Bits & Blocks: The Fusion of Gaming and Blockchain | KBW2023

time I'm gonna hand over my microphone to Joseph J hello hello thank you for joining us um jents likewise thanks for coming thanks having us um I reckon we just get cracking jump straight into it um so we had a brief introduction already but I would love to make another round um let you guys have the stage show your projects how about we start with David well can you guys here okay cool so happy to be here David benom CEO co-founder of ready games uh we're doing a layer three that enables mostly web2 game studios to enter web 3 seamlessly uh from soup jut so we'll talk more about it but excited to talk about this topic and uh be on the panel uh I'm Jamie Thompson CEO of Vulcan forg um we're one of the leading blockchain game studios been around for about five years now um grown from a staff of three people to over 160 um you might notice from the ticker py are as opposed to the company fulcon Forge we got about 12 games from Mobile to desktop and we're doing nothing thing for blockchain gaming there you go all right then well um obviously a lot has changed in the space over the years um and I'd like us to start by hearing a bit about what your initial motivations were uh what inspired you to join the space and start integrating blockchain technology and then whether or not those motivations have changed at all like how has the the feis evolved over time should I go first sure well so our background at ready games uh we been building like gaming technology for game developers for at least 5 years now I'd say three years ago we had an orts platform it was running cach gaming on mobile devices and we were interested in expanding our prizing to include things like nfts and so as we got into looking into that we found the technical hurdles to actually get this done we're incredibly High um and we're pretty good technologists like in our company and when we saw that and began to realize what was needed which is really all the live operations to run a game on chain we started building it at which point it became clear that is something a lot of other people would want um and so we then productized it basically we have I think uh stayed pretty close to our vision which was something like a play Fab or game Sparks if you guys in the gaming industry know what I'm talking about for web 3 gaming but then beyond that creating an ecosystem around all the Publishers so our Insight was really to not be publisher but to serve the Publishers with all the tooling they need so since then we've went live I guess 6 months ago we signed uh 16 major studios in six months that represent 2,000 games and three 250 million monthly active players in their web two titles those Studios range from hyper casual Mobile on Android and iOS to hardcore on PC to browser based games HTML 5 so it's a whole range of things and we're about to start launching all of this into a huge huge bundle we think it translates into about 10 million monthly active paying wallets in the first 3 to 6 months from launch so it'll be the largest cohort of web 3 gaming participants in the world and uh we're really excited to then get the kpis and data which guess I guess your question which is how might things change I think the answer is when we start getting all this data across casual Games Hardcore games PC games games on the Apple App Store the Google Play Store such an incredible diversity of games those kpis will be I think groundbreaking for the industry because they're going to give meaningful scaled kpis on multiple dimensions of CAC LTV like all these missing statistics how does web 3 give lift we're going to try to share that as much as possible with the world and hopefully really create the case that really all games need to begin to migrate to web 3 so that's that's kind of where we're at we're really trying to bring this forward and I think in the next two weeks we'll settle on a partner like an L1 partner for this it's so much volume that we're figuring out who to work with at which point we'll announce and all the games will start going yeah talking about l1s I know you guys recently spun up alysium um and transitioning there so how has the journey been for you yeah um I mean rather than talking about our company and where we are I'd rather talk about your question there I think it's a very good question where we are now as opposed to where we are before in terms of blockchain gaming and um the metaverse hype and it's um it's a good question actually because when we started we were gaming studio first and we thought you know you've got this enormous industry of crypto and lots of money in this space you've got gaming which is like a billion dollar industry and billions of players if you combine the two you're going to create this trillion dollar company and everything's going to come to come to life in Eureka and actually as the journeys progressed we found the opposite is true a lot of Gamers mainstream Gamers don't really want to move into crypto and the crypto sort of gaming um users are sort of don't care so much about the gaming experience and more sort of one to earn and that was a real sort of hard thing for us because we also thought it was going to be Eureka moment it didn't happen um so as we moved along we kind of realized that these two demographics didn't merge as well as we thought they would and this new demographic has come out a lot more and um I think that's what we should start targeting I know it's very easy for us to always say look we just need better games and we have better games and the mainstream users are going to come over and use blockchain um but we have to start seeing in my opinion anyway is game is a complete separate industry you've got the game is a if you're going to make a really Dynamite game then you're going to get more money probably from the sales in the gaming Market there's a reason Ubisoft and and all the other big companies haven't made migrated to blockchain yet because they're making their billions in traditional gaming I think we need to go the other way and actually embrace the fact we're different and we are using blockchain and we are using nfts trans um transactions um monetary economic systems within it and base the virtual world and the game around what blockchain offers as opposed to try and poach gaming users into there so that's what I would say we've done a u-turn on um rather than trying to sort of match and compete with the sort of mainstream gaming um industry we've actually sort of forging out your own your own path your own demographic and um it's a very different demographic and and in doing so you know what people like and what they work and and more money sort of flows into into the G products to go a little bit deeper on that um and it sounds like you're both taking different approaches um one maybe more you could title it web 2.5 and a more sort of onchain focus I'm curious and David will start with you um for the web 2.5 approach where does that value ad come from the blockchain itself I know we've talked about uh increasing revenues or decreasing CAC for example is that kind of the clear Focus there yeah so I you know the Publishers we deal with um have made a commitment to enter web 3 like independent of us we don't have angelize web 3 we know the minute we're evangelizing web 3 to a publisher we probably are ahead of ourselves here so these Publishers have independently built very successful multi-million dollar gaming businesses in web 2 and they're looking for an edge and they're looking for an edge in a business that has very thin margins um where actually a lot of the user acquisition cost which relates to the CAC I mean it is the CAC uh is constrained by things like idfa and other changes in the way we can track ads and Etc so in this extremely thin margin competitive business if web 3 can provide an edge then it's really interesting and so I think from their point of view they're looking at the edges coming from basically a couple of different places like one place is that the value of the digital assets they sell in the game the the the swords the Skins Etc increases because of the tradability collectability uh Rarity and the secondary like Market potential like that's a lot of additional value into an asset so one hypothesis is that you know that asset maybe it still cost $2 for that asset but in web 3 you're just going to get more conversion to buy that asset because there's so much more value in it forget even raising the price well if your conversion goes up H Happy Days Are Here like if you went from a 4% conversion to a 7% conversion that's an extraordinary increase in conversion second thesis is around retention oh well can I build a loyalty program like we have a publisher mini wos that's entering in with us 15 or 10 to 15 million monthly active players on their browser-based PC games they want to create a loyalty system backed by nfts where basically players in their games would be rewarded for continuing to play well that gets to your retention number hey if I can move retention by you know relative 10 15% that Cascade significantly down the third scenario is in fact the user acquisition scenario we are all paying a tremendous amount of money to Google and Facebook to drive app installs and game installs and those companies are worth trillions of dollars and the reason why in part is because they take way too much money in the funnel and so if in the context of web 3 there's a new way to Target identify qualified game players from their onchain data and that meaningfully reduces the acquisition cost well now I have put three things together through web 3 more value in my asset higher retention for my existing players and possibly lower acquisition cost you put that together and that could add up to a 30 40 50% increase in gross revenues or your unit economics I mean we don't really know but that's the question could it so these Publishers you're working with take the approach of saying listen we have a huge portfolio of games we're already making millions of dollars a year why don't we take one of our middle titles and and just start AB testing it in web 3 let's ask these question questions we'll take this middle title not our super hit not one that's super not doing well one that's sort of in the middle let's just take it let's start AB testing it and let's get the data these are all totally datadriven companies there's no modern-day publisher that makes money that isn't a data company at the heart of it so this is what they want to do and they've had a huge frustration with web 3 that the engineering implementation costs so much capital and they're not even tech companies they can't even really execute on it it's just too hard what an enormous waste of capital so if we could just to do this Capital non-intensively get the testing get the ab data then we can start turning the Taps and if the kpi show us in fact some meaningful lift then we're all in and we can start moving the rest of the game so that's their strategy it's extremely practical it's not blockchain IDE ideological it's business ideology make more money give me an edge and we like that conversation because we're business people too and that works out pretty well and we will see what we will see I'm excited in the next I'd say 90 days start giving out this data publicly uh and hopefully it'll be awesome because then it'll maybe create a stampede of web 2 companies saying this is profitable I want to do this too which would be great for the whole industry um which is what we need to do here make more money right make more Mone um so whereas David is tackling the sort of the question of like how can we incrementally increase margins I think on the other side this argument of well let's go fully onchain approach or a more onchain agnostic sort of approach and get a small cohort of players that are deeply monetize and spend a lot in the game um from your perspective I don't know if you have any sort of data or perspective on what does that look like for a game to be sustainable how many players roughly do there need to be that are you know web 3 native and then how much are they spending on average yeah I'm not saying that's the ultimate goal is to have a smaller amount of users who are paying a lot of money I'm just saying that that's where the situation is now and I think there seems to be some sort of not panic but this focus on saying okay we need a billion users and that that that's what the blockchain gaming is all about um whereas I think you can find Value and it certainly is when in any sort of business when there's a Innovation or Evolution or there's some sort of new technology coming around there's always a small amount of user base everything's always very in infanty at the beginning before people start changing it I'm just saying I don't think we have to measure success in that way we don't have to measure success with users um or even monetary wise or there are so many sort of kpis you could use um for example ax axi Infinity you know their game was wasn't the best wasn't exactly Counter Strike um but they had you know millions of users um and they rewarded people who you know earned monthly salaries from it um is that a successful game I mean it certainly wasn't a fun game it certainly wasn't billions of people um it rewarded people so it's successful in the fact that like people could um um from developing countries could earn money and had the user account um I'm just saying we're in such Uncharted Territory it's it's it's too easy to say um we we just need fun games which can be tokenized um we're in a place where you could actually utilize I metaverse I would say is actually is not so much a game um with blockchain technology it's a virtual world um which has an economy within it I mean you've got a way to sort of pay people you've got a way to own assets you've got a you've got these different things that games didn't have and I don't know I think generally think there's a reason why these game Publishers haven't used um blockchain technology that much yet I don't think they're unaware of it and I think they have sampled and they have tried to use it I know Ubisoft added um a couple of nfts they got this enormous push back on it um and I'm trying to work out why that is and I generally think it's because they don't think they're going to make any more money doing it and we can say well look users can own their Assets in this Ubisoft game but yeah but that doesn't really mean much anyway because these nfts still depend on this centralized game existing like it doesn't matter if you own your s in Assassin's Creed on the Xbox if Assassin's Creed stops developing who can't use it but what the advantage of an nft really is is that it can be used anywhere because it's on a transparent Ledger it's on a blockchain where it can be pulled out the data can be used in multiple games I think that kind of interrup ability and the different kind of uh crossplatform uses of nfts is where we'll see blockchain gaming Focus instead of just saying okay well now if you could own that sword in the game it's going to make that game more valuable well not really I mean it would allow sort of transaction users more valuable more transparent and sort of more priced up more but still it's centralized depending on the actual game existing in itself even on Xbox existing so I think that's where we'll sort of uh spread a blockchain technology a more sort of interoperable global metadata Hub that can be used by anything in entertainment to switch gears a little bit David I know you like to throw around the numbers of the uh the partners that you're bringing on and the the the number of users that they have um and it's a significant number seeing as most chains these days are uh volume is limited let's say when you're picking your partner how much does scalability factor into the decision seeing as we have seen in the past spikes from other side meta mint for example um and where does scalability play into that decision it's like the table Stakes meaning the minimum requirement is that there's that trust that it can scale right if that trust isn't there that it can scale then it's almost like we're misleading our Publishers to work with that L1 because we want our Publishers to be successful and that implies obviously that a lot of players are going to come into their games and if we've picked a partner who can't scale then we've done a really big disservice to our publisher Partners who are kind of counting on us as the deao representative of this club we're turning into like a club here with buying power um and so we should leverage that to get the best possible deal for everybody in the club this is one of the benefits of being in an ecosystem right um but scalability is Central it gets to product quality the other piece that's pretty Central is the quality of the of the team on that side meaning how collaborative are they how responsive are they we have an excellent engineering team do they have an excellent engineering team can we kind of solve problems together quickly effectively if those things line up then then they're qualified I do think down the road there's a multi-chain situation So eventually the dependence on any one L1 will just receive for everybody because there are such uh you know incredible efforts being made to enable that interoperability we heard some of them today at the Keynotes Etc uh and those are meaningful and valid and uh but at the end of the day it is about product quality that's the most important piece and you can never really know right I mean you can know as much as you know in terms of scalability but it is a trust thing in the end because uh you can never really know the future and if some or more of these games really blow up yes you could have this kind of for I guess fortunate problem you know of that much demand yeah we'll see how it plays out in reality right yeah exactly and Jamie is someone who's building out that layer 1 infrastructure um what were some of the key considerations that you and your team sort of took on when you're bringing in developing these new games and you want to ideally scale them to millions of users um yeah well I guess the sort of the usual concerns ease of on boarding you know gas prices have to be low there has to be a way to have social logins um and such but I I'll tell you an interesting sort of story what we did we had a um I said we were working the gaming the mainstream market first and then we sort of they were successful enough they they brought enough income in and we moved into sort of blockchain games and one of our games Vulcan verse was um we were build it from scratch around the community um so therefore it was an MMO RPG um fantasy Greco Roman and it's obviously doing quite well now but at the beginning it was nothing and um we literally because you know when you launch into crypto or blockchain world people need to know what you're doing every second of the day because you know some people have invested they bought or they bought a token or they want to see what you're doing so you transparency is key so we can say listen guys give us a few years we're going to make this MMO and we'll come back to you we had to show them develop them every single day we were doing it and so V Converse was literally this big MMO RPG and the beginning we were showing them the worst kind of terrains we had wolves with their heads on the arms the centor with the you know the wrong way round or nothing worked but what was interesting was because they before we even made the game they own the nfts they own the assets because they own these assets we were playing with they didn't care they had this emotional attachment to to what we were making so even though their wolf was walking on one leg or or backwards because they own that one of a hundred wolves they they have this attachment to you a more forgiving nature you wouldn't have in mainstream gaming if there was a mistake or there was a bug they'd be absolutely all over you but because they knew they own the asset and they see the game developing they can still sell that one of 100 nfts to someone else and still earn so um regarding considerations yeah we do have to sort of think about the mainstream users coming in as social logins but again as I said I've done a bit of a u-turn on this as I've sort of worked in Industry more and start to think that no you know let's embrace the fact that this is blockchain technology if there's value users will find it if they find those values be made and they can they can make money or they'll enjoy this blockchain experience they will find the hurdles to overcome it and uh I was going to say that one of our mobile games V Vulcan Creed we in the midst of all this blockchain gaming we made this just just a mainstream mobile game it went ballistic in the mainstream but there was no integration for blockchain it proved exactly what we thought that these are two individual markets so yeah I mean in terms of what we're considering ease of onboarding low gas fast transactions all the usual sort of blockchain you know concerns um so you've both you're both looking at blockchain and integrating it within the games at various different uh degrees um and as the industry has evolved the ease of of blockchain adoption within these games has you know gotten easier with a number of different white label Solutions becoming available toolkits sdks um there's the the unity um Tex de that's come out um for example I'm curious as to what is available now that you wish you had a couple years ago um and what is still missing and you're looking forward to David I mean I'm just thinking about this like um I mean certainly what's available now is much more ease of the tooling to integrate with a blockchain what's available now is a lot more understanding of what what does and maybe doesn't work as easily like in terms of onchain transactions what we can all do um what's probably missing now which would be helpful is that true interoperability between l1s and l2s that's missing that would be useful uh it would be useful because it would kind of abstract it even further into just what it really ultimately is which is a decentralized Cloud Server I mean let's be real all we're doing here is creating decentralized cloud computing that's it uh but doing it in a decentralized way is really really hard so what's missing is just having that work once and for all that would be awesome uh and then I think there's going to be something with AI that will be very very powerful here because when you have a decentralized network there's a lot of autonomous decisions that have to be made in in continuously um having agents intelligent agents that can make those decisions backed by a smart contract is going to dramatically increase the value proposition in a decentralized network that that a centralized Network can never ever replicate so now you're getting into points of differentiation that have meaningful economic value for the whole world and so the idea that you could have legally enforceable smart contracts with a well-trained agent that's able to make decisions for me or you or a company or group of companies or a group of people and take those decisions with other agents in real time and conduct legally binding trans transactions whether they're economic or just other types of legal transactions wow like that is going to be extremely potent uh and we'll do a lot to reducing the complexity of enabling a lot of these marketplaces and things to occur where right now we have to kind of build it all and build all that logic ourselves it's it's very just to get to then like does this Market work this is a what I'm describing is a much more agile way to kind of engineer these questions so that is something that's missing and is just be beginning to be understood like like Ilia from near was talking about that today he's on track with that like that is correct like intelligent agents um with smart contracts is a sort of superpower that differentiates web 3 from really Web Two in a profound way um I I'll approach that question not from from the tech point of view because obviously I'm not the tech savvy person but also um David covered some great points there but I think the tech has actually not changed that much in terms of in blockchain for the last two years it's always been there what I think that wasn't there before and is now which is very important is the sentiment completely different um a few years ago oh only five six years ago crypto was still a scam blockchain was only Bitcoin everything was you know the worst things under the sun was being done by blockchain then a couple of years ago things shifted and people realized is there was more use cases for it there was more entertainment you had crypto kitties you had some very old sort of nft crypto punks all those kind of things sort of coming out and then thanks to ax Infinity blowing up the play to earn Market I don't personally like that term so much but that sort of brought the whole idea of blockchain Gaming onto into mainstream so I think what we have now and for those that are working in blockchain gaming we we have it I say easy we've got we've been given everything that's worked and everything that hasn't worked we've got a a mainstream out there who know blockchain in general most of the general population don't think it's all some big scam they understand the concept of crypto they understand the concept of blockchain they know that blockchain and gaming has worked they've heard of play to earn earning money in the game so we can look now and say look axi had a great idea here but this didn't work you know this wasn't sustainable and also it it brought the seeding of quality of games very low because the purpose of people going in there was simply to earn money and if that's the only reason you're going into a game then the developers don't need to sort of up their ante they don't need to keep the game um exciting so we have to start saying okay this worked there that was our kpi there we get users if you want users just to sort of farm money do another axi style if you want Gamers to come put put the level up so I think what we have now is an awareness we have a more uh more mature sympathy an understanding of of what blockchain technology is um and we've had sort of trial and errors of other companies that have gone through it and what doesn't work uh and so yeah I think those who are working in blockchain gaming now have the best chance to go for it and I still don't know if there is a future in blockchain gaming and and I'm talking from the CEO of one of the biggest blockchain gaming companies I don't personally know if this is going to be the next big thing I think AI certainly is I think there's a market for nfts and blockchain gaming but whether or not gaming Market will pivot to that permanently I don't know and I haven't seen an indication of that happening yet Fair points um I think to wrap things up I'd like to ask one last question we're at this stage in the market where a lot of the games that raised Capital over the past two to three years have built out their games and they're now ready to launch um Jamie I know you're fairly familiar with this that in that launch process the uh the ability to scale for user acquis um Can in some regards be hindered by web 3 whether that be due to the platform regulations or General on boarding frictions um I'd like you both to list a couple handful of key considerations that other builders should kind of keep top of mind when it comes to this stage of growth um David will kick off when you say Builders are you limiting the set of Builders to Pure Play startup web 3 game Publishers or like cuz there's a lot of different kinds of Builders are going to have very very different challenges so it's I heard your question is really focusing to one competitive set which is I've created a studio to build web 3 games I build web 3 games this is what I do that's one cohort but then there's others like the ones we deal with who are not that at all they'll have very different challenges than the one correct yeah I would to specify I would say anyone with not taking a web 3 first approach should probably go seek out one of you two to help honor and and help sort out but for those that are fully pure web three approach yeah so I I think one of the challenges and I it's really rough you know with the pure web 3 approach is that in in the gaming industry RIT large user acquisition is one of the most important business elements that make Publishers successful or fail and it's actually more than game quality the reality is if you think you're just going to build an amazing game and put it out there and they're all going to show up that rarely if ever happens and you can see kind of games that you could argue are kind of H somewhat they're fine do really really well and the reason H they're fine they do really really well is typically the publisher has an ingrained ability to Market extremely efficiently to an audience probably because I've issued other games and they have a huge list of players and they know how to reach them so what I'm getting at here is if web 3 games don't have a Monumental amount of marketing powder like you need boua dollars like this has to be treated at the level of like releasing a movie or something like that do you have a 20 million2 million marketing budget no okay well that's going to be a problem because the truth is that's probably what you need uh because yes your game may be frictional in terms of some of the stuff cuz it's pure web 3 maybe not in an App Store with all the convenience features of Apple and Google pay and blah blah blah blah blah so you've got a lot of friction in your funnel you're going to need a lot of marketing dollars to overcome that and so if you see a project that doesn't have a meaningful amount of allocation to marketing I think they can succeed but they're kind of have a hand tied behind their back it's unfortunate it's real it's kind of frustrating right you're like dude do I really need to spend so much money on ads like Frick it's so boring and so annoying and so irritating because you just want to build awesome products and design great stuff and just have that work but that's just not how it is unfortunately so I think for the new entrance coming in that are pure web three entrance they need like a partnership maybe they can find an alliance I mean maybe they can have an investor in there that's a bigger publisher that has a marketing lift that can help them there has to be some sophistication and there's agencies like in LA that do this you know that who like ca and others that will partner you with a bigger Studio I feel like there's got to be more fluidity on the marketing side it's it's a marketing challenge honestly as much as anything and I don't know if there's enough attention in web 3 there's a lot of kind of like purism in web 3 like we're just going to do this it's going to be awesome hold out the flag and it's like okay but in the gaming industry that's not going to get you very far and you need to have a really good marketing strategy actually it's going to always bow down to having a lot of money too so I guess my answer to your question is it's going to be tough without large marketing budgets and it's through no fault of the tech per se I just think it's the reality of gaming it's actually just how gaming works unfortunately you typically need a big partner with money to help you Jamie did you have anything add um yeah I agree with David that just because you make a good game doesn't mean it's going to snow bable and be incredibly popular I think there were other kpis um s to think about I I disagree with David on on on the idea that you need a uh a 20 million Market budget to sort of make something very popular I think in web 2 Gaming in the world of of gaming it's so Fierce and competitive then yes you might need that but I think because web through gaming itself is so Niche and so small I don't think that's that's the case now and I think go back to my my first answer to your first question if you're setting out into web 3 gaming Market blockchain gaming then just literally lay out your kpis clearly know what your who is your target audience are you trying to like just get people into Farm uh money keep it sustainable and say look we've got a billion users in which case you will get users people will come in anyone wants to make money they find a way to do it Dex and all these kind of places people know how to I know the times you're trying to funnel the way in and and find a way or or are you trying to find a good game and whatever I know the time's good thank you very much for your fanel how can people find you socials Vulcan forge.com Twitter fulcon Forge anything with Vulcan forged on and actually we're going to be on TV tomorrow to 300 million homes just to put it out there that's cool uh David bam you can find ready G G at ready. you guessed it gg.

gg that's all you need to know and go from there thank you Joe it's been a pleasure I'm Jack all socials thank you very much for attending enjoy the rest of the conference thank you all Jack have a good day thank you once again please a big round of applause for uh this