Fireside Chat with Robbie Ferguson, Immutable, and Kartik Talwar, ETHGlobal I Pragma Sydney 2024

[Music] all right for our next interview I want to bring on Robbie to talk about the future of onchain gaming so please join me in welcoming Robbie on stage so thank you for joining us you're also another Australian native here and uh we want to kind of cover everything that's happening in in crypto in this region so my first kind of question to you is just tell us about how IM mutable got started and you've kind of had a journey of trying a few things and uh kind of getting to where you are now we would love to kind of set the stage by letting everybody else now too yeah awesome thanks so much for having me uh so I'm Robbie I'm the co-founder of immutable uh we are the leading web 3 gaming platform globally we have 330 games building on us we've raised uh close to half a billion by now from TC 10cent and other funds uh we obviously work with the foundation which creates the IMX token which is around the 35th largest token in the world today and our vision is very simple we think there are going to be more users onboarded by games in the next two years than every other application Live on blockchain combined and the utility of those use cases are going to be some of the clearest uh and some of the most that are uniquely enabled by blockchain technology um so how we got started uh I've been in Bitcoin since 2014 uh my brother got into it in San Francisco uh we thought it was kind of interesting but honestly we also thought it was kind of silly we didn't really see the major value when ethereum came out we became obsessed and that was because you could write contracts you could actually play and interact with applications and I remember did anyone here raise your hand if Ed ether rooll back in the day a few hands um basically it was a smart contract gambling game where you would roll a die and it would probabilistically return to your reward based on the outcome of that dice very very simple game uh but there are slot machines in Australia where between to3 billion is spent by the government annually on heuristically verifying that these machines are paying out what they say they're paying out 88 to 92 C that they have the sufficient reserves and all of this was rendered redundant through a smart contract version of this that was 200 lines long and so it was pretty obvious that this would become the financial backend to everything and then the application did something that the government could never do which is they took the profit streams or the revenues of this application and they gave it to every user joining the application aka the first Co-op for gambling and I became obsessed with this idea of hey you can actually have a brand new form of capitalism using the same incentives but using a much more effective distribution mechanism which is bootstrapping by giving pieces of the network to every one of your first users and so uh we built trading Bots for a few years uh and uh in 2017 we were building I think it was called the distributed autonomous bank or dab effectively a a compound uh competitive compound it was lending protocol we're about to launch it when the first ever nft came out which was a crypt Punk and we saw these and we said this will be the first breakout application when you apply it to gaming um and back then it was about 80 billion now $150 billion that is spent on in-game items every year so this is not the ability to play Roblox or Call of Duty this is literally the Skins inside of fortnite I feel like I'm speaking to an audience that will get this but uh that market has grown 10% year on-ear and gaming is now bigger than music movies and TV combined and when a gamer buys a fortnite skin or where they buy a coining Candy Crush they get zero rights they get a line in a database even when some level of gray Marketplace is enabled like if we have any Counter-Strike GO fans in the room uh the 15 billion dollars traded every year of csgo skins is completely at the impunity at the back and call of what steam or valve decides to change the rules every year um and so we thought there was a much better way we started by building the first ever onchain game called etherbots you can play around of it today it'll cost you hundreds of dollars in gas fees I don't recommend it we sort of with that the the you know break point of ethereum scaling back in 20178 and we quickly realized we had to build a platform that made it simple for everyone else to um and so immutable today does a bunch of things but really it comes down to how do you make it incredibly easy to build a real money economy and a web 3 game and how do we make it incredibly easy for people to play a web 3 game uh we have obviously mutable ckvm IM mutable X we have our wallet we have our Global AUD book sdks there's a whole ton of stuff that that kind of goes into that that's awesome maybe one thing I'd also be curious about is uh what's that same timeline look like for a game te publisher a studio how kind of have they evolved their thinking from 5 years ago where they thought everything is a scam in crypto and we don't want to touch it to you now working with some of the biggest ones and uh what was kind of that moment for them yeah there interesting it was kind of there was an it was definitely yeah there was an idyllic period before anyone had heard of nfts where I remember uh Gods onchain which was our second game uh went to the top of um the the gaming subreddit of all time and uh this was cuz we we took a sort of um we supported some uh Blitz drong during the moment of controversy if people recall that uh due to you know just supporting gamer rights and the reaction towards digital ownership was incredibly positive you know people were saying like how cool is this it's an alternative to you know the exploitive current model and then of course The Branding issue with nfts came I think we've matured a lot and how studios are thinking about it now i' split into West versus East so Asia is definitely fullon web 3 gaming you have in South Korea pretty much every one of the largest gaming companies of the world uh having a very active strategy where they're doing nine figure budgets to to create web 3 games you have Crafton creating migalo which is a Roblox competitor with a nine figure budget you have Nexon creating a web 3 game uh you have a huge bunch of Indian midsize Studios um in China the number one outsourced game development today where they're trying to distribute it Beyond China are web through games um because it's you can't deploy it locally but you can to an international audience so it's sort of taken over I think very virulently and part of that is the reaction towards digital ownership is very positive in Asia and they're used to paying for things in games there's no none of that branding issue in the west it's definitely um taken off but often it's at the sea level of these games companies and they have to get the game studos on board and so it's classic Innovative dilemma we see the most active successes in the next two years are going to be midsize Studios with 10 million to $200 million and funding who are going all in on leveraging web 3 so they can take down huge incumbents games like alian uh which is also Sydney based uh with you know nine vigers in funding uh games like space Nation uh games uh where people are leveraging the assets and distribution of web 3 to be more successful um that being said you know we engage with we've mapped around 40 AAA Studios I guess you could call them 39 of them are open to web 3 21 of them have a active projects or initiatives um so the the reaction is quite positive really it just comes down to what we call like the Farmville moment if you look at the history of gaming there's been three major shifts in distribution you had the shift to social gaming you had the shift to Mobile gaming and the shift to free-to-play gaming which was a lot of a horizontal that underpinned all of that each of those distributions only became popular when someone created a hit game that showed how everyone else could clone it on Facebook when you had the shift to the social graph leverage gaming Farmville was the first game where everyone figured out oh this is exactly how you can encourage your friends to join the game by making you know Rewards or poking depending on whether your friend helped you farm a cow or something I don't know I'm butchering terms here uh but as soon as that came out people cloned hundreds of copies and it became very easy to build a hit game with this model we still haven't had that moment for web 3 because the only thing that came close ended up being an unsustainable economy what we're really focusing on is how do we have this boilerplate web 3 game with real ownership where everyone can easily clone the underlying structure and create a successful game uh and eventually there'll be a point in our thesis where Gamers will demand ownership and they won't play things that don't provide it to them and that's how you'll you'll be able to get the entire industry on board that's actually I mean thank you for for that amazing answer I think that's like a super comprehensive view of how that's evolved and kind of where we are my kind of obvious question is um we kind of see different versions of the pce for like why you should have a web 3 game or why should a game have web 3 elements uh what is kind of your answer to that question like what exactly is it that you are compromising on or not compromising on if something is more tied to a digital asset so in my view people always talk about aew morphic versus skew morphic you know onchain native games I think it's simpler than that it just comes down to do people want to play it and is the value day experience through web 3 sign significantly more and right now I think the clearest use case is people are spending $150 billion on in-game items that they can never sell again and we have an opportunity to turn that into open economies where they can sell them later on and you can have emergent thirdparty Financial infrastructure institutions Goldman Sachs trading desks trading futures for fortnite skins in five or 10 years this is the most obvious application because we have this huge spot Market where people can't sell and in every example where they've had some gray Market some allowance to have tradability people go crazy there's $15 billion traded if Counter-Strike goost skins every year in Magic the Gathering there's an estimated secondary market cap in the billions of dollars of cards but every year they have to monetize by creating $ 30 to $50 million worth of new cards and deprecating the value of old cards in order to make them more attractive there's a much better business model there it's where you take fees every time the economy trades and suddenly the incentive of the developer is aligned with the incentive of the players which is to grow the economy over the time grow utility and that was what I I guess at its core what excited me is the ability to align incentives between the issuer of assets and between the uh the buyer which has always been intention between you know any primary controlled issuance AKA Fiat uh asset in the history of of the world and there's certainly more complex things really it comes down to games ceed or die based on acquisition retention and monetization how much does it cost to get users into your game how much will they stick around how much do they spent and we think we can improve all of these stats drastically while making a much better incentive alignment you know your acquisition costs plummet if you can get a piece of the game by signing up so that's really share to earn that's the advantage of tokens and UA uh driven by those token balances which we've seen emerge over the last year retention players stick around far longer we found 2 to 3x longer when they have assets involved in the underlying game because they again have skin in the game and third which is monetization the question I always ask is how much would you spend on a house if you could never sell that house you would spend something you would spend some you know future discounted cash flow of like not paying rent but you would not pay the millions of dollars uh certainly that Sydney has seen real estate prices climb to uh in recent years uh and so I think fundamentally comes down to those three from that you could argue that onchain gaming is going to be really exciting that hey we just want real money economies and and the logic itself I personally think full logic of complicated games onchain does not make sense based on either scaling requirements or decentralization requirements right now but obviously that could change maybe with like one small exception of uh anything that kind of requires Randomness uh where you know that it can't be biased so any Lottery type or or gambling type behaviors I'd rather take the onchain version than an offchain um but that's totally fair so uh jumping kind of back to immutable there's a lot of things that you've been doing the last few months and there's been a lot of already cool announcements uh and I want to kind to focus on each of those uh and just going to have you share what what have been some of the cool things so what I want to start off with is understanding what is a mutable passport and what kind of LED you to to launch that uh so a mutable passport is our wallet it is designed to onboard the next billion players a lot of people say that but I think we've really got a user experience that's finally getting to the point where you don't have 99.99% of people quit if if you try and acquire them from a a traditional uh acquisition Source um and basically it's a uh fully self- custodial wallet that you can sign in with email or with Google or with iOS and under the hood the architecture is a smart contract bullet that uses a dual multisig where we act as the co- signatry the other key Innovation is most easy to use wallets either compromise on custody which we never want to do that's one of the fundamental principles that we built the organization with you know why we built from ethereum from day one is decentralization and security mattered a lot to us there's no point in trying to build a brand new trillion dollar asset class if at the end of the day it's still owned by databases and servers that can rug you or or that can have security breaches um so that that was incredibly important to us but the second thing is it has to be extremely usable for games and Gamers if you deposit 10 bucks you should be able to use that 10 bucks on every single game no matter you know what wallet or or or what game you're playing on and most custodial approaches actually fragment your liquidity per deposit per game which creates a terrible user experience imagine trying to pay IAP inside of uh you know an app you're downloaded candid crush and every single time you want to pay you have to re-register your credit card redeposit funds and and sign up your consumer conversion is going to plummet so those are the kind of two major Innovations um we've actually had uh I believe a quarter of a million signups in the last week um on passport a lot driven by uh alium and by cot um and I think we're nearly at a million wallets and we were only at uh 400,000 uh six weeks ago so it's been sort of a big ramp yeah I'm not a scientist but I think that's good it's good ramp yeah um how kind of do you think about I think I don't disagree with anything you said but the thing I'm kind of still interested in asking is how do you think about the the time it takes for you to now maintain a separate service that may or may not be core to the chain that you're building and and does that fit within the the engineering scope and and the product scope of things or do you think this is like a you had to do it because nobody else was or you think that is actually the only way you can do this great question we actually we spend a lot of time thinking about where do we want to play in the stack because I think this is the least thought about people generally optimize the cynical version would be to maximize for how much you can raise from VCS and how much your token is going to be worth you know the the more generous version is uh a lot of people want to build networks that other people can use and it's unclear where value is going to acre in the long term you know where we want to play is we think there are very few people thinking about how can you build uh successfully in one spot without having to worry about a million different things and also how do you create a great developer experience and a great user experience um ultimately we don't want to build blockchain scaling technology that requires 300 phds it's basically a company all in itself that's why we partner with with people like polygon uh for their you know their zkv M Tech what we want to build is everything required to create that good developer or or end user experience and thriving liquidity um the wallet for us there was no good solution in Market but also vertical integration allows us to do things that you can't do if you just own one piece of the stack I'll give you a good example obviously cross roll up liquidity and a multi rollup future is incredibly important even a mutable zkm will struggle to support more than three to five hit games the future has to be multi rollup and either each of those rollups can be islands where user funds are fragmented where games make less money where users get poorer prices and we're basically just building you know a a whole bunch of l2s or l3s or it can feel like unified state where you can trade an asset on one chain or roll up and you can buy it on another and what passport allows us to do is by having us be the primary user experience we can do things like under the hood as soon as a user bids on an immutable order on another rollup supported by immutable Sim sort of simultaneously and atomically lockdown bits on that asset securely Bridge funds over and and transact it so those things are very difficult to accomplish in one transaction or one user experience without vertical integration um same thing goes for how we think about the rest of the stack really no that makes a lot of sense um I had a followup but I think uh that's just like know a personal curiosity so I'll refrain from asking that on stage um let's talk about kind of the polygon side of things so you mentioned that you kind of are transition to the ZK VM um what made you kind of do that transition and and what does that actually enable now so uh we've always thought that ZK is the future of scaling uh the only ZK technology that was available when we made that bet was uh starware and I mean they're fantastic uh Engineers I think they have some of the best ZK Tech around um certainly was the first in production But ultimately that was app specific it didn't have Smart contracts if you wanted to Dragon an L1 contract from ethereum you couldn't and that was incredibly important for us from a tech perspective and the other reason was simply commercial uh 15 months ago uh gaming was really split into 40% of market share was it polygon 40% with with a mutable and we thought it was incredibly silly because we're both at different layers of the stack why don't we unify forces uh why don't we work together and why don't we build with their Tech uh at the scaling layer and since that partnership I mean you know our win rate is now approaching 80% for the last six months we've gone from a 100 games at the start of last year to 340 today um and and a lot of those in the last six months so I I think just from a commercial perspective it's solved a lot of the Dilemma for games Al just to check these are all already default polygon zvm games these are ones we won together joint okay yeah and I I I think that solved you know games we heard consistently you know we have no idea where we want to build we hear XYZ and we thought why don't we just create a default platform where it's very easy if a web through game developer wants to build they know to build on on this divide stock amazing um is it is it a good way to think about these games now behaving like app specific chains cuz if I understand the aggregation layer effectively every game will be its own Universe um does that simplify things or does that complicate things what kind of the nuances of of this world yeah I I think every game probably not necessary I think big games yes and even gaming platforms and we a lot of gaming platforms built on IM mutable they'll want their own chain they'll want their own native asset Etc um and so you know I expect there to be 5 to 10 probably by the end of the year over time over the next 3 years probably closer to the 200 Mark as you get more and more hit games um and each of them will likely want their own but I still think there'll be many hubs of many games and also big default chains as well um so you know a typical pattern I would expect is a game Builds on say a default chain like commutable zvm they get to 10 million users they're like we really need our own space right now where we're sort of crowded and and they decide to upgrade all oh interesting so they're not multiple ZK EVMS on immutable they this will be a full-on spin out but on the aggregation layer yeah I would still say it's on the mutable platform I I see which implies kind of your contract and and kind of the universe liquidity Etc passport yeah so our vision is you should be able to trade any asset on any immutable supported roll up in any denomination of currency in any marketplace with the global a book all of that should be atomically matchable and I think that's resolving one of the biggest ailles heels of not just blockchain but nft liquidity more broadly today at the end of the day what we're trying to build is like nfts as an asset class have been horrendously misn by you know some of the the brands they've been associated with by a lot of the the you know things we've seen over the last four years all they are is taking the fundamental value proposition of digital ownership the same thing Bitcoin pioneered and allowing it to apply to any form of unique value and there is 100 times more unique value in the world than non-unique value there's 00 trillion worth of homes it's the largest asset class in the world and and we think our thesis in the long run digital ownership won't be the driver but Superior liquidity and Superior Financial utility will be and you're going to get both of those things if assets live on chain because fees get compressed to zero because Finance is open in modular and you're going to get you know people vampire attacking people until you know everyone owns the majority of the networks today that are owned by you know Black Rock Etc that'll be a pretty pretty interesting World long it might be sooner than we think um Switching gears to kind of the company building side what would you say has been some kind of the some of the biggest learnings you've had obviously there's a there's a very different I mean you can interpret this into multiple ways you've been trying to do this thing for a handful of years there's a constant battle with kind of convincing people to kind of about this as as a category to just scaling up the business uh what would you say has been uh the biggest Learning lesson there uh there are so many lessons that we have learned uh building a company to you know we've got 260 fulltime we've got another 100 Contracting to to build the games so you know one of the more sizable teams we're not coinbase um but you know we're we're sort of more than most teams um I think Talent density is incredibly important just bringing on board the best people we're in a privileged position where we can sort of you know get the best people in Australia which is which is pretty awesome um and I think where you know if you want to work in web 3 where we're one of the more exciting places um I would say controversially we often try and hire web 2 talent and who is Keen about web 3 and and bring them in that's not for every role um a lot of engineering roles they need to have sort ofic domain expertise but the reality is there's just not enough talent in web 3 for us to you know always be able to get the people or the scale or the talent we want um and so that approach has actually worked quite effectively um the other thing is just building a web 3 company in some ways is very different it's a lot faster paced the strategy I think is quite complex but in some ways it's very similar to building a successful tech company and so all the same principles apply um if anyone here is building a business number one resource I'd recommend is uh the great CEO within which is written by Matt moery which is actually Brian Armstrong's uh executive coach um it's a fantastic super pragmatic read about building a company and last but not least uh we got seven more months of this year what can we look forward to from from remal this year well uh a lot of games so even in the next eight weeks we have five of the blockchain's biggest games launching um the reality is belly of these any of these have launched still to date so I mean even as we see some of them come out in beta uh much earlier than we expected we're we're seeing sort of hundreds of thousands of users on boarded per week um so expect you know M Pixelmon tree metal core Guild of Guardians uh shardbound uh space nature and there's an incredible amount of content um we have I think 61 games that were known tracking well funded releasing the next six months um which is pretty much more than it's deployed on every blockchain in the world today combined um so we're we're pretty excited uh we want to make sure they're as successful as possible the token launchers are as successful as possible um and then a host of product stuff where you know we're just trying to crank at speed and iterate the consumer products to be as frictional list as possible that sounds like a jam-pack rest of the year so congratulations and hopefully we all get to try some of these games on train thank you Robbie and thanks everybody