getting too risky for me they're like leaning into what seems like a flaw in the system so i'm going to take my wins now right and even if you didn't take your wins at the peak right at 120 or whatever it was uh you probably made a really healthy profit and um removed that risk right for you guys personally yeah and of course that's a little bit sour in in einstein to to to say um and for for the past year i felt pretty much like an idiot

because still went up 10x after after we sold right um but the the point i'm trying to make here is that the liquidity in some of these protocols and tokens just makes for very interesting markets because you have higher investor turnover you can change your view over time as you see fit which is very different right from traditional venture funds where you're just locked up in your equity for for 10 years or until there's some kind of exit you can be much more dynamic with with token projects yeah you know i have uh some on the game i'm working on right now um one of the conversations one of the many conversations we're having right now is about staking and my personal opinion um when i look at it is that within the realm of specifically of of game economies

um staking to me feels like pure um uh financial engineering or pure manipulation right like when someone stakes tokens they say i'm gonna not spend my tokens for a set period of time and you then give them more tokens and this uh provides utility uh in a world where there isn't a game yet right or there's nothing else to do what can you do with your tokens well you can lock them away to artificially constrain the supply to increase the value of them um and so my again my personal theory is that uh in terms of game utility we don't require this form of staking um because you should launch a token alongside a game that it can clearly be used in and that provides the utility for it and if people are um uh acquiring the token it should be for

for in-game use or to sell the people who have true in-game use so you know i i kind of view uh staking is is pretty risky and kind of financial engineering or covering up for lack of product and use case um do you guys what's your response to that uh position do you feel like that's warranted um was staking a critical flaw here um is taking you know kind of what are your what are your opinions on staking and do you think about that i don't i don't think you describe staking they just took the words taking and applied it to just locking up your tokens the idea of staking it that you also put something at risk right that's why it's proof of stake right so if you are a malicious actor or you don't validate the chain you might get slashed on your stake you're actually putting economic value up to secure the network and if you don't do a good job you get slashed and you lose some of that value but i think

that's the way that some uh others have implemented it is just yeah you just lock up your tokens and we give you a yield for that that doesn't make a lot of sense yeah and that's mostly and that's i think quite typical what we've seen the gaming projects for quite some time is that and as kendrick mentioned usually talked about is taking but it's it's more as a lock-up program some kind of a log up program promising more future rewards and usually tied to if you lock them up now you'll get bigger rewards in the future and that's and then that's similar to for example how step in currently works which is this um um walk walk to earn uh product on solana currently that has had a lot of traction and uh naturally this this kind of staking reward lends itself to quite good uh user growth because a lot of these users come in for the promise of future returns right and then you're just kind of prolonging that process by promising better and better future returns for the longer time you you you

lock up your tokens and and then they're not but obviously if someone starts cashing out then it's and and the user growth starts stagnating then it's gonna then it starts being an issue also for these products so so it's almost like um if a product implements this kind of a token reward program or system for the users uh and that kind of exponential user it kickstarts the exponential user growth because people are in it for for kind of the rewards then that's almost the time you have to create valuable things in the product if you don't have those because um all these things of of locking up your tokens yet again for bigger rewards they wouldn't be considered as real things because they aren't really providing any value there's no value that the user is paying for uh and um yeah now deviating a bit from the from the original question but but that's mainly probably the kind of program you're referring to

so so two two interesting points there one is that um the way i'm even talking about staking staking rewards and the way i see it a lot in in public is not what is not true staking as it's intended where uh staking is part of running the network you put up collateral for the right to run the network and validate transactions and if you fail to do your duty properly you're penalized right uh mostly it's just uh presented to to users as a lockup protocol with rewards um and that it has a valid use case for marketing right you can look at it as a marketing cost to kickstart your growth but um it can uh be a double-edged sword in in that way um something that's really interesting you know so like come to ux uh com

come to us is a uh developer that i have a lot of respect for they make games and similar to the ones i've done and they've done really great job with with a lot of mid core rpgs they just released chromatic souls afk arena i i have it on my uh phone right now i've been playing it the arts beautiful and i know vaguely that it's tied in that it is a blockchain game although because it's i'm playing on the phone i haven't everything about it being part of the blockchain or having blockchain is is uh walled off and i haven't yet discovered it outside of the app but i i know that um they're not alone in being a developer who was uh building on this terra ecosystem and so like what what happens now what happens if you're one of these developers um in plays uh a

portfolio and they were building on some chain and the chain basically collapses what what options do they have now yeah um i i think in general we always or the the deals that we look for or uh companies we're interested in like we always say we wanted to build on credibly neutral layer ones so robust layer ones that we think have proven themselves over time and are robots to semi-robots so ethereum obviously uh some of the ones around that polygon avalanche is coming into that solana to to a degree so i think that's kind of the we're looking for the main change to uh in terms of companies that we invest and when it comes to terra more specifically and the companies building who have or who have built on that i guess they have the option to migrate to to cosmos because that's the same underlying

technology that they can actually go on um but i think everybody's kind of waiting for it how it's playing out because we don't know yet there's all kinds of proposals should we fork the change we do should we restart it it's actually up and running now i believe that the delegation is is kind of frozen so you can't change the the validators at the moment but the chain is up and up and running so are we going to have a a new start of this chain is going to be different chain i think people are kind of waiting and seeing what's going to happen um but then yeah i think they'll have to migrate and over time people will i think converge on just the proven and solid layer ones yeah and clearly i think what we've seen and also from our chats with the alternate layer ones and layer two is just that that's what now obviously they're seeing an opportunity now to be quick and on boarding

i think a lot of these are are trying to poach coach developers that previously were building on on ontario or or were looking to build ontario to to work on their change as well i mean just if you uh uh compare the feature depth and art of chromatic souls to a lot of um what's currently playable in in the general blockchain ecosystem most most games aren't even playable like if i ran one of those uh networks i would love to have this game at such a high quality on it and i'd be trying to figure out how to basically vampire strike and and get them over uh get them over to my network um so when when developers come to you guys i know that play is a is an early uh stage fund have developers generally chosen a chain for their project or projects is that something you help them with like how do you

it seems like a really critical choice for a game company to make and actually quite um quite frightening if you're thinking about it like literally this week when you're like when you're seeing the uh the possibilities of what can happen um so how you know what what are uh what stage of the decision making are our game companies coming to you with and and how do you help them with that decision so i think at varying levels some have some already have an idea of what they're going to build on some haven't really given it much thought obviously if you're if you're coming with a free-to-play background and a limited understanding in crypto but you know how to make games then it's probably not not as straightforward as as a lot of these kind of value prepositions look very similar um i i think as kendrick said we we don't have like a clear favorite that they you should just be

building on this one i think it comes a lot down to to to the intricacies of the the companies themselves and the games that they're looking to build and um at the end of the day i think there are there's only a couple of key things you want to you want to be maximizing for right now and that's obviously that it's it's something that is as proven to be as secure as possible ethereum is likely going to be difficult to the current issues in in scalability but looking at some of the adjacent ones the other ones mentioned obviously polygon as it's evm compatible uh avalanche being uh being a newcomer salon also being one but again a bit more secluded due to running on a on a different on a different language [Music] but i think i think we need to also operate with the assumption that the end user probably is not going to care too much right uh in in the next few years when

hopefully a lot of the complexity will be abstracted uh through better wallet design hosted wallets for people who really don't care about kind of self-custody and managing their own wallet kind of obfuscating that in the background and having these having these games feel like any other free-to-free-to-play game basically with the same kind of frictionless design as you would experience in in anything else right now but but um obviously it takes a bit of time to and from from very very different companies to get to that point so currently currently security definitely being one but this and it's something that's not gonna shut down that it's gonna keep up running similarly to how you you wouldn't want aws to immediately just shut down yeah and then would have to think about migrating somewhere else now obviously some of these some of these organizations and foundations behind these solutions are starting to get quite big uh not only from a support perspective

from personnel support perspective in terms of integration but also from a financial standpoint and i think it's also not more about kind of where do you find that you'll have a mutually beneficial partnership that you'll get both engineering support business support is there funding that could be leveraged uh from some of these organizations uh and uh not so much maybe about those tinier details uh and then it's i i i mean it's a talent question as well so if you're working with a team that already has in-house rust talent uh then probably the low low threshold solution there is to go for solana because it's based on rust but if it's team that doesn't have rust developer talent and even if they don't obviously most don't have solidity developer talent uh i think what we've seen in our portfolio is is that instead of trying to go out there and recruit those really expensive experienced solid developers because um

they're either they're either retired from their ethereum gains or then they're just uh uh just have very very high salaries because um probably an experienced solid developer is probably one of the most hot commodities on the planet right now so so what we've seen is is having backend developers that have an interest in kind of getting around the ropes of solidity because at the end of the day the contracts that these studios need for for their nfts and uh and and the tokens in the in the game are aren't aren't too complex and and we've usually seen the teams trying to build that knowledge in-house um and and then if they build on polygon for example they get to piggyback on everything that is being developed on ethereum due to them being compatible with each other and obviously there's still a lot of r d uh focused on on ethereum lots of organizations focused on on grant programs we're developing tools for

ethereum development uh different kind of developer frameworks for that so so i think i think that's also kind of a part of the whole composability aspect that and that sort of it's an easier time to deploy something on polygon when it's been developed in ethereum but if if we're looking to have those editions on solana as well then it's probably a longer way to go in that sense so no kind of clear question but i think where we just what we try to do with developers we try to hot not without this being too much of a sales pitch trying to kind of highlight the questions you you want to be asking yourself before before making these choices but luckily you can go quite far into game development before actually having to choose uh choose these things or i mean dependent on kind of what level of of of on-chain elements you want to have in the game yeah that's an interesting point about the um experience level on the team you know i i liken this period of time very frequently to the explosion of facebook

games and at the time like it was a giant talent war for flash developers and people who were experienced in as3 and there were so few of them and the set you know like recruiting them seemed impossible and salaries were super high and at electronic arts i remember we actually had just as much luck taking experienced knowledgeable developers who were interested and like learning action script 3 wasn't it wasn't painless but it wasn't that hard um and it was actually a lot simpler than um trying to fight over the same four people whose experience in game development was like using flash to build slot machine games you know it was a very weird time and so from a talent or perspective i i feel like find someone who can code and and is interested in learning and and work with

them to to learn the new thing and don't fight over as you said the the same small pool of people who are either rich or extremely expensive yeah find someone who looks at solidity like they look at c plus yeah um what what do you do you think this uh incident impacts the future of stable coins i mean if anything uh a stable coin as far as i can tell it being called a stable coin that's just a marketing spin right it's just intention there's nothing that uh can magically force a token to stay exactly on the value of the us dollar um does this shake your you know as investors how do you think about the future of stable coins like is it going to be a thing are we going to witness the collapse of more of these stable coins in the future or does it serve a really

critical uh role in in the blockchain ecosystem i i think unfortunately it's probably given a lot of ammo to the regulators to step in and to step in maybe a little bit early when the technology is still so so nascent and obviously they've been eyeing this industry for a long time right because they were experimenting with monetary assets and potentially even assets that are a threat to the kind of national banking system uh of several several nations i mean uh bitcoin is being adopted as legal tender in three countries now you know there's more more to come probably so but yeah this obviously invites regulation and i don't think that's bad necessarily if it's done in a thoughtful way because yeah like if you look at uscc that's pretty much a regulated stable coin out of the us that is one to one backed with a dollar in the bank so

that should just be one dollar straight up um as again except for you know the us government freezing those assets for sanctions reasons but that's no different from your bank account so yeah i think it will invite more regulatory scrutiny and the big problem i think we've seen over the years with multiple regulators around the world is that they just do not understand the technology right um at its core and because of that they make bad regulation and that's more of a threat than anything else i think is bad regulation so i'm i'm very um [Music] optimistic on countries who get this right do it thoughtfully and get it right because that's where a lot of talent will flock um but we'll see europe is not doing a great job here they've trying to pass all kinds of uh i mean europe does what europe does which is make rules and chase take all the talent out to to

other places and u.s is a bit messy but i think they'll get it right in the end um so we'll see there's a lot of regulatory arbitrage going on at the same time but yeah of course this invites the regulators to come and take take a look in our in our corner any um i i know we're kind of out of time any closing words to game developers in the audience if you were someone who was thinking of red pilling or thinking of making the switch to blockchain and and this uh incident might have scared you away what would you say uh to game developers about your belief in the future of uh blockchain technology for gaming do you have an inspirational quote there already anton no i mean uh i think the same thing as applies for investing do your own research and try to try to map out the risks and and

don't go too fast i would like to give a lot more sort of actionable advice on this but the fact is that the the industry is still young i mean in a manner of sort of quite a uh short span of time we've seen two obviously one uh that we felt at the time was quite big with uh with with the uh the attack on the ronin bridge uh but then again dollar wise we're talking about tens of billions of value that was evaporated uh here during uh during the lunar one so so obviously keeping in mind that it's a it's a very nascent industry um and i don't mean to say in that that it's okay that it's okay for this stuff to happen i i think i think um obviously it should be avoided avoided at all costs but when it comes to come to developers choosing choosing what to build on uh there's some of these have already a a better kind of um and more solid history behind them so so just trying to try to keep that in mind

by doing their own research i'd say for for anyone looking to enter this is just a mega trend like this is the opportunity of a generation uh to really get ahead and do something different than be innovative again uh this is as big if not bigger than the internet itself get involved it's a blue ocean like come up with your own things experiment start companies start protocols um it's just yeah you're going to be you're going to be golden for the next 20 years this is the i think the only tech opportunity in the world for the next 10 years where you really have a great opportunity to innovate whereas the internet has been become pretty pretty siloed and stagnant and there's multiple ways to make money but there's also multiple ways here to make the world a much better place and that's why some of these systems are being developed and

it's almost like little nation states the individual networks and philosophies behind them right like bitcoin has a very strong type of libertarian band ethereum is much more kind of liberal inclusive type of uh place and yeah find find your gang and and hook into that ecosystem and build great stuff i think you'll you'll do you'll do very well all right well with that uh we will wrap it up thank you in the audience for listening thanks to our sponsor and uh kendrick thank you for coming on and uh and uh guesting for the first time i hope we'll have you back again in the future thanks ethan pleasure all right bye friends