Yat Siu & Justin Waldron: The Future of Crypto Gaming at KBW2025

Oh. All right. Welcome everyone to Korea Blockchain Week. My name is Kate Irwin. I am the content lead at Blockworks for the Drop newsletter.

I cover consumer crypto and all things gaming and this is my first time in Korea. I'm so happy to be here and as someone that's played thousands of hours of OverWatch, you know, I always knew that the Koreans were the best gamers in the world. So it's an honor to be here. Um so I love to start with today's panel. We have Justin Waldron Open Game Protocol and Yat Siu of Animoca Brands as some some serious powerhouses in the gaming space.

So if we could start with some quick intros of you know from from each of you, what are you focused on right now in the crypto gaming space? I'll quickly start. Yat Siu, chairman and co-founder of Animoca Brands. I think we're most known as being an investor in this space. We have over 160 gaming portfolios over 600 companies in the mix.

And when it comes to the gaming side, I think we have two main sort of things we focus on which we can talk about me later. One, we do think next year is going to be really big for blockchain gaming. Ask me why later, right? But the second point is that we actually think opportunity from an investor standpoint is very much in the liquid markets right now. Relative to of course we are investing in a lot of young startups as well.

However, the market we feel is a little bit depressed and we think there's a lot of strong quality projects out there where the tokens are currently live, right? Versus four years ago where the market was still emerging, right? So we think that's an area that we're focused on and sort of investing in projects that are actually live out there, investing in the tokens, supporting them, driving cuz most of the on-chain activity of growth actually comes from blockchain gaming. And the other area we're focused on is digital identity, right? Digital identity is a way to create better reputation scores for people who are playing games but also other things, because in blockchain gaming and finance is kind of tied to each other.

So, meaning if you have a very strong gaming credit score, maybe that means you can also have a good finance score on the other side. They're kind of tied to each other, which is sort of, you know, in the vein of Web3, amongst other things. Um and and uh the other area, of course, that it ties into is using that as a venue to develop more financial literacy, which we think is important to bring Web3 adoption, especially in gaming, as well. Hey, I'm Justin. Excited to be here.

Um I started my first game company uh 18 years ago uh when I was 19. That was Zynga. I built our first game, Zynga Poker. Um Zynga's well-known for bringing the freemium model to the West. So, we first built games on Facebook.

We had games like FarmVille that got to 40 million plus daily users. Um we popularized this business model that is now widespread in mobile games. Um That was a great experience, but a lot of people noticed at the time, "Hey, what Zynga really figured out was distribution and this new form of monetization, new business model for games, not necessarily making the best games that were ever made, although people enjoyed some." Um and so, my personal interest in in media and in games has always been, "How do you develop a new business model? How do you find new distribution?

How do you um widen the base of creators that can succeed?" So, that's what we're working on with Open Game Protocol. It's it's um how do we solve the distribution problem using crypto tools to empower game creators and players. And obviously, there's a lot of talk about AI. You know, some folks might say we're in a AI bubble.

Others are saying, "No, this is a serious thing that's going to change everything." Where do you land on where AI fits into gaming? Are you using AI now? And and where do you think it might be in 6 months to a year from now? I mean, AI is everywhere.

Um and to me, if I was to use a parallel, it's kind of like, you know, how people talked about sort of crypto and blockchain as a bubble back 4 years ago or 5 years ago or 6 years ago and now it's kind of just everywhere, right? Like for instance, people talk about how oh, NFTs are dead, but NFT sales in terms of a monthly basis is about a half a billion plus a month. So, if you're in the space, you you know what's happening, but if you're outside of the space, you might think it's gone. And to me, that's kind of AI is the same as in we use AI everywhere and it's becoming so ubiquitous that maybe people don't even think about the tools they're using or the products they're using are all AI developed, whether it's in gaming or in other areas. So, I think it's more like is there a hype?

Maybe a little bit, but it's true as in it's something fundamental to everything we do. Like if you're a company that's not using AI, you become irrelevant. Kind of like if you're a company that wasn't using the internet years ago, you're irrelevant as well, right? In terms of gaming, of course, the most obvious use case is production and so on, but the things that we're most excited on, one is sort of agentic AI inside games, NPCs. You know, we've been talking about that for a while, but cost was prohibitive.

As cost comes down, I think sort of agentic sort of AI inside gaming can really sort of develop new forms of gameplay. And the other one, of course, that being from involved in the creator economy, is using AI tools to create games, right? So, vibe coding is really getting to a point where it's very, very advanced and developed. And when you think about what are the two biggest game platforms in the world in all gaming sort of trad gaming, if you will, Roblox and Minecraft, and what is the key ingredient to them? It's UGC, right?

It's user-generated gaming. And what has been the roadblock is how do I make games better and more powerful as an amateur, right? And so, the tools were done in a way where it's easy. Like in Minecraft, I just build blocks and Roblox have simple tools. And now I can basically just ask an AI to basically just help me code more sophisticated game.

So, pretty excited about that. Yeah, we're super excited about it, but I would say that Um, thing that it's showing is just what what's the value of code. And um, it turns out it's very little. So, there was a funny thread the other day on on X. Somebody said, "I'm posting an open source uh version of LinkedIn online.

Sorry, Reed Hoffman." And um, it turns out it's okay because it there's a lot more to building LinkedIn than than just writing the code. And we know this. Like, if Facebook sold you the code to Facebook, it's probably not worth much without the network. And so, I I think that um, the recognition from the market that network effects are what's valuable is also recognition that software is not worth much.

And this just continues the commoditization of software. So, the question then becomes um, how do you add the network? How do you bootstrap the network? How do you get distribution? How do you get monetization?

Um, these are the key questions. Like, I think it's a given that the creation is just going to be incredible. That people are going to make things that we we always wish we had. Um, I think games have huge budgets and they're coming down and people are able to be creative. We're not stuck in a room approving a game with um, IP that we feel is a little bit boring because we can't predict what people are going to like a year from now or two years from now when the game finally ships.

We can be topical. Uh, games will come back as a form of media because they'll be able to compete with things like video and text where the culture is is constantly being reflected in the content. That's something that games have really struggled with over the last few years with the rise of things like Tik Tok. So, um, we're very excited about it. I think the next challenge is like, how do we get these people discovered?

How do we get this content out there? I'd be curious also talk about the the economic side of crypto gaming and and where we see that headed in in coming years. I think crypto with with the blockchain can can really make games um, feel different and it can give game studios a different uh, edge over traditional games where, you know, maybe they have large treasuries of certain tokens and and they can do different things maybe in DeFi to make additional revenue. Um, I'd might curious um, Yat, to get your perspective on the sort of economics of the gaming investment side and and sort of where game studios can can use crypto to their advantage. So, um, no, that's a great question.

First, I think when you talk about sort of business innovations, you prefer, you know, we talked about sort of freemium business model that basically Zynga popularized around the West. The next form of basically the business model really comes around how to manage treasury management of of uh the tokens that you have in your ecosystem. So, when you build a token ecosystem, it's not specifically, and I think this is where the challenge we had with previous, let's call it Web 2 to Web 3 attempts, shall we say, right? You know, the classic Web 2.5 thing, which to me felt more like Web 2.

1 or Web 2.2 really, uh which is that they basically translated the gaming business models of, you know, free freemium into just Web 3, but not actually taking advantage of what Web 3 was really able to offer, meaning that skins were NFTs and basically virtual currency were tokens. But, they sold them the same way and effectively sort of did actually something that was quite damaging to the community because they ended up diluting the ecosystem because they were assets, but, you know, traditional gaming uh developers don't think of their production as an asset. They think of themselves as content producers. They're making movies and entertainment.

They think of something that is not sort of supposed to be lasting in the same way. But, they they also so the result, uh they made mistakes in that process. Um, when you have a treasury, you can actually do things like treasury management. You can do You can engage in the market, for instance. You can work with market makers to get a fee out of the transaction fees, for instance.

Um, you know, 4 5 years ago, we didn't have sophisticated purpose markets. Now, we do. So, if you have a treasury, you can actually sort of be in the market, and you can create yield from that. And when you generate yield from that, you then actually can actually sustain the game development and actually make more money perhaps that way than necessarily, um, uh than necessarily sort of selling your tokens down, as it were. Um, the other thing, of course is that not only is it not adversarial, what happens is is that it becomes aligned.

Um, and that's the whole thing about Web3. You want to try to align yourself with the community. How do you do that is if you get more energy into the token, more attention, more users to use it, then actually you get more liquidity. When you get more liquidity, that's when things like market making make more fees. When you make more fees, then you get more revenue, right?

Um, but the challenge is that people who make games don't necessarily have the financial experience to operate like a hedge fund, all right? Um, and so so this is where, you know, sometimes we're companies like us come in and we try to help in that area, but you can work with others. Uh, and that's something that we discovered, you know, over the years as to how to create a sustainable business model in the Web3 gaming space and tokenization, which, you know, if we continue to do what we did 5 years ago, we wouldn't be able to generate sort of hundreds of millions of dollars of revenue a year, um, if we did that, right? And so it's kind of part of the exploration, and I'm not saying we figured it out. I think everyone's still still looking at sort of new directions, and I'm very excited also what is happening on chain, you know, with hyper liquid, with sort of, you know, basically a DEX perp markets.

There's more that can be done. Um, the parallel to me is that if you look at for instance someone like Sony, everyone knows Sony for their electronics and for Sony PlayStation and for all the games they produce, but most people don't know that Sony finances actually responsible for most of the profits, right? Um, and what happens in blockchain is often the finance component accelerates ahead, right? And so you need to have that capability. So if you don't have financial literacy or experience in this, then it's very hard for you to compete in Web3 broadly, and that's true for Web3 gaming as well.

And and I'd love to talk a little bit also about crypto gaming. I in my view has evolved from being this kind of more of a a walled garden ecosystem where each each game has its own space and it's maybe its own blockchain. We're still seeing a lot of that, but I know open game protocol is looking to do something a little bit different, so I'd love to hear Justin, your your sort of opinion and view on the the gaming ecosystem and to what extent it should be open or connected to other tokens and other chains. Yeah, thanks. It echoes what what Yats was just talking about, which I think is this financialization in the products and understanding how to use them has become a crucial piece of succeeding in Web3, but we're asking game developers for too much.

It's very very hard to make a game succeed in general, and then now we we also say you have to do all these things to succeed. The chances of making a successful token are low, the chances of making a successful game are low. When you multiply them both together, we get what we got. And so, I think that the next phase of games is about figuring out how to help game developers that don't want to touch crypto at all, but they understand that crypto rewards are very valuable. And they understand that it can it can drive distribution, it can reward their players, it aligns incentives with other communities, it opens up new marketing opportunities.

So, I guess what we're trying to do is provide these easier opportunities. So, you can think about it as a marketplace. Before Airbnb existed, there were a bunch of houses that were sitting empty, right? These are amazing assets, no utilization, low utilization. Then there's all these people who are traveling to these places, but they have no way of connecting.

You can call somebody up and try to find an empty house, or you can have a network that actually makes these things easily available to you. Our insight is that there are huge token communities that are already very interesting in Web3. And actually, people like these tokens, and a lot of those communities want more content. They want to stay relevant with all of the competition for people's attention. And so, our insight is if we can find a way to pool the attention and the capital required to reward game developers and players, then you can have the same sort of matching where you have untapped assets on one side.

There are millions of the games that are already out there. If if the burden isn't them integrating web 3 tokenomics into their game from top to bottom, which I think has been largely the expectation and the approach that we've taken with this sort of skeuomorphic design like like Yat mentioned earlier. We've said virtual currency becomes ERC-20, virtual goods becomes NFTs. I think there's a much broader space of exploration that we kind of left out because some of those early explanation explorations they led to very good outcomes, huge outcomes that led to a tremendous amount of investment in particular directions in this idea maze that's in front of us. And we spent so much money and time on some of those specific areas of the idea maze that we never came back and explored some of the other places that we could be going.

So what we're hoping to do is just allow for teams to collaborate much more easily. Maybe I just want to add also just to supplement the there's the element of gamification that's happening in finance because essentially of of blockchain, right? Not just in terms of the namings, of course, like Pancake Swap and Sushi Swap and fun things like that, but also the fact that actually many of the DeFi protocols are taking the lessons from gaming and making the finance effects and the trading like a game in itself. And so what's happening is actually I would argue that the world of finance is doing a better job in taking gamification into their experiences than gaming companies taking finance effects into their games, which is what is supposed to happen, right? And so to me, that's why DeFi broadly speaking is winning because they're better at adopting these elements because the finance sort of attributes they understand well and they've integrated the gaming.

Note note for instance, they're not game developers, but they all love playing games, right? So they understand this. Whereas not a lot of the people broadly as a mass who develop games necessarily like finance, right? So so having that blend, finding the person who knows games but also knows finance or at least loves finance, right? And I want to determine the difference between loving finance and the sort of understanding it well versus loving money.

It's a more universal thing that's a different thing, right? And and so so finding that combination or learning that combination, I think has a special skill. And that's also why I think Asia has an edge. Because I think in Asia you find more people who both love games and love finance. Less so in the West.

And love Pokémon, which I also love too. All sorts of things, yes. I think what's really interesting too is as we've sort of been seeing this this gamified RWA boom, real world assets, these Pokémon cards coming on chain, and we're seeing millions and millions of dollars in in volume of of people essentially trading Pokémon cards on chain. I would love to hear any thoughts you might have on what why this is happening now, why this surge is happening now.

I mean my general view on this is when when you tokenize anything, you're basically giving that asset a network property, right? And sometimes that asset is very virtual like, you know, game currency or whatever, and therefore it has intrinsically only a network property of that community. Or it has a network property that's existing that you basically supercharge. The perfect example for me is stablecoins. And so when you talk about tokenizing sort of Pokémon cards, it's essentially it's I don't know if you the right term is stable Pokémon cuz I'm not sure how you to put this, but that's basically what's happened.

When you think of the US dollar, the value of the US dollar isn't higher because it's a stablecoin, but its distribution is wider and bigger than ever before. Like people in Africa and South America, Southeast Asia who don't have a bank account are now dollarized. We have over 150 to 200 million people around the world more that have access to the dollar than ever before. Which of course means that even though the value of the dollar doesn't go up, the distribution and the power of the dollar and the discovery of the use of the dollar is bigger than ever. And so that's what tokenizing Pokémon cards did the same way, right?

You had a community already, you had a base. When you tokenize it, suddenly you open up to the entire world in a way that everyone can discover. Remember, Pokémon markets were somewhat fragmented. It started with someone's neighbors trading it, and then it went into maybe the village neighborhood, then it went into the city neighborhood, and then maybe people had sort of, you know, like some certain websites and you find them on eBay, but it was kind of this collector that collector, and now you unify that by tokenizing it, and you basically combine the community and you enhance the network effect, and then suddenly the trading increases. So, I think this is true for all assets, and which is also why we're so excited about RWAs broadly.

Yeah, one thing I would just add is this demand has just been there for so long, and when we think about one of the earliest Bitcoin exchanges that existed was Mt. Gox, right? And some people forget Mt. Gox MTG stands for Magic the Gathering. This this site was for people to trade Magic the Gathering cards, and in some way there's so much affinity between these these these groups that it's this idea is obvious in hindsight.

Now, people have tried it before, and I think we've finally made progress on the UX and the technology enough that you can build a great product where you're actually making trading Pokémon cards more efficient. That's sort of my answer, and I think that there are low-hanging fruit everywhere now, and a lot of people have been grown bearish on certain markets because they've they've seen certain things play out, and they lost faith in certain approaches, but what they're not seeing is that there's just low-hanging fruit everywhere that's been made available because of some recent advances, and this is just one example. Like, this is such an obvious idea that someone could have called this out 10 years ago. It's just now being done in a way that everyone can use it. And there's been attempts before, right?

But pre-pre-blockchain. And so, it forced people to go onto a centralized website, and they had to log in, they had to KYC, or whatever it was necessary, and that was a barrier. There were a lot of friction points. And now, and I would say that if you had both tokenized, for instance, Pokémon cards 5 years ago, it wouldn't have worked because you wouldn't have had enough users that were on chain to take advantage of that. You had to get to a certain point where the network's already ready to do so.

And now, with basically token economies worth in the billions of dollars anyway, you've got a community that you can tap into. Well, thank you both so much for coming out and sharing your thoughts. I really appreciate it. Thanks, everybody. Thank you.

Thank you.