Yat Siu, co-founder and executive chairman of Animoca Brands, has been a key player in Web3’s development due to his involvement in the rise of Cryptokitties. This was his entry point into the world of NFT and blockchain, and he quickly realised that it could transform games, digital ownership and online identity.
In this interview, YAT shares perspectives on shaping the future of the industry, on the growth of Web3, the challenges of closing the gap between Web2 and Web3, and the strategic investment challenges that Animoca has in gaming, NFT and decentralized technologies.
Can I share my journey to Web3?
My official journey to Web3 really started with Cryptokitties. At the time, the Vancouver studio was deeply involved in helping to build encryption. So I first discovered NFTs. This was back in 2017, but at the time, NFTS was not actually a mainstream concept. Our involvement in Cryptokitties was a pivotal moment for us, marking an official entry into the Web3 space. It can be said that the involvement of Web3 was through NFTS.
Before that, I was always intellectually interested in Bitcoin and blockchain technology, but I wasn’t an early adopter. For example, I am not an early owner of Bitcoin and did not participate in ICOs when they were popular in the early days. After the waves of ICOs began to die, we entered the Web3 space. However, intrigued by the possibilities of decentralized systems and blockchain technology, I quickly realized that Web3 had a major impact on games, ownership and digital identity.
Today we are deeply involved in Web3, with a portfolio that includes investments in a variety of projects across gaming, NFT, and decentralized technology. We may not be part of the original Bitcoin or Ethereum “OG” technology generation, but we strongly believe in the long-term potential of Web3 and its impact on industries around the world. We learned a lot along the way. And being part of this transformative space has been exciting from the early days to ever.
How did the background in Web2 games have an impact on your approach to building on Web3?
My background in Web2 games has had a major impact on how I approach building on Web3. We come from a gaming background, and that experience has provided us with a solid understanding of what makes a game and platform successful in terms of user experience and design. One of the important things we understand is the user interface and design. This is very useful for Web2 users in Web3 spaces to make transitions easier.
One of the things we often get praised is the ability to explain the concept of Web3 to Web2 users in a way that makes sense. Web3 is complex and intimidating, especially for those accustomed to the traditional Internet. I was previously part of a Web2 gaming company, so I know how to make complex concepts more accessible and how to bridge the gap. We essentially became translators or evangelists of space, helping to bridge the gap between the two worlds.
They were also able to provide guidance to large Web2 gaming companies seeking to integrate Web3 and blockchain. They often come to us for advice on how to approach Web3 and what kind of user acquisition strategies to use. Web2 background offers a unique advantage in this regard. This allowed us to apply that knowledge to the Web3 ecosystem because we know how to build our business and attract users to traditional spaces. For example, Web3 tends to focus on incentives and airdrops for user acquisition, but we understand the classic ads and marketing methods of Web2 and how they complement the Web3 approach.
Do you think it would be easier to develop a new generation of gamers who will start directly on Web3, or would it be better to help Web2 gamers move to Web3?
What we observed is that most of the gamers active on Web3 today represent a new kind of gamer. Many of them come from emerging markets, especially from places like the Philippines and Indonesia. There, players are encouraged to play the game in a way that allows them to make money. These gamers are not the same as those who play popular web2 games such as Minecraft, Roblox, and Fortnite. The types of games and incentives they are involved in are completely different.
Web3 gamers often prioritize financial compensation as their primary goal. This is a transition from the traditional Web2 game mentality. In Web2, the idea that gamers generally play for fun and make money from games is often secondary. However, in Web3, the game is designed around a play-to-earth model, with the financial element being the main motivation for many players.
Games like off-grid are interesting as they try to bridge the gap between these two worlds. Off The Grid is very similar to traditional Web2 games such as PUBG and Fortnite, but it incorporates Web3 mechanics into an abstract and less overwhelming way for Web2 players. This makes a great example of how Web3 attracts Web2 gamers.
However, the challenge is that they deal with a wide range of cultural and economic thinking, particularly between regions such as Asia and the West. In Asia, players are used to the idea of monetizing gaming activities, whereas in the West, gamers sometimes view the financial aspect as secondary or even less important. As Web3 games continue to evolve, it is important to fill in that gap and catering for both types of players.
How about installing new people on Web3? Do simple games like Clicker help attract new users or can you make money?
When it comes to bringing new users into Web3, the key is to find ways to make the experience fun and rewarding. Whether it’s a simple clicker or a complicated strategy game, all kinds of games are designed with some kind of incentive structure in mind. The mechanisms may differ, but the ideas are the same. It’s about attracting players by giving them something worthwhile in return for their time and participation.
For example, consider poker. Poker is ultimately a game that involves money, but most people who casually play it at home do it for fun and social reasons rather than expecting to make a living. The financial aspect can make the game more exciting, but the main drivers are social interactions and challenges.
In Web3 games, early focus on making money led to situations where space dominated professional players and people who were often playing games purely for economic benefits. This made it difficult for casual players to enter the space, causing many issues, including fraud, bots, and farming.
However, the advent of blockchain technology provides solutions to address these issues, such as digital identity verification and prevention measures. If we can find ways to control fraud and create a safer and fairer gaming environment, I think Web3 games will become much more appealing for Web2 gamers who are used to the more traditional gaming experience.
How would you explain the current state of the market? Do you think we are in a bull market?
Yes, I will definitely describe the current state of the market as a bullish market. Bitcoin has recently hit an all-time high, with major price movements in Ethereum, Solana and other major cryptocurrencies. Overall, everything is going very well and the market seems to be in a very positive stage right now.
That being said, there are some altcoins that don’t play like Bitcoin, mainly because there are a large number of tokens available in today’s market. There is much more dilution of attention than three years ago when the market was low saturation. What’s really attracting a lot of attention right now is the meme coins. Just as NFT did in 2021, Meme Coins has a lot of retail interest.
The cycle we’re currently watching on Memecoin reminds us of many of the ways NFT unfolds. In 2021, the NFT space was booming, with Ethereum prices surged to around $4,000. Next, these NFT projects are launching Meme Coin to attract more users, and starting NFTs to keep the cycle going. It is all part of the same ecosystem, only the various economic and cultural factors behind each wave.
Do you think Bitcoin will reach $100,000 in the next few days?
We don’t know if that will happen in the next few days, but we predicted earlier this year that Bitcoin would reach $100,000 by the end of the year. Of course, the market is always unpredictable and we know that Bitcoin can retreat or fluctuate before it reaches a new high. But I believe it will reach $100,000 this year and we are seeing market dynamics revitalize in the way that can bring it there.
Do you think the NFTS is now winning a new wave of adoption, or is it still quiet in the market?
First of all, I don’t think NFT is quiet at all. Looking at the volume of NFT sales, it’s definitely on the rise. Especially in the game, the activity will re-enter this space. I think the reason NFT might look quieter now is because it’s not as loud as the coins in memes. So, when you’re in a room where a lot of different things happen, you can feel like there aren’t that many NFTs around, but in reality, the other projects and tokens are even bigger and more careful.
What’s really interesting to me is that memecoin is beginning to fire NFTs as part of the ecosystem. As these memecoin projects become more successful, they find ways to use NFTs to build and strengthen their communities. This shows the evolving relationship between NFTs and meme coins, and I think we’ll see this convergence progress further.
What is the Animocha brand’s partnership with Ton Foundation and Telegram?
When thinking about the best distribution platform for Crypto, it’s definitely a telegram. When I first started working with the Ton Foundation last year, I quickly learned about Telegram’s potential in terms of user recruitment and onboarding. You can see how many new users have entered the crypto space through Telegram.
Of course, there are still some issues, such as multicounting and other challenges that come with other big platforms. But that is something that has been addressed over time. Nevertheless, we remain very bullish about ecosystems. For us, distribution is an important part of our thinking about growth, and is considered by Telegram and Ton as one of the best gateways for Crypto and Web3. That’s why we support this partnership and bring many unique ecosystems to the Ton ecosystem.
What are the most unexpected innovations that have emerged from the Web3 project Animoca invested in?
We’ve invested over 540, so there’s definitely a lot of exciting innovations we see throughout the space. But some stand out. For example, in the case of MoCaverse, one of the most important innovations is their work on the reputational class. This is an interesting solution to resolve Sybil attacks on Web3. This is an important issue when considering scaling these systems.
What’s really exciting is that they found that while creating this reputation layer, they use something like proof of zero knowledge to maintain user privacy. This is an innovative approach that can have a huge impact. Another project we are excited about is the Humanity Protocol. Rather than relying on intrusive methods like retinal scans, it provides an alternative way to verify identity through hand scans. It’s not intrusive, it’s more comprehensive and can be used on smartphones.
Finally, Open Campus Edu is a project we are truly excited about as we are working on student loans in our Defi space. They work to generate better yields and interest rates for students, which is a $5 trillion market. We believe that working in that space in a decentralized way can bring a large amount of money to Web3, leading to a more sustainable approach to education funding.
Which industry within Web3 are most interested in and would you like to implement within your business?
For us, our focus has always been on culture, entertainment and social networks. Essentially everything that defines how we live and interact with on the Internet. Looking at the most valuable companies on Web2, they are not telecom companies or infrastructure companies. They are content-driven companies such as Netflix, Facebook, Google, Apple and more. These are companies that create cultural, social and entertainment experiences.
Early on, I felt that the Web3 ecosystem was built on similar principles. Infrastructures like L1S and L2S may seem more important in the early stages, but services and products that people actually care about, such as gaming, entertainment, and social interactions, will drive the long-term success of Web3. So we made a strategic decision to focus on these areas. We are constantly looking for solutions that will improve and expand these industries. That’s why we’re investing in human protocols and L1 and L2 technologies.
Do you think it can trigger a new wave of adoption of Web3 games?
One of the great things about the game is that it only takes one blockbuster game to change the entire industry. That’s what happened in Web2 games and could happen again in Web3. They’ve already seen games like grids that can drive adoption to appeal to both traditional gamers and Web3 natives.
But I think there will also be another wave – Memcoin Games. I think Meme Coin will ultimately play an important role in Web3 games by launching its own games and integrating the games into the ecosystem. Merging meme tokens and games brings a new wave of interest and adoption, especially as meme coins are becoming more popular.
What keeps you motivated while building such a large ecosystem?
There is a lot to keep you motivated. We are truly excited about our mission at Animoca Brands. This is to provide the rights to digital properties. I really believe that Web3 can create a better, fairer internet. One of the most exciting aspects of Web3 is that it may create a new form of capitalism (low-key capitalism). Here you can be more confident in the behavior of the market, knowing that people are more transparent and fair.
Many people lost their trust in traditional capitalism because it was so centralized. Decentralization allows Web3 to restore its trust and provide a more equitable market. It is also rarely positioned to be able to help shape the entire industry. At Animoca, we have the ability and take responsibility seriously. Being part of this transformation is both a privilege and a blessing.
