Tao Rongqi in conversation with Dapper Labs: NFT, blockchain games, and Metaverse

This article was published on Wanxiang Blockchain, original title: "Wanxiang Blockchain Hive Academy | NFT, Blockchain Games and Metaverse", guests: Tao Rongqi, Mik Naayem.

In the 54th issue of Wanxiang Blockchain Hive Academy, we invited Tony Tao, founding partner of NGC Ventures, and Mik Naayem, CBO of Dapper Labs, to have an in-depth discussion on the current status, future opportunities, and challenges of NFTs and blockchain games.

Tony Tao: Good evening, friends in the Wanxiang Blockchain live room! It is a great honor to share the next hour online with Mik, the CBO of Dapper Labs. First, we will have some exchanges about Flow.

Flow is now a public chain that almost all blockchain enthusiasts know, and it has collaborated with many major IPs in sports, music, art, and other fields. How did Flow attract globally renowned partners and investors like Ubisoft, NBA, and UFC? What areas does Flow plan to expand into in the future? Thank you!

Mik Naayem: The main reason we were able to attract these well-known investors and corporate partners is largely due to our previous experience with CryptoKitties, which helped us understand what application developers and users need, as well as what large enterprises truly care about. Everyone is more focused on user experience, which must be interesting, engaging, and most importantly, secure.

The experience from CryptoKitties allows us to have conversations with these companies and propose solutions that they find comfortable. By collaborating with Flow's parent company, Dapper Labs, they can achieve their goals while users also receive significant attention.

Tony Tao: How will Flow layout the Chinese market in the future? What challenges do you think Flow might face in the Chinese market?

Mik Naayem: The Chinese market is very important to the world, especially for blockchain. We have also seen a lot of innovation coming from the Chinese market, which is very important for Flow, as Flow sees itself as a global network.

To enter the Chinese market, we will first collaborate with some developers and partners. For example, HashKey and SNZ will help us enter the Chinese market and develop and grow the community from the start.

At the same time, we also use a bottom-up approach, hoping to help enterprises and those technical personnel succeed, sharing our experiences and tools with them to help them achieve success.

Tony Tao: Can you also reveal whether Flow is currently collaborating with any major enterprises or IPs in China? What are they specifically?

Mik Naayem: We currently cannot share the major IPs we are negotiating with, but fortunately, all enterprises globally are actively reaching out to us, hoping to collaborate with Dapper Labs and Flow. We hope to see some exciting collaborations in the near future.

Tony Tao: Does Flow plan to collaborate with native Chinese IPs? As far as I know, the largest native IP in China is "The Three-Body Problem," along with some traditional Chinese culture, such as the Forbidden City. Is Flow interested in these IPs? What advantages does Flow have compared to local public chains in China?

Mik Naayem: Let me first answer the second part of your question: What advantages does Flow have compared to local public chains in China?

Developers building on public chains face the same issues, which are not limited to China but are global problems. Since the Flow team comes from an app development background, we understand the needs of developers. They are not looking for the fastest chain; instead, they need a chain that can help enterprises built on it succeed and meet user consumption needs. This is a common challenge faced by developers worldwide.

We have thoughtfully considered this issue, always thinking about how to help enterprises built on our chain achieve success. Everything we do is aimed at this goal, hoping to help the number of users for applications and products developed on our chain reach millions, and to achieve this in a safe and interesting way.

Now, to answer the first part of your question about collaborating with native Chinese IPs. We believe that IP is the best and most important way to bring mainstream audiences from outside the circle into this field.

For Dapper Labs, collaborating with a major IP like the NBA, although the NBA is an international brand, is primarily more popular in North America, where we are more familiar with the NBA. However, in other regions, we still hope to help good developers who understand local IPs and the uniqueness of local markets, and we want to assist them in leveraging local market IPs to create a good user experience. Of course, there will be Chinese developers using native Chinese IPs to build on Flow, but it won't be done directly by Dapper Labs.

Tony Tao: Following up on the third question, as a Chinese person, I personally hope to see Chinese IPs appreciated and consumed by global consumers and public/private chains, but this is quite difficult. In the NFT field, the discourse power is basically held by certain overseas groups, including aesthetic and capital preferences and thresholds. How does Flow view this issue? How will it help Chinese IPs build global influence?

Mik Naayem: We have two ways to help Chinese IPs build global influence:

First, we help IP developers by providing guidance to create user experiences suitable for global users.

Dapper Labs helps them develop experiences suitable for global users, and we spend a lot of time working with developers, providing them with insights we have gained.

Second, we bring users to specific apps through traffic direction. By laying out a global network with Flow, we can help projects reach global investors and further connect with global audiences.

Tony Tao: Will there be plans to add other content beyond games and NFTs on Flow in the future? Will there be a shift towards or expansion into DeFi applications?

Mik Naayem: In the DeFi space, we are now seeing a growing number of users utilizing their funds at a scale of hundreds of thousands.

Although the trading volume in DeFi is increasing, the number of users has not seen substantial growth. Bringing in a large number of users through entertainment is the first step. The second step is to enter the DeFi space. For example, in the NBA Top Shot game, users can choose to serialize NBA collectibles into smaller pieces or use them as collateral for loans, which can further unlock the potential of DeFi. Currently, there are 5 to 6 projects on Flow that are combining DeFi and NFTs, which can also serve as a bridge to the DeFi world.

Tony Tao: When collaborating with IPs from different countries, there are always some restrictions from the countries involved. How will you help different countries' IPs enter new markets? For example, NBA Top Shot has restricted participants' nationalities through KYC. If a foreign IP wants to enter the Chinese market, how will Flow help solve these issues?

Mik Naayem: Regarding IP issues, each IP's situation is actually different. What Flow can do is to be a bridge, a hub for connecting projects with the right partners to help them solve problems.

The second point is to direct users to different apps. As a public chain, Flow and Dapper Labs cannot solve all problems. But fortunately, both large and small enterprises are willing to collaborate with us, which provides us with convenience in finding the right partners.

For example, if an American IP wants to enter the Chinese market, they must find Chinese partners to help them solve various issues, including legal and cultural ones. We can help establish such connections. Similarly, for Chinese IPs entering the American market, they must localize their applications and make them more suitable for local user behaviors, and we can also help them find the right partners.

Ultimately, the core of everything lies in understanding needs and finding the right partners. Flow plays the role of a bridge and hub in this process.

Tony Tao: The next part of the questions will focus more on NFTs. Currently, the NFT market includes various types, including digital artworks, game items, tickets, and others. However, consumers purchase these NFTs mainly for collection purposes. Is it possible in the future to break free from the limitations of collectibles and move towards a larger market?

Mik Naayem: The answer to this question is, of course, there is potential to go beyond collectibles.

First, regarding investment, the reason people are investing now is that they see the future potential of NFTs. Collectibles are mainly easy to develop and require less funding.

Previously, there wasn't much funding entering the NFT space, so developers had to create products that were easy to develop and could quickly go to market. But now, with more and more funding flowing in, developers can spend more time refining user experiences.

For example, early iPhone applications were also very simple, but ten years later, we can see large and complex games on it. Things always develop in cycles.

First, showcasing initial success will attract larger funds, allowing you to have the capital for larger-scale development and better experiences. We are currently just at the beginning of NFTs, and I believe that in the next 3 to 4 years, we will see more use cases that will allow large consumers to gain experiences that go beyond current collectibles.

Tony Tao: What is your view on the application of NFTs in digital ownership and usage rights? Currently, there have been some negative cases in this area, such as music NFTs and short video NFTs, where even ordinary users can enjoy music and watch short videos without owning the NFTs, while NFT users cannot gain additional benefits from this. What benefits can ownership of NFT items bring to their usage, aside from collection?

Mik Naayem: Because NFTs are not a solution to all problems. For listening to music, the current "rental model" on platforms like Apple Music and Spotify is already quite good; true ownership does not provide a tenfold improvement over the current rental model. This does not mean that NFTs cannot be applied to the music field; they may be more utilized in licensing, for example, NFTs can allow music owners to seamlessly license to each other, thus solving copyright issues and creating new music and albums. It can also solve payment issues, with payments made through smart contracts rather than hiring a legal team.

True digital ownership is more applicable to experiences that can provide a tenfold improvement for businesses and users. For example, in NBA Top Shot, if the digital collectibles we offer are merely photos or images, that experience is worse than buying physical items offline. Therefore, we choose videos, which capture the highlight moments of stars, the very moments that fans love to watch basketball for, thus achieving a tenfold improvement in experience compared to offline collectibles.

In the music and art fields, we now see hundreds of different use cases, but only some can truly achieve experiences that are dozens of times better, while others do not provide substantial improvements through true ownership.

Tony Tao: Different digital assets have different ways of preservation. For example, a photograph's image, what do you think is the difference between ownership generated by downloading it to a computer hard drive and owning an NFT?

Mik Naayem: Regarding your question, when the internet was first designed, digital assets could not only solve ownership issues but also clarify who created the digital asset and how many of these assets exist. The combination of these three factors gives digital assets value and allows them to maintain value over time.

Because this combination gives digital assets a more authentic experience. Digital assets owned in the form of NFTs can be permanent, just like your offline physical assets, while also having scarcity and ownership. Downloading such things to your computer hard drive only solves the ownership issue but does not prove who created these assets or how many of them exist.

NFTs effectively connect the real and virtual worlds.

Tony Tao: Personally, I care more about investment. If many digital assets are created in the future, I am more concerned about how I can invest in more worthwhile targets.

Based on this logic, I wonder whether the existence of NFTs and DeFi is to help the long-tail market, which has potential digital assets that have not yet been born but will have infinite possibilities in the future? It has creators and more investors, allowing creators and investors to combine in the early stages, enabling the creation of potential digital assets in the future. This is my perspective.

Do you think there is a ceiling on the number of NFTs in niche areas? For example, will there be a ceiling in the NBA Top Shot area? What would that ceiling be? If there is one, how should project parties coordinate the number of NFTs with consumer demand?

Mik Naayem: This question involves economic models, and the model is actually inspired by the fashion brand Supreme. Supreme does quick releases every Thursday, and on Thursdays, people line up to grab them. Some people hold onto them for a long time, some immediately resell them, and others view them as long-term investments.

Look at the growth rate of each release; if the value is increasing, you might feel excited and tell your friends about it. The key is to understand your growth rate because you want the releases to activate or attract more people to enter, allowing people to get what they want, have exciting moments, while also not letting the quantity become too large, causing market saturation. The key is still to understand your user base, understand how they will use your product after they obtain it, and also the growth rate.

Tony Tao: How do you view the current development status of blockchain games and the outlook for their future?

Mik Naayem: Blockchain games are still in a very early stage and have not yet achieved large-scale application. Blockchain game developers are very fortunate because users have long understood the value of virtual worlds and virtual land, allowing them to attract significant investments even before formal game development begins. Now they have the funds and hope to use them to create the future game world.

However, blockchain games need to compete with centralized games, whether they want to see this situation or not. For game users, they want to have an equivalent experience, but I believe the future is absolutely bright because games are where we spend a lot of time, so we want ownership of games and the ability to decide their future direction.

I think blockchain games have not yet reached the level of competing with centralized games, but the decentralization of blockchain games can help users and developers unlock a lot of value. I believe that in 4 to 5 years, we will see significant development, and people will choose to leave "World of Warcraft" for blockchain games.

Tony Tao: Will the vast majority of games in the future combine NFTs and gaming?

Mik Naayem: Some games, such as MMO large-scale real-time battles and war games like "World of Warcraft," will become blockchain games as long as they are persistent games.

However, for fast-paced mobile games, such as fruit slicing, turning them into blockchain games does not make much sense. Within ten years, those large immersive games will become blockchain games. By blockchain games, I mean those with open economies, where users have ownership of what they buy and can even vote on the future direction of the game.

Tony Tao: Besides what you just mentioned about large games becoming blockchain-based, I am personally very interested in the investment of users in small games, but this seems quite difficult to operate.

The advantage of blockchain games compared to regular games is scalability, allowing for expansion and even integration between different games. How far along are we in integrating many games into the same world, the same universe?

Mik Naayem: Currently, I think we are still in a very early stage, but the potential is huge. For example, within two months of CryptoKitties launching, we saw many developers creating different competitions between cats or putting hats on cats, creating Facebook and Twitter for cats, etc. These are very important. If a specific asset type has a community, developers can further develop based on that asset type, creating network effects. Initially, asset types and games gradually develop and integrate. But we are still in the early stages; the first step is for early games to achieve sustainable profitability, and then developers can further develop based on existing games.

I don't think such a future is far off because some early games have already started to become profitable, so I believe we can see real composability within 6 to 12 months, at which point there will be explosive growth.

Tony Tao: The concept of the Metaverse has recently become very popular. What is your view on the Metaverse? Will it be the future? How will it integrate with gaming trends? How will the Metaverse, NFTs, and blockchain games combine?

Mik Naayem: My answer may be a bit controversial, but I firmly believe that if we want to realize the Metaverse, it can only be achieved on the blockchain. For the Metaverse to exist, developers must be able to develop without permission, and the experiences must come from every corner, with more and more experiences being developed, and there must be interoperability between experiences. Users must have ownership of the experiences, and they must also be portable. Only then can the Metaverse be realized through infinite creativity.

Our early investors have said that the smartest people are often not within the company. If we want to realize creativity, we need developers to create without your knowledge or permission to achieve a true Metaverse.

Tony Tao: Thank you very much, Mik. The Metaverse is something I and some friends are looking to work on, focusing on the NFT field in China. I am a very culturally inclined investor, I love games and the Metaverse, and I am very fond of NFTs. I particularly hope to combine these concepts to find targets in these areas.

I really like Flow and Dapper Labs, and I personally believe there will be a lot of interaction in these fields in the future, including investment and finding Chinese developers. That concludes our sharing today. Thank you all for your time.