Breakpoint 2025: Fireside: Animoca's Yat Siu: Animoca Brands (Yat Siu), Republic (Andrew Durgee)

I think most people know Animoca Brands really as an investor in the space, but we're basically not a fund actually. We invest out of our balance sheet. Today we have over 628 portfolio companies. A good number of them are in the Solana ecosystem. We've been known for Web3 gaming back in the day. We still have 200 portfolio companies in gaming and growing, but we also invest in everything else in DeFi, DePIN, AI, and that kind of stuff. The way you can think of Animoca since we announced the go-public plans is essentially as a kind of altcoin index of all sorts, right? Where we basically invest in the ecosystem for the long haul. If you invest in Animoca, you have a way of playing the broader crypto Web3 altcoin space beyond Bitcoin. And of course, that includes Solana and everything else in the ecosystem as well.

I mean, I don't know if it's a unique thesis, but my general perspective is that altcoins collectively are going to exceed the value of Bitcoin by a really, really large margin. The perspective is really the stock market versus gold. Bitcoin is basically like digital gold. Gold today is a $27 trillion asset, bigger than Apple, Google, Facebook all put together. Actually, the top companies in the world are roughly $50 trillion in size. When you include the stock market, it's $128 trillion. When you include the private markets, that's close to $250 trillion. So roughly 10 times the value of gold. Why is that? Because people use Apple, Google, Facebook, these products and services. What do we see in the token space? It's the same. People don't use Bitcoin, but they do use altcoins. You use your Solana for gas fees to buy something. You use some tokens for gaming, for digital identity, for DeFi, for DePIN. This is basically altcoins. So altcoins is actually the engine of growth in crypto because we use them. As a result, it makes sense that altcoins, like the stock market, are going to exceed the aggregate value of that. But of course, which altcoins, that's a different topic. It's just a question of the fact that we think altcoins will exceed in value in aggregate. So that means we can expect a long way to go still for Solana in terms of value. Having said that, I think it's unlikely that Solana will exceed the value of Bitcoin because Bitcoin as the ultimate store of value has become almost like the crypto piggy bank. You make money with your token ecosystems and you save it in Bitcoin. So the growth of altcoins actually benefits Bitcoin. For all the Bitcoin maxis out there, the message is that things like Solana and altcoins are actually good for Bitcoin.

And I think the unique perspective around, especially when you think about L1s, L2s and the ecosystem, is the open permissionless nature of crypto and blockchain means that essentially value can freely flow across each other. Which also means that how do you retain value and network effects becomes more challenging but also more competitive. So that means there's true competition and true capitalism at work in crypto, which isn't the case when you think about Web2 companies. If you're building on Facebook, Google, or Apple, you're building in closed ecosystems. They can shut you out anytime, but at the same time you depend on them for value. Whereas over here, you can basically move and transfer value even across chains if you wanted to, which necessitates that the chains and ecosystems in play have to do more to retain you. Which I think is actually a better outcome for everyone.

The data construct is a great example. That's right.

First of all, yes. We have been, when it comes to gaming, probably the biggest investor in Web3 gaming. We cut our teeth early with things like Sandbox, Axie Infinity, OpenSea, and all that kind of stuff. But I would say the way to think about Web3 gaming, when we say 'gamify,' many people in the industry, particularly those who came from Web2, made a general mistake. The mistake is that they're translating Web2 gaming experiences directly into Web3 parallels. From a skeuomorphic perspective, it's a nice add-on, it's understood, but it's not the final product. For instance, skins in gaming as NFTs, virtual currency as tokens, you sell them. Sure, there's an element around that, but actually it's much more than that. When we say 'gamify,' we actually mean more specifically the gamification of finance, of which you can wrap a gaming layer around it. For instance, things like prediction markets. Polymarket for a lot of people is a game in and of itself. If you think about what's happened in the world of finance, look at Robinhood and eToro and all the other trading platforms. It's a game. There are leaderboards, social rankings. Why is that? Because most of us in this room and people watching this are already gamers. Gaming is part of your culture. It's the way we speak to each other. My parents' generation would not look at trading as a game, and they certainly wouldn't be looking at prediction markets other than from a gambling perspective. It's not fun for them. But for people on these trading platforms, it's fun. It's entertainment in and of itself. That's what it means to gamify something. The lens of gamification as an extension of gaming culture into all products and services, which in crypto really means primarily finance for the time being, is how you bring Gen Z into the world of finance and thereby teach them financial literacy. That doesn't mean crypto gaming won't be big for entertainment purposes, owning your assets and trading them. NFTs themselves are an expression of that. You have ownership, but the benefit of ownership is you can trade it, sell it, lend it, and do other stuff. That in and of itself becomes fun. Why we're bullish on gaming, I want to give a macro picture. Gaming has had a tough couple of years. Post-COVID, everyone thought gaming would increase. It actually went flat and slightly lower. Its biggest competitor macro for gaming isn't actually demographics. The biggest competitor is TikTok. What TikTok has done is essentially...

It's attention, but ultimately what gaming is is a social platform. It's about social attention. There's something in gaming called Bartle's taxonomy, which divides the types of people who play games. Roughly 10% are adventurers, 10% are achievers who want to level up and get really good, roughly 1% are killers who are psychopaths in games and want to kill everything, and roughly 80% are socializers who play for social reasons. If you have kids and they play Roblox, which is the biggest game in the world with 340 million users, why do they play? Chances are it's because their friends are there. And of course, UGC content adds that additional layer of social engagement. So it's social, and TikTok has been eroding much of that social layer, taking competition away not just from Instagram but also from gaming. What tokens do is they represent the memetic and the market of attention in gaming. AI tokens are a great example. They were really big last year, but it wasn't because AI tokens had massive adoption. It's because AI was hot as a topic and it was reflected in the market prices of tokens, much like the stock market would reflect on topics like that. We need a catalyst for gaming that takes over macro market narratives, and that's GTA 6. Our prediction is that when GTA 6 finally launches, which has been delayed to November of next year, we'll see a big moment in Web3 gaming tokens as well. However, that won't happen until next year if they don't delay again.

I think it becomes a catalyst moment for attention. From that attention come other areas. For instance, GTA 6 has RP servers, roleplay servers, where you can build your own mods on top of GTA 6. There's another big catalyst: the Clarity Act next year, which most people believe will be approved in US Congress. It gives clear clarity on what is a utility token as a digital commodity under the CFTC and what would be a security. This is a barrier to allow other gaming companies to think about how to launch a token. If you're Take-Two, Activision, EA, or one of those big companies, you're not going to launch a token until you have clarity. Think about what happened with the GENIUS Act. The moment it was announced, Facebook, Amazon, and Walmart were doing a stablecoin. They wouldn't have been able to do that before. The same with the Clarity Act. That's where we'll see an impetus of tokens launching or being announced or planned. It also means a relaxation for many big gaming companies who will say they can now have a token because it's not problematic from a legal perspective, whereas before it would have been. We used to tell our gaming advisory clients that a token won't necessarily make your game, but it could kill it.