NFTs and Digital Asset Ownership with Yat Siu from Animoca Brands

Diana Chen:  Hey, everybody.  Welcome back to The Unstoppable podcast.  I'm your host, Diana Chen.  And I'm joined today by my co-host, Matthew Gould, co-founder and CEO at Unstoppable domains, and our guest today Yat Siu.  He's the founder and chairman of the board at Animoca Brands.  Welcome Yat, I'm so happy to have you here.

Yat Siu:  Pleasure to be here.  Thank you.

Host:  So to start off.  You've — you're involved in a lot of things, but the main thing we want to talk to you today about is Animoca Brands, and you're interest in NFT's and all of that good stuff, but take us back to the start of your crypto journey.  How did you get involved in crypto in the first place?

Yat Siu:  So maybe I'll start actually how we got involved, actually, with NFT's because I mean, the crypto stuff is interesting, but maybe a little boring.  But I think the more interesting part is how we got involved in NFTs.  So we actually were investors, and eventually acquired a small studio in Vancouver called Fuel Powered, who's sort of CEO and co-founder was a personal nickname, who became a co-founder of Dapper Labs, the company behind them, Cryptokitties.  And at the time, he was sharing an office together with another person running a company called Axiom Zen that was basically founded by Roham.  And they both were sort of working together on this little experiment called Cryptokitties.  

And of course, at the time, we were discussing, sort of the acquisition of Fuel Powered. Cryptokitties was not meant to be part of the program at all; it was just more like an experiment.  Let's see how it goes.  And then midway through our sort of completion of the transaction Cryptokitties just took off, right.  Like, like, in a big way, in the end of 2017.  And through that arrangement, because Roham basically asked me, you know what, come join us and sort of go full time with this, because it's going to change the world and we've kind of sort of agreed as well from that.  

So we said, "Look, (inaudible) who's going to join you, who's going to advise us, we're still going to acquire Fuel Powered, but we would then also have a closer relationship and become your publishers for at the time, what was Cryptokitties in our part of the world.   And so that was sort of marked the beginning of our journey with NFTs pretty early, sort of in the development.  And we also kind of had acquired a front rule sort of seat as to everything that was going on there.  And ultimately, that also led us to become shareholder in Dapper Labs as well.  So that was sort of sort of our beginning in that journey.

Host:  Got it.  And so this was probably around 2018 when Cryptokitties was getting big? 

Matt Gould:  2017. 

Yat Siu:  2017.

Host:  2017.

Yat Siu:  Yeah.  And early — and then we became publishers in actually January of 2018, so it was very fast.  Yeah.

Host:  Okay. Wow.  Okay.  So back in 2017, I mean, NFTs weren't really a thing they weren't really talked about beyond Cryptokitties.  People are just now in 2021, starting to understand what NFTs are.  So back in 2017, how did you start learning about NFTs and understanding — like, how did you wrap your mind around this concept, because people are still struggling with this today?

Yat Siu:  So I think the part that sort of — sort of the light-bulb moment that was went off for us was the fact that you could actually have real true digital ownership, one that we as a as entity that produced them so to speak, could not alter or change, right.  And I think this is — this is the part that is important because we view NFTs actually as property rights, not necessarily as just sort of, an image or something, it represents essentially a contract of true ownership that you have, between whatever asset that is being represented.  And the other thing that was really interesting about Cryptokitties was actually the creation of the kitties outside of the generation, sort of Gen — sort of Gen zero cats, the generation — the revenue that would be generated was only done through other people breeding cats, and essentially trading those cats, and then the company would make money from the revenue share of that.   

And I remember one of the interesting conversations we had when we were discussing sort of, we actually did the publishing deal with HTC that sort of launched a crypto phone and combining it with Cryptokitties.  And we talked about bundling Cryptokitties with HTC phone.  And, you know, we said, "oh, yeah, okay, we can give you some Cryptokitties, but it's going to cost $50 for a pair of them."  And he was like, "what? I actually have to buy these things from the market and bundle it with the phone. I can't just sort of, you know, you can't just give them to me, and I can just upload it or something. It didn't work that way, right?"  

So it was — it was sort of that concept of that true digital ownership.  That for us was sort of the light bulb that allowed us to sort of think about that space in terms of the gaming space, particularly because we were a video game company.  And with the other thing that was big for us is for anyone who has been in the video gaming for a long time, we often dream about the ability to actually openly trade these assets to be able to transfer ownership on them can actually do that.  Prior to that there were services like itemBay, obviously eBay has sort of black market approaches in terms of people trading assets.  So that market already existed before just wasn't sort of allowed to be done in a sort of legal way.  And sort of NFTs represented a way in which we could do that.  And so for us, that was sort of, that big sort of moment where we could do that, because the assets are owned by the user, and they're not owned by — and owned by the company or studio.

Matt Gould:  That must have been actually a pretty interesting conversation, because you're talking to one of these large phone manufacturers for a distribution deal.  And they're like, "What do you mean, I have to buy them?"  And you're like, well, we just we didn't, you know, didn't think about how you could maybe incorporate that distribution in and I think that's something that crypto has problem with just across the board is how do you — how do you on these on chain assets, how do you also work in with your distribution partners, this is a chicken in the egg problem trying to get these things out there and in people's hands.  

And I think that that's super cool that you guys are already trying to think about getting NFTs into people's hands so early.  But before we dive into that, I actually kind of want to ask, if we're trying to explain NFTs to someone who may be not in the space like, how do you explain it to your Mom?  And I understand the property rights part, but I always like to get people inside get them — what's your two sentences because I'm sure you get asked all the time?

Yat Siu:  Well, I don't know if I have an appropriate response for my grandma, right?  But the way that I like to describe non-fungible tokens, outside of the property rights context is I think of them as open digital assets.  So to me non-fungible tokens will do to digital assets what open source did to code.  I think that's the way that we like to explain it, at least in terms of the possibilities there.  And that's possible, because you have property rights.  So what I mean by that is, if you take it from the real world example, when we own physical assets, we have the ability to alter and change them and do whatever we want, because we truly own it.  I can buy a car, I can paint it, I can change the seats, I can add value, I can resell it, I can get a loan on it, I can do whatever I want with it.  I can't do that with digital assets in any game today actually, right.  

So because I don't own it, but with an NFT, I have this component of an open digital asset, which means I can add layers of experiences and value on top of it in any which way I please.  In fact, I don't even know how you will do it, something will come up, that's kind of cool, and there you go.  And then whether you resell it, whether you wrap it, whether you sort of, give a lending product, whether you provide a fractionalization service, these are all added layers that you can add on this, because the person who you interact with truly owns it.  So I think of that as the layer that, for me is the true power of what non-fungible tokens represents.

Host:  And I'm kind of curious, like you said a lot of the use cases aren't really out yet.  We don't really know how people are, you know, what are changes that people can make, like when we're talking about a car or house, we know, you know, basic things, you can paint it, you can rearrange the furniture, the seats, things like that.  But if you were, I'm sure you've given us some amount of thought, like, say you bought a piece of digital art, or any other kind of digital asset.  What are some, you know, like creative or more practical things that you can do with it, to make it feel more like you own it in the traditional physical sense than just, you know, in a virtual sense?

Yat Siu:  So I guess, maybe I want to challenge that thinking about, why is it important to own it in physical sense?  You know, certainly, if you have kids, or the younger generation, you know, I don't think they care that much about how they necessarily physically represented as much as virtually represented.  You know, their stats in game is more important, the number of likes you have on Instagram is perhaps more important, right?  How they're viewed virtually is perhaps more important than their view, sort of physically, you know.  

I'm, you know, I'm from a generation where people sort of wanted to be sort of seen where the paparazzi was in terms of newspaper, sort of a, sort of, sort of articles or sort of magazine covers and, "oh, look, he was there at that restaurant, or that bar or that club or something, right?"  That's not an (inaudible) anymore.  It's more like, you know, what game are you playing?  You know, how many kills have you achieved?  How cool are you in this kind of virtual world or another?  So I think I think that's part of that paradigm that's changed a bit as well, where we're trying to make a bridge, which is relevant.  I mean, you could have, you know, screen, you can have a cool video representation, but I feel that's limiting its potential, I feel that we're still trying to fit it in some kind of, call it old world order, which I don't think is really necessary, and that's that's that twist ourselves a bit.

Host:  Yeah, I love that.  I love that challenge to — you know, the traditional way of thinking and so if we kind of go off of that conversation and talk about like, how can — what is the impact that we can have on NFTs digitally.  So for example, like, would I be able to sell a tweet like say I tweet something that I think is really funny, really clever hasn't been tweeted before?  Would I be able to sell that tweet with the goal of sort of like getting, making it go viral, getting a lot of likes and retweets and you know, getting famous that way, or whatever the case may be like, let's just envision some like real cases that could potentially happen?

Yat Siu:  So the tweet examples perhaps interesting just because of Jack Dorsey's sort of, sort of auction of that tweet.  The issue with the tweet, as exciting as interesting as it isn't perhaps even historic, is the fact that the tweet resides in a centralized environment.  And actually, that was demonstrated earlier when someone bought a tweet and then the owner posted the tweet actually promptly deleted it, probably just to make a statement.  Maybe that in itself —

Matt Gould:  It is the very first rug pull on an NFT.  Yeah.

Yat Siu:  — When you think of it as an expression of sort of as an expression, which is maybe a form of art, maybe that was the whole point, right?  You know, that that they tried to sort of demonstrate, but I think that is part of the issue about interfacing, something like a non-fungible token with something that is actually in a centralized set setup, which means that you own it, but do you really, right.  And that's the part where if you can actually make the asset, truly a non-fungible token, and it resides in a digital context, in its truest form, which we think of in terms of NFTs, because they're born digital as it were, then you actually truly own it, and it can't be taken away from you. 

Whereas here, it's really a sort of context of that, but the way to think of that is autographs, right?  It's kind of like an autograph.  And, you know, I've got the original signature, the original version of that and that's an example of that.  Where I think open digital assets really sort of add value these non-fungible tokens.  There's sort of multiple layers to it, but the first one, obviously, is the benefit that it gives power back to the creators, because as we've seen now, many artists and creators actually make more money from the secondary resale in the secondary markets from these assets than they do from the primary sale.  And they continue to make a royalty of that going forward.  That's a very powerful way, and very powerful sort of statement of what it means for the future of creators, something that wasn't possible before.  I mean, imagine if, in the physical art world, you know, the estate of Picasso was able to generate a small percentage of the sale that happened every single time in Sotheby's or Christie's or elsewhere.  Actually, the amount of value that would be generated for Sotheby's, but also every other Picasso owner, would be a tremendous because the estate would have more funds to promote or create or produce sort of the message of Picasso, right. 

So I think it puts value in the right places.  And I think that is sort of an important part of that transparency. The other part of this is where I go back to open digital assets, is that we don't yet, we don't really have the full picture of what people can do, we're only really scratching the surface.  And I'm from an age instead of — when I came to Hong Kong in '93, I started one of Hong Kong's first internet service providers in '93.  Okay, so there were maybe 10s of 1000s of Internet users.  It was an idea that was little bit too early, but you know, back way back, then there was a big movement, and that was open source.  And the idea that we should be using open source as opposed to closed source for probably a good 10 years felt ridiculous, because how could you sort of compete with sort of, you know, the professional code that would be delivered by, you know, third party companies, and, and so forth.  But now you can't compete against sort of open source, you have to embrace open source.

And by us, you know, it's a great example of the network effect, that open source delivered, you know, the code of millions and the intelligence of millions come together, and basically, then deliver that incredible sort of knowledge that really created a — let's call it innovation revolution, as it were.  And now, you know, the start-up tech scene would not have been possible, if it wasn't for the fact that there was open source.  And that is important, for the — for the — in terms of innovation for code and software, but it hasn't happened for digital assets, right.  And the reason it couldn't happen is because the code that the actual digital assets would be stuck in — in the centralized platforms, and now that they're open and free, we can start sort of doing things to them that I think we have still yet to discover.

Matt Gould:  Well, that's actually — so I want to take it up a little bit here.  And I wanted to talk a little bit, specifically about Animoca, and what digital assets you guys are currently issuing and kind of where you where you guys are in the market.  So I would love to just hear a little bit more about what you guys are working on over there currently, and what do you see as the next couple of things that you guys are going to be rolling out over at Animoca just to kind of set us in a time in place here on the discussion?

Yat Siu:  Yeah, so I mean, Animoca Brands is the company behind Sandbox, which was quite well known in terms of sort of selling digital land basically doing sort of a game called sandbox, which is a blockchain equivalent of Minecraft or Roblox, we feel that sort of user generated content, creating your NFTs, and sort of also been a real estate developer, if you will, in the virtual context.  And that's been quite successful.  I mean, not too long ago, we sort of sold roughly $3 million worth of land in like, I think, five minutes or so.  The other thing, the other product, I think that we've been pushing out a fair bit is F1 delta time and the RefToken.  F1 delta time is officially like sort of licensed title using Formula One.  And it's a blockchain racing game, it has many elements of DeFi that's built in there, so you can use it to the staking and yield generation.  But also you can play a game where you can race and win, and we've got basically people forming racing teams.  And again, actually, just today, we sold almost $2 million worth of racetracks that was sold out in like 23 minutes.  So quite a bit of demand in that space. 

We are also heavy investors in NFT space.  So we're investors in opensea, we're investors in X Infinity, WAX, Decentraland, I mean, just a whole host of actually 35 companies in that space.  Part of the reason we did that is when we entered in space in 20 — and of course, Dapper Labs.  When we entered that space in 2018, there was actually a pretty lonely field.  Nobody was really investing in that.  And so to help build an ecosystem, we thought, well, maybe we need to sort of do something about that as well.  So we invested in many of those companies to help bring up sort of that ecosystem at that time.  So we kept doing that until I guess, 20, we will continue to invest, and most recently, we made an investment in NFTfi, which is the lending platform for NFTs.  But this is something that, you know, obviously, is no longer as needed, because, you know, lots of funding is now going into NFT spaces as compared to before.

Matt Gould:  Well, I remember because Unstoppable, we make NFT Blockchain domain names, and we were founded in January 2018.  So I remember exactly what it was like in 2018, and we actually know the Rarible guys and the Opensea guys, and all the people inside the space, and it was such a tiny community of three years ago, and then it has absolutely exploded over the past couple of years.  Actually, I would just say mostly the last six months, even six months ago, you could you could go and get NFTs, a friend of mine actually got the Paris Hilton NFT off last summer.  And I think now that you wouldn't be able to get that for less than, you know, seven figures, just seeing what's happened the last six months, it's really been crazy. 

You touched on a few things there that I really want to talk about and some of those have to do with incentives, and how these connects to the digital world.  So you actually mentioned some things, so I'd like to talk about F1 delta, already know the game that you guys have.  So I'm actually very curious, you had a couple of — sounds like you have a couple of DeFi incentives inside that game, which I thought was pretty interesting.  So you have a game, it has race cars.  I think I understand that, how do I, you know, how do I have tokens that I stake?  You know, how am I earning yield an interest on that, I'd love to just kind of hear a little bit more about how that game works?

Yat Siu:  So right now, you know, what you can do is you can't stake your cars and as such, you stake it in NFTs.  And then you receive yield in the form of — in the form of the Ref token, which you can then trade or buy other assets with.  What's interesting about that approach is it's sort of a precursor of an example of what could be ultimately a rental program.  Because you end up basically staking your cars into a pool that can then be used by others, right.  So that's, that's one example. 

The other thing, of course, when you stake cars is it ends up taking NFTs out of supply in the market.  And that's interesting sort of paradigm, right?  Everyone talks about sort of how do I take tokens out of supply, but if your focus is around sort of delivering value to the assets, then maybe there should be an interesting way in which you can take NFTs out of supply.  So it's a little bit of a thought experiment in terms of sort of scarcity around actual sort of circulating NFTs.  The other thing that we do that is why the racetracks I think are popular and in fact, I think our sort of racetrack, the sort of first one that we sold actually medical oven from the meta purse, he actually sort of auction that one off for at the time 220,000 US dollars. 

Those racetracks generate yield, because when you actually play on the tracks, and there's like fees to be paid and sort of prize money, track owners get a share of that.  They do have to do some work, but they get a share of that in terms of revenue, and that's basically how the real world operates, except now it's done in a virtual sense.  So the more races take place on those tracks, the more fees you end up generating, ultimately (inaudible).

Matt Gould:  Okay.  So I want to unpack that for people listening, because that was, that was a lot of really cool things that you just suggested there.  So I'm going to see, I'm going to try to unpack this, I always like to pretend that I'm trying to explain this to my own Dad.  So what you just said there is.  So we have these digital NFTs now.  And then one thing that you said earlier that I thought was really cool is maybe people should care less about physical things that they're earning, because everyone's moving into this digital world.  And so we have all these new things that we're creating as these digital NFTs that people have.  And then an interesting thing about having digital collectibles, as opposed to like a physical one, like a beanie baby, is you can build incentives into them.  And, and I actually want to talk to you about incentives, but you just mentioned three, and I want to go through each of them. 

So renting is a very interesting incentive.  Like I kind of imagine, if you have a collectible, like a beanie baby at your house, it's very hard to rent that to somebody else, if they want to use it for a little while, because they could destroy it, right?  And then it would, but with a digital NFT, you could rent that to somebody and, you know, they're not going to do any harm to it.  And then even better than that, you can put it inside of a contract.  So you know you would get it back. So you don't have to worry about it being stolen in some cases, which is interesting. 

Another one that you mentioned was like supply reduction.  And I guess this is more about specific in game mechanics, there are certain things that, I guess you could imagine people playing the race car game, for instance, and you are you've been trying to win this race for a very long time.  And you realise that this guy's car is no longer on — in the game, because someone has taken it out of the game.  So maybe you want to race because you can never beat him, right, but now you know he's gone.  So that can also be something else that comes in there. 

And then the last one you said, which is interesting, I wanted to kind of talk about was the — the idea that someone could build their own racetrack, which is essentially like a level inside of a game, at least inside of my head.  And so inside this digital world, you could build, you know, a specific, a specific area of the game that people could only get access to, and maybe you could charge for that.  And so that makes it very more interesting way for people to connect on these open protocols for people to come together.  So those are three that you just said there. And I think most people don't realize that all these incentives are going to create all sorts of things that we can't even imagine that people could do with these digital assets.  So you gave us three there that I thought were pretty interesting.  I was wondering, do you have some other ideas floating around about incentives that you would — you think maybe, that you guys are looking at this next year that we may be interested in seeing coming out.  I'm very curious what you guys are thinking on this space?

Yat Siu:  First of all, I mean, the beautiful thing about sort of crypto and blockchain gaming is that there's no shortage of ideas, right.  Everyone basically has all sorts of new creative ways in which you can experiment and often sort of where ideating — ideating them sort of somewhat on the flier as well, because we are experimenting as to, as to as to how to do that, right.  One of the things that we're quite focused on is because of the value of these assets have increased so dramatically, you know, how do we sort of bring in new players into the field that can afford to spend, you know, $20,000, basically to play our games, which is kind of expensive.  

So what we're thinking about is, for instance, creating a new race layer experience, that allows them to sort of, you know, farm, essentially rev that it can then afford to pay.  So it's almost quasi-free to play-ish of sorts. But essentially, without trying to upset an existing economy, because we can sort of make more, we shouldn't be making more assets that are cheaper, you know, we shouldn't sort of devalue the economy, we have to really be mindful of that. And it's actually no different than, you know, sort of managing land supply, for instance, in a city or a country, we have to manage that balance as well.  So these are — these are sort of elements that we have to think about, sort of think about sort of how to do that, and integrate that.  

In terms of experiments on DeFi, I mean, one of the things for us, that we think of this is that, you know, the asset themselves can be a collectible purely of itself, but we think the power of the NFT becomes truly apparent when there is deep utility.  So the goal that we have for our NFTs is that utility extends beyond our games, but that's actually our long term mission here.  Which means that we're hoping that these assets get used in other games, we're hoping that other people adapt them in their own particular ways, whether they park them outside, you know, Sandbox, whether they actually sort of use them somewhere else.  And, you know, lending protocols is just one way of taking it out and providing another service.  

Obviously, some people choose to fractionalize it, but here's an interesting example. fractionalization is something a lot of people talk about NFTs, but none of our F1 delta time car owners want to fractionalize it because they can't use it otherwise, right.  So that means why should I fractionalize it because I can get more value driving the car or doing that, right.  So one of the things that we are now looking at building which is important is how to create a setup where people can drive cars, where you have a separate owner because one of the things that we've now experienced, and so people have done this on a trust basis already.  But, you know, it's not done in a contract level, so it doesn't really scale.  So the next thing that we need to do is find a way where an owner can hire a driver, like, on a contract basis, rather than just simply sort of on a — okay, let's share a wallet and let's work together, which is what's happening right now, right.  Because there's, there's no actual mechanism to do that.  And we're multiple race teams do this.

Matt Gould:  Yes, to make timeshares on the blockchain.  So that people can, you know.

Yat Siu:  Yes.  And one of the things that we discovered is, so we have two kinds of game modes on F1 delta time.  And the first one that we launched was a time trial and then elite trials, which is basically like a statistics based game.  You basically take your parts, you combine it, and then you race, and you have to sort of measure the weather, and then there you go, you've got results.  That proved to be quite popular, and remains one of them sort of popular events, and then we finally launched the game, which is really a skill based game where you're racing with the assets.  And the sort of the skill based element ended up becoming perhaps even more than 50% of the game itself. 

So the assets were important, but skill ended up sort of tipping the balance, whereas a statistics based game, it was really just around getting the right statistics, and people built spread sheets, people build programs to analyse it and sort of did that.  But when it came to skill based, a whole bunch of — a whole bunch of guys that I've actually, I'm not that good at this, right.  I need to do — I need to find someone else to help you that and that in itself, then created a new kind of economy by itself, and a different kind of bearing.  So the type of games and experiences you build will end up also creating different kinds of economic incentives that we have not fought sort of, sort of envisioned at the time.

Matt Gould:  I think — I think that is actually an incredible insight.  So I'm going to unpack that from my own playing games online, you can imagine a situation where like, I may be really good at doing one part of the game, right, but then in order to accomplish another part of the game, I may not be very good at it.  And right now, if you're playing a game online, it's like you as your character have to do everything.  Or maybe you as a group of characters have to do everything together, but it could be in the future that like, I have to, I have to make a friend on the on the internet and say, like, hey, like, I really can't do this race course, like I built the car, because I'm a really good mechanic.  And I love that part of the game, and I'm really good at that part, but I just can't beat this race course, and until I beat this race course pause, I don't get to go to the next level.  And there's somebody else on the internet, and now I've just made a friend and I'm like, hey, you can borrow my car for an afternoon, and then drive it and that he can play that part of the game.  And then he can beat it for me, and then maybe the next thing.  

So I really kind of like that, because it's more ways to have richer connections with other people in a digital environment.  But of course, you know, I'm sitting here and I have I have my VR — I have my VR headset over here on my right.  So like I'm the wrong, you know, I'm definitely all the way out on the edge of this thing, but I think that that's super cool.  One other thing I want to talk about, before we kind of move on to the next section is actually creators.  And specifically I want to talk about artistes, because we mentioned this really earlier, I think people are missing this, but it's pretty easy is that a work of art can pay someone or like a work of music or something can pay them every time it gets transferred in the future on the secondary market.  

And the example that I give is if I'm like a young and developing artists, sometimes I'll sell my work only for a couple of thousand dollars.  And then 15 years later, you know, maybe someone says that that's my best work that I did much earlier in my life, and that that art piece will resell for, you know, $15 million, like, if I'm really good at whatever it is, and I'll get zero on that secondary sale.  And the nice thing about these digital assets is that you can put inside the code itself, that whenever this thing gets transferred, you know, for money on the secondary exchanges, that the original creator gets a portion of that.  And so I've looked at that, it's like a way of kind of smoothing out your lifetime earnings, right.  

So as an — as a young artist, you can — and it also aligns incentives. So I just think that that's really cool. So I'd like to pass that back to you and see if you've seen that, you know, in, in the companies that you've worked with, and just kind of getting your opinion on how that's how you think that's going to help creators, one, make more money now and then two, like align incentives between creators and their audience over time.

Yat Siu:  So I think the way to think of this, the way we think about this is that yes, absolutely, you're right, right.  Creators have this ability to generate more value from secondary sales perhaps or at least value over time.  Whether it's (inaudible) is over sales are so may not even be the main point.  I think the main point is that you are justly rewarded for the work that you've done.  And you create a collaborative environment with your collector owner of these assets, and I think that's the part that's really quite powerful.  Because at the end of the day, it is rarely the artist that makes his art famous.  It is often the collector or the collector as a community, "Oh we all own Picassos, that should be valuable let's go work together and sort of tell the narrative, right."  And that's the power of what sort of blockchain and in effect tokenizing has done, right.  

It's created a value system within a community.  You know, we see this with social tokens, and NFTs is a form of a social token, if you will, or a sort of social non-fungible token because it represents a piece — I'll take it from a creator standpoint of him or herself, right.  And that representation is ultimately owned by a collection of people out there, non-fungible or fungible.  And then what happens is, is that they talk about it, they, they participate in it, they maybe resell it, and every time they resell it, they actually grow the narrative of the artist, and they become closer to the artist in that process.  

So it's actually the very deep way in which value and true value generation happens, we think.  Now, this isn't just sort of an artist making an art, and then as a result, the composability and the adaptation that happens, as I say about open digital assets is where I think it's exciting.  With F1 delta time, for instance, we don't have a creator element per se, but people basically build cars with all the parts and components, put them together, which is a collection of eight to 10 assets, as a bundle for perfect racing or something, and then they resell it.  

Sometimes they give it away at low cost to create user adaptation, but it's another form of adding value, right?  It's basically sort of OEM parts, if you will, and making a custom race car.  So it's not just about, oh, let me resell it and talk about how great it is, let me add other elements to it for this version of that version, you know, and you add value to that.  And that sort of add value, makes the community stronger, makes the process stronger, brings people closer together.  I mean, there's so much there's so much glue hear in that process, that that's really what we love about sort of this whole thing about open digital assets.

Host:  I love what you just said there because, you know, with all the — with NFTs and anything new that comes up in this space, my question is always, how does this apply to my real life, right?  Like all of it kind of seems mostly theoretical when it first surfaces, and I'm always like, well, just tell me the practical implication of it, and that's why I love what you just said is like it builds community, it creates more of a social component and more of a collaboration component.  

So taking a step back to that, who are the people that are using Animoca or playing blockchain games right now, buying the NFTs out there?  Who are the people doing it right now?  Are they people like Matt, who's got a VR headset next to him on his desk?  And then how, how long do until normal people are using it?  Not that you're not normal, Matt, but how long until the masses are using these things, and how do we get to that point?

Yat Siu:  So I think one thing to understand, perhaps, is that I think the general, people community globally of people who own NFTs, is perhaps still only half a million, maybe 700,000 people, right?  I mean, in the context of the world, that is still very small.  But the reason we're seeing this explosive growth is that we went from 150,000 people last year, to you know, 3-400,000 people this year — this this first two months or more.  So we're effectively witnessing a tripling of an audience, right?  So we think, "Wow, look at all this growth."  But unless we believe that non-fungible tokens has a mass — has a market appeal of no more than 10 million people, we still have a long way of growth to go.  And so it's natural for the sort of innovative type people to be in the NFT stage, and that's what we're seeing right now, broadly speaking, right.

We are experimenting in terms of how to bring non-blockchain people into the blockchain world.  But I think it has to come from a place of value, but for games like Sandbox, and particularly F1 delta time, the ability to sort of understand NFTs and crypto is important, because the game was designed that way.  And one thing is that for that audience, it is also important, right.  What happens on chain is important.  Can I audit the ownership?  Do I know what's real, right?  You know what happens on it, that is actually important for that audience, because they care about that stuff, and when you do it right, then they're also willing to pay the premiums as opposed to maybe this is fake, right? 

Now, this may not be super important for people who are not in crypto, and I think in the mid to long term, that has to be the approach.  So right now for instance, with one of the — one of our one of our company's quit, which is a digital collectible marketplace, but it's not a fully on blockchain in the sense that it sort of began life as a mobile, sort of as a mobile sort of digital collecting experience and they've got like 7 million collectors on there.  So probably with licenses from Marvel and all that kind of stuff, but not blockchain yet.  And what they started experimenting on is, you know, not with crypto, but with cash accounts.  

Say okay, if I end up getting some special sort of rare Marvel cards or sort of, you know, panini NBA cards, all that kind of stuff, right?  Then would someone be willing to pay cash for that digital collectible?  In the same way that NBA Topshot had sort of an experience, you know, obviously, with different values involved.  And it turned out that there was a group of people who didn't have the time to farm these assets inside the game in a sort of game element, but we're very willing to pay a premium for ownership of these rare cards.  So a balancing mechanism came into play, where you have an army of people playing for little money, essentially the mobile app to try to farm these assets in a gamified way.  And when they happen to sort of chanced upon a set or collection or something rare and special, they would put it on a concept of auction market in cash, and then, you know, one of the collectors would pay for it in cash.  

So I think that could be perhaps one of the mechanisms in which you can bring in non-sort of blockchain guys, because they have friction with that.  The way I look at crypto and NFT and blockchain gaming right now, as I consider it as like sort of gaming for Wall Street, right.  So people who understand money and willing to spend a lot of it.  And if you bring in the friction of people who are not in the Wall Street segment, but they see that there's value in money, they are more likely to go there.  And I think that has been the power of NFTs and in the DeFi space, which is liquidity, right.  Without the liquidity, then NFTs would probably not be very effective, it needed to have the DeFi infrastructure, it needed to have liquidity in the marketplace, for it to have the appeal that that it has today.

Host:  For sure, I love all of that.  I think our goal here too, is to, you know, not just be having these conversations, talking to people who are already in the crypto and blockchain space, but to really help people outside of the space understand why this stuff is so cool, and I love that you guys are doing that as well.  Another practical application of NFTs is something that you tweeted recently to Bill Gates, actually, so we all know Bill Gates stock in '96, content is keen.  We've all heard this, but you tweeted that him that NFTs — that NFTs is the very definition of liberating content, ideas and experiences in a truly decentralized manner that you believe he envisioned — Bill Gates envisioned when he said content is king back in 1996.  So I just want to call this out and give you a chance to explain or educate us on what is the connection between NFTs and content?

Yat Siu:  Well, so when the internet really started to come, sort of a promise, although still early, many of us recognized and, of course, Bill Gates was one of the first ones to recognize it, actually, content would be king, for one main reason that anyone could sort of produce content, you wouldn't necessarily have to read content on let's say newspaper, or in a centralized sort of — sort of large — sort of studio, anyone could make content, anyone could make a podcast, anyone could make a blog, and they could be heard.  Because what the internet sort of 1.0, web 1.2 was effectively was as effective broadcasting mechanism.  Or if you will, a giant, super cheap photocopier that in time simply got cheaper and cheaper and cheaper, right. 

So the cost of content distribution basically went down to zero.  And that is the reason why knowledge broadly is a commodity and we have all this information that we didn't have before.  So that was great, that was wonderful.  And so he sort of said, that's why content is king because, you know, content is available to anyone, the ones who make the best content would win.  But it turned out not to be quite true at that time, because of the infrastructure that the internet had.  And sort of Jonathan Perelman then basically had a counter quote, and he said, "Sure, content is king, but distribution is queen, and she wears the pants."  

And the whole point of that quote, basically, is to say that, without distribution doesn't matter how great your content is, you will never be found. And this is where we find ourselves today in the internet, right?  Can content be found if it's not on the App Store?  Can content be found if it's not a Netflix, right?  You know, is it Game of Thrones or is it HBO, right?  Is it Mario Brothers or is it Nintendo? Like, which is it, right?  And I think this fight that we see, for instance, that epic has with Apple, for instance, and many other cases is actually a great example, how content is perhaps the Emperor with no clothes, at least for the time being, right.  

And that is actually what we found ourselves.  Sort of a little known story, although actually quite well known story in 2012 is, you know, we were one of the largest mobile phone game developers in 2011.  If you sort of search on history, you'll see that we dominated the charts.  We were probably also the only at that point, non-sort of, let's call it Western company that had such a prolific presence on the App Store.  At one point, we had 12 out of the 20 top spots in the app store.  And in January of 2012, Apple decided that we were a bad influence to the App Store, and they pulled all of our apps just like that.  

And of course at that point, things would that was kind of embarrassing, we didn't really talk about it much, but the whole industry knew that (inaudible) Animoca lost all of their apps, and we basically were removed from the app store for basically two years, which had a major impact on our business at the time.  And then we moved on to Android and so on, but I think the biggest issue for us was, of course, that again, it was effectively a kind of rug pull, if you will.  But in this context, a centralized organisation, the distribution outlet decided, for whatever reason, we don't like you, right.  There was no appeals process, there was no due Court order or something like that, there was nothing, it was just, that's how we feel like.  

That story that deplatforming that we see happens every day, to some person around the world, for any content creator.  We may not necessarily agree with the content they're producing, but that choice is actually not yours, effectively.  And this is where non-fungible tokens are different.  Because ultimately, the content that is created is yours, it can't be removed.  Sure, maybe the discovery might not be available in the same sense, but I can't actually sort of take it away from you.  And it also means that the people who bought this content, you can't remove that.  

And why do we say that, we say that, because non-fungible tokens represent digital asset ownership, we foresee a future, particularly for games, where games are going to be using NFTs in multiple ways.  So for instance, you know, take it from a digital fashion standpoint, if you're doing digital shoots, and they were used by hundreds of games, because they're cool.  But other games would choose to adapt the use of these shoes, because they want the audience, they want the other owners of issues to play their games.  So there's a natural reason to do that, in time, those shoes themselves become a platform that we described as content as a platform, and then ultimately, doesn't matter that you're being deplatformed somewhere else, because the people own the shoes themselves, you can take away their shoes.  

And so they can go to any other ecosystem or environment with the ownership of the assets.  And that's why we think that with NFTs content is actually King, as truly King. Because people will be making games and content and experiences based on the assets that you own, as opposed to us going to places where we are supposed to be sort of having those exclusive experiences in some kind of walled garden somewhere around the world, right, that's, that's kind of where this came from.

Matt Gould:  Well, I'm — this is one thing that I like to tell people, which is that, you know, blockchains can't kick you off, which is one of my, it's one of my favourite things like, you know, when you have trouble with deplatforming, and all these different things that are happening around, and I agree with you, I do want to kind of, maybe take a little pinprick and pop the hype on NFTs just a little bit here.  So, you know, what do you make of the NFT hype right now, I mean, it definitely feels like it's Bob — you know, it's kind of looking like a bubble, and it feels like it could burst.  And a couple of criticisms that I typically get on NFTs from people is like, you know, who would want to buy, you know, a JPEG, you know, for a million dollars, essentially, especially because the storage part hasn't been, I guess, beautifully solved.  And for people at home who may not know this, when if you buy a piece of artwork, on an NFT online, usually what that is, is it's a blockchain asset.  And then it's pointing to, you know, the picture of that artwork, and may have the signature of the, of the artist or there's authenticity, so you can know that it's coming from that person.  But I actually just have some questions for you like, what do you think are the good criticisms of the NFT market right now and where are things that the — the people like ourselves, in the NFT space can do to like, try to solve some of the what do you see as the problems for NFTs?  Maybe we've gotten ahead of ourselves?

Yat Siu: So likewise anything, when there's money to be made, and a lot of people rushed into it, and aren't necessarily thinking about the long term consequences, or even the short term consequences, right.  And, you know, that is one of the elements of sort of free market and capitalism we have to deal with, right.  And, you know, with any sort of new technology, you have a little bit of a hype cycle, perhaps, although I would argue that, although I just feel very bubbly, I have sort of a view, that sort of mid to long term, we are on the right track.  I'll get to that bit a little later, but I think one of the things that you mentioned, for instance, about sort of image rights and so on, I mean, you can put your images on IPFS, right.  

You can have other ways in which you do that. I think it's a technology around to solve that will come.  And I think what's missing right now is that we lack an understanding of what makes an NFT valuable.  We rely for instance, for artwork, in terms of oh, well, you know, I get curator to verify it, and basically, you know, the art without the actual verification is not actually that valuable, right.  And that's kind of what we should be looking for in blockchain in the same way that you know, you audit a contract or you audit your accounts, but we should have an audit for NFTs.  And those are things that we haven't done yet because the market is not that mature for the time being, but eventually, we will have to get there to ensure that the good stuff bubbles up.  

And so for the time being just like with anything, you know, we would ask people to study, right.  What is the NFT?  Who's behind it?  What's the background?  Are they anonymous, or they're not going to scratch it up all these little sort of warning signals that you can put to it. The other thing that you mentioned was around sort of, you know, yeah, could I just download the JPEG or so, I mean, you know, often it's been said already, I mean, you know, a little graphic copy of a Monalisa, it's just not the same as the original, right?  And I think, you know, I came to Hong Kong, in '93 and back in '93, you know, Hong Kong still had a reputation of sort of selling fake stuff.  

So fake Rolex was kind of a big deal and, you know, very few people around the world actually have any necessarily brag about their fake Rolex, you know, but we're having a, having a fake Rolex is really more sort of an aspiration of actually, I really want a real one, but they don't necessarily say, "hey, look, this is fake, it's like, awesome, right."  And I think that's true for you know, any for digital assets as well, you want to know that you have the original, or the authentic one.  So I think the way to look at NFTs is not necessarily just that isn't valuable, per say.  It's more about is it something that's real, right?  We don't necessarily want to show that we're carrying around something that's pirated, right.  

Originality or knowing that I bought something that benefits the artists may be good enough, right.  We don't have to say that NFTs must be worth thousands of dollars each time.  We just want to show that we've allegiance to the artists and creator.  That's why we want to buy an original Nike or we want to buy an original something, not because we want to sort of — sort of pay more money, but because we are telling them that I care about you that I care about having the real stuff.  And that's where I think NFTs have that powerful signal of it's the real stuff, whether it's worth $1 or $10,000, that's almost secondary, as far as I'm concerned.

Host:  Awesome.  Well, yeah, I've — I have learned so much from you in this conversation and I've got so many questions written down that we won't even have time to get to, but we always end every podcast episode with a segment that I call "Explain your tweet."  This is where I go through your Twitter and pull out funny or interesting or insightful tweet and you actually retweet a lot from the brands that you support, but also, you know, a lot of insightful retweets as well.  So definitely go check out Yeah, Yats Twitter to, you know, just for good overall learning, but I did find one tweet, I'm going to call out that I found personally interesting.  So I love backpacking and climbing mountains and stuff and I've done a few trips.  

I did Kilimanjaro, Patagonia, like several big backpacking trips, and I think I've read every Everest book out there.  And so when I saw this tweet, you probably know it's coming now.  When I saw this tweet, it really stood out to me, you tweeted on January 14th, "Please consider supporting those who are in need in Nepal, which is run by Tashi Tenzing and family member of Tenzing Norgay who is one of the most famous Sherpas to climb Everest.  He was one of the first few people he got up there with Sir Edmund Hillary."  Yeah, exactly.  So this is organized by your daughter.  And then you said. "If you donated at least $10, share your address below, and I will send you an NFT for my personal collection." 

So tell me more about this campaign, what it is, and then how many people actually responded that they donated? And then what NFTs did you send them from your collection?

Yat Siu:  Yeah, so the NFT that we ended up sending was sort of — dependent where — which address they gave me and so actually, it was a bunch of guys from the WAX community.  And so we issued some Bratz NFTs at the time.  So we — I sent some for my personal collection, so we had a licensing partnership with Bratz and we sold some activities that have actually become quite valuable as well, but I guess that's just the market right now.  And we sort of passed them out sort of as a sort of freebie.  At the time when I gave them out they weren't that valuable.  

So but anyway, the background on this is, so Tanshi Tenzing is a family friend of ours for quite a while we actually are supporting his schools for some time.  He built schools to support really sort of young girls.  One of the problems that girls in Nepal had, particularly in rural areas, was child trafficking.  And so essentially, to combat child trafficking with education, so he had to build schools. So that was the background and so we had a relationship with that.  And our kids actually, sort of we're sort of hiking the Basecamp trail.  You know, I've mentioned many times, so we have a good relationship there with that, and I love Nepal, sort of I'm a tracker, hiker, sort of — so sort of sort of love, love nature.  

But because of COVID, right?  It was tough and unlike other places where you can have digital work, sort of living the life of a Sherpa or living in the rural life over there, you don't have much digital options, right?  So you are restricted physically from doing stuff.  So it affected people's ability to literally just get food and so on.  So that was a campaign.  We ended up having a quite a number of people sign up in support, most of them were not from the NFT community, it's just like people who are supporting Nepal, I mean, it was like a GoFundMe, but yeah, I mean, it was also not a big campaign, right.  But it was, it was, it was successful, we close it out, very grateful for that.  And, of course, all the other guys from the NFT community that donated, you know, got their NFT I actually think it's interesting as a potential model in the future, right. 

I think charity and donation models could work out interesting that way, you know, an NFT doesn't necessarily have to represent anything of value.  It could be just a memory of a moment that was truly yours, or an achievement you made.

Host:  A 100%.  So shout out that organization real quick.  Tashi Tenzing's organisation so people can check it out and donate if they're able.

Yat Siu:  So it's the Green Tara foundation is what it's called, yeah.

Host:  Awesome.  And then, post-COVID, my first big trip is going to be Everest base camp.  So I'm going to be in touch with you and get some tips from you and maybe get connected with your contacts there.

Yat Siu:  Absolutely, yes.  (Inaudible).

Host:  Yeah, thanks so much.  I really appreciate you being here, before you go, just tell people where they can find you if they want to connect with you personally, and also where they can check out Animoca Brands.  And if they're new to the blockchain gaming space, what are some of the, you know, initial easy and interesting and fun things they can do once they go on Animoca Brands?

Yat Siu:  Well, I guess one, I mean, my Twitter is Y-S-I-U.  It's pretty easy to find, it's probably the best way to interact with me.  Just because, you know, it's open and everyone sort of — is there somehow, sort of — crypto and Twitter has become sort of the place to be in some ways.  In terms of products, I invite you to take a look at several of them if you can F1 delta time.  The other one is of course Sandbox.  And probably from a pure crypto standpoint, Sandbox might even be the easiest experience because you can go there start buying land and just learning about it, that seems to be an easy sort of translation.  

If you want to learn what we're doing with moving sort of traditional games into blockchain, I invite you to take a look at gamee.  It's both on the App Store and on the website G-A-M-E-E dot com.  It's probably — it's a play to earn platform for games, we think it's very powerful.  And of course, the other one is quid, Q-U-I-D-D dot com.  And then most recently, we also acquired Lympo.  So which runs the lympo token to do sports NFTs, and actually we have a bunch of other things, but I think I've said enough, so go check it out.

Host:  That will keep people busy for a little bit.  Thanks so much, Yat.  I really appreciate this.  Thanks Matt, for co-hosting with me as always, thank you listeners for tuning in.  And we'll be back again soon with another episode of The Unstoppable podcast.

Yat Siu:  It was a great pleasure.  Thank you.