Animoca Brands is a global leader in blockchain and gaming, on a mission to deliver digital property rights to global gamers and internet users to create a new asset class, play-to-earn economies and a building a more open metaverse. A veteran technology entrepreneur and investor, Yat Siu is the co-founder and executive chairman of Animoca Brands.
Walter Jennings: Welcome to Waves in the Finoverse. I'm Walter Jennings, the host of a podcast brought to you by Finoverse. We're talking with the wave makers creating ripples, waves and tsunamis across finance, crypto, FinTech, Web3 and beyond. Listen weekly to hear the changemakers talk firsthand about their experiences in this dynamic industry. Joining us in the booth is Yat Siu, the co-founder and Executive Chairman of Animoca Brands. So welcome to Waves in the Finoverse.
Yat Siu: Thank you for having me. It's exciting.
Walter Jennings: Yeah, really appreciate having you here. We're coming to you from Hong Kong FinTech week. Yat Siu, so a lot of folks know about Animoca brands, but I just want to understand a little bit more your personal story. I understand you grew up in Austria and studied music. How did that set you up for a life of digital assets in NFTs?
Yat Siu: Well, I think my parents are musicians, particularly my mom, she was first an opera singer. And then she was an opera director, she moved to Vienna, really in the 60s. And then obviously, in the 70s, was studying music. That's, you know, and as any good Asian kid will attest to the parents wish you to do something, then I guess that's what you do Asian to Tiger parenting, it's all true. So that's why I studied music. But I think the one thing that really sort of gave me, I guess the passion for what I'm doing right now is actually, you know, looking back then I didn't realise that that was the case, my mom really struggled as an artist, as a creator.
And I think when we look at, for instance, what nonfungible tokens can do for the creative economy has given me a level of empathy. I never ended up going into music profession, because I just realised how difficult it is for someone who has a passion in that ,in the arts, but it's constantly being taken advantage of. The other thing is that my mom used to work in, you know, parts of eastern Germany, particularly in Berlin at the Komische Oper. And, you know, for those who may remember, they're old enough, that was truly up in that sort of a communist era in the eastern side of Berlin. And, you know, she would cross check with Charlie and so on. And I would see her there.
And I really saw a different world as well. So it introduced me to a completely different kind of societal structure, having come from sort of a social democracy, going into communism, and then eventually, through the work I ended up doing at Atari. And so I'm moving me to America, where I was exposed to capitalism, and then to Hong Kong, where it's basically Uber capitalism.
You know, I guess all of these experiences helped shape our thinking around sort of what the Metaverse should be today with digital property rights. You know, because of the fact that I grew up in Vienna, and I was writing composition software, I used to pre internet service called CompuServe. And I was discovered basically, ultimately, by people who liked what I wrote, and gave me that opportunity. And maybe the other lesson was that it didn't matter that I was a kid at the time, it was like maybe 13 or 14 years old, or that I was a minority growing up in Austria, it just didn't matter.
All that mattered was in a virtual context that I knew how to do something that maybe was valuable to the community at large. And that gave me that opportunity. So I think really, since the 80s, I've always been attracted to, you know, the internet as it were, or know the Metaverse as we may call it today.
Walter Jennings: Yat, I'm very interested in the hero's journey, what was the spark that led to the creation of Animoca brands?
Yat Siu: Well, Animoca Brands was originally incubated in some ways basically, you could say through our plays, and it spun out, you could say in now, what was now known as the original Animoca in 2011, actually quite some time ago. And then eventually spun out from that into what is now known as Animoca Brands. Through a listing in Australia before we basically sort of went you know, I guess quasi private again, through not being a public but unlisted entity.
And the spark really was around mobile gaming. When we saw what happened with mobile phones we were going to do back in 2010. We felt that actually this was a new way in which people would engage and sort of gaming which was really a growing industry it would explode. And as a result of dip through basically the smartphone.
But really, I think the spark of Animoca brands was the beginning of when we discovered CryptoKitties, actually our studio in Vancouver, a company called Fuel Powered, actually was involved in building it. And it was actually a company that we had just about finished acquiring. And when we saw what they were building with CryptoKitties, and then it launched this incredible sensation, we were fascinated with what it could do.
And we felt actually, this is truly the way in which you can own a digital assets online for the first time, truly, you know, and we didn't come at it from the financial lens, we came to it from the lens of ownership. From the ownership of your culture. Because before if you remember, a crypto was genuinely something that was very financial in nature. But with Bitcoin, it started in 2009. You know, for basically you could say, 10 years going, everyone was looking at the world of crypto entirely from a Wall Street lens. But actually with CryptoKitties, it now became possible to look at it from the perspective of a cultural lens of an identity lens, you know, through non fungible tokens that fascinate us. Because, you know, as gamers, we felt we should own our assets anyway. But if you play a game today, we don't own anything.
So, you know, this was a way in which you could do that. And we had then the freedom to transact and free sort of freedom to do all sorts of economic activities that we would not normally be able to do in in game assets. So that's how we got involved in this. And we went all in. And in 2018, we decided this is, you know, we believe this to be the future of everything, not just, the future of games, but the future, basically, of everything, and went heavily into it made over 300 investments to date.
And most high profile companies that you might know are companies like Sandbox, but of course, OpenSea is part of the family and Axie Infinity, Dapper Labs, Decentraland. And, you know, a whole host of other sort of significant companies in the space have all emerged from, you know, our support and group activity and investment, starting from 2018.
Walter Jennings: Sounds like you're early days being found on CompuServe, reaching out and finding CryptoKitties and suddenly connecting the user, the developer with the end product. Specifically, you mentioned earlier Sandbox and Decentraland. Talk a bit about the concept of virtual land ownership and how you see that evolving?
Yat Siu: Well, I mean, do you think of generally the lens of ownership, what does ownership really mean to us as humans, before we even talk about sort of what is land ownership? Because the fascinating thing that the way we think of it as that the value, and the meaning to our ownership is entirely virtually constrained.
For instance, when you think about the choice of car you buy, the shirts you buy, or even the shoes you buy, you're making a conscious decision to buy one fashion item over the other. If it was purely for its utility, the shoes maybe only have the same colour, and they should only have one function, which is to walk. But the same is for cars, you know, the utility of a car is to take us from point A to point B. But actually, when you make the purchase of a car, how much of the decision process of its utility of the car comes into why you purchase it? And the short answer is almost none.
We all know that the car can take us from point to point, but we buy it because we like the seats, or we like what our friends say, or we like it that is maybe carbon neutral, that it's energy friendly, or that it's battery powered, or the fact that it's from receivers, so that it may be a Rolls Royce, or it says we want status. All of these are entirely virtual, if you think about it, these are fictions that we as humans embellish and love because it says a piece of art of who we are.
So then we go to virtual lab is the same thing. Virtual land is just basically taking that 99%-100%. But the meaning and the purpose of it is 100%. Actually, as significant to us as we purchase something physical, like, you know, I live in Hong Kong, why would you not purchase a land somewhere in you know, further away, where you have a nice big house and you don't have to, you know, why do you want to live in mid levels? Right? Why do you want to live in a sort of what may be a smaller place? Because the district, the society, the community speaks of the value I wish to be associated with or the community I wish to be a part of that is also virtually unconstrained, right? It's not actually the utility in and of itself.
So when you buy land and Sandbox, for instance, you know, land around Snoop Dogg is more valuable than land somewhere else. Again, why is that? It's not because, you know, one block of land is further away, sort of is more valuable than the other just in its pure essence. Right? That's like saying Earth is more valuable from one country to another. It isn't. But it's actually the location, the community, the network effects that give it value in the same way that we choose to think that and believe that you're living in mid levels is more valuable than living somewhere else in Hong Kong. Actually, the same is true in the Metaverse, right. It's about the community that said it's about the sort of virtual value that is constructed that speaks to us as members of society.
Walter Jennings: Yat, so Animoca brands has built a portfolio of some 350 different..
Yat Siu: 380
Walter Jennings: 380 companies and projects,what is the ecosystem you're building and what's your core mission?
Yat Siu: The core mission is to deliver to digital property rights. Right now, digital property rights exists more as a contract, right. So in the same way that you know, we have in law ways in which you can protect a physical property currently, in law, you don't have a way to particularly digital property in the same way. However, it was hard to do so because the digital property would normally be inside a private database, which means that the company who basically owns the data actually has say, and sway over what it does.
That's why blockchain is so important, because now data becomes a public good, which means that data is now stored in an immutable fashion, which means that my ownership of something digital can now be not just verified, but truly be made and claimed to be mined. And so that's really the mission. And so everything we invest in, really has two core purposes outside, of course, the fact that we want the founders to be good and everything that we you know, has to be a sound business and has prospects is the fact that it has to one assist in the development and growth of non fungible tokens, right meaning as digital property. And also it has to add to the network effect of NFTs.
So for instance, the marketplace is a good example. Because a marketplace is a way in which your NFTs have utility in which it could be, you know, both discovered and also, you know, perhaps exchange for value traded by someone else. But you know, that's not something that we actually do as a game company. But we invest in those businesses because it helps grow the entire ecosystem. We think of the Metaverse as the sort of sort of expansion and growth of literally new economies.
When we think of Sandbox, we don't measure it based on, you know, you know, it's P&L like a like a corporate, we do, of course, have to look at the sustainability. We look at the economic activity, like a GDP, how many people are employed, how much growth do we see in terms of the business in and of itself in terms of, you know, economic activity that was generated. And then from that, we obviously take a kind of quasi tax, and from that we grow the business in a sustainable fashion. So it is almost like nation building.
Walter Jennings: I want to ask, if your chief risk officer gets any sleep lately, it's been a market gyrations this year, have caused the valuations of digital assets to fluctuate significantly. Does this heavy weighting in virtual leave you potentially exposed? How do you balance out the risk?
Yat Siu: Well, from our perspective, we're genuinely all in it. Let's face the good thing about us is that we don't have leverage, right? I think one of the reasons why a lot of companies in the past have gotten into trouble isn't the fact that crypto assets have fallen, I mean, you know, asset values have fallen broadly in the market, not just related just to digital assets. The reason why they got into trouble is because they were leveraged. And if you don't have leverage, then generally speaking, the prices are a momentary fluctuation as to long term trends, where we think the business will go. Remember what Bitcoin and Ethereum was four years ago, Ethereum was floating in the low hundreds, and Bitcoin was $3,000 or less, right?
So it's all relative to that lens, right? So again, when you look at it from economic activity from growth in the space, you know, if you take a 10 year lens, you're fine if you're basically thinking about the next six months, okay, but next six months, those are traders, so the speculators and that's a different market. Now, there are a lot of businesses that focus on those. But that's not our focus. And as a result, we're not too concerned about that. Because we're more thinking about where is the where is this world? The Metaverse Web3 going, really, in the future as proper as opposed to short term?
Walter Jennings: Okay, well, then let's open up that longer term lens and look into a field that you're recently entered, which is education. Tell me about your ambitions in education, and how that fits into the overall portfolio.
Yat Siu: So non fungible tokens have this incredible power to create network effects and capital formation in content related assets. When you think about the classic Web2 example, content wasn't an acid content was to be that you consumed by the way we consume music, or you compute sort of games, for instance. But with NFTs content now becomes an asset, which, like I mentioned in the last example, then becomes a platform of growth in and of itself. So during the same with education.
Who are perhaps the biggest content creators in the world? They are our teachers. Who are perhaps the most valuable sort of content creators to our society? They're probably our teachers, we spend more time our children spend more time with teachers, probably at least in the working, instead of in the working week, then with their parents at home, if you think about it, right. So they have a very valuable job, but then think about how much they get paid, actually very little, relatively speaking. So that's the issue we have right now. But one of the reasons why they get paid relatively little is because the content they produce, even though they are societally very valuable, actually isn't valued in a financial sense.
So what's financially valuable are things like real estate, for instance, or the ownership of our assets or fences, art or so on, right? Because of the fact that they allow for capital formation. So this is the same thing that we're now trying to do with with education. We're taking the content teachers have created, we're turning them basically into non fungible tokens in what we call publisher NFTs. And it means that you now whether you're a parent, or whether you're another teacher, whether your school, you can now buy ownership and IP rights of this particular content, and you then have the ability to monetize it, if you wish. Now what happens is this kind of content already makes money.
So it's something like almost think of it as rent, when you buy a house, right, you're not buying it based on one times rent, you're buying it based on multiple years of potential rent potential that you can maybe enhance it, and put work and make it better. And we're doing the same with education. A teacher that makes $1,000 a year in their content could potentially sell their assets for maybe 10, or $20,000, in the same way that we've seen sort of your art really appreciate for, you know, NFT artists, for instance. And if we can make that happen, that we can get a lot of capital flowing into the right areas of society, which is our teachers.
And you know, if they get more money, not only do they live a better life, they can reinvest back into the areas of learning and teaching and get better resources. So we think and we hope, as it has done with artists and gaming, that it creates the right incentive structure, where money and value can flow, actually to the participants who most deserve it.
Walter Jennings: I think for anyone who has never developed curriculum, you don't understand the hard yards that go into it absolutely developed a three day course on creative thinking, which I've taught in the Gulf countries, and teaching creativity to Arabic speakers. It's a very challenging culturally and linguistically. But that's valuable curriculum.
Yat Siu: Absolutely. There is value to that. And it's not never been fully appreciated. And I think hopefully with the Metaverse in Web3, we can change that.
Walter Jennings: Now, Blockchain gaming and the Metaverse as well as user generated content and the potential to play to earn or party to earn, what are the longer-term opportunities in this market for you?
Yat Siu: The paradigm is ownership, because of ownership, you can have play in our inoculator. Without ownership, you can't do that. For instance, one of our portfolio companies actually infinity, it grew because someone ended up creating an Uber like service, which then create another company, which is also one of our portfolios called YGG.
And they basically provided a way in which people who own these axes, which are basically these gaming assets, that you could then basically give to people in the Philippines, we then use them and they shared the revenue that they were earning from the game and gave them a living wage. And this is very critical. Actually, millions of people in the Philippines who don't normally have access to the ability to have a credit card or to have, you know, a bank account, actually ended up having a crypto wallet as a result. And they became financially included, which is, you know, one of those amazing stories that people don't fully appreciate. Because, of course, living in a place like Hong Kong, for instance, we all have the benefit of having a bank account, and we all gonna have a credit card for the most part.
Therefore, you know, why does it seem valuable, but for these developing places, actually is absolutely critical, because it's not financially viable to provide a traditional banking service in those places.But you know, talking about the opportunity spectrum, I think more and more people are confused about sort of play to earn a planner, because they look at the space and say Well, you know, the game is free, where there's money to be made". Well, let's talk some facts.
The gaming industry, last year was a $200 billion plus industry and is rising, right of that basically 30% goes to platform fees. On top of that, you know, over $100 billion basically goes into advertising, right? You know, basically, which goes to the benefits of companies like Facebook, Apple, Google, and all those guys. How much of that 100 billion dollars that the industry basically spends on promoting the games actually goes back into the gaming industry, the gamer doesn't get the benefit, right? The game studio doesn't get the benefit, right.
So when we add all up, it's a highly extractive tax, ultimately, in the form of advertising costs in the form, basically, of platform feeds. What played around actually does with ownership paradigm, is take that value that is going to these platforms, and give it back into the ecosystem, because instead of paying Apple and Facebook, you basically effectively paying the players for their time and attention.
That value then actually will more likely go back into the ecosystem. Because if you're a gamer, and you're deriving value from the game, what are the chances that you're reinvesting it into the game economy? Much, much higher? Because you certainly know that Apple, Facebook and Google are probably not going to put anything back into it, because that's not their business model. Right. So I think we're basically sort of changing the face of, I guess, in this case, capitalism inside these games as a structure games already a very financial system, in terms of what it does for game studios and the platforms that benefit from it. It's just that the value isn't fairly distributed. And Web3, and the Metaverse can change that.
Walter Jennings: Yat, I'm interested to look forward. This week. We've seen Elon Musk take over Twitter. We've see Mark Zuckerberg changing Facebook to Meta. Why don't we have a blockchain social media yet? And what are the opportunities in social for Animoca?
Yat Siu: I think we've made a number of investments in the space to try to sort of spur on this idea of social and the metaverse. So I think it's beginning. Remember, social has multiple sort of experiences, social doesn't necessarily need to look exactly like Facebook. But I mean, an experience like Sandbox is very social in and of itself. A blockchain game is very social in and of itself, I think the classical way of thinking in the sort of Web2 way was that the should be sort of, you know, one dominant partner, that should be one giant company that owns at all.
But the way we think of Web3 is actually that may not be the most healthiest experience, we want to have more fragmented and more distributed systems, they all talk to each other, because they're all on chain. But one difference, now we can actually build on top of our experiences.
Today, you can build these micro experiences through WhatsApp group, and Facebook groups, for instance, you know, but that's actually a very imperfect way of actually creating a close relationship, a close knit relationship with your 1000 true fans. Whereas in blockchain, you can actually build it very much in a custom manner, with but you're still connected, wherever your wallet is open to the world, you know, everyone can come and conduct business with you freely, you're not in a walled garden, I don't have to go to a platform to do business with you, I just have to basically go directly to you, because you basically happen to be on chain.
Walter Jennings: Okay. And do you think there are any checks and balances that need to be put in place to ensure that Web3 and blockchain remain a force for good?
Yat Siu: Well, I mean, I think you know, what Hong Kong is doing right now, basically, with a virtual assets policy and looking at positive ways to regulate it's very positive, I think, we've always welcomed this idea that there should be some form of positive regulation. But there's a fine line between sort of overregulation, that sort of feeling sort of cripples an industry or positive regulation that gives clarity into a market that makes it clear what the rules are.
One of the problems about many places in the world, and to a certain extent, Hong Kong as well, is that there wasn't clarity as to what isn't possible. And therefore everyone's operating in these sort of, you know, that's called shades of grey. And they don't know what they're doing this right or not, which has in the past driven a lot of companies away from Hong Kong, even though Hong Kong has been one of the earliest places around because you know, FinTech, financial systems, that's just, you know, Hong Kong, they know this space so well, right.
And I think Hong Kong realises this, which is why they've gone out and announced this sort of virtual asset policy. So we're very positive about this development here. You know, regulation is an ally, really, if you think about it in the right way. But of course, in the past, people were worried about it. But the worry doesn't come from the fact that the regulation couldn't be positive. The worry comes from the fact that in the past, the people who regulate it didn't understand the space. But again, I would say especially what we see Hong Kong, we do show leadership in the space. I think it's very exciting. And we are very optimistic.
Walter Jennings: Now. Yat, so we have a tradition in our podcast asked people if they could bring a song with them in the Finoverse, what music would they want to accompany them?
Yat Siu: Well, I guess I have a classical music background. So I think the way that I think of the space, we're in this moment, I think the writers of all queries by Wagner comes to mind. It has the right drama, it has the right attention. It also has the right sense of sort of excitement and growth that certainly we feel here as an industry. So I would say that would be myself.
Walter Jennings: Right, and finally, what's next for you and Animoca? And what can we look forward to in the coming year?
Yat Siu: Well, we continue to build out the Metaverse, obviously, we will continue to make investments as a space. Hong Kong is our home and our headquarters. Are you proud to sort of be here, you should expect us to continue to sort of particularly grow in areas of education, but also broadly, you know, I think if you think of for instance, we have new Metaverse is coming out, like what we're doing with life beyond with gaming experiences, like phantom galaxies. So you know, everything we're doing in this space is to try to further and grow basically Web3.
Walter Jennings: Well, I look forward to podcasting in the Metaverse one day with you soon.
Yat Siu: See you in the Sandbox.
Walter Jennings: See you soon. Thank you so much Yat Siu, Co Founder and Executive Chairman of Animoca Brands and guest here on Waves in the Finoverse.