Owning assets in a video game seems like a pretty natural concept, so why have so many gamers in the U.S. rejected NFTs outright?
Yat Siu, co-founder of Animoca: I think the reason why so many in the West, particularly in the U.S., are rejecting NFTs is not because of the fact that NFTs give you ownership. I think the rejection is partly due to shifting sentiments about capitalism. For the first time in my life, I’m witnessing a very strong anti-capitalist sentiment in America.
The consumer in Asia, however, looks at capitalism as a net good. Things like democracy and property rights are fairly new concepts. Only four decades ago, South Korea’s economy was the same size as North Korea’s. Now it’s among the top 12 to 15 countries in the world. Consumers in Asia have seen capitalism work for them.
In the U.S., capitalism, especially in the past few decades, hasn’t worked in the same way. It has exacerbated inequity. In this context, crypto, which NFTs are part of, risks becoming viewed as a rich man’s toy that spreads the same kind of inequity in the virtual world.
The news headlines focus on things like a $300,000 Bored Ape NFT and skew perceptions about the entire NFT industry. An average gamer sees this and doesn’t appreciate that the average NFT is actually a $5 or $10 in-game item. It’s like thinking that the entire car industry consists of only Lamborghinis.
What is your conception of the Metaverse? A lot of people talk about it without clearly defining what it is.
I think that we’re already in a kind of pre-Metaverse. Among the top 20 countries in the world, we spend, on average, nine to 10 hours a day online. That’s more time than we spend at work. But it’s not a Metaverse that we as consumers have ownership of. So, that’s why I describe it as “pre.” The open, true Metaverse has to be one in which you have ownership. Without ownership, it’s meaningless.
Is the Metaverse a virtual reality space? Is it screen-based? Is it augmented reality, with the Metaverse overlaid over the real world?
I think everything you just mentioned is a vehicle to experience the Metaverse, but it’s not the Metaverse in and of itself. I go back to this principle of we’re already kind of in the Metaverse. When you’re in front of a big screen or even a mobile phone, the way you’re engaged in your game, it’s already immersive, and the connections you’re making with other people are also real. So, I don’t think the specific interface method matters. We prefer this sort of quasi-hybrid interface anyway.
My conception of the Metaverse is an interoperable digital space with an economy that individuals contribute to and create — because they can verifiably own what they produce via NFTs.
The Metaverse is like a community nation-state. What gives it value is its community and the network effects embedded in these communities. In order for it to have meaning and value, it needs to have ownership, which then gives rise to all these other rights and freedoms and makes the community powerful.
Social media brings together people from radically different backgrounds and perspectives who would never meet in real life, and they clash. Do you think that in the Metaverse, communities will coalesce around shared values and outlooks in separate virtual geographic regions?
Coalescing around our own values is what humans do all the time, and I think the same will happen with the Metaverse. The problem with social media companies is that they’ve weaponized this effect because they put these groups together.
It wasn’t so much a problem with the communities as much as the platforms themselves. They created algorithms that, in order to maximize engagement, ultimately brought out the worst in us because they would reinforce our existing ideas and prevent new or different ideas from coming through.
And we also lost the ability to have civil discourse because we have nothing to lose and no accountability — I’m behind a platform, and I could be anonymous and free of all consequences. Now, what’s encouraging is that these detriments of social media are not necessarily true in the open Metaverse. If I own a parcel of land in The Sandbox, as an owner in that space and a stakeholder in its success, I don’t want to spoil it.
Do you think Metaverse users will also be manipulated into engagement by an algorithm serving up outrage bait?
In the future, particularly when experimenting with DAOs and a coin for governance, those algorithms could actually be driven by the community’s goals instead of a centralized platform chasing the maximum possible engagement regardless of the social costs.
You could argue that the original construction of Facebook was as a platform to serve everyone on it. But it just ended up serving a very small group of people while everyone else was milked for data, attention, outrage, etc. What would Facebook look like if it actually served its more than 2 billion members?
The algorithms were devoid of morality or ethics because the people involved in them had one motivation: profits. That’s shareholder capitalism. With Web3, through token ownership and NFT ownership, you automatically participate in stakeholder capitalism, which is much more inclusive and representative.
Would decentralized governance of the Metaverse help to humanize the virtual world?
I think so. The humanization of the real world started when societies acknowledged that rights must be universal, not just for a privileged few.
In the digital world, we have somehow subordinated our digital freedom, almost like this type of freedom isn’t important. Why is it okay for Apple to decide every little thing about what we should experience in the App Store? Why is it okay for Facebook to be the arbiter of what we can or cannot see? We would never accept those forms of control in the physical world.
But once you realize that you can have similar freedoms in the digital world as you do in the physical world, you don’t want to go back to the previous repressive system.
It’s not the companies that will make the shift — it’s the end users, who will, over time, choose to use games or social media platforms in which they actually have a say and where their rights to ownership and freedom are intact.
How are we going to attract users to these new platforms when all their friends and 20 years of data are on Facebook, Instagram and Twitter?
I think this is the point where we need to understand that our data and our time have real value. When Facebook was a company that was barely making millions of dollars, we didn’t notice or care because there was little or no value to our data and time. Now Facebook makes $120 billion a year.
If the incentive on offer is ownership, I think many people are willing to start fresh in a new system. Look at it from the perspective of a migrant: I could have my assets or real estate or other property in one place, but I’m still willing to move somewhere else and give everything up because it has a better framework.
To me, that is the essence of the switch from Web2 to Web3.
The open Metaverse requires some level of interoperability — being able to take your NFT assets from one game or website to the next, even if it’s owned by a different group. Are there any current examples where you can do that?
There are some initial case examples.
But the key thing is that the paradigm of ownership doesn’t mean that you are forced to create an API or framework that another party has to adopt. It’s up to the other party to adopt your assets in ways that make sense to them.
The fact that we own cars makes it possible to have everything from Uber or Grab to companies making baby car seats. They didn’t go to Ford and say, “Can you please adjust your car design so that my baby seat will fit?”
The baby-car-seat companies just built baby seats based on how cars were designed, not the other way around. And that’s how we see permission in the decentralized world as well.
One example is the YGG [Yield Guild Games] gaming guild.
The one where they rent out expensive Axie creatures so new players can use them to make money in the Axie Infinity game?
That is a result of the network effect in action. YGG created a business model that is almost Uber-like, based on the ownership of Axies and which adds value to the NFTs and to the gaming system in a manner that none of us imagined was feasible at the time.
I suppose another example is Bored Apes. What do you think of BAYC’s idea of handing over the intellectual property with the token? There are now platforms where you can hire out your Bored Ape for an ad or to attend a party.
Indeed, that’s why my Bored Ape #9730 was on the runway at New York Fashion Week with Vivienne Tam! Packaging commercial IP rights within an individual NFT is a more powerful way to prove ownership (and therefore enforce it) than the traditional approach of “Oh, you infringed on my rights, so please show me the contract that you signed and I’ll take you to court.”
All these novel characteristics are already available on-chain. And the freedom to do so is powerful, as now buying an NFT confers all of these additional rights on top of it. So, I think what Bored Apes has done is nothing short of revolutionary in terms of how we think about IP rights. And, of course, many other companies are now taking a similar approach.
Video games tend to have relatively short lifespans because the only way the publishers make money is by pumping out a new title or inflating the economy. If we have user-created economies evolving inside a game, will those games be around for longer?
Yes, and there are already examples of user-driven in-game economies, even though they’re not on-chain. Second Life and Eve Online are over 20 years old and still growing. Second Life’s GDP is over $620 million. It’s bigger than it’s ever been. You can’t name many other games in a traditional context that have gone on for 20-plus years and are still thriving.
Minecraft is another game with longevity and a particularly interesting case because of its degree of decentralization and open-source approach. That’s how contributors on SourceForge are able to make mods or experiences such as Mineplex.
What you are seeing in both those cases are network effects that can accrue thanks to a degree of control over players’ digital goods.
Except that Minecraft has explicitly rejected NFTs.
I think that is more a problem for Minecraft than it is for NFTs.
Minecraft expressed a value statement that is political, even if it doesn’t fully comprehend that yet. The decision was a centralized one — no public debate took place. It was a preference choice and not necessarily an informed one. Instead, Minecraft chose to inflict damage on a community that had innovated by integrating NFTs with Minecraft.
At the end of the day, I think Minecraft’s decision hurts the users.
Will the games that stick around and evolve economies eventually all join up and become “the Metaverse?”
They have the potential to do so, and in some ways, that’s already happening. That’s why we refer to the open Metaverse based on genuine digital ownership. The ownership paradigm is a bit like why monarchies inevitably transform into democracies: If they don’t, then there’s a revolution, or they simply collapse under their own weight.
When you look at markets in Asia, especially South Korea and Japan, the most prominent Web2 game companies are already planning, have announced or are implementing Web3 strategies. This is the shape of the future, and it’s not a distant one — it’s near-term.
I was talking about the Metaverse with someone, and they asked if we’re just going to recreate the existing world there and have rich areas and poor areas. And I thought, “Yeah, probably.”
Digital slums? I don’t think that we can entirely remove inequity from our lives. Unfortunately, if you believe in capitalism, then there is going to be some degree of inequality. The critical consideration is: What’s the opportunity for someone who is on the bottom end of the spectrum to advance upward? And I think the Metaverse provides one of the best paradigms for solving this thanks to things like tokenization and play-and-earn, NFTs as a form of ownership, IP, and commercial rights management, data as equity, and so on. There are multiple pathways and opportunities for participation.
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Our time is valuable in the sense that someone will pay us for it. And so I think the idea of universal basic equity that is derived from our time is a more sustainable concept than universal basic income, which leans heavily toward an ultra-socialist approach where it becomes an entitlement you get for doing little or nothing. But in the Metaverse, you need to actually do something for that equity, since the more you contribute and participate, the more valuable your data becomes.
The people currently working on the Metaverse appear to be mostly be Asian developers and white developers. Is there a possibility that this could lead to structural or systemic problems?
One of the things I really love about decentralization is that if a community doesn’t speak for you, you can just make your own community. The cost of making a token isn’t expensive, nor is the cost of building a community. So, if you have a community that doesn’t speak to you — because it’s very Asian, male, Caucasian or whatever — then you’re totally free to set up your own community spaces in an entirely decentralized fashion, at a relatively low cost.
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If I want to build a community just for Filipinos, or for just four people in Nigeria, I can do that relatively easily.
What do you think is the time frame for the open Metaverse? What are the big events that we’re likely to see in, say, two to five years’ time, or 10 years’ time?
I think in two or three years, we will get to hundreds of millions of users playing blockchain games, largely thanks to the arrival of “AAA” quality games to blockchain, which better appeal to traditional gamers.
Adoption and usage won’t be as dependent on initial sales, NFT drops and the financial structures that we see today in blockchain games. Instead, they will be games very much like traditional AAA games, and the blockchain layer will be there to provide ownership and other important utilities but will not be the main feature.
It’ll be where people are enjoying the game for free but owning the NFT. And then they can trade it afterward. I think we’ll hit several hundred million users in the next two or three years. We’re going to see mass adoption happening through games, but also education is an area that we’re betting on as well.
When do we get to the actual Metaverse? Do we wake up one day and all the games are interoperable and we’re all living in it?
I don’t know that all the games will be interoperable, and probably not quite in the sense that we imagine today.
I also think that the mass genesis of interoperability will probably emerge from indie game developers. The big game companies have less incentive to push interoperability because they have established monopolies and are quite happy with the status quo.
What I think we will see emerge is various different games with modest user bases in the thousands or tens of thousands of users with reasonably good economies. They won’t be billion-dollar businesses, but they will grow and thrive because their assets will also be adopted and used in other games.
Are we going to see standards developed for interoperability?
I think there will be standards. In fact, that’s what we’re already working on, for example, through the Open Metaverse Alliance, which also includes The Sandbox, Upland, Alien Worlds, Dapper Labs and many others.
However, as I said earlier, I think the greatest way to mainstream adoption won’t come because we’ve created a standard — it will come because of ownership and freedom of composability. Someone else out there in the world is going to come up with use cases for NFTs in a manner that we couldn’t have imagined.
Someday soon, someone is going to say, “I can do this really cool thing with your gaming assets that you never thought of,” and suddenly, it’s going to blow up.
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This hour-long interview has been edited for clarity and length.