An interview with Yat Siu, Chairman of the Board, Animoca Brands

I recently attended Roblox’s Q4/FY 2023 earnings videoconference. While the numbers are all growing and, undoubtedly, massive, I still struggle with the huge bottom-line losses reported by Roblox year after year. I can’t stop thinking this in my head: there is something wrong here. It made me think of Matthew Ball’s recent essay, “The Tremendous Yet Troubled State of Gaming in 2024,” which highlights the key issues of the entire gaming industry: extremely high capital intensity for games’ production, underdevelopment of monetization through advertising, lackluster ‘real’ growth, no space for indies to break through, lack of true diversity of content. 

Who else is seeing this? Is there a different future for gaming? I sat down with Yat Siu, Chairman of the Board at Animoca Brands, which is behind The Sandbox, for example, and the most popular blockchain-powered games on the planet, to discuss about traditional vs. non-traditional gaming. 

Here is the summary of our exchange. 

What are the main differences between traditional gaming (like Roblox or Fortnite) and blockchain-based gaming? 

There is one big difference. Blockchain-based gaming has digital property rights, while traditional gaming doesn’t. Our vision is centered on sovereign rights for gamers. In traditional gaming, all assets benefit the game, the skins benefit the game, and engagement benefits only the ecosystem. Our view is exactly the opposite: it’s all about the assets. The ecosystem is at the service of the assets and their owners. Think about it, in the physical world we behave exactly like this. I do with my properties whatever I want and drive my car wherever I feel like, and the broader ecosystem is at the service of individual freedom. In the digital world, we seem to be limited. You don’t even own your car. Traditional gaming demands that you stay in the game, to unlock positive network effects. In blockchain-based gaming, the key is in the assets being played and owned by the gamers. 

What are the main technological obstacles for blockchain-based gaming to become as popular and penetrated as Roblox or Fortnite?

I don’t think it’s a technological issue. We have built great games, which behave like traditional ones. Phantom Galaxies (Animoca) is very advanced, and even more beautiful than Roblox or Minecraft. Most gamers engage with games for social reasons because their friends are there. This is the key driver for the success of any game. Web 3 games did not reach their apex yet, in terms of massive following. The number one challenge for adoption is mindset. Buying a phone or opening a bank account is difficult from a procedural point of view, and we still go through it, as we see the benefits of communicating and banking. Web 3 is like that, or like the internet in its early days. Web 3 gamers are financially literate. Web 2 players have low financial literacy. Web 3 gaming is growing fast in Asia, which is very capitalistic and where tangible financial interests are part of everyone’s culture. This is why blockchain-based games are so developed in Asia. Gamers want to play and earn, play and own, according to their skills, engagement and ‘work’ done for the ecosystem. 

The recent SEC approval of ETF Bitcoin in the US could be a way to open the door to in-game rewards such as tokenized assets, securities, or crypto, especially for an adult audience, or for branded programs?

It’s a good first step. We learn through play. Today, most of our interactions are digital. We can scale anything only digitally. Thanks to the digital world, we have more connections, globally and locally, than we could have in the past. In modern times, books were the main platform for telling stories. Games are today’s entertainment platforms, where we share, have fun, and learn. Games could be a great way to teach people about finance. The SEC approval opens new possibilities for fractional ownership of digital assets, and especially reinforces the idea that we can own stuff digitally. The Web 2 world is based solely on rent and concentration of gains in the hands of a few big actors.  

What’s the best blockchain game that Animoca has built? What KPIs do you look at? 

Axie Infinity was a tremendous success, and it is still growing. Pixels is one of the biggest games in the world. We usually look at users and the value of the token, which is up for both. It’s true that Web 3 games do not have hundreds of million users. But exactly like for restaurants, MacDonald’s is not the only solution for going out with family or friends. There is a lot more out there. In the Web 2 arena we have come to accept that we don’t pay, so that games can use our info. Gaming is in trouble because those who pay are a small minority. This is why the P&L doesn’t hold. Web 3 gaming has higher chances for indies to break through, to have a healthier and faster path to financial sustainability, and to protect IP. Take Palworld, for example, which has become popular because it replicates so many elements of Pokémon. Blockchain-based games can be profitable with a few thousand users, while having richer content and diversity, and higher engagement, thanks to a fair distribution of resources across the ecosystem. Capitalism is a system that promotes change. It must be disruptive by nature. Stability is a function of closed oligopolistic markets. We have decided to stop innovation in the name of stability and concentration of power in the hands of a few actors, which will struggle to turn a profit, and with large audiences, who engage only for free and tend to respond to the same content. This is why we have so many shooter games. When you enter Web 3 gaming, you jump in an open market and you are making money faster – platform and users, but volatility is part of the equation. This is why we need to raise awareness about money and our digital worth, for gaming to step up and flourish in the future.