Gabriel Leydon - How Web3 Onboards a Billion Users - [Web3 Breakdowns, EP.37]

Today, we are sharing an episode of Web3 Breakdowns with you. My Invest Like the Best conversation with Gabe Leydon last year was one of my favorites and became one of our most popular. Since that conversation, Gabe has become one of the most interesting builders in web3 that I know so I was excited to have him back to share his views of the space and how it might grow. If you enjoy this episode, subscribe to Web3 Breakdowns on your preferred podcast player. My guest today is Gabe Leydon, who’s episode last year was one of our most popular ever. Gabe has spent the last 20 years designing video games and is one of the most original thinkers I know. He was the co-founder of Machine Zone, which pioneered free-to-play hits like Mobile Strike and Game of War. Over the past year, he has been in stealth mode building a web2 meets web3 video game company called Limit Break, which is founded on a brand new business model that he calls free-to-own. We dive into his vision for the future of gaming, how it could onboard a billion users onto the Ethereum network, and why the LTVs of crypto gamers are so far higher than their web2 counterparts. Please enjoy this conversation with Gabe Leydon. For the full show notes, transcript, and links to mentioned content, check out the episode page here. ----- This episode is brought to you by Coinbase Prime. Coinbase Prime combines advanced trading, battle-tested custody, financing, and prime services in a single solution. Clients have used our comprehensive investing platform to execute some of the largest trades in the industry because they are the only publicly-traded company with experience trading and custodying crypto assets at scale. Get started with Coinbase Prime today at coinbase.com/prime. ----- Web3 Breakdowns is a property of Colossus, LLC. For more episodes of Web3 Breakdowns, visit joincolossus.com/episodes. Stay up to date on all our podcasts by signing up to Colossus Weekly, our quick dive every Sunday highlighting the top business and investing concepts from our podcasts and the best of what we read that week. Sign up here. Follow us on Twitter: @Web3Breakdowns | @ericgoldenx | @patrick_oshag Show Notes [00:02:19] - [First question] - What free-to-own gaming means and why it’s exciting [00:11:40] - Pre-existing behavior that sets up free-to-own for success [00:12:32] - The progression from PFP NFTs to clubs and the road ahead [00:14:16] - Overview of the business and monetization model for free-to-own games [00:17:51] - The story of DigiDaigaku, their mechanics, the drops, and what lead to their creation [00:22:14] - Balancing supply and demand in a free-to-own market [00:24:35] - Creativity and extensions of the DigiDaigaku NFTs [00:26:13] - Tiering, breeding and the role the Genesis series will play in the Digi universe [00:27:32] - The level of brand marketing NFTs will unlock for businesses [00:29:57] - How free-to-own will be the primary monetization method for brands [00:31:21] - A future with a global marketing shift towards digital property and economies [00:33:06] - Why most of the winning PFP projects are of unique characters [00:35:50] - His Twitter strategy and how he’s created such a fervor around him [00:42:40] - What will define the legendary marketers over the coming decade [00:43:06] - Interoperability needed to make real-world NFT uses appealing to consumers [00:44:44] - Whether or not we’ll see more token-gated business in the future [00:45:40] - Stable Diffusion and his impression of the new AI art generating bots [00:48:56] - What great distribution looks like in a digitally native world [00:50:03] - The emphasis of innovation taking place in the metaverse being a bad thing [00:53:24] - Things he most admires in adjacent games and creators in his world [00:54:25] - Unique game mechanics that Web3 technology unlocks [00:56:16] - NFTs will be the gateway for people to acquire crypto

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Patrick O'Shaughnessy?

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• 0:45Patrick O'Shaughnessy?

  so I was excited to discuss his views on the space and how it might grow. If you enjoy this episode, be sure to subscribe to Web3 Breakdowns on your preferred podcast player where you'll find more conversations like this one. This episode is brought to you by Coinbase Prime, an integrated solution that provides an advanced trading platform, secure custody and prime services so you can manage all your crypto assets in one place. Coinbase Prime fully integrates crypto trading and custody on a single platform while giving clients the market's best all-in pricing through their proprietary smart order router and algorithmic execution. Coinbase Prime extends beyond individuals with companies like Tesla and MicroStrategy using the investing platform to execute some of the largest trades in the industry.

• 1:26Patrick O'Shaughnessy?

  Coinbase is the only publicly traded company with experience trading and custoding crypto assets at scale. Build a unified investment portfolio with the most trusted name in crypto. Learn more by visiting coinbase.com/prime to get started.

• 1:41Speaker 01

  This is Web3 Breakdowns. Web3 Breakdowns is a series of conversations exploring innovation in the decentralized internet. Each episode, we will focus on a different topic. We will cover NFT projects, crypto assets, blockchain-based protocols and businesses being built with Web3 architecture. We will talk to founders, artists, investors and influencers to understand this emerging ecosystem. Come join us down the rabbit hole. To find more episodes, transcripts and a library of content to continue your learning, visit joincolossus.com.

• 2:21Speaker 01

  All opinions expressed by hosts and podcast guests are solely their own opinions. Hosts and podcast guests may maintain positions in the securities discussed in this podcast. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions.

• 2:35Patrick O'Shaughnessy?

  My guest today is Gabe Leydon, whose episode last year was one of our most popular ever. Gabe has spent the last 20 years designing video games and is one of the most original thinkers I know. He was the co-founder of Machine Zone, which pioneered free-to-play hits like Mobile Strike and Game of War. Over the past year, he has been in stealth mode, building a web two meets web three video game company called Limit Break, which is founded on a brand-new business model that he calls free to own. We dive into his vision for the future of gaming, how it could onboard a billion users onto the Ethereum network, and why the LTVs of crypto gamers are so far higher than those of their web two counterparts. Please enjoy this great conversation with Gabe Leydon.

• 3:16Patrick O'Shaughnessy?

  All right, Gabe, so it's been almost exactly a year since our first conversation, which remains probably our biggest hit of the last year. In the intervening year, you've been building a new business called Limit Break. Not a thanks to you. Farley, thanks to me, and I'm an investor in the business. Yeah, not just because of that, because of the episode. Well, I hope it had a small part, but we get to revisit a lot of those ideas because you've basically been a learning machine in the years since, building probably more actively than anyone else in the web three space, which is ironic. So much talk and not much building, but you and the team have done a lot of innovating in that world. I think we need to start with this concept that you've just kind of released to the public called Free to Own, one of the key builders and innovators in the free-to-play mobile video game space.

• 4:01Patrick O'Shaughnessy?

  And I think you believe pretty deeply that that era might be sunsetting and Free to Own as a concept is sort of the next wave of how games are built and monetized. So I'd love you to give a treat us on Free to Own, what it means and why it's exciting to you.

• 4:15Speaker 02

  Well, it's the next level of free, first of all. I can definitely talk about this subject probably like thirty minutes straight. But first of all, the reason free to play took off was because of piracy. They were making PC games and Nexon was tired of getting their games pirated. So they said, let's just give our game away free. That was the beginning of free to play. And it was attractive to gamers who had to pay upfront for a game. That's why they were pirating in the first place because they didn't want to. So they said, well, look, now I'm going to just try this. So the term free to play, what it means is, is you're free to play it. You can play it whenever you want. It doesn't cost you anything to play it. You just download it and play it. That's a big step in distribution, player sentiment.

• 5:00Speaker 02

  They're very happy that the game is free. But then when they play the game, they start buying items. Essentially, that's what happens. There's item stores, there's virtual currency stores, and they have to buy those. So the early criticism of free to play was, especially by people who didn't understand it. They said, well, the game isn't really free because you have to buy upgrades inside the game. So it's not really free. Of course, that didn't really matter to anybody. And now vast majority of the business is free to play, soon to be all of it. So the next step in all of that is we have these items in the store that we sell to people in free to play. They're all web two, locked on a server, and the developer completely controls them.

• 5:42Speaker 02

  And they decide basically everything about those items. So you have to buy them and then you kind of like hope that they remain relevant. So the next step is free to own, which is essentially an extension on free to play, except we move what's free a step further. It's not just the game that's free now. You can get virtual items that could potentially have value before you even play the game. So we're abstracting the items that everyone's paying for already. So a hundred and twenty billion dollars a year of items are sold essentially every year on mobile phones. Now we say, okay, not only is the game free, you can download it and play it.

• 6:25Speaker 02

  But before you do it, here's some important items in the game. So now the players have ownership and it's a web three item, it's not a web two item. So they don't have to pay for the game. They don't have to pay for the item. Now they're incentivized. They're like, I hope this game does well. I have this item. It's a rare item. It's approvable, one of one item in a game. And if this game takes off, maybe other people will want it from me. I think the simple explanation of it is that we're taking the free to play economy. We're putting that on web three and we're giving it out. And the reason why that's so important. And a lot of people in web three criticize, say, you know, well, people have done free stuff before. Right. But they didn't brand it right. They didn't call it a category.

• 7:09Speaker 02

  They're not saying it's the next thing. They just didn't. So what I'm trying to do here is say, no, this is what's going to replace free to play. And how it replaces free to play is going to be impossible to just do the same old item store thing moving forward. And the opportunity is, I think I read today, there's only 60,000 daily wallets on Ethereum that own an NFT. That's it. 60,000 daily users, nothing. As a result, web three gaming kind of doesn't look like a thing. It looks fake in a way. You have one big game with Axie and it's big. It's had some issues, but they've innovated a ton. But they've got like something like 800,000 monthly players. It's respectable.

• 7:51Speaker 02

  And then the number two game has like 10,000. Okay. And the number 10 game has like 100. So basically it's not a thing. It's not a real thing. Web three gaming is not a thing. No, it's not a real thing yet. Not yet. It will be very shortly. And the reason why is because everybody's been saying, do this land sale, buy this land sale. And the land costs $7,000 because that's what it costs. When the game comes out, it's going to be great. And the player is sitting there going, gosh, if the game is really big, my land is going to be worth 30 grand or something. They're so excited about it versus just giving it to them for free. Getting the exact same effect, the exact same effect, but more with them thinking this is awesome.

• 8:34Speaker 02

  Like this could actually be the next big game and I own a piece of this. And as a result, I think we go from 60,000 daily wallets to a billion very fast, very, very fast. We just saw on Reddit, there was a controversy with their NFTs that they just put out. People are like, oh, we don't like NFTs, but they gave them for free. And it changed the sentiment on Reddit overnight. There's still some people that don't like it, but overall the sentiment changed a ton when they didn't have to pay for it. Free to own games are how the world onboards to Ethereum. And once we get those three billion gamers on Ethereum, I think the gaming business goes from 200 billion a year

• 9:19Speaker 02

  to six trillion a year, very quickly.

• 9:23Patrick O'Shaughnessy?

  Why six trillion?

• 9:25Speaker 02

  Cause I think it's a 30x mainly because of the unrestricted nature of the payment rail that we're on. I think you and I talked about this before, but everything is throttled by paper money. $20 bills, $50 bills, $100 bills. Products are designed around those bills, 1999, 4999. The world designs products around these denominations because of the anchoring that was set. Think about, when was that anchoring set? 70 years ago, something like that? 100 years ago? Who knows? Long time ago. And the dollar is worth 99% less.

• 10:09Patrick O'Shaughnessy?

  There's no $10,000 bill, right? That would be the equivalent probably.

• 10:12Speaker 02

  Yeah, but people still think in terms of $20 bills. They do. It's very important to have SKUs at 1999. Anybody who makes products will tell you that. 99.99. So Ethereum is a huge reset on all of that. Now it's 1 ETH, 20 ETH. You see all these people talking about it this way. It's a different way. It's a different way of thinking. Also, the big change, the obvious change, I don't know if it's so obvious, actually, is if you go to the App Store and you make a game, the biggest in-app purchase you can do is a hundred dollars, and that's limited by Apple. Google also just copied it, said, okay, we can only do a hundred dollars. Yet you see these board apes selling for two million.

• 10:55Speaker 02

  If you take the average person and you show them an item in a game and you show them a board ape, will they be able to tell the difference? No, they won't. All of that behavior that you're seeing on Ethereum with profile pictures is crazy, like five hundred thousand dollars, two million dollars, whatever. All of that behavior is pre-existing behavior. None of it is new. It's been around in games forever. People have been spending tremendous amount of money in games forever, more than they've ever spent on a board ape or whatever, like a lot more. But they did it through credit cards. They did it through in-app purchases. Ethereum is kind of the equivalent to a wire, an instant wiring system, except with a different currency with Ethereum.

• 11:41Speaker 02

  And it allows people to kind of express their behavior, their pre-existing behavior, in more upfront ways, like what you see with the PFPs. And I think it's super important to recognize that none of this is new. None of it is new. It's been going on in games for 20 years. I've seen it up close. It's not new, except now we have the ability to kind of give you ownership of that item, which is super important. And the potential for desire for the item is worldwide. Everybody in the world could want that one item that is provably yours. What does it go to? A billion dollars? A billion dollar NFT? It's hard to imagine, but I mean, what is it?

• 12:26Speaker 02

  500x more than what we're already seeing? We already saw 70 million NFT. We're like 14x more than what we've already seen with only 60,000 active wallets. Is it really that crazy?

• 12:37Patrick O'Shaughnessy?

  Can you just cleanly define the pre-existing behavior that you referenced that you've seen before? I want to make sure like we fully described the thing being tapped into.

• 12:45Speaker 02

  People are willing to spend a lot of money on virtual items. They're willing to do it. They love it. They like it. They do $120 billion every year on their mobile phone. And if you show someone an NFT and you show them the item they're buying the game, those people won't be able to tell the difference. But if they understood that one was property and one was not, they're going to prefer the property, obviously. And there's a lot of pushback in the gamer community around NFTs. You've got to remember, like that $120 billion is generated probably about 8% of the people who play the games. It's a vast minority. And there's nothing anybody can tell me that would convince me that those people don't want an NFT. Why wouldn't they?

• 13:29Patrick O'Shaughnessy?

  Can you say a little bit about this progression in the world of NFTs from PFPs, which is we'll just call that like the board A category to what you're calling clubs?

• 13:37Speaker 02

  They were kind of like the second version.

• 13:39Patrick O'Shaughnessy?

  Crypto Punks, maybe it was V1.

• 13:41Speaker 02

  Yeah, Crypto Punks would be like a PFP version one, very early NFT. And then version two would be what we kind of just went through, which is a lot of non-technical teams making NFTs and then getting a big audience around them and frankly, not knowing what to do.

• 13:57Patrick O'Shaughnessy?

  Having all this capital and just like sitting on it.

• 13:59Speaker 02

  Yeah, and they would like just send people stickers and stuff. So they just, literally, they would send you a sticker, a t-shirt, a fanny pack, and they would say, you're part of the club. You got the fanny pack. You got the sticker. You're now a part of the club. But I kind of just see that as what I would do if I didn't have any engineers either. I also do that, but I think that phase is going to quickly go away and move into more, this is all software, this is all virtual items. So there's a lot of unique things that you can do online with an NFT. If you have a serious engineering team that is building new solutions. And of course, all these things are going to plug into games. And they'll be interoperable between other games.

• 14:43Speaker 02

  That'll be what NFTs are mainly for, like moving from one virtual universe to the next. Limit Break is kind of pushing into that. My new company is pushing into that version three, which is constantly updating, always adding new features, creating new technology around the products. That's where I think everything's going. So NFTs are about to get a lot more exciting now too, because it's not just about getting a T-shirt or whatever. You're actually be able to interact with lots of different software with your NFT.

• 15:13Patrick O'Shaughnessy?

  I want to get much deeper into that interactivity and what you've already done with the Digi NFTs. Before we do that, I just want to talk business model a little bit. So as I understand it, obviously, one way to do this would be the land sale. You make seven grand a sale, the company makes a seven grand, straightforward.

• 15:30Speaker 02

  No, they make like 70 million in a day.

• 15:32Patrick O'Shaughnessy?

  I mean, per though.

• 15:34Speaker 02

  And that's been pretty normal. I think it's actually been the biggest reason why web three games haven't took off. Because it was normal to make 50 million dollars in a day or a hundred. And it didn't just happen once. It happened, I don't know, maybe a hundred times. So there's something there. If you can do 50 million dollars in a day, a hundred times in an industry with only 60,000 people, really, maybe a hundred thousand at the peak. There's something there, but it's not going to exactly like bring in the masses.

• 16:05Patrick O'Shaughnessy?

  We were talking about one example of our tech six months ago or something. And I think my response, like this is so fucking dumb. And you were like, Patrick, how many times do you need to see this before you understand the potential here? There's a tiny number of people with a crazy amount of money.

• 16:18Speaker 02

  It's not something that happened one time. It's something that happened a hundred times.

• 16:21Patrick O'Shaughnessy?

  Yeah. In terms of onboarding billion people, not 60,000 people, the, the role of free is critical. But then the business model gets pushed further down. So as I understand it, it is ongoing participation in the transaction volume, the dollar transaction volume for the company.

• 16:37Speaker 02

  So we're building free to play games, mobile free to play games. We can't do. Web three on mobile yet. Do you think it'll eventually happen, but not yet. You have to build a bridge, first of all. So you have to build a free to play game, high quality, something that you can distribute worldwide, mobile, free to play game. That's the only way to get scale and you have to build a specific crypto version of that game to bridge those players over.

• 17:06Patrick O'Shaughnessy?

  In the browser?

• 17:07Speaker 02

  No, there's PC. Axie has two thirds of their traffic is on side loaded Android apps. Honestly, I think Android is actually where a lot of the action is going to be, the Android and PC, Mac.

• 17:17Patrick O'Shaughnessy?

  All right. So we've got this model where you're building a traditional game that you've obviously spent your career building, traditional mobile, traditional free to play. And on the other side, building this setup NFT projects and almost like a game embedded in the NFTs that we'll talk about with Digi. But the business model for Limit Break is twofold than it sounds like. The first part is traditional free to play. The second part is participating in some of the transaction dollar volume or ETH volume on the trading of the NFTs.

• 17:45Speaker 02

  What's exciting about ETH is it's programmable. When I work with in-app purchase, Google in-app purchase API, I can't really do anything with it. This is programmable. So we've got a bunch of stuff coming that just hasn't even been done before. Like we just did something that works with the existing system, but there's no reason not to make new things. So there could be new token types, new business models. This is all programmable stuff. So it's a mistake to look at Ethereum and say, what it is today is what it's going to be. That's a huge mistake. You can do pretty much whatever you want. It's an imagination problem. And I think it's a lot of the reason why people discredit Web three is because one, they don't really know that much about it.

• 18:30Speaker 02

  And two, they don't consider the programmability of it, what you can change about it. They kind of just think about, well, here's what I would do with my existing game. And here's how I would put it on it with the stuff that everybody else does. And that's not right. That's not the right way to think about this at all. It's a lot more exciting than that.

• 18:47Patrick O'Shaughnessy?

  Can you tell the story then of Digi? How it was conceived? Why they look the way they do? What they are? How many there are? Get into some of the mechanics, the drops that you've done since. As much of the story, I think, as possible would be fascinating to people.

• 19:01Speaker 02

  The first thing that we thought about when we made the Digi series was, I'm particularly obsessed with Japan and wanting to be number one in Japan. Japan is the best gaming market, period. They consume games like nobody else in the world. Everybody wants to be number one in Japan. It's very, very hard to do as outsiders, for sure. You definitely have to kind of adopt their way to an extent of how they play games. If you want to do well there. So that was number one. We're saying, okay, anime is becoming a universal art style that is accepted everywhere. There's not that many art styles that actually scale worldwide.

• 19:44Speaker 02

  There's the American photorealistic style that we're all used to. There's the Nintendo anime.

• 19:52Patrick O'Shaughnessy?

  Cartoony.

• 19:53Speaker 02

  Cartoony look that's been accepted everywhere. Chinese games, they tend to use like a lot of Chinese history in their art. That's a big reason why it doesn't scale. So like Genshin Impact is made in China. It's the biggest game, but it looks Japanese and it's made in China. Korean games kind of have like this Korean fantasy look to them too. They usually have trouble scaling out. And European games just look like American games, pretty much. So you talk about, if you want like a billion people to play your game, there's really not that many looks that get a billion people excited. You're between, in my opinion, kind of the Japanese art style and the American photorealism. So that's why we picked that.

• 20:38Speaker 02

  We're really going to focus on. Japan. We did two thousand and twenty-two just because it matched the year, but it was more about being a small collection. We wanted it to be very, very small and exclusive. Not ten thousand, could just be a very, very small group of people because we wanted to really get those people excited about what we're doing at the company. And have them enjoy the ride along the way as we get to like releasing games and stuff like that. Just have like a smaller fan base. We wanted people that were more intimate type of thing with just really hardcore fans of Limit Break. And then we, of course, released it for free, which is not new. People have definitely done free before.

• 21:19Speaker 02

  We did it on purpose. They are very different than what's been done before. But we gave it away for free and they were really popular. As a result, we had an instant community built around us by doing that instantly. And there could have been more efficient ways to build that community, definitely. We're going to keep getting better and better at that over time. The people who got those for free are like so excited about us. Really excited. They look at everything we do. They want to be on the Discord. They propagate it. Yeah. And that's the point. It's like, why wouldn't you want an army of people making memes online all day, using your stuff as profile pictures,

• 22:02Speaker 02

  promoting the things that you do? Because like, look, the biggest problem in video games is that ninety-nine percent of them fail. Ninety-nine percent. It's probably worse than that in free to play. It's probably like ninety-nine point nine percent. And the number one reason why they fail is because nobody knows about them. That's the number one reason why. Nobody ever hears about them. They're not good at marketing. They don't have any money. It's not differentiated enough. And it could be like a great game. If you played it, you'd be like, oh, I like this game, but it just never takes off. That's what happens to almost every game, like literally ninety-nine percent of games that come out. So why wouldn't you want to take some of your in-game assets?

• 22:44Speaker 02

  Give them away for free, rally a community around a developer, have them waiting for you, whatever it is that you do, have the people who didn't get it for free asking for the next thing that's free, because there's a ring of those people too, that are just like, I wish I would have got it, will you do it again? Just get everybody excited about what you're doing. Frankly, that's the hardest part about making a game is getting anybody to even care about what you're doing. And that's why free to own is going to destroy free to play. That's the real reason why. It's because people care, because they have ownership of the things that you're putting out for free, about whether you're successful or not.

• 23:23Patrick O'Shaughnessy?

  How do you think about the future of the supply-demand balance? If everyone agrees that free to own is the future, why doesn't it just face the same problem of, in a sea of free NFTs, no one knows which ones are which?

• 23:36Speaker 02

  Absolutely. There's going to be tremendous competition, but in the meantime, free to play is dead.

• 23:41Patrick O'Shaughnessy?

  Right.

• 23:43Speaker 02

  And I don't mind that. I'm like a wartime CEO. I don't mind going to war. And by the way, one, I'm very, very good at making money on free apps. I'm maybe one of the best in the world at it. So I have no problem with that. Let's all compete on that. Two, there's not many people that are good at it. So as we push the market that direction, yeah, there'll be a lot of people doing it, but there won't be that many people good at it, because it's very, very hard. Three, the existing people that sold their land and made their $70 million now, that's an anchor around their neck. I'm sorry, that era, like, yeah, you made a lot of money, but that's not where we're going. Where we're going is a sea of free NFTs with 3 billion people

• 24:25Speaker 02

  with active wallets, because they got their NFTs for free. And some of them might be valuable to someone else. I don't see it as an issue. It's actually net positive. If everybody started giving everything away for free, what would happen to Ethereum would be insane. In my opinion, that's what's going to ultimately make Ethereum is free NFTs. In my opinion, that is the core use case of Ethereum is NFTs. It's the thing that can scale that everybody will end up having. Ethereum is that medium of exchange between all of those NFTs for everybody on Earth. So I don't see it as like a currency or a DeFi platform or whatever. It's an NFT platform and everyone's going to have one and everyone's going to want one.

• 25:11Speaker 02

  And yeah, there'll be trillions of these things and most of them will be worthless. But what's the intrinsic value of an NFT anyways? Zero, the gas cost essentially. One, why would anybody turn down? And two, there's going to be some that are very, very successful that people are going to desire and want, despite the fact that there's trillions of them.

• 25:32Patrick O'Shaughnessy?

  Can you talk about the creativity behind the extensions of the original Digi collection? You've already rolled out Spirit and some other things that sort of programmatically combine with the original assets. I think others have done small versions of this too. Port Apes did too, but talk through the creativity here and the purpose.

• 25:48Speaker 02

  The big thing is we're trying to connect to Web 2. Between Web 2 and Web 3, we did this adventure ERC 721 token, we call it. Essentially allows you to lock up, I'll say, your token, your NFT. And when you do that, you can secure it and then give your token, your NFT permissions to interact with another app. And that other app could be another NFT game, another Web 3 game or another Web 2 game. And now you have the real beginnings of the metaverse. It's not that every NFT works in every game, meaning it's all rendered, the gun, like one gun works and the next thing is like, no, no, no.

• 26:28Speaker 02

  It's about NFTs having permission to go into different worlds and then having that world set up an event for those people. The Digi people, they lock up their token and then another game has a Digi event. And the only way they can get into it is by giving that NFT permission to go into that event. That event gives them rewards, NFTs, whatever the event ends and then the permission ends and now they're back in the Digi world. So that's how I see it playing out rather than just everything, accepting everything. It would be more about like worlds connecting with each other. And you can create much better experiences that way too, because it'll be a more customized experience than popping in and out of every app.

• 27:10Patrick O'Shaughnessy?

  Say a bit about the tiering and the fun aspect of, I don't have a better word than like breeding, some of these NFTs to create new things like the royal class versus the others.

• 27:21Speaker 02

  The Genesis NFTs, we call them Genesis because they create the world essentially. So we have this very small group of people who are generating the next set of entities, the heroes. That's essentially how we've designed the system to work is that these Genesis entities make the future NFTs. As we expand into other worlds and we make our universe bigger and bigger, those NFTs will be better over time, hopefully. So that's essentially the idea. And this is still very hard to talk about. Future work is very, very hard to talk about because of the way the legal system here is in the United States. Want to have people collect those Genesis entities and we want to make them special, essentially.

• 28:05Speaker 02

  And that's the reason why they're making the heroes. And only that, we could have done another free mint, but we're not.

• 28:12Patrick O'Shaughnessy?

  And is the idea that the holders of the Genesis characters could then control the destination of the things that are created from them, meaning they could sell them, they could...

• 28:22Speaker 02

  Yes.

• 28:23Patrick O'Shaughnessy?

  So they're the propagators.

• 28:24Speaker 02

  Yes. Yeah, they're my advocates. And the more interesting things that we do together, the more they're going to advocate for what it is that we're doing.

• 28:35Patrick O'Shaughnessy?

  One of the things that jumps out of the conversation so far, you had talked about a year ago, seemingly jokingly, that coffee shops would be selling NFTs. And sure enough, that happened, kind of crazy. It seems like there was an era, and I think MZ, Machine Zone, was one of the most, if not the most sophisticated, performance marketer back in the era of extreme targeting. That's changed. That's changed now, and it seems like NFTs are a chance to unlock brand marketing again versus direct response performance marketing. Can you talk about that?

• 29:06Speaker 02

  Of course. You have these virtual items that cost you nothing to make, nothing. And they're tradable, they're limited in supply, you can save it forever, you can give it to a friend, you can put it on OpenSea. Why wouldn't you be handing these things out everywhere? Of course you should be. It just makes sense. And that's why I say free to own. So like when people say free to own, like, oh, that sounds like play to own. Yeah, but play to own implies I have to play it. Play to earn implies I have to play it to earn. Free to own is you're just, here, it's free, now you own it. People discredit how important the messaging is, the branding, the messaging.

• 29:48Speaker 02

  I'm really pushing it and other gaming companies have already adopted it, which is amazing. Because it's obviously true. When they say my game is free to own, they get thousands of people saying, give me a free NFT. Isn't that what a game needs? Don't they need thousands of people paying attention to it? And hopefully millions? So to me, this is so obvious. Sometimes I wonder why I even have to talk about it because it's so obvious. I put it out there, it's like, well, I'm right and I won. It was like a death blow. It's just like, yeah, it's over. This is it. This is how it's going to be. And it upsets a lot of the people who made hundreds of millions of dollars selling NFTs. Because now it's like, oh, people are going to want them for free now. What do I do? It's like, yeah, you can't just give them stickers anymore.

• 30:33Speaker 02

  You're going to have to work harder than that.

• 30:34Patrick O'Shaughnessy?

  Can't they update pretty quickly though?

• 30:36Speaker 02

  Technically, they could. The console guys couldn't move over to free to play. They all got smoked. Every single one of them. The skills that you need are not, you don't just decide that you're going to start doing this stuff. You're going to have to really try to figure it out. You can, you can figure it out, but most of them don't.

• 30:54Patrick O'Shaughnessy?

  Do you think that the free to own NFT concept becomes a primary monetization method for other large brands? Make up an example, Kanye West.

• 31:02Speaker 02

  Yes.

• 31:03Patrick O'Shaughnessy?

  Maybe he doesn't have an army of engineers.

• 31:06Speaker 02

  Everyone will need one.

• 31:07Patrick O'Shaughnessy?

  Will that then become his method of fan monetization?

• 31:11Speaker 02

  It's going to be everybody's for everything. It's kind of like saying, do you think people are going to use coupons? Everyone's going to use NFTs, everybody. There's going to be trillions of these things. They're going to be everywhere. It's going to be so annoying because they're going to be everywhere. But as a result, you're going to move a lot of consumer spending from credit cards to ETH. And it's going to be crazy. It's going to be something like nobody's ever seen before. So that $20 limit, everybody designs products around, goes away. Things just change in a really big way. Ethereum is the real metaverse. It's the digital world blending in with the real world. And these digital products unlocking things in the real world and vice versa.

• 31:56Speaker 02

  So yeah, everyone's going to use it. It's like the new email or something like that. The new mailer in your mail, the new countdown timer, the new sign up for when this thing comes out. That's what it is. We already see car manufacturers use it, clothing company, like everybody. It's going to go to everything. It's going to go to, like I said last year, your coffee shop, 7-Eleven, whatever.

• 32:18Patrick O'Shaughnessy?

  I was thinking recently about the interesting marketing strategy of what I would call the equivalent of a concept car that Mercedes might invest, God knows how much money to create some, not production, but incredibly cool thing to expand people's mind and to build their brand. That is fundamentally an investment in the brand, not in selling the next S-Class or something. Talk about that more writ large beyond gaming. Does this mean that the whole world's marketing spend is going to shift more from Facebook ads to spectacles that expand people's brand impression in a sort of general but not specific way?

• 32:54Speaker 02

  You can move that spectacle into digital property now. You end up with these like interlocking digital ecosystems where the NFT forms access from one place to the next. And that's very, very powerful. And if you're not a digitally native designer, like business type person that thinks about virtual economies and how these things work, you're going to struggle. It's going to be really hard because it's not going to make sense to you. But I could see entirely new brands building extreme brand loyalty through these NFTs and getting everybody so excited that they want to go to the thing that replaces Starbucks. They prefer it because they're part of that community in a more meaningful way than just an email signup list or a push notification on a phone.

• 33:39Speaker 02

  Like I said last year, I don't think it happens overnight because there's not enough people that understand this stuff, like how to even think this way. But if you're a young person, you're going to want to think about media, any kind of consumer good, experience, service, and thinking about how do you integrate NFTs into those things and create a loyal community around your business or product.

• 34:03Patrick O'Shaughnessy?

  This may be an overly specific question, but it seems as though so far, every one of the really successful and enduring NFT projects is like an actual person, character, or some sort of anthropomorphized ape, or it's people centric or character centric. What's going on there? Even something like Loot, which was a flash in the pan, went away.

• 34:23Speaker 02

  It was free marketing on social media. People use those as PFPs. They called them PFPs. They didn't call them JPGs. They called them profile picture projects, right? You could have just said image project, but it was important that they were called profile picture projects because you would buy them and you would make it part of your profile. Then other people would see it and say, oh, I want one of those, but there's only 10,000 of them. So essentially, calling them PFPs was the thing that made them big. Otherwise, they would just be drawings. That was important for NFT 1.0. That was the marketing. NFT 2.0 was join our club. So it was like a PFP plus a club. It's not just a PFP. It's also a

• 35:08Speaker 02

  little bit more. We'll send you a pack of stickers or something, something like that. And then the third one is more interoperable, virtual experience, which is where we're going through gaming and through crossover gaming and all kinds of different things that we could do with these things. But it's more software-driven, modern approach to Web 3.

• 35:31Patrick O'Shaughnessy?

  Do you think we'll see success away from characters? When we studied Magic, I think the most expensive Magic card was a Black Lotus or something. It wasn't a character. It was an item.

• 35:41Speaker 02

  There's been a few. There's been a few keys. They function as keys that have been successful, very successful, like Proof Collective keys. They sell for like 50 ETH, something like that. And those are like membership NFTs. Those have already worked several times, not as frequently as PFP projects have worked. Memberships have worked already several times, so they'll continue to work. And then for items, the reason why you don't see Black Lotus is because it's just not a big Web 3 game yet. Just why? There are mystic axes in Axie Infinity that have sold for nearly a million dollars. We've seen some of that. And an axie isn't really like a PFP style drawing,

• 36:23Speaker 02

  I guess, image. It looks like a character, and that's worked. So my rule of thumb is if it's worked twice, it's going to work three times. If it's worked once, it'll probably work twice. If something's worked 100 times and you don't get it by then, you're just never going to get it, probably. And then someone else is going to make a billion dollars and you're going to say, why wasn't that me?

• 36:45Speaker 02

  You're going to say, how come I didn't do that?

• 36:47Patrick O'Shaughnessy?

  One of the most intriguing things to me, watching this and sort of having the benefit of a combination of the inside and the outside view, is watching your Twitter strategy. On a relative basis, per follower, you've got like a crazy amount of fervor happening around you. I'm just curious to hear what your thoughts on it. Like, why have you created such a fervor? And how much of it is intentional and strategic versus just kind of messing around?

• 37:13Speaker 02

  We announced Limit Break two months ago, and nobody really paid attention. And we kind of purposely did it that way. We didn't make a big deal out of it. We didn't do any press. We just said, we got these investors, just left it at that. Nobody really paid attention to it. Then we did this VentureBeat article where we announced that we raised 200 million dollars, which is a lot of money. And I knew we were going to get a lot of attention that day. So I decided to spend it on going after paid mitts, essentially, and say, okay, well, I'm going to have everybody's attention today, for today only. And I probably didn't do it in the most artful way, but it definitely worked. But I said, all right,

• 37:54Speaker 02

  I'm going to end paid mitts today. That's what I'm going to do. I'm going to try to level set the industry in my favor, which is free, something I know how to do. I don't have a big fan base like these other guys do already. They'll still be able to. They'll be able to put out another mint and make another 50 million dollars, 100 million dollars. They'll be able to do that for a while, but not forever. Honestly, I think a lot of people were cold water, basically. It's like somebody raises 200 million and you kind of expect them to say, come work for us. We're really cool. And I said, no, this is over.

• 38:33Speaker 02

  I couldn't have predicted response I would have got, but the reality was I was right. I learned a hard lesson is that NFTs haven't been doing well lately, so they don't exactly want somebody new coming in saying this old way is over. They want their old NFTs to do well. That's not a very popular message if you're kind of holding some stuff that you wish would do better. But over the weeks, like I said, I've already seen a dozen companies adopt strategy. And I've had lots of people privately message me and say, I wish we did into the pavement. I wish we would have done it for free. It's better. I know I'm right and I know it's right and I know it's inevitable, so I kind of just like leave it alone now. Kind of push it, but I won't push it too hard.

• 39:16Speaker 02

  I had one day to kind of change things. That's how I saw it. I had one day to do it. Where everyone was going to see what I was talking about. Two hundred million dollars is such a large number. Like, everybody's going to say like, what the hell is going on, right? And ultimately, like I said before, this is how we get three billion people on Ethereum. I want the sixty thousand people that own NFTs that are using Ethereum every day to own my NFT. That would be great, but that's not where we're going. That's not where we raised the money that we raised. That's not why we're building what we're building. We want hundreds of millions of people, not tens of thousands. And if we achieve that, we'll be the biggest gaming company on earth by far. Won't even be close.

• 40:01Speaker 02

  To me, as someone who's been doing this for twenty years, I know I'm right and I know it's obvious. And I know I'm going to have a lot of competition, a lot, because they're going to see it work. I already know there's several companies just getting ready to just try to eat us alive. I already know that's happening.

• 40:18Patrick O'Shaughnessy?

  Is that why the two hundred million is functionally that effectively a defensive raise?

• 40:23Speaker 02

  No, it's opportunistic because the LTVs of a crypto player are so insane in comparison to Web two. Look at it. Okay, a few thousand people are willing to spend fifty million in a day on a land sale. That does not happen in Web two. That is impossible, actually, literally impossible on Web two. There's no way to do it. It would never work. Even what Kevin Rose did with Moonbirds, he had ten thousand Moonbirds that he sold for seven thousand dollars apiece. Oh, what? First of all, in a game, that's impossible. Let's keep that in mind. Like you actually can't even do that in the game. There is no gaming platform on earth where you could do that.

• 41:09Speaker 02

  You can't do it on console. You can't do it in mobile. You can't even do it on PC with Stripe. They're not gonna let all those purchases through. You're gonna get chargebacks, like there's gonna be a... So you literally can't even do it. So you have an art collection, membership thing that they're doing at Proof at 7,000 apiece. Okay, so if you're a business, that's pretty cool, right? Like you're making a business and you're looking at that as like, geez, that's amazing, right? So the old trad fintech stuff is kind of irrelevant in comparison. Why would I ever even wanna make something on credit cards if I could work on E? I'm pretty influenced by Mark Finkus. We were very young kids competing against him in 2008, 2007.

• 41:54Speaker 02

  In the early Facebook days, he was the only one who took it seriously. And he would go out and say, "I'm gonna raise more money than anybody. I'm gonna do more marketing than anyone, because this is gonna be huge." And the people who you're competing with were kids like us. And we were just three of us in a room and it was kinda like, what? It was almost like Zynga's gonna win, guaranteed gonna win. That's how it felt. That's why we made an iPhone game. Zynga was so dominant already that we were like, "Well, they're not on iPhones, so let's go do mobile games." Because we started on MySpace and we thought about going to Facebook and we just thought it's pointless because Zynga's gonna win. And they were right, actually. Everybody could always do better execution when you look backwards. But they were right. He was right.

• 42:39Speaker 02

  And I was wrong. I was the kid who was scared. I was the kid who was wondering if it was real or not. And he had the bravery to say, "No, this is real. And I'm gonna raise more money and I'm going to spend more money on marketing and this is gonna be huge." I learned that lesson and now I'm forty two and I look at this and I say this is the exact same thing all over again, except this time around, I'm not going to be the scared kid who thinks like, well, maybe I'll make a few million.

• 43:07Patrick O'Shaughnessy?

  Be the warlord this time.

• 43:09Speaker 02

  Yeah, I'm not going to be the scared kid that says, oh, maybe I'll make a few million dollars and that'll be great. No, this is a real thing. This is big and we raised a lot of money, but I want to raise billions. I don't want to stop here. Like I want to keep going because it's obvious what's going to happen next. It's obvious. And so we've got to execute and make it real. So now it's a question of hiring the right people, figuring out the right marketing plans, building a great game, scaling.

• 43:38Patrick O'Shaughnessy?

  What do you think will define the legendary marketers of the next ten years?

• 43:42Speaker 02

  Knowing how to get hundreds of thousands of people excited about your digital products, digital products. Branding is, this is cool. You know, Kim Kardashian wears it versus here's a piece of our business, our world, our virtual world. You own it now. We're going to go do this next. We're going to do that next. And then all those people are on your team.

• 44:04Patrick O'Shaughnessy?

  It seems hard to me. It's probably just lack of imagination, but in your context, building a digital world and a literal game that is fun to play makes a ton of sense. If something entitles me to enjoy myself more and for longer or in a different way, I get it. Where I struggle is the coffee shop, is the crossover from something digital, the NFT to something real world. Do you think that it will be as powerful in that context?

• 44:32Speaker 02

  Depends on how interoperable they are. If you say, this is my cafe and here's a membership, I think that can work.

• 44:42Patrick O'Shaughnessy?

  Here's a back room that's cooler where you can hang out and you sign in with your NFT.

• 44:45Speaker 02

  Discount or we save your order for you or a ton of different things or you get to vote on what our menu is next week or whatever. Not necessarily those are good ideas, but there could be a million of them. It's not so simple. I think that will scale. It will scale and it will work to an extent, but I think that. If these things can blend with other virtual worlds, the cafe does an event with the barbecue place, members get something special over there that week, and you have these networks of interlocking businesses doing cross-promotion with each other, managing these virtual spaces and how they connect with the real world, then you have something very, very powerful.

• 45:28Speaker 02

  That's more of game-like thinking than it is somebody who runs a cafe. That's a good startup. You're gonna wanna like share communities. You don't just wanna like dominate and own one. You wanna share, you wanna partner, and you wanna make membership, if it's just membership, exciting.

• 45:43Patrick O'Shaughnessy?

  Do you think we'll see more token-mediated media experiences?

• 45:47Speaker 02

  Everything, absolutely. Token, gated.

• 45:50Patrick O'Shaughnessy?

  You have to own these two podcasts, NFTs. If you own both, it unlocks this collab between the two of them or something.

• 45:55Speaker 02

  Any kind of business scheme that you can come up with would probably work if it's cool. And that's actually the hard part. It's like making it cool. I think if you make it really cold and it's just X plus Y, it becomes too much of a math calculation. You're just doing ROI calculations. It can't be so simple. Actually, if it gets to the point where the ROI becomes the thing that everyone's thinking about, you're screwed. It has to be more about the experience and what you're doing and how it's changing all the time. That's what it has to be about.

• 46:29Patrick O'Shaughnessy?

  Capture some imagination and some emotion.

• 46:32Speaker 02

  I save $2. It cannot just be that. Take it a step further.

• 46:38Patrick O'Shaughnessy?

  It's exciting that some emotive responses, some imagination will fuel the most successful of these projects. And it brings to mind something you and I were texting about the other day, which is the insane surge in these AI models being open source, stable diffusion being the one that I think's really caught the public imagination. Say a bit about your impression of watching these technologies proliferate alongside what you're doing. These things are crazy powerful. They feel like magic.

• 47:03Speaker 02

  Creative people are really scared. So they look at these things and they say, the knee-jerk reaction you often see is like, well, they're not as good as like if a person did. But only saying that because it's close.

• 47:15Speaker 02

  If it was terrible, they wouldn't say anything. So they get very defensive. For somebody like me, it's great because I can't draw. There's all these really cool stable diffusion extensions and I saw one in Photoshop where you just like draw a stick figure and it'll turn it into like amazing drawing. Um, you just draw a stick figure and then you type in what you want it to be and it'll look really good. That's great for me. Because I can't get the pictures in my head out. I can't get them out of my head with my hands. It's going to change communication. I think it's more of a translation tool than it is an image tool. We use words and letters and characters, written language as hacks because we can't

• 47:58Speaker 02

  tell you what's in our head. So we've got to translate images in our head to words. And then turn those words into an image in your mind, which is very, very hard to do. That's why we have writers because it's hard to do and only a few people can actually do that, can turn words into an image. Stable diffusion is like the ultimate writer. It's the ultimate author. It turns words into images that everybody can understand. I don't need to speak a specific language to understand it. Language is almost like a, it's like a mistake. It's like a temporary thing that gets replaced by machines that can make images. And the images will be much more efficient at communicating what we're thinking.

• 48:40Speaker 02

  So when I see it with stable diffusion, I say, okay, here we go. We're finally going to be able to turn words into images and have real communication now. I almost want to replace or modify what you see with these AR glasses with Google Translate. You go there, you're in Japan and someone's speaking Japanese and you see the English words. I would almost want to pair it with stable diffusion and have a picture that goes along with it. Somebody says turn right, I can have an arrow or something, you know, I can have a visual that makes more sense than maybe what a bad translation says.

• 49:16Patrick O'Shaughnessy?

  Is the ultimate proof point of all this, the fact that memes do such a better job of communicating certain ideas than words?

• 49:23Speaker 02

  Pictures say a thousand words, right? That's true because they're better than words. It'll have big, big impacts on art and gaming. It's really exciting for gaming. The next step is animations and 3D models, which is already happening. That's going to have a big impact. And at the end of the day, if everybody can make art and everybody can make games like marketing and awareness is once again going to be the biggest problem that everybody has as everybody can draw now and everybody can write now and everybody can do all those things.

• 49:51Patrick O'Shaughnessy?

  Maybe just go there even deeper on distribution. I kind of asked, well, define great marketers and you said, understanding of NFTs, but assuming everyone understands NFTs.

• 50:00Speaker 02

  What's after that?

• 50:01Patrick O'Shaughnessy?

  What's after that? Like, what is great distribution? That's way too broad a question, maybe, but.

• 50:06Speaker 02

  Great distribution is aligning the community with the product with the same incentives. That's what great distribution is. That's what NFTs do. Instead of drink Coke because it makes you dance really cool on a bus or whatever. It's like drink Coke because you own a Coke NFT. That is way, way, way more powerful. That's what I see. I see aligning incentives across capitalism and the consumer. That's what I think NFTs can do. And it's gonna take a lot of creativity to do it. And I don't have all the answers for everybody, but I do see it in games fairly clearly. I think everybody does. Like in games, it's

• 50:46Speaker 02

  pretty obvious. It's just that we haven't seen a big game besides Axie. So there's a lot of people waiting, but there's enough there from my free to play background where I can look at and say, oh, this is obvious. This is definitely going to work.

• 51:00Patrick O'Shaughnessy?

  I think it's fair to say, last time we talked a year ago, you had a fairly grim view on like the general state of innovation.

• 51:06Speaker 02

  I still do.

• 51:07Patrick O'Shaughnessy?

  It seems like on the digital side, at least, it's unbelievably exciting.

• 51:12Speaker 02

  I was thinking about, how come we don't have like new bleach? If you look at your household items, it's the same stuff that people were buying like 50 years ago. And those are the most important things. Those are the things you use every day. They don't get any better. Nothing changes really. Like, it's just all in the digital world because it's all imaginary. That's why. It's a great environment to just make stuff up. You can make it real, like NFTs kind of make your imagination real in a lot of ways. That's what's so powerful about it. It makes the digital world real to an extent. That's why they're so powerful. That's why they matter so much. But if you go back to 2019, do you really feel like you're living in a much more advanced world or less?

• 51:54Patrick O'Shaughnessy?

  Well, my friend and I have this, again, image communicating a thousand words. I live in Greenwich suburb of New York City. And the Metro North is the train connector between the two that everyone takes that commutes to the city. And if you look at the old train schedules from 1995, from the early 1920s, the train now takes longer to get to New York than it did in 1995 by four or five minutes. And it's basically the same as it was like 100 years ago. And my friend and I, Bill, always joke about this of just like, can you believe that this is the case? Like, this is insanity.

• 52:27Speaker 02

  I said this last time, I'll say it again. The digital world advancing faster than everything else is a very bad sign. It's not good. You can't have all the innovation, and this is me as a game guy, but you can't have all of the innovation going into digital worlds. We live in the real world. We don't live in the digital world. Like, we can't just keep making the digital world the thing. It's not gonna work. And it's not gonna work. But it makes sense because there's scale there. You can make money worldwide instantly. It's very obvious why everything's getting pushed into the digital world. But it's dangerous. Everything getting pushed there is very dangerous.

• 53:09Patrick O'Shaughnessy?

  I agree with you that it doesn't seem versus 2019 or 2015 or whatever, that really much has gotten fundamentally better. But I am definitely an optimist. Seeing things like Booms, Supersonic, or Clover building, you know, like new building technologies.

• 53:24Speaker 02

  That's sort of bringing us back to the 80s, though. Like a quieter version of the 80s.

• 53:31Speaker 02

  Which is a big deal. The fact that it's quieter is a big deal.

• 53:34Patrick O'Shaughnessy?

  I continue to hope and believe that we will retest some of these things.

• 53:38Speaker 02

  But why when you can make an NFT? You see the problem? That's why I always say about going to Mars. No one is going to Mars. We're going to VR Mars because we won't know the difference anyways. You see my point? Like, if VR gets so good that you don't know that you're not on Mars, then why do you need to go to Mars?

• 53:58Patrick O'Shaughnessy?

  When we talked last time, we were sort of at like near peak optimism about Web 3 and crypto. And now we're not maybe at peak pessimism, but.

• 54:05Speaker 02

  I'm not pessimistic about Web 3. Everything's going into the virtual world. Web 3 is gonna be the most important thing there is because of that. But I'm not saying that's necessarily like a great thing. It's still true. It's still gonna happen.

• 54:20Patrick O'Shaughnessy?

  I think you mentioned that there are two other games, maybe you're even an investor in them, or at least respected what they're doing. What do you most admire in some of the adjacent stuff that's getting built in your world? Castaways is one, I think they use as an example.

• 54:32Speaker 02

  Oh, yeah, Dayton. Dayton is, he's one of these Gen Z kid. He just works so hard. It's really cool to interact with him. He's determined. It's becoming more and more uncommon, in my opinion. But what was great about him is like how much he's been pivoting. Like he just pivots relentlessly to find the thing that works. Like he saw what we were doing free. He did it for free and then it worked for him too. So he's just pivoted everything into that model now. You gotta have that desire to win to kind of abandon what you're doing to change. You should be willing to work on something for six months and then just throw it away in one day and do the new thing. And a lot of people aren't willing to do that and he is. So it's cool. He's a lot younger than me.

• 55:15Speaker 02

  He reminds me a lot of myself when I was his age. And he's going through a lot of the same problems I went through. So it's cool to see that.

• 55:22Patrick O'Shaughnessy?

  What do you think are interesting options for game mechanics that get released by Web 3 technology that weren't possible on Web 2? You're building a Web 2 game, I know.

• 55:32Speaker 02

  What we just released with the adventure token is huge. It allows you to do a permission crossover event between games, essentially. So if you wanted to be featured in a game right now, you would have to go to the company. This is very common in Japan. So in Japan, they have these crossover events. They do it better than anybody else in the world. And it's like a real business over there. And they have agencies, actually, that manage brands coming into games for the companies. They set up the calendars. They say, well, Spider-Man is going to come in this month and da, da, da, next month. And it's run through this agency. The gaming companies get the calendar and then they start making content ahead of time and they plan stuff out like a year in advance, essentially.

• 56:13Speaker 02

  In the new world, we have smart contracts where I can ping a company and say, hey, here's my assets, connect to this smart contract and those assets will come into your game. So now you have a much more fluid world instead of like an agency-driven marketing thing. You can have IP holders giving access to different IP programmatically through these smart contracts. And they can guarantee that they have access to it and they can build really cool virtual experiences around that in a way that they couldn't do before. So interacting from right now at games, you have two games, they're both virtual worlds. Interacting between the two of those right now is done through phone calls and emails and meetings. That can move over to a smart contract world.

• 56:58Speaker 02

  And that'll create a lot more interesting interaction between virtual worlds that were not possible before Web 3. That's just scratching the surface in my opinion, but that alone is non-reveal. That's actually a really big deal.

• 57:12Patrick O'Shaughnessy?

  To go from 60,000 to hundreds of millions or billions of people. I'm curious what you think needs to happen on the rest of the infrastructure side, specifically like how these people get their ETH to begin with and where they keep it.

• 57:24Speaker 02

  They won't get ETH first, they'll get an NFT first.

• 57:27Patrick O'Shaughnessy?

  They'll need a wallet still.

• 57:28Speaker 02

  They're going to need a wallet still, but they're not going to get ETH first. They're going to get an NFT first and that NFT could turn into ETH. That's where they're actually going to get their first ETH from.

• 57:37Patrick O'Shaughnessy?

  Oh, fascinating.

• 57:38Speaker 02

  From the NFT.

• 57:39Patrick O'Shaughnessy?

  All right, that's very interesting. Yeah, reverse the order.

• 57:42Speaker 02

  Yeah, reverse the order. The NFT has no value. It's cost zero to make. ETH has value, but I can still turn that NFT into ETH if it's managed properly. Does that make sense? So the world's going to get its first ETH from an NFT.

• 57:55Patrick O'Shaughnessy?

  And they're going to get the NFT for free. So wallet seems like the key technology then.

• 58:00Speaker 02

  Yeah, well, and the thing that's holding everything back is mobile wallets. It's Apple's wallet. It's Google Pay Wallet. Once Ethereum gets integrated into that wallet, it's over. Instant adoption worldwide. That's the real gate right now. But remember, people are really into these games. They're very, very into these games and they're willing to spend a lot of money on free-to-play games. I don't think it's going to be that big of a jump to convert players, not the world, but players from free-to-play to Web 3.

• 58:34Speaker 02

  That's the real target audience to move over. Everybody else is a lot harder because you've got the wallets and stuff. But remember, these people are willing to play games for four hours a day. They're all their friends are on it. They want to have all the items inside the game. You already have all the motivation there to get them to move over to Web3. It's all there.

• 58:53Patrick O'Shaughnessy?

  I think it's a fascinating place to close our discussion that onboarding is the inverse, I think, of what many have expected, that we're waiting for everyone to get some ETH so they can buy some stuff, when in fact, they're just going to get some stuff and then maybe that'll turn into ETH is a fascinating closing thought. I've been so fascinated watching you build this business and have learned so much in the year since our first discussion, talking to you. I really appreciate your time today and everything you've taught me.

• 59:20Speaker 02

  Thank you. I appreciate it, too.

• 59:23Patrick O'Shaughnessy?

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