How to Build Crypto’s First Breakout Game | Robbie Ferguson

Transcript

all right everyone so on Empire you obviously know that we talk a lot about the institutions coming into crypto and that is why we are super excited to share that we are hosting the digital assets Summit we've hosted this since 2019 it's coming up in London March 18th to 20th don't miss your chance to get ahead of the curve you can get 20% off with code Empire 20 we'll see you in London so welcome everyone this is going to be a very special episode I'm actually this might be my first live episode that we've done so I'm joined by Robbie from immutable we've known each other for a bit of time and uh had the Good Fortune of investing really on so Robbie welcome thanks Santiago great to be here yeah it's actually my first time

in Sydney and Robbie's been a great host he showed me around a bit and as you can tell it's here summertime and beautiful out here so it's roughly 30 degrees cius I went to the Fahrenheit conversion uh but it is probably the best time to come visit cityy so yeah highly recommended so Robbie I mean why don't we start with your background and a little bit of conts on immutable absolutely uh so bit of background around me I've been a software engineer for the last 10 years now um originally taught myself how to code uh just after high school and I've built roughly you know four or five startups before mutable um was a massive gamer growing up and so the first thing that I built with my brother was A League of Legends betting platform where you could Waiter on your own matches uh

until that was shut down by Riot games for breaching their terms of service uh and uh the thing we built was a Shopify competitor which basically automatically optimized your store based on machine learning uh so it optimized your pricing and your copy to have the best possible conversion uh and and that went reasonably well uh but we got into Bitcoin in 2014 that was yeah pretty early on um I think uh we were just investors we weren't super into the technology I was like wasn't du sold but when ethereum came out my bud got me into it who uh bought a percent of the preset and he we just became completely obsessed uh with essentially what he could build and that was the big

difference between Bitcoin and ethereum to us is I could see the potential to basically replace hundreds of billions of dollars of financial infrastructure overnight and I think the thing that initially sold me was there was a do you remember etherol yeah yeah W different times different time but the the magic about etherol for me is they launched this product which is basically a probalistic dice game smart contract in ethereum little gambling appli and uh I remembered in Australia which is one of the largest per capita gambling countries in the world I'm not into gambling it is yeah I think it might be the uh largest yeah it's it's uh I mean it's kind of sad in some ways uh but I remember the Australian government in order to ensure that slot

machines pay out the required payout amount they GG up all the machines and then they heuristically test them so they literally go out with these machines they're spending them hundreds of times in making sure that they pay paying out what they're saying they're paying out and they're cut off from the internet to prevent any regular updates and they spend billions of dollars of this every year and then someone built a little application with a few hundred lines of smart contract code that red all that redundant you had open and transparent probabilities that couldn't be routed around that were you know completely guaranteed uh by the blockchain and then they did something that the government could never do which is they took the royalty or revenue streams from the protocol and they gave it to every person who used the the machine so essentially you know

democratized ership of company now it wasn't the gambling that attracted me it was well hey if you can build what is essentially a toy in a few months that replaces or obviates billions of dollars of government spending this is clearly the most powerful Financial technology ever invented this is going to take over the world uh and I was also sold by this idea of like the decentralized Uber back in the day if you remember that was one of the big pictures along with eum white paper writers put in the network Fe compress we haven't seen that happen obviously to physical networks yet I still believe it will but we have seen that happen to financial and onchain networks things like dexes which have incredibly compressed fees and where they're typically democratically owned things like uh a mutable when we can give every Trader ownership of the

underlying protocol so that's what sold me U me and my brother started building trading Bots uh for the first few years uh first on uh ethereum uh on cloncs and then on decentralized exchanges you on the troll box I did not disate uh but yes I I I legendary it was a lot of fun until I think they removed that in 2017 once like it got acquired I think they or before it acquired I think they removed it yeah yeah uh and that one was a yeah that one was a a very funny experience um I remember using leverage for the first time and I vowed to never uh naked short ethereum again um and we basically wanted to build a business that would long-term be scaleable though

and like actually have an impact on the industry and so in 2017 was the start of the year and we were writing the white paper for the distributed autonomous B cust at University at the same time studying law and computer science uh and my brother was the lead engineer at a billion dollar e-commerce store uh done under here and we basically uh we we' finished writing the white paper in the early smart contracts for something called the distributed autonomous bank or dap it was effectively a lending protocol very similar to compound we hadn't solved all the overcollateralization problems I they' been solved today either uh but we were about to launch this when five icos went to 20 went to 40 I mean it's got very cold feet uh about the space from a regulatory perspective we thought

everyone was going to jail and we only had interest in building something that would be around for a long term at the same time the first ever nft came out in the form of the crypto Punk and we saw this and we said this will be how gam is own in game items and that to us was just so blindingly obvious you know back then gam spent $80 billion US on ingame items every year now it's 150 uh and so we started by building the first ever decentralized blockchain game uh it was called eat the Bots came out in 7 17 it went viral made a few million dollars in sales and coinbase put their first ADV adventure check in IM mutable and we started building kind of you know what we are today and obviously over the last six years we've now scaled it to 300

people around the world uh we've raised 300 million us uh from 10 10 cent and more most thats in the bank uh We've you know obviously work with IMX the token which is worth you know roughly 2.5 three billion us today and we have 7% of all three games the World building on us so uh it's been a a long journey but I think um the the persistence has been the most important thing because ultimately the amount of people we've seen just come and go based on them either misspending money uh having the wrong approach to security it's almost funny how well you will do with the space just by being incredibly consistent and focused on your mission and making you know smart same secure decisions focused on actually delivering value yeah yeah I remember when I met

you and we made the investment um you know was axi was picking up and I think people were you know the play to earn narrative was really hot at the time now it's completely died down and gaming is a narrative You could argue is is not uh not very popular uh for I think you're one of the few people in crypto that has a very unique vantage point to understand who is building and what is what is the reason to build a game on chain so maybe you can unpack that for people and and give us your defin like what is the type of gaming like what are the games you're excited about how does it work with a mutable and yeah totally

so I think onto games that only represent around 15% of the games building on imut today and by on Shain I mean the majority of the logic of the game's gameplay state to state transitions would be stried to be stored on on actual onchain blockchain code uh and I think that's probably because the ad20 the vast majority of value is from taking the actual asset economies and tokenizing them and that's what we've see as the majority you might call it web 2.5 you could also call it fully web 3 in my opinion something like alium where 100% of proed go back to IV the token I mean that's basically as decentralized a as you can have but ultimately what they're doing is a sane

mix of you know they're building a very high fality traditional game and auto batt uh and you know a collectible sort of RPG game like Pokemon uh the idea is you take the assets anything to do with the value of those assets and you put that on chain so Randomness merging fusing Etc of Collectibles and I think that's probably where we're going to have the biggest product Market fit in the medium term there are absolutely some really exciting F onchain projects they're very ambitious uh I think the jury is out is you know what will the user experience of like be of those games in the short term and will there even be the sort of possibility of truly

decentralizing a game logic for a massively multiplayer game with 30 State updates per seconds and the challenge you're talking about there is it it really is the computational like intensity of a game if you're if like every state transition like every interaction yeah and a game like and I've heard Kieran uh from ovium talk about it's sort of like think about a web two Game feature parody The Gamer might not even can play the game without having to set up a wallet without ever thinking about crypto now it's on the Epic store kind of uh Marketplace or you in the store and so you can go download the game play it and then it has I've heard him say this concept of crypto enhanced so it's like if you want to

claim the points if you want to trade the nfts that are there for you then you can do that in a decentralized context and and it solves a lot of the issues like so many people that are in gaming get interested in crypto right precisely so to me the the most obvious product Market fit is Counterstrike go has uh a secondary Marketplace for the in-game skins or costumes and they trade roughly 12 billion US dollars worth of those a year that's on a databased marketplace where they don't permit many third party marketplaces they certainly don't permit defi or other Financial finet utility or or value being placed upon it and they regularly do things like trade locket so hey you can only trade them once per week and like ruin the value of G's assets that to me is well let's just

give them the ability to truly R and sell that stuff that's the 100x value proposition that's where we have an immediate need from an existing demand analog which is why we so excited in the first place absolutely I think there's exciting future potential around decentralizing more on game logic but I don't think we need to look Beyond let's just take that $150 billion spent every year and actually give people property rights to it give them an incentive aligned business model where they can make money say through secondary royalties and and that to me is probably the second most uh important thing is by leveraging web 3 your creat economic incentives that can be way more aligned between the publisher and the player good example is mad the Gathering where they can basically that there's an

estimated secury market cap of MTG cards physical cards of roughly 10 to 20 billion US dollars but every year magic is forced to create new cards that are more powerful than any previous ones sell a few tens of millions dollars are worth of them in order to generate revenue and that makes the experience worse for everyone because you have power creep you have devaluation of old cars you have new sets being de King all sets why not just take a clip on these asset trades your incentive is just grow the GMB grow the marketplace grow the economy that's exact same incentives the players have that to me is a really exciting business model one that the it doesn't even matter about like what is the uh you know technical level of uh scarcity enforcement of this stuff

because it's at the end of the day the publisher has the same incentive as what the player is and that's really what I think web 3 is about under its SC is like realigning incentives of capitalism to be more democratic more self custodial more earable by everyone yeah so what's interesting of course like immutable you've been doing it for six years um and you quickly realize we can't do this on the L1 of etherum we have to build an L2 yeah and so I'd like to get a perspective on on that journey of cers because now we have hundreds of l2s but I think you've been very focused and opinionated like we want to own the gaming category what makes alium well suited for gaming and and um yeah that's a great question uh so first off I would

say the scaling Journey For Us was a hard fought one I mean we launched SC Unchained in the middle of 2018 uh it immediately had more than 30 million nfts as cards this is more than every other nft on ethereum L1 put together and this is all launched without a scaling solution because they didn't exist and so we immediately had to invent batched minting and deferred minting uh which is uh one you could basically have your provable seed of onchain Randomness for say minting your cards but then you could delegate when you wanted to Mint those into actual nft assets at any point in time later which meant like let's say because I think when we launched uh do you remember fcoin it was a centralized extremes that launched and it had an incentivized gas

consumption of L1 and so we we quite possibly chose the worst week in the history of gas congestion of ethereum like to date to lawence Scot insan I think G was about 100 right the context soly the packs that we were selling for $5 where the previous uh gas fee was 10 cents now had a $10 fee yes so you ask able to pay a $10 Gas fee for a $5 pack of cards it's not going to work welcome to crypto welcome welcome to crypto good luck building your business uh and so we we literally uh we we did two thicks one we invented deferred minting where you could say very cheaply not create all of your nft assets but just the the onchain randomness seat and then when gu was three you could like minted onchain uh and and that was a big thing because you

know effectively similar to do you remember when you could like buy gas when it was cheap oh yeah yeah yeah yeah so like this was this proposition but like made very simple to Gamers the second thing was oh as simple as it could be back then uh the second thing was uh B spting which was uh a way of optimizing gas efficiency for nfts by like 90% And that's a standard still used by every Major Market Place in the world today um which was invented by Alex by c um uh we realized that even all of this Innovation architecture it was still nuts like you're still at any point you're requiring Gamers to even pay a cent it's too much friction and there is no way you will hit a billion Gamers so we started looking down the path of scaling Solutions and we basically investigated everything of the

sun we had to look at side chains and we decided they never were suitable for our security profile because the number one thing we would never do we would never put users assets at risk the company reasons you put your company at existential risk if you have one failure you will never regain the trust or players nor the largest companies in the world they will never build on you that two because we truly believed in the value of decentralized technology in like what we building otherwise what's the point let's just build a stain competitor right um then we looked at plasma and nothing happened there right uh and then we looked at uh optimistic proofs and this whole branch of you know rollups and you know I think that was for us didn't work for nfts because of the withdrawal times and also because

the cost structure um and we thought you know ZK probably the the long-term uh strictly Superior Solution this is back in 2020 so pretty early when we're making this call I still remember the conversation with the board and they're like this is a science science experiment are you sure you going to bet the company it and we're like we're pretty sure this CK thing is going to work guys like hear us out uh and we we ended up building you know essentially the first ever in production CK up for nfts with the starware team with starx um and we released that in the end of 2020/21 yeah yeah um and obviously now we we're launching douc GM full smart contract compatibility Etc is that with po exactly yeah so the I think it was a long scaling journey I think we had stage Channel experiment in there for

like four months as a prototype as well uh so you've literally tried the the entire flavor of the you basically just described the E like the ethereum's like scalability Journey yes did you receive oh and I didn't even mention the most important thing which is well why not build an old L one because it would have been very easy to build an old L one to raise back you back then we ra 15 mil we could have raised 50 and pitched to a VC we're building the new chain for X right and that was the most attractive thing you could do for Venture but we thought that ethereums we wanted to build wherever I wanted to build and we also wanted to build with true decentralization and security and on either of those we just couldn't see a way where you're building outside of ethereum's ecosystem or not scaling

ethereum's ecosystem for us uh scalability on top of ethereum was far more attractive because you can inherit all of ethereum's network effects and liquidity and you also get the the security of you know what what I think is by far the most decentralized and secure blockchain in the world um so that was a decision we made pretty early on which was hey you know where if there was you know it's not some random form of aism if there was another blockchain that was like hi requirements for us but they just wasn't and has it been on today we I mean I want to get into zika evm it just like zero knowledge proves as a category unpack that a little bit but I want to ask you the question but you read my mind is if you were to do it to today from

scratch uh we have other l1s um would you consider something else I think we made the right call with ethereum uh and I'm happy with would you do it today for sure oh yeah absolutely you you kind of have the same setup in L2 yeah yeah yeah if we if we were if I were going out the you know door and coming back in and saying how do we build a m from scratch absolutely it's zkm on ethereum I think is and I think the gaming Market has largely shifted to want to build around an ethereum ecosystem I think the AL because remember the difference like and you know this is is better than I do but uh every single Bull Run you have this chain rotation thesis right where like you know the chain link God article

which I'm a big fan of uh which basically says you know you get congestion you get high prices you create narrative F to create all tell ones with reduced decentralization improved scalability and then you back those with hundreds of millions of dollars in order to bootstrap liquidity from scratch that's what we see every single cycle the difference about this cycle is l2's work and l3s work on ethereum so now the narrative Comm actually you can scale this thing uh sort of horizontally rather than having to create brand new L1 architecture and so I think that's the fundamental technical difference between you know what's going to be the next Bull Run whe whether it's in six months 12 months 24 months and the historic ones we've had yeah so talk to talk to us a little bit about um the the choice to do um ZK like

zero proof because you know for anyone that comes to crypto this is like the Holy Grail yeah right and uh you know but it's taking a while like lot of good things so tell us a little bit about that so I think if you're just looking down the decision Pathways it's well do you want to build on ethereum or of ethereum and we made that choice pretty early on we want to build an ethereum aligned ecosystem the other choice was what scaling infrastructure can you use and uh apart from side chains there wasn't really much that was viable apart from rollups and that was even speculative back then right obviously side chain were this was 2020 2019 oh even when we're looking at like side chain adoption that's 2019 yeah um end of 2018 the only other alternative is some sort of centralized solution built

on ethereum like with ethereum assets but the custodial uh and we were never really happy with custodial by default no and I think centralized Solutions or centralized exchanges as backings for nfts have clearly proven to not work right um so that that was a I think the right call as well then you get to the rollup landscape and you basically have to choose between optimistic rollups or ZK rollups I I think oiu are you know generally fine but for nfts they just in particular don't well work well and and that's a withdraw times uh obviously much longer because you have to wait for you know for if you're working with optimism you this is four five but this is theism

even existed right like this is like an architecture just Tak days you could have like incentivized like rally like like reers to prove that but it's still a lot precisely and and the benefit like if you have fundable tokens you can Market make you can say okay well I'm willing to take risk at the bridge and like kind of loan you on the other side I can't loan you you're one of a kind nft right so it's by definition really really hard to do for nfts as a use case then it comes to what you use in ZK uh and I think there was probably only one even close to production uh Team back then which was which was starware uh which built you know we built our first app specific rollup so it was a a validum implementation it didn't have any smart contracts but I think what it

did do was it gave us scale it gave us security and it got us to Market and uh the the really important thing in that is we wanted to use something which directly inherited ethereum security I think that was that was crucial to us and we also knew we had to be able to support the scale of hundreds of millions of nfts I mean like let's be real this takes off you have three billion Gamers there is going to own thousands of assets we have to support the scale of trillions of nfts being traded many millions and millions of times per hour uh so I think uh that was why we ended up on on ZK and we've been able to stick that pathway uh obviously expanding uh we now have both immutable X built across STX app specific rollup uh no smart contracts and we're about to

launch a mutable ckvm and with the launch of mutable Z KVM we're also going to be able to launch uh our archain uh hypothesis or sorry offering which is basically basically cross roll up liquidity and you know a large platform a large game can their own the lap chain with global AUD book and and that's what I'm really excited about is sort of horizontal scaling again you read my mind because I wanted to get your perspective on dydx because um I believe diversifi you guys and dydx were probably the first projects to use starware yeah um and then dydx made the choice uh to go to Cosmos and have their own chain yeah and you know I've heard folks say look building on

Cairo was difficult you have to use the like basically they're the systems like they would have to build it for you now the tooling is improved and you know I I won't speak on Caro specifically and you know big big fan of Star team I think they're exceptional people um the the main thing that's shifted even since we made our initial decision is evm uh compatibility rather than evm transpi ability uh and typically we've actually always been I I think anytime a competitor says we're launching a propriety Lang language like you know uh Cadence or or or some sort of like proprietary scripting for their um smart contracts it's a massive impediment actually to adoption and they're always advertising it is this is a great way to use our blockchain it's not it's just you have to learn a new uh language and

all of the network effects people hypothesized back in the day Network effects would ACR to defi it doesn't defi can be cloned for the cost of $30 million in Grant incentives as long as you use solidity because then you can just copy paste ethereum and that's ridiculously easy to do as we've seen uh so I think there has been massive Network effects built around solidity uh you can even see the like even slight differences mean there's brand new forms of security and risk architecture which means all of the benefits you get from Smart contracts being audited as lost so I I think that those Network effects will persist uh and that's why we we really value true revie compatibility over like even a slight loss of uh composability

yeah um how important do you think security decentralization is for the gamer I mean do you think that that's relevant at all I mean I appreciate from your standpoint absolutely but it's one of those things where how do you envision like you know it's always a spectrum or security like def5 Ires way more security You could argue within a game toally totally agree uh Gamers should not have to care about this but it's incredibly important in the same way that if you used non-secure and an encryption websites users would not notice users shouldn't have to know the security algorithm that encrypts https but it's absolutely fundamental to their

information and data if you're using the wrong thing and you're damaging uses there's going to be breaches of data breaches of privacy that impact them but it's something that they shouldn't ever notice so it's it's a funny uh thing where you can kind of get away with it for period of time your consumers aren't necessarily going to immediately notice but as soon as you have one incident you then lose the ability to have any future customers adopt you that technical de sort of creeps up on you precisely so like I I think and also the value of nfts is not going to be trivial in gaming like there's already probably a trillion dollars wor of digital assets they're just locked up in gaming right 150 billion every year uh there's already literally provably tens of billions of dollars of Counter-Strike ghost skins so you add on defi you add

on financial utility it probably gets 10 times larger index funds Goldman Sachs rating the stuff so it's going to very meaningful I think it needs to be secure uh our BR has always been self custody first make you know invisible your experience but we never wanted to have like cast wallets as a default yeah yeah um I want to transition a little bit into talking about the the current state of gaming in crypto yeah um you obviously mentioned you have the line shair what is it 75 76% of all games um is there a game today that you would play uh that that leverages crypto is kind of like a you would du a crypto game for sure there's actually one on my

phone that we just won that's not it's not public yet but I'm really excited about it it's already got hundreds of thousands of players in like in web 2 while they're testing um we just won this one yesterday I'm really excited uh totally I mean like play alivian Auto Battle play uh cross the ages play Guild of Guardians if people have been with the beater uh with day one retention of 67% uh I mean there's games coming out and the the IAL thing about our catalog is we rank every game in the market map of all web three games and our Criterion is what's the team quality AK have they previously shipped successful games with millions of customers that's actually another one Criterion second what's the economics and approach to uh web 3 game design

third what's the funding how much five power do they have behind to to make this successful uh fourth what's their sort of you know regular gameplay quality what's the quality of the game they've built so far and then fifth what's their time to Market obviously that matters the most of us we want to have hits faster but uh what then produces is games that we're play testing we're looking at will Ordinary People love these games and that's how we prioritize where our go to market eics go and this is why I always say when we have 220 well funded games these are the ones that we've actively proactively decided uh these are the ones that can be potential hits and with play test of the games and I think internal team is pretty brutal like hey this is you know uh not not a great game

uh but the reason that's so important is I'm not that interested in just having the next generation of D5 thinly skinned as a game in order to generate narrative legitimacy we keep going through the same Cycles in crypto right like it's uh and I'm really not speaking to anything in particular here but we we often go through someone recreates some s of Ponzi and they just try and wrap it in the thing that is kind of the zist in order to give it narrative legitimacy or some cut through yeah and I I'm I I I'm saddened every time I see games using that because I think the point is we don't have to do that there's real demand out there people want to trade this stuff let's just give them ownership and and make a real value proposition yeah I I would say like fundamentally people play games because

it's a distraction from The Real World it's just fun um but then there's nothing wrong the I guess what you're saying there's nothing wrong with the financialization of and and layering on incentives people criticize that as saying it's not sustainable the in-game economy is not you know hear these kind of criticisms to play to earn I would say play and earn is this the more viable model but what is your perspective on that as a whole like you know these economies you talked about that being pretty big criteria as you evaluate a game like what are some parameters where things that you say hey this can actually work um so first off the fundamental difference between uh

sustainable and non-sustainable I guess game is is the reason you play the game to earn money in which case it's kind of Zero Sum based on your financial return profile or is it because you like playing the game and there can be as much financialization as you like within that you can have games where they're fun and a whale wants to spend $1 million because now they have the ability to sell later and that's totally fine that's just an expans of the value proposition as long as there's some fundamental reason You' play that experience in my opinion and but I nothing against super you know financialized games I think we're the vast majority of Reven was driven by whales anyway we're now delivering them far more value because now the whale who spends a million dollars on Game of War is in oh great I've I've have nothing to

show for this they can build an ecosystem they can own part of land and guilds and be a person who's meaningful in that ecosystem I think that's awesome uh the second thing though on E economic sustainability this is the reason why we do a mle Studios this is why we publish things like field of Guardians it's that we actually have people in the front line understanding what it takes to BU a sustainable economy and so we have a lot of thoughts here we'll be rolling out with with gold of Guardians and testing out our latest Paradigm but the first hit will be the the model that everyone copies you saw that with axi and people copied it and ultimately it was unsustainable nothing against axi you know great game uh but uh that's how gaming evolves right is you have a hit and then people copy that sort of hit we

saw this with fville with Mafia wars Mafia wars has been Rec into 20 different different games all leveraging you know the social in uh graph of of Facebook uh we want to make sure when there's the first hits They're copying fundamentally sustainable economies yeah I mean look we should probably talk about what is wrong or what are the challenges of traditional game studios because I mean there's a lot of pro I mean you look at Zinga as a company and look Mark pinkas has gotten quite interested in web 3 I think and people should go out and check out kind of he has great cut threads around this yeah but you know you have the retention problem you know the halflife of of a game whether it's fast casual uh or triaa game is pretty it's pretty tough I mean you have to it's sort of this

treadmill that you're on a hamster wheel that you have to put out more and more hits yeah um and it's a real race to the bottom right so my my favorite stat is uh in in China like we've shifted from hey you pay for the ability to play a game to you pay for items inside of games to now you have literally clone games in China they have like a clash Royale or Clash of clients clone and they advertise themselves as our loot boxes are half the price of our competitors like it's it's a complete race to the bottom right it's completely okay who can get cheaper acquisition who can you know sell this value proposition for Less yeah all right everyone so we talk a lot about the institutions coming into crypto on Empire Santi and I are both headed out to London March 18th to 20th

for Block works' 8th ever digital asset Summit Das this is an Institutional button up conference that we've hosted since 2019 I like to joke that it is probably the last remaining kind of suit and tie event in crypto people are still wearing suit and tie it's pretty funny you'll actually hear from a lot of the largest institutions in the world coming from Standard Charter FIS JP Morgan framework folks coming out winter mute vanc golden Sachs there are a couple big themes of this conference one Bitcoin Catalyst the having and the spot ETF two A View From the buy side three rw's tokenization and stable coins four Global regulatory Frameworks five institutional infrastructure including Banking and payments six the macro case

for crypto if you have anything to do with the institutional side of crypto you have to be there Santi I got you back we hooked you up with a 20% off code it is Empire 20 there is a little competition running internally at blockworks to see who can drive the most number of tickets so help Santi and I out register with our code and you get 20% off that is Empire 20 you and I both invest you from Studios personally gaming is probably the top category or the second where I've invested into so many teams yeah and I think what most people don't appreciate is you have really talented Builders from Candy crushes of the world from all these great Studios saying

there's something here there's something interested in crypto yeah uh the retention you know the nft component like layering elements of web 3 that can actually solve some of these problems that ging right um build more engagement and whatnot um I guess like what um like can you give us some perspective because I think people don't really appreciate I think one games take a long time to build y you have fast casual I guess but even that like these things take time to build um and I think we're just going to start seeing these I mean ug's already out yeah but we're gonna see like what what's what's the next year or the next 18 months look like in terms of so I think 40 to 50% of the games building on mutable today will be live in 2024 so

it's going to be a big year uh that's when we start to see you're hearing the threeyear development point for most of the games and that's typically kind of the lower bar of uh time it takes required to build a good game there will be delays but that's why we have 200 of them right so that across the portfolio you're having this you know C of games going live that we can help support I think even the micro gaming vun we've seen in the last couple of months will accelerate things people will try and get to Market faster they'll try and ship tokens faster and the most interesting thing to me is when you look at the largest I think you're totally right right which is the smartest people in game design today are saying hey there might actually be something here not saying they going and

saying let's shift activis blard overnight there's no reason for them to like this is innovative dilemma right there but you have in Korea you know five of the 10 largest public gaming companies there actively building very serious effort eight or nine figures of budget into web 3 you have migalo which is crafton's web 3 competitor to Roblox with hundreds of people you have uh Nexon building maple story that core IP with a web three variant uh We've mapped the 61 largest gaming companies in the world by market capitalization 30 of them have active full-time teams dedicated to web three gaming exploring it building a game building several games only one out of the 61 said we

will never do this so it's clearly going to happen like there are clearly going to be hits out of the 15 billion that's now been invested what are these Studios look like in two or three five years in in a version of this world where Gaming's a huge hit web three how do they take their existing portfolio and maybe wrap nfts around it or or is it like you talk about in a dilemma like how do you see that transition is it a graceful one can they manage it or is it or you're more bullish on new Studios like Crypton native Studios I I think uh oh that's a good question I'll get to that in question you I think we're going to see Mega hits right so it like there's going to be a ton of failures but the biggest games are going to dwarf

the volumes and revenue if Web Two Hits even and that will make people take notice and say well hey if this game is delivering this much and it actually doesn't matter whether the revenue is to them or to the community it's just about how much Economic Opportunity is here uh and how can I here's an interesting one and by the way it could happen in months time because I mean people forget but gamings are the most fast like Revenue scaling businesses ever like just go from Z to 100 million a month and they never need a fundra again because they're profitable right uh unless they have emissions to build you broader Studios and they to drisk but not if you have secondary royalties on a lot of this stuff precisely um and one of the things I'm super bullish on is games biggest cost is Google or Facebook running ads

getting people to click in and play their games they spend billions and billions of dollars of it you know gayblade and from machine Zone was famously like the biggest Performance Marketing uh spender on games of all time and he was running ads for hundreds of millions of dollars and uh what I think what we have the opportunity to do is completely replace that spend with viral sharing of games because you give players value that cause them to stick around longer share with their friends and even to take a chunk of your future value of that game tokenize it and then give that token away yeah there's this idea in gaming um before crypto I is also invest in games like this viral coefficient and the virality of like hey you you play game you tell your friends

like and how does that propagate I think you can we've seen time T any crypto that's super powerful you know and and you can embed interesting referral programs on chain you can codify a lot of this stuff um that it's not a Ponzi if it's a real product it's sort of like you're bringing real demand yeah exactly yeah and I think it's it's an it's just affiliate marketing a more efficient way whether instead of paying Google billions of dollars to acquire customers your customer acquisition cost can be arguably lower more efficient more trackable and you own a more direct relationship with a user and to Build a Better Community because you know it's a win-win you know the users also benefit from this economy it's basically removing ad Brokers as a middleman or

and and instead replacing it with directly sharing that value with your audience in exchange for them becoming your early evangelists and I think that's awesome I think that's a strictly Superior model yeah yeah um what uh what have been kind of the the challenges is that you foresee in terms of like if if 200 a thousand games launch is there an upper bound and have you guys done the math around hey we in credibly support x amount of users like load balancing like this you know what I mean there's obviously an up limit to what we can support on just IM mblc KVM that up limit is very high like it's the highest of any you know L2 it's fium implementation so it's optimized for uh for for gaming scaling in

particular uh we've done a lot of optimization around uh you know nft design Etc but and we'll be supporting ERC 1155 which people be excited to hear uh which we don't have on our app specific rollup but the key thing is horizontal scaling so the ability for anyone to have their own a mut appp chain you'd have cross roll up liquidity across hundreds or indeed thousands one day of these app chains and that means you can with assets on chain a purchase a listing on chain B with our Global Order book across any Marketplace using uh any wallet using any denomination of that listing on any immutable sported bu up and I think that's how we have this engine that's sort of aggregating liquidity and

providing the best prices to anyone who wants to trade so if you're a a game the vi will kind of they may deploy an immutable they get really big they'll arguably likely transition to their own AB chain uh exactly yeah so I think like a a giant scale game most games W need this exactly and kind of have more uh Sovereign World of Warcraft or like yeah yeah they can control more parameters by having their own change or like precisely they could have their own native gas currency uh and I think the other cool thing is this gives a really strong Sovereign option to people who want to build their own platforms or or chains for for infrastructure as well yeah how does the like the global liquidity I mean that's pretty novel The

connectivity to I'm not like I'm thinking of IBC or yeah is is it like how does it actually work to go too technical but yeah there's there's a few things that give us an edge here the main thing that comes down to is vertical interation platform so because we own build both the rup layer and the wallet layer and the water book layer we can create seamless experiences that other people C so a good example is imagine your a weite this specific example but on another you know super chain or app chain you're trying to buy an asset on chain B with from funds on chain a you have to bridge those funds across as soon as you signal and and first off that has you know obviously finality times the blocker um so unless you're using ZK prefs it's going to be a problem second off you have to as soon

as you're signal to me you'll likely be front run uh and so you have this problem of like how how do you have liquidity across different uh rollups and third you have the weakest link problem which is if you have different security models for each of your proofs your entire ecosystem is only as secure as your weakest link we solve all three of these I and and the way we solve them is the global order book means we can actually lock down bids on asset on chain b as soon as you indicate to bid on chain a and because we have the the passport the user experience we can make the completely invisible in an atomic transaction to the end user and because we're using the same security model CK rollups on everything it CH C so I think that's kind of how we think about things

from an architecture perspective that's super interesting yeah oh invol uh because of the global order book you can normally do it in different rollups one person can be say selling in an ingame Marketplace and the other person can be say on sphere Marketplace or uh GameStop or rarel or magicon and that means your unifying liquidity not just across rollups but across any trade value yeah um I want to hear your thoughts on I know you're a gamer uh what are some of the types of games that you're most excited about um you know maybe we can go through different categories we see a lot of tcgs I think that's a native mtic fit for web 3 I think there's a very strong clear value proposition there I'm very excited for games that are mobile

targeting Asia I think they're going to be huge and they're probably where the next 10 million need is going to come from we have a ton of games building in Asia right now honestly even I was just in Hong Kong last week even out of mainland China obviously crypto is not legal there but you have people like building games and then not seeking to publish them locally they just want to do Global publishing with web 3 and they're kind of in you know cottage industries and like kind of you know building in clandestine ways I mean it's not the the worst thing in the world but they're not being overheard about it and and there's I was talking there's literally hundreds of these games over there so um I think it's certainly going to be Asia which will be first across the post um other things I'm excited

about I think things leveraging ugc with web three incentives super excited about Shooters targeting like the csgo strategy I mean uh if you have a look at like uh the reaction say to uh some of the say Midnight Society or dead drop it's a mainstream audience watching that and they're pretty supportive of that because they're used to paying for items in CSO they understand it the value that they're getting and so I think that's a really big validating step for me there's no push back there and this is the most hardcore Gamers you have in a western audience because they natively experience this value in csgo and because they've gotten screwed over before oh yeah yeah yeah I mean like it's almost like if you talk to vitalic and so many other people that have been

interested in crypto it's because of this trading skins problem you know V famously said the you know the the damage component of his Board of Warcraft spell being removed which I I think invation but like it is kind of a a great evidence Point yeah so look I mean obviously no surprise I'm really excited about game a uh I think next year in the visibility that I have you have it's it's looking like there's going to be really fun games that we can play and I'm really excited about it I guess for a skeptic listening like why won't this work like if if you in two years time we sit down again and we say God we're we were all very excited gungho as here with what we're seeing and the type of you know builders that we're see what's like the bear case I

think maybe reg uh but it seems like a low you know that's like existential for all of crypto yeah exactly um realistically I can't see they're not being hits that it's not like could because there's no leap required to say you should be able to sell and off amp your value from kind of strike Co skits there's already demand there and demand for a long tale of games all with secondary market economies just on great data basis and gr Market places so you know this thing is going to take off I think the bank is like it doesn't replace all of gaming right it's not every single multiplayer game with an economy assist and and that may take time but uh like at this point there's clearly going to be hits and it's about making sure that those are decentralized

there's done with friction your experience yeah I mean look people constantly criticize especially doing bare markets like there's no product Market fit there's no value what's the point of all this it's just a casino for me the way I think about gaming very simplistically is like nfts are a very like it's touching a nerve like collecting is such a a powerful sport it's social people love collecting this stuff like basically created the ability to have digital provable scar it yeah that creates doesn't necessarily replace it just creates an entire economy and it fits so nicely with games yeah um and so I mean again we're all super biased but for me that was the big aha moment of of

course you put aside the broken economics and whatever of things that were defi with a veneer of gaming but true fun games will work I think totally agree and I think you said it back in the head right nfts are just taking the value proposition of Bitcoin which is digital cust ownership of goods with scarcity and applying it to any form of value and we just think the first place that's going to happen is the place where people are already spending hundreds of billions of dollars and getting zil for it right yeah yeah um let's transition a bit into talking about what's next for if immutable um you know in terms of collaborations Partnerships um you're go to market like how do you really win this category you know there's again hundreds of l2s

you're very focused you're very how do you win the gaming category yeah I look I think we're we're close to you know being there at this point um without toting our own horn we you know we've uh I think built considerable progress over the last year end of last year we had roughly 35% of all games polygon had the other 35% with two all right we were competing in Market we spending tons on grants hiring BDS we negotiated you know for six months I think one of the most meaningful Partnerships that's happened in web 3 and that was taking a imbl platform combining it with the know the open source DK technology that polygons are developing and we don't want to build scaling infrastructur it's on our

business and providing a joint solution to Gamers that would massively simplify their choices when they were choosing seeing hey how do we building web 3 it shouldn't have to be here's your scaling infrastructure here's your platform here's your wallet it should just be I'm just going to use a mutable right and you have everything be saying defaults and that's been an incredible partnership and shout out to the polygon team it was exceptional but this came about through the Hermes acquisition J exactly yes so they bought those three ZK teams back two years ago now and I think what has been one of the most successful examples of m&a in the space uh and uh now have including Market leading CK technology and most importantly we were able to unify our goto Market efforts and have the imal platform plus polygon uh basically have

this incredibly strong joint value proposition since then we've taken 100 well funded games to over 220 and thousands more apply and self-service building with our you know apis when you don't even need to build smart contracts our win rate has jump from 35 to close to 70% uh that means the percentage of deals we win when we're competing against other blockchains so that's been phenomenal I think really thr with the progress of that and and the best thing has been we've had games come to us and say well we were deciding between and polygon all the stress and now it's just simple we can get to Market faster and then I think we have the second four of those which is um the Merit Circle partnership which if you're watching this has just gone live uh which recording this on Tuesday exactly yeah but it's going live yeah yeah on on

Thursday uh uh or Wednesday us and uh that is another example of us taking the largest web through gaming down the world uh who has $100 million non-native treasury a much bigger native treasury uh has this incredible focus on how to they invest in publish build infrastructure for games and we say well you know why are we we've been competing in market for the last year we can simplify the choice for developers we can massively improve our own efforts and we can create a much better own product um so I'm really really excited to be working with uh the Merit Circle being sphere Marketplace uh on immutable km they can be using passport Global a book uh and more importantly we you know we're just sort of committed to developing this product and and this partnership uh to make it as useful as

possible to G so for people that might not even aware of what Mir circle is can you just maybe dig a little bit deeper into the role that they play in the gaming ecosystem a lot has been through gaming down the world $100 million native non-native treasury in cash and a much larger native Treasury and their focus is building you know a suite of products in an ecosystem to help game developers uh succeed and deliver simulus user experience and uh again the thesis was very similar which is that they're currently building on uh Avalanche and they're going to be you know expanding and putting a lot of efforts on immutable Z KVM and they now don't have to you know compete for these deals we can work together on the games building on immutable which is the Lion

Share of games in the industry we can you know they massively reduce their costs and and can build a much more successful business uh and together I think we just have a much stronger value proposition to game developers so you know your question was how do we build all market share when creating M the default platform I think it's exactly this which is by supporting and empowering people to build incredible businesses incredible infrastructure with the the suite of games building on immutable today we put in the hard work to kind of on board all of these people now they can go and you know build with businesses at different layers of the stack so I think that's the the thing we're going to be really focused on over the next year yeah so maybe for uh if you're a builder I guess

uh you built games in the past for web two like how's that experience today like what are the challenges that you need to overcome you talk about tooling you talk about Merit circling you guys make it easier for them but how smooth or difficult is that transition like you have to learn solidity you have to you know understand like one of those things right I'm sure folks you know for anyone out there that is listening saying Hey I want to build a web three game like yeah does that actually mean so my my favorite thing and what we started from day one is we always thought it was crazy to require people to have to learn smart cont contracts to build a web three game we certainly have that and if you build an KVM you can copy any default contracts from ethereum L1 use

it build your own dii but we imagine as this goes mainstream the vast majority of people will want to build just using apis like stripe you don't have to Lear a proprietary language to build with stripe it's very very simple uh interface in the same way we' now integrated sdks into Unity into all latest versions of Unreal Engine which are are used in production today uh this is for Contex the most popular probably engine right precisely the the mo the most the two most popular and our thesis is just make this ridiculously simple people shouldn't have to hire PhD economists smart contract experts solidity architecture uh Engineers they shouldn't have to hire Auditors this stuff should be you know boilerplate

audited tested and they should just work with a simple set of apis to create a real that's what we build today I'm I'm very proud of that uh a good chunk of the people building today still build you know directly with myart contracts more advanced developers most of the developers who are sort of you know eth native or web three native today but that's kind of our a long-term view if you're building a Marketplace it's incredibly simple so it sounds like it's gone super easy you don't have to hire a solidity engineer you could just focus on building a beautiful great product feature parody are better than a web 2 game and then you guys help with all the other stuff y so join hub.com uh you can sign up with passport you can build incredibly easily if you're if you're a Game Dev uh listen to this and will

automatically prioritize your game for access to Grants an RBD team and the ecosystem so just to recap and I think this is good place ended the five or you said I think four or five the most important criteria as you value a game are again the five the five are yeah yeah it's uh Team quality uh web three game design uh game design quality of uh the game that we're we're testing uh funding sorry work through game design and game design combined um and time market so we want games that are coming out faster to have more shots of tiits in 2024 right yeah that's amazing well Robie I'm super excited obviously your journey we've known each other for such a long time we actually met in person like all you know not too long ago but

we've known each other for for a long time in the digital world so amazing what you guys are doing I think one of those things that is being overlooked I think and we talk about narratives and Empire a lot and I think 2024 is gonna be a fantastic GE and a fun one for people to actually use products and using crypto elements so yeah we're we're you know quietly confident I think very excited about what it'll bring I love that quietly confident right well thanks so much for listening Robbie thankks every out take care hey everyone thank you so much for watching today's episode really hope you enjoyed it we wanted to take a second to just remind you about our upcoming digital asset Summit in London March 18th to 20th Santi and I got your back seats are limited and we hooked you up with a 20%

off discount code it is Empire 20 if you heard it earlier in the podcast there's a little competition running at block works to see who can drive the most number of tickets so when you register for the digital asset Summit make sure you use our code Empire 20 see you in [Music] London