The Quest for Seamless Gaming: Triumphing Over Blockchain Game Infra Challenges | KBW2023

interactive so ladies and gentlemen I'm going to hand over my microphone to Richard hey guys uh my name is Richard Kim I'm a general partner at Galaxy interactive uh we're currently investing our third fund uh We've have over 800 million of AUM dedicated 100% to investing in gaming Studios and infrastructure across both web 2 and web three titles AE you want to introduce yourself hey everyone I'm AE I'm one of the co-founders of uh we are building the next generation of onboarding and growth for web 3 games so excited about abstracting away the blockchain making games as seamless and easy of an experience for players to just jump in and get started playing so I wanted to talk today about the infrastructure needed to build an open economy game and uh my my choice of words here is actually quite intentional uh because you know often you hear of web 3 gaming uh but to me that actually presumes a conclusion that I think is worth digging into a bit um as to uh why um why why everyone has assumed that crypto is necessarily the way to bring open economies to Virtual Worlds and games um so I guess we'll start the discussion there right I think actually you and I kind of discussed a bit and I think we're both and probably everyone in this room is broadly aligned with this Vision that open economy in gaming and Virtual Worlds make sense um but as we know crypto comes with a ton of challenges right so maybe talk to me a bit about what your core view is on the role of crypto in bringing open economies um and I can kind of share my thoughts on the same topic yeah uh definitely I think blockchain is a very useful and interesting tool to build open economies on top of but you know I'm not going to go out there and say that it's the only tool I think it just happens to be a very awfully convenient tool and probably marginally better than whatever else is available to build these uh what's what's great about blockchain is that it's it's it has all the uh that has all the fundamental principles you need to build open economies on top of it's trustless It's decentralized it stores your it's it fundamentally stores your property rights so no one can challenge who owns what um and it's has all those uh basic qualities you need on which you know new things can be developed and people can start working together at creating these open worlds open economies um and honestly a new form of trade and capitalism that can develop yeah I mean in in kind of my day job I I get the opportunity to talk to a lot of game studios about you know both their present aspirations around building web 3 games um but also just the history of um experiments in trading and open economies in games like Diablo II with the auction house in various MMOs that have had various forms of trading and you know one of the consistent points of feedback I get particularly from the public company CEOs is you don't need crypto to do that right in fact crypto doesn't actually solve some of the hardest problems in this space uh around for example uh making sure you're not violating gambling rules right or making sure that you do KY an AML for real money conversions um so you know I I think when we talk about um infrastructure before we talk about the how uh of building uh you know open economy games I think it's worth talking for five minutes on why right because it's it's pretty apparent that we're going to go through a ton of brain damage um to bring open economies to to games um so maybe let's talk a bit about uh the types of games that we think Crypt it's worth going through the headache for um maybe you can share some thoughts and I'll I'll add mine yeah so I mean right now if you explore the the universe of web 3 games every single genre is being tried every single type of game is trying to be built and people are exploring all over because it's not certain What type of game is going to work best here it's it's a serious process of experimentation right now uh you know you're seeing things from these real world um real world money games you're seeing Ling Games you're seeing FPS MMOs RPGs like everything under the sun is being tried out right now and that's just the type and genre of game there's more along what platform there's mobile PC um console everything's being tried here I would definitely say that um some some types of games are more suited for web 3 than others uh I mean the the I I think that for a bunch of types of games you know um web 3 does make sense in one way or another um there's something you can build there's uh there's a more user focused content generation platform you can develop out of that but I think the type of game that I'm most excited about um for web 3 is the type of game where the community itself is going to generate a lot of content the you know we're starting in gaming today but the vision of web 3 in in in gaming has really been even more than gaming about Virtual Worlds and what we like to call digital civilization at holiday uh it's the idea that people are going to generate their own experiences own content and it's something that one centralized company no matter how big it is I don't care if it's Apple which is the biggest company in the world like they can't they don't have enough of the resources to do this meta just tried it didn't go that well unfortunately um or maybe fortunately for the space who knows but uh it's it's the idea of blockchain in the space is that we can align incentives we can create the the the the fundamental infrastructure for people to come in create content on top of and really come in and create a shared new form of world so I mean Richard and I were just talking earlier as uh as Nexon building maple story like this is the perfect type of game um to build on top of on top of web 3 and super excited to see where they take it super excited to see some of the other types of games that are building on top here too yeah like in my own head as I kind of narrowed down the types of titles I want to spend my time reviewing um in my head it's first betting games um and the reason why is I think what most crypto games lack is the idea of organic pay or Demand right in my head I think about this ratio all the time of if the numerator is the communal weight of expectation uh on your project price going up um and the denominator is organic payer demand so by that I mean what's going to get someone to buy the token or nft irrespective of the price of the thing so abstract away all the speculation um and in crypto broadly speaking both in nft space and gaming space that ratio is way too high right the ratio of expectation to organic payer demand is too high and so U betting is very interesting to me because um in web 2 Gaming one of the largest categories is what's known as skill-based gaming the idea that I put a dollar you put a dollar the house takes 10 to 15% in these quick hit casual matchups um that solves your organic payer demand problem right because there's always a reason to be buying more things to beted on um now contrast that with something like a an axi style you know PVE play to earn and so you know I look back at The Last Five Years of blockchain Gaming I'm like man we've been building all the wrong types of games here right um I think to O's point the the kind of Creator universe type of games where nfts and tokens are used to incentivize Community creation on top of some shared IP that people actually care about is super interesting which is why you know we've we we've shifted a lot of our Focus to Korea and Japan as interesting uh areas because of the kind of especially in the anime space and other areas of like strong fandom um for for pre-existing IP um and then I think this third category uh for which probably 1% of projects are going to be successful but is actually quite intellectually exciting which is the idea of like a truly virtual world like I think what what Hilmar is doing with Eve is a great example of this right um you know he's thinking about it as I'm creating an entirely new universe with an entirely new digital physics for which there will be this kind of independent currency to govern whatever it is that's built in this universe right um and he has the 20 years this year there holding Eve Fest uh later this month in Iceland and it's going to be the 20th year anniversary of that and that's actually incredible if you think about it right like how many blockchain games have been operating for that long zero um so yeah outside of those three categories I think there's uh a lot of discussion about infrastructure and all the headaches and but before you even get to the how the point I guess we're making here is you have to ask the why uh and if you can't answer the why the one thing I'll add here though is that it's these games I mean we've now gotten to see a few of the types of games that are going to work or have worked historically like uh even online what they're building is fantastic it's worked in traditional gaming and it's it was just the most obvious candidate to build into web 3 um but honestly like who knows where the next piece of innovation is going to come from like nobody could have seen axi taken off like there was no real if if you thought in terms of traditional gaming is actually going to take off this like weird tokenomics model weird little system that they were creating there nobody expected that so I think there is like there is some value to the experimentation being done right now and who knows like it's I'm I'm I'm excited to be surprised um and it'll be I'll be very glad to see that there's another category that we didn't even come up with here yeah to that point and this is going to be a good lead into the how um you know I've started to look at the fully onchain gaming space as well and you know here the idea is can we make it so all the state and all the kind of state transitions are fully onchain um which is perhaps the most interesting thing because it incorporates trustless as a core design primitive um for games and and that's where blockchain really unlocks an entirely new category of design my my personal VI on that space is were probably several years too early uh but let's talk about it like uh a like how how do you break down in your head the infrastructure stack today for building a web 3 game yeah uh so obviously different types of web 3 games out there fully across the Spectrum and first of all the game developer just needs to decide how web 3 you're really going to be um on one hand there's the very very web you know and and a way that you know often people like to qualify as like the web 2.1 type games like they may have an nft that is like a skin but that is the only part of the game that's web 3 and then on the other hand there's the fully onchain games autonomous worlds um those autonomous Worlds by the way just a side comment I think they're they're up to something interesting um the people who are building that out I'm not quite sure yet if this is going to work or if this is just a uh solution in need of a problem but um it's very early it's very R&D stage right now I think there's um it's very much pushing the frontier but um if we can solve a lot of the technical challenges like scaling um and um just the number of sheer number of transactions and stuff that happened on chain for these games to go um that could be something that could be a very interesting future especially as we start developing more and more virtual world um territory for games but going back to the original question of what sort of infrastructure you need I mean do you when you when you're building a game in web 3 you have to you just have to sit down and start with a fat list of questions you start with things like okay how web 3 do I want my game where does web 3 come into the design of the game like does this game even need web 3 that's that's something you have to sit down and answer um as bullish as I am web 3 gaming not every game should be a web 3 game um you really have to think about why does this game need to be web 3 does this geme does this game does this economy need a token um do we want to have nfts and what Assets in the game should be nfts and once they are there you know what can the user do with it um thinking about from a user perspective uh player perspective that this is how the N this is how the player Journey will go this is how they will use these nfts This Is How They will upgrade and continue their experience and this is what the player's lifetime is is going to be throughout this game once you've made that decision of I'm going to build a web 3 game this is how uh my this is how my nfts are going to be this is how the assets are going to be designed this is how the economics are going to work if you have that then you start thinking about the things like okay what chain am I going to choose and a bunch of different factors of chains when you're that's that's a tough decision that every diff every game goes through we talk to a lot of games at the early stage where are thinking about this like what chain am I going to choose uh they're thinking about things like scalability they're thinking about CH things like gas cost they're thinking about um they're thinking about things like what kind of developer ecosystem and tooling exists there a lot of these things are questions they have to answer and that based on what they need they pick the right chain after that then you start thinking about um now let's think about next level infrastructure so um right now one of the things that people are thinking about even after they choose a chain is am I going to go on the main net of the chain am I going to go build on an app chain with something like supernets subnets um super chains everyone calls these things something different uh but if you're doing that now what infrastructure providers am I going to use like who's going to provide wallets who's going to provide um payment rails who's going to uh who's going to provide like in-game uh like data analytics there's a million other pieces of infrastructure that you need here so part of what we're trying to do at holiday is make it super simple we want to give game developers Solutions we want to give them Solutions before they even have figured out what those questions are and because we know at this point we've talked to so many game developers we've seen what the what types of problems they need to solve that uh we can think ahead in terms of here's what you think you need now but here's what you're going to need six or 12 months from now so why don't you think about using this solution instead um but yeah it is a challenge it is not easy to build a web 3 game I think um that list is notable not for its length by the but by the number of things that actually aren't on that list that you still have to think about whether you're building a web 3 game or not like and that's not even anything about building an actual game yeah yeah also a great point so let's start with that right I the first question I ask when I approach a web 3 game is is some of the design related questions right like going back to the Diablo I experience the reason the open economy Auction House failed in that context was if you could just buy the same gear that you grinded for for like a week for like a buck right like most people like to think that their time is worth more than $1 a week right and so when you kind of take all those intrinsic motivations for playing a game and you reduce it to a single dollar amount in the form of a single virtual good that's tradable wow you've really Chang the core player experience right so um that's probably should consume a very large portion of the infrastructure related discussions and then there's all the kind of like non web3 specific types of questions that you got to ask like for example because my game is now an open economy game have I suddenly taking myself outside of Social Casino space right like think like a zingo poker or a coin Masters these games that make in some cases billions uh a year for completely funny money right you you may say why would I do that why would I spend a virtual slot machine at a minus 100% Roi um well people do and people spend yesterday like uh you know um I learned that you know games like maple story you know to to be you know on the top rank leaderboard you have to you know spend hundreds of thousands or even Millions right this is a very well-known fact and a lot of the lineage 2 type of MMO and this this type of game and so it's like okay um the moment I make all the rewards of that game suddenly real money what do I have to to now deal with I have to deal with the fact that uh I don't want to go to jail for violating gambling rules right I don't want to go to jail for violating loot box rules because the uh the arguments that game developers have traditionally made is no no no we don't have to comply with that because it's all funny money and so the moment it's not funny money but it's real money what happens um you have to think about you know uh money transmission licenses Payment Processing like all these things uh and so I think that's just a kind of footnote before we kind of go more back to the web 3 infrastructure side because um you know like Hill Mark said something interesting in his presentation yesterday which was he he viewed a lot of web 3 as solutionizing before you have a really crisp definition of the problem statement um and I think it's very much the same for for web 3 infrastructure as well right so I would bring it back one level higher instead of you know the first question being oh which blockchain are you using right I would have a much more user Centric approach of like how am I going to actually get this virtual currency right like you have games in Korea like what com to us is doing like what we made is doing none of these guys are giving you the ability to actually buy the token with one or dollars or local currency today right the user experience is go buy it on an exchange send it to a wallet and then have it recognized in game right so stuff like that like so how do you think about some of these problems from from a more kind of like user Centric first principles kind of way I mean so a lot of these problems right now are a big reason why web 3 gaming is not really picked up um I was talking to a friend earlier today who's building a referral system for for web three dabs in game specifically and he was telling me that hey yeah we can send people referrals to these games but then it's going to be like connect wallet connect to decks a million things and I you've lost me at this point like I don't care so you're sending all these referrals that nobody's actually clicking or doing anything with um that's the problem right now in a lot of web 3 gaming and that that some of the infrastructure like what we're trying to build is really trying to solve um we want to make these experiences as simple as possible and we want to abstract away the blockchain completely the blockchain is great it's fantastic in terms of what you can do the types of open economies you can build on top of it but there's no reason we need to make a you know you know plaster that every single place on the game the best type of experience as we like to say for a blockchain game is when the user doesn't even realize it's a blockchain game you know few years from now we hope that uh nobody's talking about blockchain games anymore it's just games and the blockchain itself it's like hey what what technology are you building your game with are you building it on Unity are you building it on real are you building it with blockchain like these kinds of things it it fits into something like that where it's just another standard thing so so um right now it's quite challenging like I mean you just talked about some of the problems you know how how complicated a process you need to create and it result it's it's partially a result of just how many hats you need to wear as a game developer like you need to be a game developer you need to be able to raise funds you need to be able to you need to be a lawyer uh what like a money transmitter lawyer a Securities lawyer an international trade lawyer like there's so many things you need to do here um and in solving all those problems you create this janky experience that nobody really wants to really knows how to use yeah so let's let's spend the last kind of seven minutes here going one layer deeper uh behind some of the infrastructure you're building so one term that's come up a lot in the last uh few months is account abstraction give us a one1 on what what the hell that means and what the Practical difference is for users so for the longest time in the space uh we have I'm going to start with this so a very long time in the space we've kind of viewed accounts and wallets as the same thing and when we think of accounts everyone thinks of a metamask or you know an EA as we call it the problem here is that we sort of just stopped iterating on that once metamask came out we never really considered what else can we do how else can we make this better account abstraction is the latest technology in the space which you know as the name applies is abstracting away a lot of the complexities when you want to create an account when you want to um do transactions so with account abstraction it's this idea that uh tradition like people coming from a very non web3 background a very traditional background can just jump into web 3 experiences quite easily now our our so this is this is just a new standard um on ethereum ERC 4337 and it's the standard exists there's a bunch of cool features of it but what we're doing at holiday is we're really taking the standard and building a very game specific smart account solution so at holiday what we're doing with the holiday smart accounts is saying okay you're a player coming into the game you shouldn't even need to know there's a blockchain or anything happening just start you come into the game you put in an email or like Gmail password or something to log in and with that poof everything is done you can log in with socials in fact one of the latest things we're working on right now that we're about to release soon is uh login and sign transactions with just face ID like you don't even need to have any form of identification there or any form of login it's just you know I want to create an account let me pull up my phone scan my face done if I want to sign a transaction it scans my face and I'm done that's it that's how seamless it is social login is one of those core components another core component of what we're building is gasless experiences um every time you play a game right now um and you want to do anything onchain you have to go deal with gas and it could be as simple as I just want to do the most simple onchain transaction the most simple onchain action but I'm going to have to go let's say it's a game on polygon it's probably going to take a cent to do it um but but to go get that 1 cent worth of madic token I'm going to have to go onramp into crypto go use a de figure out how to do all this and then I can pay that transaction instead of that what if we could just make the experience gasless most of the times these days the developer is more than happy to pay that one cent on behalf of the user if you can save them 10 minutes of trouble that's what that's what Gast experiences are just giving the developer that ability and saving their the time for the user and making them making sure that they don't just leave the app which is the worst thing that can happen for the developer last thing here that we're doing is things like session Keys um automatic transaction signing so is this especially good for mobile games where on a mobile game every time you want to play a a web 3 game and sign anything you have to go switch to the metamask app sign it and then go back and the whole experience is a back and forth and back and forth and back and forth and it's awful what we're doing with session Keys is you just click sign transaction once and for the next 30 minutes or hour as the user is playing games every transaction transaction just Auto signs so you don't have to do anything further from there everything's automatic this is one side of what we're doing just making the experience seamless for players on the other hand we're trying to think about what if we could redefine accounts as a whole you know as I was saying earlier we've been locked into this old thinking of what a wallet should be but you know accounts in web 3 are very similar to browsers in web 2 and we've evolved significantly over the years of what a browser should be what can an account be what if on an account we could do more than just store trade store send and receive assets what if we could delegate access to assets to people what if we could build organizations and guilds and companies and groups of people who can share assets and have different sets of Rights over certain forms of assets um what if you can do things like in gaming specifically things like subscriptions things like battle passes um things like trials things like rentals one thing I hear consistently um when we're talking to a bunch of games is that every time they want to add a new feature on in their game so say something as simple as a rental protocol it takes months to go build that um you have to code the smart contracts you have to get it audited and it's a massive massive pain what we want to do with our account infrastructure is it's just a flip of a switch we're trying to basically upgrade wallets to account like smart accounts in the same way that Bitcoin in a way was upgraded to ethereum it's a generalized computer we want to make generalized accounts which developers can use to do whatever they need they can uh within certain bounds within those certain rules make whatever form of user experience that they need to so that's that's what we're building at Halliday that's what we're trying to solve for game developers can you elaborate a bit on how the recovery process works for if you if you lose your password and all yeah so it depends if it's a social login um social recovery is quite easy it's built on like a MPC um so you know if you let's say uh you you lost your Gmail password um I mean you can just go ahead and Gmail and reset that um but with uh that that's one of the things that that's especially cool about account extraction is that signatures can be abstracted it doesn't need to be the traditional ecdsa signatures that are required for metamask or required for traditional wallets we can have all these new forms of social signatures like what we're talking about like pass Keys here so social recovery is just a very easy problem to solve and you don't need to worry your user doesn't need to worry anymore about like Oh shoot what if I lose my seed phrase all my assets are gone got it cool well we have two minutes left I guess we'll open it up for any questions before before we wrap up here in the absence of any questions I'll I'll leave you with a question which is what do you think is the the most important part of the web 3 or open economy infrastructure stack that you guys aren't tackling but which is such a core problem statement for the user that until it's solved we're not going anywhere in this space ah I like to think we are tackling all the fun ones um I think I wouldn't say I I won't say something about the infrastructure stack necessarily but what I will say is one of the core things that isn't being tackled right now the questions is um how are we going to attract a lot of the traditional game players and what kind of experiences are they looking for like there's a very Grand Vision of what we're trying to build within in web 3 gaming like we are all very excited about building these Virtual Worlds digital civilization um and the types of games we were talking about earlier like Nexon like E online these types of games where it's MTH that's like MMO type experiences but how are we going to build that first one and where is that first game where's that first experience that people get really excited by where is that going to come from and what's needed to build that I think there's a lot of people that are thinking about this there's a lot of people experimenting with different types of games um but what's that going to be I don't have an answer for just yet yet cool well thanks for the time um how can people find you after yeah check us out on holiday. XYZ we're at Halliday HQ on Twitter um definitely reach out if there is um anything we can help with if you're a game developer if you just like to chat about developing games in web 3 or web 3 infrastructure um always love meeting uh game developers or others in the space great and if you want to reach out to me I'm Galaxy rtk on Twitter thanks guys thank you once again ladies and Gentlemen please give a big round of applause for two gentlemen to um