Transcript
Angie Lau: Art or music, university degrees or dating… Asia is showing us the way on the limitless potential of the digital world. So, what are the hottest projects that could disrupt the way we live our lives in the years to come? And who are the people behind them? Welcome to Word on the Block, the series that takes a deeper dive into blockchain and all the emerging technologies that shape our world at the intersection of business, politics and economy. It’s what we cover right here on Forkast. I’m Forkast Editor-in-Chief Angie Lau.
Today, we’re in conversation with Brian Lu, founding partner of Infinity Ventures Crypto, based out of Asia, that’s looking across borders and investing in the next generation of startups that are redefining the internet around the globe. We want to know what the next bet is, and why it could very well be seeding a future we’ll soon find out about. Thanks for joining us, Brian.
Brian Lu: Thank you, Angie. Nice to see you again.
Lau: It’s great to see you. Ok, so, I’ve been hearing a lot about the fund and a lot of conversations, no doubt, you’ve been having with investors around the globe — but your investment thesis is really specific here. It’s GameFi — or at least that’s one of them. GameFi, in other words — combining the power of games and decentralized finance (DeFi). Why GameFi? Why this bet?
Lu: Well, our fund actually has three focuses. We have DeFi-fintech, GameFi and Web 3.0. But we’re a little bit more skewed towards GameFi because our first investment into the fund was Yield Guild Games (YGG), which kind of set the tone for the types of companies that were introduced to us, because of the massive success of YGG.
Lau: So, YGG. Tell everybody about YGG — why it was important in the chapter of NFTs and play to earn?
Lu: YGG is the first guild for the Web 3.0 community. It’s right now the largest guild in the world. It’s based out of the Philippines, but it has branches in all over Southeast Asia, LATAM (Latin America), Brazil, (South) Korea, Japan, India… And, basically, what YGG does is, it’s a guild that provides scholarships to a lot of the unbanked and underbanked people throughout Southeast Asia, which allows them then to earn anywhere between US$300 to even upwards of US$1000 right now in playing a game for maybe anywhere between 30 minutes to two hours.
Lau: Ok, and that’s tied to something that’s really captured a lot of people’s imaginations — and we’re talking about Axie Infinity here. Tell us, what is this scholarship? How does this actually work? For a lot of the audience who’re just learning about this now, bring them inside this universe that you’ve been hanging out in for a couple of years now.
Lu: For scholarships… Throughout Southeast Asia, there’s a population of about 655 million people. The median age is about 30, and, on top of that, their minimum wage is about US$300 (a month). So, when you get into games such as Axie Infinity, or when Axie was very popular, about — it’s still popular now, but — six to eight months ago, Axie would probably cost you US$1,500 just to be able to play the game, which is way out of reach for most of these scholars that we were reaching out to. But even though it costs US$1,500 to be involved to play it, in one month, you could possibly earn maybe US$300, maybe even US$600 to US$800 playing Axie, depending on how many battles you would win.
Lau: And so what kind of economy are we talking about here? Why is this of value, and why did this trigger almost a run on play-to-earn investments that we’ve been seeing in the VC (venture capital) space for the past couple of months?
Lu: This kind of triggered a whole new sector in gaming. Gaming is a multibillion-dollar industry. Crypto is a big industry where people are trying to figure out how to enter. Now, gaming was really, in my opinion, the intersection where the public could understand the use case for crypto, and with just normal people within Southeast Asia being able to earn or just support their monthly earnings with extra income just by playing a game, it kind of blew up into something that was actually tangible for people that didn’t understand crypto to say, ‘Hey, there’s actually a real use case for this.’
Lau: So what happens when you earn within the game? How does this relate back to the real world?
Lu: Yeah, now that’s what was difficult to do, probably last year, but it’s getting easier and easier this year. So, for example, last year, if you wanted to turn your in-game tokens into fiat, it would have to go from — for example, if it was Axie, it would go from the Ronin Wallet, then transferred into MetaMask, and then from MetaMask, you would have to transfer it to a local OTC (over-the-counter asset) or an exchange within that country, and then transfer it into fiat.
But nowadays, this year, there’s several companies out there trying to solve this issue. One of them, for example, is XLD. XLD is one of the portfolios of IVC, where they have a wallet, and that wallet enables them to use the in-game tokens such as (Axie Infinity’s) SLP (Smooth Love Potion) and use it in the real world, where they can pay their utility bills, where they can pay their groceries, straight from SLP right to that merchant.
Lau: So this is really getting granular, and I want to kind of break it out and get back to the 10,000-… 20,000-foot view here. Your fund, Infinity Ventures Crypto, has just closed something like US$70 million. You’re looking at GameFi, you’re looking at DeFi, you’re looking at Web 3.0. So, when you’re actually looking for the next generation of investment, what are you looking for? What kind of tags you that, ‘Wow, OK, this is a really interesting or promising game.’ What are the fundamental elements that actually make a successful play-to-earn game for you?
Lu: That’s a good question. Right now, most of the play-to-earn games might not be the most fun to play, but they’re able to earn, so you can play and earn a play-to-earn. But a lot of the games coming up in Q2, Q3, Q4… you have a lot of much more well-designed game loops that are coming out, where it will be making it a lot more fun for the user to play, and not just for the user to try and earn from it. So there’s a ton of them coming out. One of them that has just launched a mini game is looking to launch their game in March — that will be doing their IDO (initial decentralized exchange offering) at the end of this month — is called Crypto Unicorns by Laguna Games, a triple-A (major) studio out there. And this one has actually got a lot of people’s attention, because the art is done very nicely, the game loop is very thought out. It’s very complex. There are many aspects of the game. There’s racing, there’s player-versus-environment, player-versus-player, there’s breeding, there’s a land play to it. Everything is integrated, and it’s going to get the user and the player a lot more involved within the whole game.
And then there are also games out there that are a lot easier to play, such as Fancy Birds, which just released their birds to mint last week. They just got revealed yesterday, and this game is a lot simpler to play. These are hyper-casual games where you can probably only spend 5-10 minutes on the game a day, and you might be able to earn anywhere between US$5 to US$10 a day playing this. So, anybody can play these hyper-casual games, not just advanced gamers. You’re talking about grandparents — even your parents — that don’t really know how to play games can play these games.
Lau: And so the idea is to get people to play. It’s entertaining. They want to spend more time in it. They want to spend more money in it. As they earn, they’re spending, they’re trading. It’s an economy within the metaverse, I guess.
Is this the definition of the next evolution of gaming? Is that going to replace the kind of gaming that past generations have been used to, like, with the actual hardware and the in-game closed environment where it’s just playing? Where do you see the evolution of gaming going?
Lu: Now, that’s a good question. Back in the day, when games started moving onto the mobile phone, you had these Facebook games that anybody was able to play, which then turned into something called pay-to-play, which then kind of evolved into ‘freemium’ games, where people were able to play for free. But if you really wanted to get to the next level, or really wanted to become good at it, you’d have to pay for it. So they were called freemium, and now, all of a sudden, it’s kind of evolved into this play-and-earn type of environment.
Now, if you’re talking about equipment, the equipment doesn’t change. These play-and-earn games are still being used on mobile phones or being used on computers. But the whole aspect of the community owning part of the game, or owning the assets that you’re playing with, instead of the game company owning the assets, is something that’s completely different and new, and a lot of gamers are excited by that. For me, myself, I was a huge gamer, and in certain games that I played, I spent so much money that I had all these gems and armors, but I wasn’t able to sell it, and it just sat in my account not being used. But nowadays, in these NFT play-to-earn games, you own the assets. You can trade them freely within the community. If I have too much of one gem, or one sword, or one weapon, I can take that and then sell it to someone and actually make money from it.
Lau: It’s not only interesting, it’s what we’re seeing in the space. And it’s not just the gamers who are interested. We’re going to talk more about big brands trying to make their way into the metaverse, intertwining all of this. All right. GameFi entering the metaverse — the concept of the metaverse and gaming seem to be closely intertwined, as popular games like World of Warcraft, Sims and Second Life gave birth to some of the first virtual worlds. Now, as players are searching for more immersive experiences, will the metaverse be the next frontier of gaming?
Let’s talk about YGG here. Yield Guild Games recently introduced its first regional subDAO (sub-decentralized autonomous organization) for Southeast Asia — I guess it’s ‘YGG SEA’ — where you also serve as a co-founder. Why are DAOs so important for YGG’s global expansion, and what will their role be in the future of GameFi?
Lu: I was part of the incubation team for YGG SEA. I was lucky enough, and our fund, Infiniti Venture Crypto, was lucky enough that Gabby, the co-founder of YGG, gave us this opportunity to help YGG penetrate Southeast Asia a lot more by becoming a subDAO. And what is a subDAO? So, a subDAO for YGG basically means that the subDAO has a territory within the world. For us, it would be Southeast Asia, and we would kind of be the spear for YGG to go in there, into each country, and help really market and penetrate the local community.
Now, there are several different countries that make up Southeast Asia, and on top of that, each country has a different language. So when YGG was in the Philippines, trying to penetrate Thailand, trying to penetrate Indonesia, it was very difficult for them, because none of the marketing material coming out of it was localized. Everything that they were doing was in English, and they were focused really within the Philippine community, because it was growing so fast there. When YGG SEA came in, we tried to focus, and tried to basically build a team and boots on the ground in every single country where marketing is localized, recruitment is localized, where we would have a targeted marketing campaigns in their local language to teach them how to: one, play the game; two, how to even open up a crypto wallet. When you think about it, our target audience — their average wage is anywhere between US$100 to US$400. The median wage for Southeast Asians, a month, is around US$300. But in some places — the much more rural places in Indonesia — you’re only making about US$100 a month.
So, these people don’t have bank accounts. They’re truly the unbanked and underbanked. So when we go in there, we have to teach them how to open up a crypto account. We have to teach them how to use that crypto account. Then we have to teach them how to use (social gaming platform) Discord, which is the main gathering place for us in YGG’s ecosystem. And all this is new to them. So, for YGG’s example, if you’re in the Philippines, it’s very difficult for you to get that across in these countries that you’re trying to penetrate. So, Southeast Asia is the first subDAO. But since then we have IndiGG, which is YGG India, coming up. Now we have YGG LATAM, which is called OverGG, that just started. Then we are in discussion with SkyGG, which is Korea. We have BAYZ in Brazil, and then we have YGG Japan, which will be starting sometime in Q2. So YGG is really spreading their wings all throughout the world right now.
Lau: This is a really unique concept. It’s brand new. This space moves so quickly, it really does. It feels half-evolutionary and a lot of it revolutionary. But what you’re talking about is local access onboarding, and onboarding and training the local populace in their language, with their perspective, with a full understanding of culture and language, and onboarding into crypto adoption, NFT adoption, play-to-earn, play-to-win adoption. It’s almost educating this really important sector that we often talk about — the unbanked — and onboarding them in a real way (so) that they can be motivated to participate in it. And that’s really unique right now.
Lu: Yeah, it was a brand new concept that was, I guess you could say, started by YGG, but from this play-to-earn explosion that’s happened last year. There’s all sorts of different ‘to-earn’ industries that are coming up. One that’s extremely exciting for us over here at IVC, that we just invested, in was a ‘proof-of-learn.’ Proof-of-learn is now something they’re calling learn-to-earn, where they’re focused on teaching Web 2.0 programmers how to code in Web 3.0, code in Solidity, code in Rust, which is something that right now everybody is in need of.
There’s not enough Web 3.0 engineers in the world — and you can even see it in Silicon Valley, where you see news articles pop up saying that there’s a bunch of Web 2.0 engineers leaving Silicon Valley to jump into the Web 3.0 world. And a lot of people might be afraid to take that leap because they don’t understand how to code in Solidity or Rust. And something like proof-of-learn, that had their announcement for their race last month, is trying to solve (that).
Lau: That’s incredible. Let’s talk about the metaverse here, as well, because the beginning of 2022 has already brought a lot of metaverse-related developments, with Shiba Inu announcing their metaverse, luxury brand Gucci doubling down on its metaverse commitments and acquiring more virtual land. Let’s talk about the brands here, and real mainstream adoption when it comes to luxury retailers and the like. What do you attribute this increased interest to? What other industries do you see most likely moving towards the virtual world? What are your thoughts there?
Lu: Metaverse wasn’t even really an ‘it’ word in the early parts of 2021, when we were starting out our fund and we were talking about Web 3.0, and the metaverse — people are like, ‘What is the metaverse?’ Then, all of a sudden, Facebook changed their name to Meta, and, all of a sudden, metaverse is the word that everyone’s talking about right now. And it’s very interesting to see, because the first mover into the space — Sandbox — has already been talking about the metaverse for so long. Right now, you have a lot of the first movers, such as the games, even buying up these big pieces of LAND within Sandbox and then going to Decentraland, and even now, there are other metaverse startups that are popping up which people are buying land in.
Highstreet — one of our portfolios, a Taiwanese founder that was in VR and AR (augmented reality) — jumped into the metaverse last year, and started to basically build out what they’re calling, right now, an apartment complex, where each apartment is your own metaverse right now, which is really interesting. People can go in there and put furniture and walk around. And then you started having a lot of other brands partnering up with these luxury brands. And that says so much for where this industry is going right now. Because if you’re talking about adoption from Gucci or LV (Louis Vuitton), or even these big car manufacturers that are getting involved into this, it just means that there’s a lot of adoption coming in the future.
Lau: Despite the general Asian public’s relatively muted response to NFTs so far, some collections are picking up traction. The PhantaBear NFT series, co-created by Taiwanese superstar Jay Chou, has dethroned BAYC’s weekly trading volume in January — that’s Bored Ape Yacht Club, of course — reaching 17,194 ETH… and if you do a quick back-of-the-envelope calculation, oh, that’s about US$45 million. Is this a sign of the Asian public warming up to the idea of NFTs? What do you think, Brian?
Lu: Actually, I do think that it’s happening. BAYC and CryptoPunks are, of course, the blue chips of this industry. But then you see a lot of people in Asia looking to build their own ‘BAYC of the East.’ You have PhantaBear. Another one is Monkey Kingdom, which is on the Solana ecosystem. That one has a ton of followers, and that one was actually created in Hong Kong. And then you also have a bunch of other ones that have picked up a lot of steam. Just two weeks ago, Karafuru, out of Indonesia, was the No.1 best-selling NFT on OpenSea. You even saw the likes of David Beckham’s son buying it and tweeting about it. And this is made by an Indonesian, and it was actually targeting the Indonesian public, but it became kind of a worldwide phenomenon. And that one went from — I think 0.5 ETH was the mint — all the way up to its peak at 6 ETH. And that one’s gaining a lot of steam.
But right now, NFTs in Asia have really taken off. You have a lot of people that are finally getting involved into it, because China, first of all, banned crypto last year, but then they came out earlier this year and said, ‘Hey, you know, but NFTs, it’s OK. You can go ahead and do it.’
Lau: But digital assets are not for speculation — (that’s) very specific in China. But at least, as you’ve said, there is room to play there. But to your point, Brian, according to the Fintech in ASEAN 2021 report, we saw that investment into Southeast Asian crypto firms surged by over 400% in the first nine months of 2021 compared to the year before. What’s driving the increased investor interest in Southeast Asia? Why are you particularly interested in Southeast Asia?
Lu: Oh, that’s a great question. So, what really got us excited about Southeast Asia was when ConsenSys came out with a report about the daily active users of MetaMask. When everyone saw that report come out, and saw that the Philippines was No.1, Vietnam was No.3, the U.S. was No.2. And out of the top 10, six were from Asia. Four were in Southeast Asia. Everyone was like, ‘Wow, what’s happening in Southeast Asia? Why are there so many people using MetaMask accounts on a daily basis?’ And that was really, you could say, because of the play-to-earn ecosystem that was booming out here. And you could say that Southeast Asia is the capital of play-to-earn, but it really started within the Philippines.
And when you have these use cases, and you have these pain points that need to be solved with huge crypto adoption, a lot of the innovation is coming within Southeast Asia because they are first-hand seeing the pain points that need to be solved within this massive growing population. So, because of that, all these innovations coming out and these pain points being solved means that everywhere else that’s going to have massive crypto adoption, we’ll have these same pain points. So that’s why Southeast Asia is getting so much investment. YGG was the first investment that (Silicon Valley venture capital firm) Andreessen Horowitz ever invested into in the Philippines, and it wasn’t a traditional company — it was a crypto Web 3.0 company. And then followed BreederDAO, also based in the Philippines, which is a protocol that helps a lot of the guilds out there breed their in-game assets, which is something that’s not easy to do, especially when Axie adds in inefficiencies and mutations within the breeding.
Lau: Yeah, it was something really clear to us when I founded Forkast — it was a clear sense that Asia was part of this emerging story, in that where the world at some point would have crypto adoption, the playground and the experimentation and the petri dish, if you will, of innovation was all happening in Asia.
And you’re stressing that point when we’re talking about what we’re seeing in Southeast Asia — that there are specific pain points — people are interested. And if there is a solution for Southeast Asia’s population of 650 million, where a majority of that population is young, and in the generation that’s interested in tech, interested and already well-versed in technology, already well-versed in mobile, this potentially could be onboarding for the rest of the world if that’s a very specific use case. If it works here, it could really work anywhere.
Lu: Yeah, I agree. When you think about it, for Southeast Asia — other than Malaysia and Singapore — less than 50% of the population in the other Southeast Asian countries have bank accounts, which then allows for companies like XLD, that has a wallet that allows people to then spend what they earn exactly from the game into the real world. There’s just so many use cases that you see within Southeast Asia. When you’re managing guilds and you’re managing 10,000 people, 15,000 people. When we started, YGG was doing it on a Google Sheet. Now they have companies such as Blockchain Space, that has guild CRM (customer relationship management) software that can be used to manage all these people. They built the dashboard to make it easier for the company to be able to manage 10,000, 15,000 scholars instead of using it on a Google Sheet. So, just the innovation that’s coming out of Southeast Asia right now is solving a lot of the pain points that are being created by this play-to-earn boom.
Lau: Do you think we’re going to start seeing more physical spaces popping up — the Silicon Valleys, if you will, that are happening in Southeast Asia I’m hearing about, one in Bali, for example — for Asia’s crypto community to really kind of come together, to put their brains together and address those pain points, as it were.
Lu: I would say right now the leading area for crypto in Asia, where most of the funds are, is actually in Singapore. But a lot of the innovation that’s happening is really coming out of the Philippines. And then you have places like Indonesia, which has a population of, I think, a little less than 300 million. That’s a little behind, but the massive population they have, and it’s just probably one of the places where everybody wants to penetrate. And you have Vietnam, which, according to our sources on the ground there, (has) the No.1 derivatives exchange in volume in Southeast Asia. For the sheer numbers of users, it’s the Philippines, but for the sheer volume it’s in Vietnam. So it obviously shows that the Vietnam community is a lot more adept to crypto, a lot more welcoming and a lot more understanding.
Lau: Well, thank you for sharing the landscape of Asia with us, and where you see the bets coming for the future. It’s fascinating to really see, it’s fascinating to cover and it’s fascinating to talk about. And Brian Lu, thank you so much for your time.
That’s Brian Lu, founding partner of Infinity Ventures Crypto. Thanks so much, Brian, for joining us from Taiwan.
Lu: Thank you. It was a pleasure.
Lau: And thank you, everyone, for joining us on this latest episode of Word on the Block. I’m Angie Lau, Forkast Editor-in-Chief. Until the next time.