What Can the Bitcoin Lightning Network Do For Web3 Gaming?

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might mean for web3 gaming uh as most of our listeners will know just about all games that currently integrate some kind of blockchain Technologies uh are either on ethereum most likely via a layer 2 solution such as polygon or immutable X or they're building on a more scalable but less decentralized layer 1 chain such as Solana or Finance smart chain but Bitcoin the granddaddy of blockchains has not attracted much attention from game developers and for some very good reasons but mainly because on-chain transaction on bitcoin is very very very slow and while Bitcoin was probably never envisioned by its original Creator Satoshi as a gaming platform that does not mean that game developers couldn't or shouldn't build on bitcoin or integrate Bitcoin in some way shape or form especially given how important Bitcoin is to the overall crypto market share and mind share but in order to make any Headway on bitcoin if you want any kind of scalability a layer 2 solution is required just like on ethereum

and so this is where the Bitcoin lightning Network comes in uh I am not technical so I'm going to be very careful about how I describe uh what the Bitcoin lightning network does um but my understanding and our guest today is going to go a little bit deeper on this is that it was originally conceived of in 2015 uh and the lightning network is designed to overcome the scalability issues inherent with Bitcoin by opening up a series of bi-directional payment channels without delegating custody of funds and that's as technical as I'm going to go and you as a developer you're saying hey fantastic but what does that mean for me as a game developer can I really build scalable accessible Mass market gains on bitcoin and to answer that question and to dig deeper into what the lightning network does and is and what it means for game developers we have a great guest on the Pod today he is Ben Cousins he is the chief strategy officer at zbd which is building Payment Processing technology on top of Bitcoin using the lightning Network and zbd's stated Target customer is the gaming industry

and so he is perfectly positioned to take us on the journey into the bowels of Bitcoin and what it might offer for gamedevs Ben welcome to the pod thank you Nico I'm looking forward to taking us into the bowels of Bitcoin as you put it fantastic um and uh as a kind of full disclosure note here zbd is also a navic sponsor uh but I can assure you that us podcast hosts have complete editorial Independence and that the lightning network is actually a topic I've been wanting to cover for a while anyway so this is a happy coincidence um that Ben and DVD uh are part of the the novik ecosystem as well so with that intro out of the way let's get right into it um and I always like to start with this question especially with folks who've got a long and storied career such as our guest today um what was your journey then into web 3 and specifically with this focus on on gaming in web3 yeah I think interesting because I think a lot of uh the time I introduce myself

is usually around the gaming site but I'll focus on the the crypto side uh given the subject matter and I I came in I'm crypto class of 2015. uh I was introduced to I was first introduced to bitcoin by an Argentinian friend of mine who was using it to send money home and uh I was open-minded enough to try it is the way I'd describe it and uh I I was a music pirate in my teens is to disclaim uh things lightly and when I saw the public key encryption the way that Bitcoin transactions worked I had a bit of an aha moment I would describe it as and I I was really quite open to the idea of a digital form of money at the time I was very very skeptical but I was open to the concept that this could come into existence it wasn't uh you know it wasn't inherently a pyramid scheme or anything like that I could understand that cryptographically this might work um I think ethereum Kate was around a

year old at that point and uh I started playing around in that ecosystem as well um this is you know back when the one I think it was a one minute block time he's had back then and it was if it still does I'm it betrays my lack of uh awareness now but the um I remember using it then and it was just much faster and much cheaper and that was the kind of uh way that ethereum came out um I moved from there and of dabbling in crypto kitties diving into Solana it was a very early participant in steemit as well which is like the first high-profile uh proof of stake failure I think um but then we yeah and then it sort of all went full circle when lightning came out and I I found the uh instantaneity of Bitcoin transactions to alluring so I kind of refocused on that and uh yeah that's that's where I found myself playing ever since I've just been I've been really Blown Away by the fact that we can now send money instantly online peer-to-peer with no Financial intermediary

I love that and uh you know most of our focus on this this podcast this segment of the podcast has generally been on ethereum or you know one of the other uh layer ones like Solana for example which is where you know block stars is building we're building our our product um so it's actually really refreshing and exciting to have somebody from the Bitcoin ecosystem to come on the show and talk about this because uh I don't think it gets enough attention and especially doesn't get a lot of attention from the um the gaming community and so that's my next question on your background um what's how did you know why gaming and Bitcoin right like how did you how did you find that intersection why are you playing around in that intersection at CBD yeah so that that then thanks for asking because that's actually where I come from I I'm originally from the gaming world my family worked in video games I began my my first ever job was doing QA for a video games company in Portsmouth in the UK when I was uh about 16 or so and I was I worked in games all the way

through into my early to mid 20s uh and then I jumped over into Investment Banking uh for this for the sin of it but I was over there and I was still working on games I was doing mergers and Acquisitions and capital raising for video games companies so I had this for me it was very much a bifurcated life where I was working on working in and around the games industry but then in my spare time really devoting myself to digging into crypto and Bitcoin and that whole ecosystem and trying to understand it um and it was very fortuitous that I found myself in around 2018 or so uh in a position to invest in in gaming startups I was working for a VC fund called latestar uh and I was I was leading a seed investment strategy for games uh and just as the web 3 kind of thing blew up uh and it was there that I encountered sort of all these different approaches to games plus the blockchain

and I think in many cases uh you know cynicism and all of the market stories aside there is there's a there there is there is something um that is tapping into there is something in in the collection of digital assets and the use of digital money in in interactive entertainment spaces that really does tap into something Gamers have been looking for uh I think that's my fundamental view there's there's a ton of noise around that signal uh and everyone's trying to sort of go after this a similar or same goal but I do think in a world where like a game where the money itself is is Fantastical the economy is something sort of somewhat managed or illusory it makes sense to use a digital form of value uh to power that economy um and I think that's where the sort of the market heated up and I I found myself most interested in the lightning

Camp as I said but yeah I really came at this through a get when it came to commercially applying crypto to My Life gaming was really the only Avenue I I had in front of me and it was very lucky that the games industry looked at web3 seriously you know in the last two to three years I obviously I was very careful with my wording I didn't want to get myself into trouble trying to describe something that I don't necessarily fully understand myself um but my my notion um and probably most of our listeners or many of our listeners notion of what the lightning network is is it's essentially a layer two for Bitcoin right that's the way to think about it um but let's go level deeper um what is the Bitcoin lightning Network um how does it work why is it needed what does it do I'll do my best here uh yeah so I mean I think if you know if you cast because there has been a lot of focus on the scalability of all kinds of blockchains um and it's interesting to me how how Bitcoin was has really been a very small part of that despite being the Lion's

Share of market cap and volume of the ecosystem um and I think I increasingly believe it's because it's a very different beast and how it's built and how it works Etc but that's perhaps a conversation for depending on how deep down this rabbit hole go um you know fundamentally I think everyone when they encounter Bitcoin has or any cryptocurrency has a very similar experience it's a bit of a wow moment and then you discover all of the flaws so in Bitcoin number one first and foremost is damn this is slow right even if I'm paying like a lot of money to get this transaction to the top of the queue and I've managed to understand that about how blockchains work this is still a 10 minute wait uh to figure out that my transaction has happened um lightning solves that problem and it solves it in the way that many uh well it solves it like in in the same approach to many other layer 2 scaling Solutions across many other chains which is it's a form of transaction batching but critically it isn't a blockchain so

the the lightning network is is not another blockchain on top of Bitcoin um it is something different and it revolves around this concept called payment channels which I think you touched on in your introduction um you can think of lightning as being like a giant swimming pool full of liquid Bitcoin I hot Bitcoin Bitcoin it can be instantly spent and received and if you were to look into that pool if you were to swim underneath it and have a look you would see it's comprised of thousands and thousands of payment channels between different people um to isolate that down to a simple example for you and Isaac um I you and I make might frequently transact together who knows what it might be let's say Nico and Ben run a tab with each other for uh the number of times we've been wrong about which web3 game is going to be a hit and we're transferring money back and forth

between each other um but we realized wow these these uh you know doing this on the main chain is really expensive and it's not really a good use of our time so why don't we just run this this tab we've got why don't we run it separately let's let's let's open the channel to one another you can think of it like having a bar on an abacus and we you know we tend to spend between each other 100 bucks so we'll size that Channel at 100 bucks and then until we're bored and decide to close out this bar tab between each other uh we'll just send money back and forth instantly and we won't report it to the blockchain we'll just trust each other that's that's the fundamental concept of a payment channel it's like opening a bar tab if that if that makes sense um where the magic comes in with lightning is that you and I might have a bar a bar tab open to one another so we can pay each other instantly and cheaply um but your friend let's call them Peter uh might not have a channel open with me so how do I pay Peter instantly on

Lightning well the answer is I can hop through you and your incentive is you take a tiny fee for the pain of having to take a payment from me and root it through yourself to Peter um that is called the gossip Network and that is how through the kind of concept of Six Degrees of Kevin Bacon the lightning Network allows you to actually send to anyone on the network so as long as you're connected to one person who is connected to another person and who is connected to another person you can follow that chain all the way through to for your payment to reach its destination um I'll pause there because it was a bit I was trying to explain a number of Concepts but is that is that much clear to you yeah I I mean that that makes a ton of sense um I'm curious as to why this has not been necessarily adopted to this point um by the mainstream by game developers in particular obviously this is the the topic of our show

um so in a nutshell what is it what is the lighting Network actually offer game developers so I'm I'm a Game Dev I'm deciding which blockchain Technologies to integrate why would I choose to build on bitcoin what does the lightning Network do uh what does it enable me to do as a developer um I think the way to look at it is is Bitcoin is fundamentally a value transfer mechanism right it's not going to and this is a this is a well-known criticism of it um which I view as more of an asset but that's again a separate conversation that the you know Bitcoin doesn't do more than payments it lets you send value from A to B and thereafter you're done with it and it's either in your bank account or you've sold it um and when I say bank account I'm in your wallet but uh the you know what what lightning allows you to do is have access to an instant global payment Network and I think something that people do not appreciate about lightning is it's it's blockchain agnostic so technically any chain can run lightning

the fact that those some chains have decided not to is a mystery to me uh there was a project on ethereum called Raiden which was a form of lightning Network for ethereum it was I think it was abandoned uh a fair while back um Litecoin does actually run a form of lightning Network so it's really a very effective means of value transfer and I would approach it as being the cheapest and most affordable form of sending value online that has ever been created and when you say what can games developers do with this I would take the approach that games revolve around transactions right whether or not the game player or the gamer is aware of that ultimately the commercial viability of the product revolves around transactions it revolves around in-app purchases or ad consumption both of those are forms of transaction in my opinion if one is one is monetary the other is not the other is a form of you

know you trade your attention um but for the provider of that product for the video game developer both are forms of monetization um those forms of monetization carry costs right so when you the the most well-known uh sort of Baddie in the room is the 30 Apple tax or 30 Google tax you pay on IAP um but there's equally transaction costs associated with any form of payment you know it's in the range of three to seven percent for credit cards it's in the range of you know you're losing um money on on ad networks through take rates at various levels of the stack um on Lightning you can process payments as small as one one thousandth of a cent so this is very small amounts of money you can send those economically uh and when you can do that you can actually do a lot more in for in the form of rewarded engagement for your players um this means you can take the cost of an in-app purchase down to sub one cent

if you want to and there's a lot of evidence in the video games Market that the lower the price point on the first IAP in a free to play game the higher the conversion and therefore the higher the ultimate LTV of the player yeah but equally you can do and this is what we're really seeing happen in the market you can do a lot more rewarded experiences where the unit economics actually work so if I'm you know let's say I'm a casual games developer and I have bought into this web3 thing I've decided I've got to do it my shareholders are all on board you know I need to enter this Market um how I have an arpdale in my across my portfolio of casual games of like 15 to 20 cents and my players are distributed across multiple territories it's tough for me to crack an LTV higher than a dollar to a dollar fifty how can I possibly send out something of value

when the transaction fee on the network could be like 20 30 cents and then I've destroyed my opt out for the day like my unit economics don't work well when you use lightning you can pay out rewards as I said there are a fraction of the Cent and all of a sudden the economics adds up you can send a player a few hundred satoshi's that Satoshi being the smallest unit of Bitcoin it's one 100 millionth of a Bitcoin so you can think of it like Bitcoin pennies um you can send a user 100 satoshi's that's probably about one cent or two cents and their engagement goes through the roof because they're playing a free game that just shared a portion of its Revenue with me just for the sake of playing it I've now got something of monetary value out of the game and that the unit that I received is liquid worldwide with multiple off-ramps so I can then go and spend it immediately um I think that's something else that

isn't appreciated about uh the Bitcoin and lightning networks and that is that there is an exchange in pretty much every country with decent liquidity so if you give that if you give a unit of Bitcoin to someone in Indonesia and they don't have any interest in hoddling as we saw in axi Infinity for example they just want to sell it to buy goods for their life uh Bitcoin can sustain that sale pressure because it's liquid enough right so a million people selling individually 25 30 cents of Bitcoin a day doesn't move the price of Bitcoin uh and that isn't a very powerful form of rewarded engagement for a game developer and you ultimately increase your retention uh which drives up your LTV and improves the unit economic performance of your game I think that's the best answer I can try to give to explain how you how and why you might use this oh that was a fantastic answer uh and it actually leads nicely into my

my next kind of line of questioning um which well a couple of questions here um you mentioned axial Infinity there which is great because obviously that's the you know the biggest example of you know rewarded gameplay I.E play to earn up until this point and obviously we saw and we've seen with just about every play to earn game if you can call them games um that they're not sustainable um and what you alluded to here is hey you actually could create a sustainable uh experience because you can't move the price of Bitcoin unless you're absolutely talking about massive numbers massive whales which of course you know those players those people individuals don't need to be rewarded right um through gameplay so so they're you're saying there's this there's this world where you could actually create a gameplay experience where if you are choosing to reward your players it would be sustainable from a kind of a macro economic perspective um now obviously it's going to cost the

developer it's a lot cheaper to to create your own token out of thin air um and reward people with infinite Supply drivers to your point Bitcoin has monetary value which means me as a developer I have to speak the cost of doing that so I'm where I'm where am I going with this line of questioning where I'm going with this is even though using Bitcoin to reward your players you could do it uh and not have it be unsustainable from a microeconomic perspective however uh it becomes less sustainable for you as a developer I know you just alluded to this because you were talking about ARP Dows and you know you have ways of monetizing your players through through other means but how do you see rewarding players through Bitcoin as a game developer where I have to eat that cost how do you see that being sustainable um and are there some good examples out there that you can point to where developers are doing that yeah yeah it's that's a very good question it's the way I have always approached it is it's it's actually a question of margin right your what you're doing is

you're taking either a percentage of a steady income stream call it ad revenue or you're taking an estimate of your player LTV which every game developer does and you're sharing that back to the player so clearly you're never going to share 100 back to the player or you have something unsustainable that's just we don't need to go there yeah but if you so the question becomes what percentage right how how what's it what gives you the biggest bang for your buck I.E what level of payout or Revenue shared to the player drives the optimum level of re-engagement or enhanced retention or you know maximized monetization whatever your North Star is um and this is very similar actually to how many game developers approach offer wall products when they're thinking about inflation of the soft currencies in their game and that's how we encourage developers to think what you're what you're really doing is like a a supercharged uh rewarded engagement platform and you

know most I don't you know we're pretty happy sharing that most developers that we've come across are sharing in the range of 10 to 20 percent um and it's driving it's driving more than 5x uplift in monetization and engagement um but I think to to keep it on a sort of path of thinking about how lightning and how lightning enables a lot of this um I wouldn't want us to think it's only about rewarding players what you actually have in your hands with lightning is it is a full peer-to-peer payment Network right so money can also come into the game and trade between players can also happen within a game environment you have a fully liquid token um I should also say that for what it's worth I think the very same argument holds true for stable coins so I'm not I'm not saying this is like a Bitcoin thing um I think this is true for video games

but I do notice that when you look at video game economics most of the stable coins sit on crypto rails where the transaction fees are too high for the unit economics so you know if I'm using usdc on polygon I'm looking at like a 10 cent or five cent transaction fee but when you're talking about like LTV of a gamer in Brazil that's actually like a really huge chunk of the player LTV like a massive chunk so that's not economical um and that's what that's where lightning really shines I think that's that would be the critical thing I'd want to convey is that you're talking about transaction costs that are they're so low you can afford to stream money in real time you can send payments per second of like microscopic amounts of value uh consider things like and these we have seen examples of this in the real world so I'm not I'm not talking hypothetically

um you could have a racing game like f-zero where when you drive into that area that recharges your car's Health you could actually be streamed money as you're in that area so you could be paid for the five seconds that you're driving through that refuel Zone um you could then decide that you want to spend that money knocking another player off of the racetrack and all these payments are real open network payments there's it's not being there's not smoke and mirrors you're actually utilizing the lightning network uh it is sufficiently performant to do that which is where I get very excited like this is this to me is a window into the future of how we will spend money online how we will interact with money online yeah I mean I I buy that Vision I think it is really quite interesting and exciting and I have to say I I mean much to my discredit here um I didn't know much about the lighting Network or what was possible using

Bitcoin as a game developer until you and I chatted a couple of weeks ago and decided to do this episode and I've been kind of researching it ever since but I still have this this niggling question where it sounds very exciting it sounds extremely sustainable for lack of a better phrase as long as you have a game that monetizes at some level right like it needs to monetize at some level um at which point you can kind of facilitate these very very cheap transactions back and forth uh create a peer-to-peer economy and have these things have real value in the real world which I mean that's kind of the Holy Grail for game developer and I'm still niggling myself here why have so few games been built on bitcoin so far why is it still such a niche uh area at least to my knowledge um there haven't been any big efforts by big developers to try and do something on bitcoin and I'm just curious as to why you know from your perch in the ecosystem um why do you think that is and and are you seeing more adoption because again the conversation is still all about

ethereum or it's about these new layer ones or it's about nfts and trading those in on open sea or magic Eden or whatever and and that's where all the Mind share is right now that's where all the conversation is where the buzz was where all the Venture dollars went over the last you know two or three years um and there just hasn't really been much of a light Sean on bitcoin despite the fact that it sounds like it's actually arguably much more sustainable to build there um if you're trying to do something that sustains over time as opposed to you know creating your own token and ponzing that to to the Moon which worked for a while but obviously it doesn't work for forever I think there's a number of factors underpinning this uh some I think we if you're someone working in the lightning ecosystem it pays to be self-critical at times and others I think are unrelated to lightning so to give some facts or some sort of observation of what what does the Bitcoin gaming lightning ecosystem look like today um it is heavily heavily skewed towards

casual and Hyper casual um this uh I I increasingly think now this is no coincidence I think it's because it solves that unit economic problem like I think if you if you ignore the fact that you're using Bitcoin for a second if you just if you put yourself in a game developer's shoes and and you know there's I'm talking about game developers Beyond zebedee's customer base in this instance we've encountered other game developers who have done they've opted to go the lightning route and they've never even heard of Zebedee um they what they've encountered is that actually this does supercharge retention like enough that they can now start to scale their hyper casual games that previously had no scale and we're really talking hyper casual here things like Flappy Bird you know balling the hoop these type of super like what um Voodoo and rolek and those guys all go after um that's where you'll find 50 60 70 80 90 Bitcoin lightning powered games uh some of them with a million you know

users it's 400k dailies really quite significant user bases much more significant than you find in the sort of higher profile web3 IP space and I think that's a very interesting dichotomy you've got going on where there's there's the market there's marketed IP that is launched and I'll come to that in a second and then there's like this casual sort of mini clip style gaming which is actually getting really significant user bases um but it's not it's not so much about the crypto piece really what's going on is the developers of the titles are making a calculated business decision and saying okay I'll use Bitcoin as a form of reward here and good I like that it's supercharged my LTV so great I'll do that and I'm not going to advertise this game as a Bitcoin game I'm not going to make a big noise about it I'm just going to basically be able to fuel my UA now because my LTV has jumped up so that's one side of how I would frame things

um you know and I would say that a cursory search on Google Play will prove what I am saying if you start looking for Bitcoin casual games you'll you'll encounter a lot um the other side of it does speak to the IP piece and I think there was a mixture of things that went on there so one thing is I I do believe um that collectibles or the idea of digital Goods really resonates in the gaming world and until recently Bitcoin had no answer there you know Bitcoin did not do nfts um we now there's now a thing called ordinals which is Bitcoin nfts and it's it's interesting to see companies like Anna Moka publicly saying like oh we'll we'll look at this because this is interesting like it's all you know someone devised a uh solution to that product Market need so to speak well it's all open source and blah blah blah but you know if I'm speaking commercially the way I look at that is ah now there's an nft product on the Bitcoin protocol it's widely used magic Eden supports it more exchanges are

adding it so there is an answer there but it's very it is very early uh I would expect that ecosystem within the web 3 gaming world to demonstrate straight growth in the next 18 to 24 months and if anyone you know listening on your podcast hasn't taken a look at ordinals I would encourage them to they're quite interesting um but the other side of it is is actually more I'm going to sound a little bit cynical but as someone who was operating commercially in this market during the last sort of big uh wave of adoption and the and the sort of crypto Mania that followed um there were definitely commercial deals at play where games companies were promised you know millions of dollars in a token if they adopted the token and pushed the token to the market and that's that's artificially propping up a market that's not a real Market yeah I think it's kind of interesting that you know Bitcoin is what started it all and now there's this you know there was this

wave of mania tulip Mania with all these different chains and layer twos and new layer ones and they're all going to solve the gaming problem and and you know to your point that there were a lot there was a lot of money changing hands right a lot of VC money coming in and Bitcoin just kind of chugged along non-commercial non you know non-uh sponsored um uh had all the problems that we know it has and still does have I I think yeah um but it's almost kind of coming full circle uh in in some ways based on what you're saying here where well Bitcoin actually is going to be around it's not going anywhere nobody can take it away from from the world um It's Just Gonna Keep chugging along as long as there is there are people who want to do transactions and you know exchange value digitally Bitcoin will be around essentially I mean there's no guarantee it's going to be around for 100 years or even you know a decade but it's going to be around for a lot longer than I think some of these other uh chains and these other uh you know products that have propped up

um this kind of VC money fueled ecosystem more of an observation I think than than a question there yeah you're definitely singing from my songbook there like I don't there's a faction of Bitcoin of Bitcoin culture or Bitcoin fandom which is very uh judgmental and looks down on this stuff I do not take that view I view it more like the it's money is boring when it works and that's why Bitcoin seems boring at times right like it doesn't it doesn't break right on yeah that's that's that's that's my observation as well especially listening the more I'm listening to you to speak about this um you know Bitcoin is incredibly boring uh it does what it's intended to do which is you know transfer of value digitally peer-to-peer in a completely decentralized way it doesn't really well I want to say really well it does it well um it hasn't broken yet but that's how that's how I have it right right yeah exactly let's put it that way it hasn't broken yet uh has its problems but you know it does that piece really well

without any bells and whistles um and when something is like um yeah like people don't I mean everyone loves accumulating dollars like that's that's not this up front here like but dollars themselves are boring like games don't come out going like and I featured dollars in my game like no one no one cares right because it's just sort of okay great there's payments involved and I do take the view that Bitcoin is very similar in that sense like it's it's hard to Market in and of itself the fact that you're using a Global Currency but if you give your users a Global Currency that they can sell anywhere your addressable Market grows the ability to reach those customers is very easy because you're using a payment rather is inherently Global you know it's it's born on the Internet it's of the internet um and if you use it in ways that it that you know it can handle right now such as micro transactions in games on Lightning it performs very well uh if you try and push it to do things that

the you know the developers or contributors to bitcoin haven't got to yet or something that is contentious you're gonna hit a brick wall like there's no there's no point uh pretending otherwise and I think that's where other chains come in um I can definitely see a future where I may go to a service a product or service that is built on another chain and I will spend Bitcoin to access that service and I'll receive some sort of token or access coin or nft or whatever to use that service and then when I leave I might get some Bitcoin back and go on my way or I might take usdc like who who knows but I see Bitcoin as sitting in the very much in the money and payments aspect of things uh and it doesn't really play in this of smart contract programmer programmability space and that that's okay like I think it's um a false argument to sort of go down that path yeah yeah so different different product different solution I'm not trying to do lots of the bells and whistles not

trying to like I mean you know we're building on Solana and Solana pitch itself to us when we first made the choice to build there as hey it's great for gaming it's super you know fast it's scalable etc etc and Bitcoin really isn't trying to do that or trying to make any claims in fact it makes no claims whatsoever um so let's um let's uh talk a little bit about so we've talked a lot about Bitcoin lightning Network you know what the gaming ecosystem currently looks like on bitcoin I'm learning a ton here so thank you Ben hopefully our our audience is learning it's on here too uh let's switch gears and talk a little bit about uh zbd Zebedee um and what you do uh why have you chosen gaming specifically as a use case uh you you could focus on other use cases I'm presuming um but you've very squarely chosen gaming as that use case um that's what you put in your most of your marketing materials um and we'll talk a little bit about your investors in a second as well um what do you do and how do you do it yeah so I think um something I didn't mention when describing lightning uh and I think

actually anyone in the cryptospace space who's really who's following lightning will will have will call me out on this Lightning's actually pretty difficult to run yourself um that's you know you you need to not just be Bitcoin technical as in you need to understand certain Bitcoin terms like utxos um but equally you need to know how to manage liquidity so while I gave that bar tab analogy of you and I open a bar tab together and we can transact instantly with each other what actually goes on down on the base chain there is that we open a smart contract with each other what's called a two of two multi-sig a multi-signature transaction uh and then that's sort of written into the lightning principle the lightning protocol interprets that we have a channel it's all it gets Technical and my point the reason I say that is what Zebedee does is it abstracts that away into a single API so Zebedee at its core what what the actual uh name of the

company stands for is Zebedee empowers Bitcoin enabled digital economy engines and that that is what the the base of our system is we are a uh licensed and regulated lightning API that anyone can use and you can think of it as it allows you to stick Bitcoin payments into your game or application like whatever your if you want it to speak Bitcoin the fastest and easiest way to do it is by using Zebedee that's that's the sort of pitch um to then sort of move away from being too uh too much of a walking advert the reason we we targeted uh the games industry or the reason we opened with the games industry is not Lisa which because um two of the three co-founders it was co-founded by uh Andre who's a CTO Simon our CEO and Chris who's ahead of r d uh two or three of them Chris and Simon are Gamers uh Chris in particular uh he's

known as Mandel duck online uh made the first Bitcoin games in around 2011 or so and if you go back and look at screenshots of those games you'll be really you'll be really depressed at how much Bitcoin Chris was paying out to people it was a lot it was a lot of money um but but back then it wasn't um but yeah so he and so there's been this awareness of Bitcoin and games work well together in the company's DNA a and then equally a more rational commercial decision of understanding that lightning shines when it comes to micropayments the gaming industry is an industry that is built around micropayments uh post free to play and therefore there's probably the strongest product Market fit in that environment um we have seen I'll share with you you know a sort of bitcoiner perspective on the Bitcoin ecosystem uh we have seen folks in lightning try and go after a

after e-commerce try and go after uh remittances try like all sorts of Bitcoin use cases right oh digital Global money um arguably just because lightning is here that hasn't solved the problem because if you try and send more than sort of three four five thousand dollars worth of bitcoin over lightning today uh you will there's a high chance that your payment will hang or or get stuck because there isn't enough liquidity in lightning yet to process a transaction that large but if you're down sub a thousand dollars or you're at the a thousand dollar Mark then maybe these days a bit above that you're going to have no problems whatsoever so we were thinking okay what a you know what where are these spaces where you have very frequent sub 1 000 transactions and that's it again that's where gaming came up um and that's sort of what underpinned it we we also spent a long time at the very beginning of the company evaluating whether or not this shouldn't be done

with stable coins and that's where we sort of had this deep dive on transaction fees on stablecoin networks and what would go on there and that's where we concluded uh lightning would probably work best so long-winded answer to say Gaming's in the DNA and we also assess the gaming market and thought this looks like it works for lightning one of your your CEO founder uh Simon you mentioned his name is actually Simon Cowell uh which I I found entertaining it wasn't the Simon Cowell um I don't think but uh nonetheless uh fun fun side fact there um I'm sure he tells me it really helps for restaurant reservations apparently I bet it does probably a very annoying in other parts of his life though I would imagine um so one of your taglines is where fun meets Bitcoin um uh which I really like um but one of the things you've been talking about here is you're not even emphasizing Bitcoin necessarily um you're just you know emphasizing uh

peer-to-peer you know micropayments essentially um web 3 games in general have very much um de-emphasizes it's not very uh fashionable at the moment for a web three uh game developer to emphasize the fact that they're on ethereum or on Solana or they have nfts or whatever it's you know digital Collectibles and you know it's we don't talk about tokenized economies we just talk about you know economies game economies you've chosen at least in in this tagline to emphasize the fact that hey it's Bitcoin it really like you know it's crypto right if if anything screams crypto Bitcoin screams crypto so I'm curious to hear uh why you've chosen that positioning um is it is it helpful I think you'll just I think you're the first person who's asked me that uh uh and gaming you interesting um so we actually spent quite a lot of time doing user research both on our own users and on what I would call like Market sentiment it's a very wishy-washy

way of putting it but we we try and figure out what people are thinking about crypto at any given point in time because obviously in bull runs all bets are off and everyone's like race everyone's Racing for everything and in Bear markets people might you know throw a plate at you across the dinner table if you bring up crypto again so it really sort of depends you know um but I would say there's there's a few sides to this one is um the Bitcoin Community itself has historically been and is you know continues to be a very uh quite a serious bunch of people um when you're talking about and forgive me for getting a bit Bitcoin you're here but when you're talking about building like a full decentralized money to replace the dollar uh it attracts a lot of folks who you know that that is the mission right we're gonna build decentralized money for the internet and I don't care about the use case the special needs whatever like the mission

is to is to build internet money that the state does not control um when you're in an industry like gaming and entertainment you know I don't really think a 16 year old who's playing fortnite needs to be hit with like uh Austrian economic lecture on how Central planning for financial systems doesn't necessarily breed a healthy Financial you know blah blah blah so maybe that's not like the way to go here when you're trying to speak to a teenager that's that's one angle so we do deliberately say you know Bitcoin can be fun too you don't necessarily have to huddle it it's fun to send it around uh it's fun there's a new thing that the Bitcoin Community is Raging about right now called nosta it's like a social networking layer on top of Bitcoin um we'd have to do a whole I don't have time to go into it we'd have to do a whole nother session on it but um that in in that model uh a like is called a zap and a zap is a payment and so instead of liking content you send

micro payments and I'm get very excited about this because to me this is breaking the mentality of huddle till you die you know it's it's much more like hey no you got a bit of Bitcoin just like send it to a friend who cares you know they made a nice cat meme it's all shits and giggles uh pardon my French but like that's sort of how I sort of see that um so that's one reason we do lean into that the other is that um in I will share that in the in the bull market we were actually playing down the crypto side of things uh we noticed in talking to game developers that they were very allergic to a crypto pitch given how much they were being inundated with crypto pitching um so we focused on peer-to-peer value transfer money and Games Etc uh and that that worked for us that that was a it did help in terms of making people aware of what lightning is good for and what it is not good for and why the fact that

it is Bitcoin might not be a big deal now that we're in you know a bear Market um we noticed that Bitcoin is the trusted crypto in terms of it's the one you can say hey we're Bitcoin and people go okay at least you're that one right like okay okay I get that one the the orange coin I recognize you know this other one I didn't I've never seen before so we we lean into it more now because we can tell that our users say okay good you're not you're not sending me a you know a bag of um snails you're actually giving me some money here and the other side of it is we are we do not like I said we don't encourage our users to hold necessarily we don't tell them to go buy a USB stick and keep it under their bed we say you you just got 10 cents from a game if you play it for a few more days you might have a dollar if you get five dollars you've got enough to top up your phone for the week and we can and our

system lets you do that like we've linked up with with merchants and so on to let people cash out quickly into things that actually I'll have tangible value um and I think in general that is a key again to pull it away from Zebedee um I think it is a key thing lightning and any and any crypto uh Network needs to demonstrate is real world utility um and that gets thrown around like oh you know if if someone buys a pizza or something it's real world utility but you need you need it consistently you need you need it all the time and that is like the default user behavior and then then you've demonstrated utility um and to to me that's what's exciting about lightning is that you can send Bitcoin from the US to the UK you're in the US aren't you so let's say you sent me let's say you were using cash app in the US you could load up your cash app with 10 bucks a Bitcoin you could send me those ten dollars of Bitcoin

instantaneously asking no one's permission on the internet I receive them here in the UK and I can cash them out instantly to pounds uh through like coin corner or UK exchange I use or any other and the total fee we will pay in that whole thing is less than a foreign exchange fee so you start to see like oh wow you have instant money transfer you can swap it out on either end because it's liquid enough and it speaks internet so you can stick it into games and applications and now you have a full Global Linked UP economy using an internet currency as the conduit and that to me I just can't get away from that it's it's super super powerful that's that's revolutionary technology yeah I mean and they're arguably going right back to the original vision for for Bitcoin I I kind of joked in the intro I said you know Satoshi probably didn't imagine uh micropayments and games as uh you know as one of the use cases but but arguably you know the more you'd speak uh it's quite compelling to me that that actually that very much could be one of the original use cases

envisioned by Satoshi uh for Bitcoin not not and it's it's yours yeah but don't quote me on this I I think I think in the origin I'd have to do some Googling I think in the original Bitcoin client that Satoshi released there was a Bitcoin poker game I think that was in there I think one of the first things that was was built into Bitcoin core was a little game and I think it was poker um you just you just reminded me of that I hadn't thought of that in a long long time yeah I'd have to check I'd have to fact check that all right um well let's let's both fact check that because that's uh that would be quite fascinating actually um okay so uh you raised a bunch of money uh Zebedee to to do um you know build out this Vision very compelling um and one of the investors that you've got um in the mix uh which is the one that caught my eye the most is Square Enix uh Japanese gaming giant of course famous famous for Final Fantasy mostly

um but a bunch of other games as well um they've been one of the most bullish on web3 uh since the very beginning um although they just lost their longtime CEO who was who was pushing a lot of that Vision um they're an investor uh in in Zebedee and I'm very curious to hear I think you do have some collaborations with them but I'm definitely curious to hear uh they are one of the largest if not the largest uh you know large developer that most people have heard of that are really pushing the boundaries on web3 and continue to do so even through the crypto winter that we're in um what are you doing with them why did they best what what are they working on um that is interesting yeah now you can that you can share uh with our listeners I will I will say they're a terrific uh and I I don't say this in some sort of um cheesy way they are they actually turned out to be a terrific shareholder to work with and communicate with they're very open and transparent and they're very collaborative

um we so the first thing we did actually was we did uh put our technology in one of their games it was a game called Ludo Zenith uh they uh but I honestly believe what they wanted to do was put our hypothesis to the test with one of their own products and uh we drove a roughly 80 increase in arpdale for that title so they were they were happy with that um and that title's still going on the the deeper discussions we have with them I I'm not going to be able to share anything about but what I what I will share and I think I can share is they're not what I don't think they're what folks would be would instinctively reach for we're not we don't talk to larger AAA game developers about uh sticking Bitcoin in Final Fantasy like that's that's you know that's not the conversations we have with them um the conversations are much more centered around the fact that we run payments infrastructure um that's like I I can't really go much

further than that because it's a it's not in any kind of material uh place where it makes sense to disclose things but also uh it's this is a very early Market um and I think there's a lot there's a lot of moving pieces but yeah really you know I would focus on the fact that Zebedee is and it's called Global regulated micro transactional payment infrastructure and that's that's powerful in and of itself okay um all right well we'll just have to watch this space um definitely curious to see what uh what Square Unix does uh yes I take your point that uh I wish I could announce yeah I wish I could announce like Bitcoin monster hunter or something but I but that's yeah that's that's not what we're and that's not what we talk about yeah no no fair enough um okay so we're kind of heading towards the the uh the end of our hour here together um you've convinced me

um that you know Bitcoin uh and and the lightning network uh are definitely relevant for for game developers uh it may be a certain segment of the gaming market for now and it may not be for every developer certainly but I I can definitely um see the the arguments for adopting something like light Network and you know I you said it really well at the start it's kind of like imagine an offer wall right I mean so familiar with offers they used to make uh Social Casino Games slots games back my last company and um you know we monetized the early titles entirely through ads we had very low um uh IAP conversion rates initially until we had a hit product but so initially we monetized through ads and all the ad networks and had them competing against each other and had their offer walls in there and so I'm very very familiar with that and I I totally see how Bitcoin would just be a phenomenal solution especially if you can do it at those kind of very very low transaction costs and for very small

amounts and not give away your your entire LTV um to to the players so 100 see that as a great use case um but I'm curious uh to kind of end end our show here is what do you think needs to happen for Bitcoin to be perhaps taken more or quote seriously by the developer Community I don't think I'm the only one who I'm not skeptical about integrating Bitcoin into into games um and I see the arguments that you're making but I know I'm not unique in having that feeling like huh like Bitcoin is just so hard it's like the the Bitcoin Maxis are really Maxis about Bitcoin for that you know Global digital currency use case not really for anything else um and I'm just very curious to hear your thought and it's been around for the longest as well and and those those Maxis haven't really changed their mind um over the years and so I'm just very curious to hear your thoughts on what needs to happen in European in for there to be more adoption of Bitcoin lightning Network or otherwise the other Solutions

uh you know in gaming but more broadly uh as well it's a yeah it's something we obviously ask ourselves quite a lot um I would share that we've got other shareholders from the games industry as well um you know most notably uh Hilmar the CEO of CCP is an investor in us and uh we speak to these folks pretty frequently um monthly by monthly whatever it might be and we we do trade sort of ideas high level knowledge high level awareness I think it comes back to um a very recurring theme which is and it's on you know this is on Zebedee to deliver this and not so much on Lightning I think when it comes to gaming um but that is that there needs to be more uh I think larger game developers owners of significant IP Etc need to see more real-world use cases of the technology in more scaled environments so

um we recently collaborated with some folks who modded Minecraft and now you go into Minecraft and you joke mine Bitcoin right so you're not actually mining it your your um fake mining it but you have to go and dig emeralds out of the ground in Minecraft and then that lets you buy uh Asics in the game to mine Bitcoin but the game is actually paying you Bitcoin like they're it's real Bitcoin that you start earning once you start mining um the retention on that product is fantastic and we're starting to share that data with Partners um we also have some more significant PC based IP coming which I think will really demonstrate to the Esports ecosystem that there is a business model here that is beyond just advertising you can you can actually monetize prize pools and transactions real time in games uh when you have PVP competitive play because the one of the first things

that uh we did and it was one of the first things in in lightning gaming was we infused uh Counter-Strike with Bitcoin so when and I shot you you dropped a coin in the game like an actual 3D coin and when I grabbed that coin in the game it was sent to my wallet in real time uh we're bringing that back in with a more significant piece of Ip and my hope is that folks will see that and realize okay so it's not just mobile casual and rewards it's also competitive play PVP it's also circular economies when you have simulated trade this is it really is a an economy engine right this is something where you can insert money into your game and I mean insert money in the circular sense so when we had coin op games and you got playtime now it's actually you insert the 25 cents there's 25 cents in the game now where do you want to allocate it how do you want to spend it and games are multiplayer so that could mean that you give it to another player in exchange

for goods or services um so I think you know the the Holy Grail many folks want and this includes you know this isn't just lightning is you know like a a massive MMORPG that runs a giant simulated economy with like a real value base that would be it would just be incredible right it would be such a fascinating thing to watch and study and see all the ups and downs of um and I do think we'll get there regardless of whether it's Bitcoin or another crypto or anything I think that's gonna come to Market but it might take a decade um in the short term I think well I would if I were a game developer right now I would be paying a lot of attention to the complaints uh Tim Sweeney and the Epic crowd put out in public around Payment Processing fees and the margin erosion there because they're not they're not alone and I know this is a well-trodden debate in the games industry but you know the that piece of payment processing is actually quite critical margin for games developers and

it can mean the difference between a successful product and an unsuccessful product and if you're and then it also equally if you're scaled if you're like a supercell or otherwise it can mean the difference in sort of 15 20 of your ebitdown margin right it's like a bigger big old chunk of cash that you're you're leaving on the table and lightning takes that right down right it takes it right down to like one percent or so um and it is from a regulatory point of view from a market awareness point of view if Bitcoin might be crypto I'm not shying away from that but it is definitely the one that if you go to a US regulator they're like yeah that's fine please pass on through if you go to the European regulator they say yes that's fine go to The Exchange and sell it because it's old as you say like it's been around people get it the orange logo cool that one's kosher it's not something new um and in that sense it's an easy way to dip your toes into this world understand the benefits that crypto assets bring to

digital environments and from there you know the world's your oyster you can choose whatever path you want um but at least now you're processing value and that wasn't possible before yeah I mean I think that argument about about margins and ltvs like it's such a finely tuned machine these days you know acquiring users and like the the formulas and the spreadsheets that run those calculations are massive and leaving even a point or never mind you know 15 or 20 points you know basis points on the uh on the table is is madness right and can mean the difference between a successful studio and a and one that has to shutter their doors because they just can't spend profitably um yeah okay well I have to say that very very compelling conversation um I did some research for this episode but I have learned so much more from you about how this all works and uh uh have found it absolutely fascinating to think about rethink about Bitcoin for the first time in many years like I'm a huddler I've been a Bitcoin huddler since you know I first got into crypto

probably 15. 2015 2016 time frame so not super early but early enough and I've done nothing but model my Bitcoin and I just really haven't thought about it in all the years since and this is why it was so fascinating to have you come on to kind of reinvigorate uh the brain cells a little bit and kind of question the assumptions that we've been making about Bitcoin and what it's used for and what is it good for what can it do and what can it do um and I love the fact that you guys are questioning those assumptions and uh hopefully our our listeners will found this as fascinating as I have so Ben thank you so much for coming on thank you for the very kind words just then I appreciate that thank you absolutely well we like to try and make our guests feel good and you're starting your weekend we're recording this on uh on a Friday and it's uh evening in the in the UK so hopefully you can enter the weekend in a positive mood and uh and a good vibe I'll do my best excellent and of course as always we uh like to give a big thank you to all of our listeners we'll be back uh next week with more interviews

more insights and more analysis from the weird and wonderful world of web3 so until next time friends stay crypto curious and feel free to send me questions guest recommendations and comments my email is Nico navic dot Co and you can find me on Twitter or as it's now called X at nicothefin VMS are open if you enjoyed today's episode whether on YouTube or your favorite podcast app make sure to like subscribe comment or give a five star review and if you want to reach out or provide feedback shoot us a note at podcast navic dot Co or find us on Twitter and Linkedin plus if you want to learn more about what novik has to offer make sure to check out our website www.navik.com there you can sign up for the number one games industry newsletter navic digest or contact us to learn about our wide-ranging Consulting and advisory Services again that is www.navic.com thanks for listening and we'll catch you in the next episode