TWIG 149: Reaction to Axie Infinity’s $1.2 Billion Annualized Revenue

before you start with the story you start with this axi infinity stuff dude i have gotten non-stop uh [ __ ] about nfts these days nft nft nft dude like big people like in this industry are calling me and think ask me what they think about nfts and i'm like you know i don't know [ __ ] about nfps except that i i i appreciate them and i think they're interesting and i think they are good use of blockchain but i have to do some work on this right and uh and i'm looking forward to get getting your thoughts mr adam um i feel like i'm in the same game i honestly feel like i'm in the same boat like there's so much happening here that i can't wrap my head around whatsoever it feels like i need a phd in macro and economics to understand what's going on here i'm going to give a shout out because uh my buddy uh mike termezzi works at from kabam use is working at forte right and i meet with him like at least every few weeks right um i guess we're drinking buddies and he lives close right and so every time we

start talking about this [ __ ] and i swear to god i i don't understand half the [ __ ] he's talking about right and so that's why i like because it's so complicated and so um uh what's the right word i don't know it's just culture it doesn't seem real right it seems so [ __ ] cultish on on across all these different executions that you know there's so many there's so many leaps of faith that that whenever you're talking about people that they just kind of brush over right as if yeah right that that's where i started to have issues i think i might have done this on the podcast right but i'm gonna do it again so like two years ago i did an interview with him like a a a panel type thing and we were just having this dialogue about it and what i basically said then is what i kind of still believe now is that it's a chicken and the egg thing you need to build the content that takes advantage of the blockchain you can't just put blockchain on top of [ __ ] content right you can't put blockchain on world of warcraft or whatever and and and what we're waiting is for the killer

app and so now we're starting to see these killer apps getting built but they are [ __ ] come come out and get crushed you know it's like there's nothing being sustained you know and so like this is what i i continue to be concerned about whether or not these marketplaces are sustainable and the amount of money that's being pushed into them is [ __ ] nuts but anyway i'll let you continue because you have given this a little bit more thought than i have um and then i'll i'll follow up with my i'm assuming that we're in in terms of technology right but we're in the state of overhype right that that second stage where you get this you reach this adoption level but it's overhyped and there could be a correction right um but anyways let's go into the article actually i'm kind of merging through here there's one which is actually infinity reaching 1.2 billion and annualized revenue has now overtaken candy crush's 2020 total revenue as well there was a documentary called

pay to earn talking about nfc gaming in the philippines and a number of articles looking into actually infinity and whether or not it's sustainable so the reports are now saying that actually infinity has made roughly 850 million in revenue in august note that is not trading volume which sometimes gets conflated this is actual revenue to the developer i don't know if that's gross i don't know if that's net but it's comparing that against candy crush's 2020 uh uh estimates anyways this is the point where like critics like me have to gut check or assumptions on this market right because i honestly i can't wrap my head around it it still feels like a giant pump and dump scheme there's so many of these nfts that i'm looking at online that people are going for thousands of dollars and it just looks like junk right on top of the the weird things of of how much value can you associate with the digital asset you're only giving value to the blockchain address anyways you've also got things like nba top shots um off

it's high and pump and dump schemes like gamestop right like there's just been so much of this happening that it's really difficult to pull this all together and then look there's obviously a massive crowd of people willing to play nft games and this game in particular actually is a meh strategy collectible game um but like it's better than any nft game before but overall like my linkedin is going nuts with people now saying that the tipping point has happened right this is now a real thing we've reached mass adoption 850 million can't be ignored in a single month so i did it i dove in and i watched a documentary because i ain't playing this you're so brave i'm so brave i watched the documentary on youtube why don't you buy some [ __ ] dude i'm not going to spend a ton of money like what is it like 700 to enter into this market i'm not gonna do that dude you got your kids college fund right no that's what this is that's for

right that's making these investments these really smart prudent investments uh maybe when the price goes down maybe i'll i'll buy into something like this or i'll check out the next rising one but anyways just watching twitch watching youtube like this documentary i definitely recommend watching because look it's obviously biased but it's just interesting right like goes into why philippines is really their number one market i think it's only like 40 of their revenue and 40. the fact that the philippines is is number one market is frightening in and of itself that that economy is absolutely tiny right and like look like basically they're talking about how a lot of the early adopters in the philippines when they bought in at something like five dollars per axi are now full-time workers right earning something like 700 to a thousand dollars per month um earning that soft currency within the game that can then be cashed out for that much money and that's playing the game as their job right that's great um and especially during the pandemic when a lot of shops shut down that's that's great to hear it's just such a weird video and actually about halfway

through it starts to feel like i'm watching a cult video or like a pyramid pyramid sales like sales pitch but for like gen z it's weird it's just weird it's basically like how people are being lifted out of poverty playing nft games which is great but now the entry price has reached too high that they're setting up axi universities which pay the entry fee for people to come in they pay the 700 plus dollars to get into the game and then profit off of those players engagement and that starts to feel like a pyramid scheme to me right and comparing this video i think to a recent post which is on is actually sustainable it makes the point the value of access tokens are really just tied to the influx of new players because as you'd expect there's basically like a finite set of characters that are actually required to compete in pvp it's the same thing in most uh games right like prop gen of game play impacting assets doesn't

really exist doesn't really create any sort of fair system and from jeffrey serlin whose axes growth lead the quote comes from an interview like as long as there are new players outnumbering the number of current players you can make that money back that's 700 in two months which again smells like a pyramid speed the article then points to axi like the definition needing to shift to a real game that's fun with intrinsic value to players besides just earning money which goes against pay to earn right still saying pattern can be an incremental gain but should not be the core focus of the game and that the monetization of nft should shift to scalable assets like virtual land and cosmetics which to be honest i can't agree with like i think proc gen of cosmetics can absolutely exist in an economy but this type of system doesn't really work and also points to articles by the sec that have said they're actively looking

into sky navis which is the company behind axe infinity as they lack the license to conduct any regulated activity in the philippines um like in general this looks like there should be legislation coming down on it i don't know if there will i don't know when but it feels weird uh obviously i have a ton of gaps in knowledge of nfts and blockchain games that i need to get educated on we should absolutely bring back ethan because i think like 850 million revenue just cannot be ignored and i think like in general my position is still that we are in this hype phase that is due for correction but that doesn't mean that the technology will go away creature collection rpgs perfect fit for blockchain game gaming and i think i feel strongly that cosmetic economies even built on existing retaining games like fortnite are actually right for blockchain so i counter eric's point there i believe cs go has already proven that you can build effective cosmetic economies that are driven by a marketplace on top of an existing game

that is fun so it just feels like engagement and value are tied to a positive feedback loop which is hype and to the point that earn to play breaks the play experience the game experience when you have to pay 700 bucks to even get in the thing and when the reason you're playing is just for resale value or really what's going to happen is as soon as there is a shiny new token in town people will shift to whatever game is most profitable to them so the question becomes like is this actually a sustainable business model that's still what i'm scratching my head about yeah again nfts are just hot hot hot right now you know our slack channel's been overloaded with nft stuff like let's put this [ __ ] in another channel dude um but i get but at the end of the day like you know we there's all actually i was reading the article that you posted and it's just it is a total like meme you know it's like this guy who

is involved with this nft uh is pumping this thing up right and talking about the first thing is annualizing a run rate for after 30 days is just not smart at all right like that is a clear like manipulation of data whether or not that data is real i don't even know to be honest keep in mind keep in mind what they're talking about 850 million in one month right which is august i think that's already a data point we should take the whole like comparison to candy crush's year rate like yeah they had this massive spike at the end the 850 million before that point that the revenue was nowhere close to that right but if you do look at the trailing 12 versus the the 12 months that they can make comparing to candy crush yeah no it's they're saying that within the last 30 days they're on a run rate to do 850 million or 1.2 billion yes i think that's the way it reads to me but but again like i regardless of what the data is i don't believe anything that they're saying to be honest but like but if you look at

nba top shop when things are going well of course we see all these announcements and stuff they did like 230 million in gross sales in in february right which of which they took five percent this is the top shot right so that's 138 million dollar run rate you know at that time for topshop and they raised 250 million at a value of 2.6 billion at the time right so and and that made sense because their run rate was amazing but monthly revenue fell from 230 to 53 down 76 by june and then 34 in july right so run rate went from 138 million to 20 million for their revenue so it's like yeah you could do all the run rates you want right but that and now the company i think is worth over four billion or something insane right and so with top shot there's all kinds of structural issues the reps that website was crashing transactions weren't going through and the big thing was that you couldn't take the money out right so

there were like some they were claiming some fraud detection thing right but that's [ __ ] right it took 21 days to 40 days to get your money out of this whole system right with relatively significant fees so it was an artificial economy driven by lack of liquidity more than anything right so that was just total horseshit but we don't see any coverage of that all we saw was you see coverage about like the 250 million or 230 million gross sales they did the first first month right which is to be honest comes back to the beginning of the podcast we have to be very clear about what investments we go into because it's we can't be hypocritical of the types of articles that we're we're covering here right where they're basically propping up axi propping up nba top shots because most the writers here are in those ecosystems right uh yeah we we can fall victim to this just i don't write any of this [ __ ] what are you talking about dude it's a total horseshit and axe infinity is gonna be the same thing like who's gonna be left holding the bag it is it

is a total ponzi scheme in a lot of ways right all right so again i am a believer in nfts i believe in digital ownership of items i think that is a very very very very big opportunity right but a lot of this stuff is crazy and cultish and it's it's execution and it's more of of the bitcoin type folks as opposed to actually people designing and developing real ecosystems you know that that are real right it's just extremely unstable it seems like it's built that way you know but this [ __ ] is happening and so when i i because everyone's gotten so goddamn interested in it i'm gonna do a little bit of diligence on my own and talk to some people that are kind of experts out there that are they're doing including my buddies at uh um forte uh and they have the rally token i guess uh but we'll see what's real and what what what how much of this hype is actually sustainable you know you know over over the long term but again i just want to be clear like

but digital ownership makes sense to me like owning digital assets i think is something that is intrinsically interesting from the consumer perspective and and executing against that is going to be very very quote unquote lucrative but the way these things are going right now is it's all it's all speculative it's not it's not it doesn't seem to be real businesses so but maybe i'm wrong maybe these are the this is what it looks like for first movers in this space you know so i don't know any other thoughts adam i i don't think you should become a twig for nft news obviously with the old guys in the room being like what the hell is going on on the ground floor i don't know i feel like i feel like i feel like there's a lot of money going into this and that's why all the products are coming to the market are just too fast to the market and there's and because we haven't seen till this date that these games can actually generate significant revenue a

lot of so-called serious game developers haven't really invested into nfts and and haven't been making the push or or they are by now but their products are not yet out so we're kind of seeing the first iterations of the products coming out with nfts that don't really make that much sense but they are just the only ones in the market and that's why they're succeeding and that's why their lifetime is so short but i think in the future i'm as bullish as you guys about nft i think it just needs a little bit of a time for more um you know seasoned developers to come in with products that actually make sense where the nft is is a crucial part of the whole whole economy feel like i feel like the nft portion can be cosmetic and optional like when we say like it has to be part of the core like i think this can exist in a fortnight ecosystem where the gameplay is fun and retaining on its own there's live content there pulling players back but cosmetics is the the one system that nfts touch which then is scalable and valuable given how

much engagement the base game gets but you would have to have some kind of a trading than than in fortnight for example like if you earn certain skin then you should be able to also sell it and then when you sell it then epic would take a cut out of that sale yeah that's exactly literally how csgo and pubg have on steam yeah i mean this is part of what my diligence or is going to try to be but the legal implications of that are something that these big publishers can't do right if you're cashing out i mean that's a that's a that is an issue yeah this is exactly how the cs go how they operate with that hot water when you know they have boxes in their game people were gambling on those loot boxes yeah yeah big fish you know did the same [ __ ] so at the end of the day it's like um you know this is what this was the point that they said when i was like kind of pushing back on this nft thing he's like well dude this is what people said about mobile you know free to play was never going to take off like no no no i wasn't saying that at all back then i mean i'm not i'm not it was a naysayer on free to play dude i'm saying like

there's no rules it's like there's no rules on this this is like like total pump and dump [ __ ] you know like these articles that are written are nuts you know and so um anyway i'll do more work on it maybe i'll have some kind of rant or some kind of investigative journalism going on here um on what what what what what how about this more on the i the idea here what's the angle what's the future of this like what does it look like when it is established players that are actually building ecosystems that are actually sustainable instead of like you know go up to like a gazillion dollars and then come down to zero within like two months you know like what does that look like in the vision of these entrepreneurs because these guys that at forte have been doing it for years right this is not like they've been building these tools and technologies for years now so they must have some kind of idea what they what the you know end game looks like yeah the the thing is that they don't know games and that's why that's why i think it's just it's not clicking yet but i think it's just a matter of time but we'll have a lot of ex

right very smart yeah they have some gamers there okay well let's see oh i gotta have them on the podcast and and discuss these type of stuff so yeah let's do that but let's send this podcast