Dialogue Yat Siu: Animoca will continue to expand, with a portfolio of over 380

Interview: Kit, flowie, ChainCatcher

Organizer: flowie, Nianqing, ChainCatcher

From December 9 to December 18, the "NFT Taipei," the largest blockchain and NFT carnival event in Taiwan for 2022, was held in Taipei, co-organized by BlockTempo, the international art curatorial team OneOffs, the NFT auction platform Lootex, the Web 3 social platform tool Passion, and the public chain ThunderCore. Yat Siu, co-founder and executive chairman of Animoca Brands, delivered a keynote speech titled "Digital Property Rights, NFTs, and the Metaverse" during the event.

In his speech, Yat Siu stated that with the emergence of NFTs, the concept of ownership has entered the world of digital assets, and NFTs have changed the ownership of gaming assets. Yat Siu believes that in a decentralized network, players' assets are preserved through blockchain and can be used across different games, greatly enhancing the openness of the economy.

Additionally, Yat Siu shared the correlation between income and property rights, stating that in countries with low awareness of property rights, it is difficult to develop long-term business or investment plans due to the inability to ensure asset ownership in the long term, which also results in lower per capita GDP and income. Conversely, advanced countries do not face this issue, allowing them to create value from their owned assets, leading to higher per capita income.

As 2022 comes to a close, how does Yat Siu view the impact of the crypto bear market and the fallout from various incidents on the industry? What strategic plans does Animoca Brands have for 2023? During the event, Yat Siu was interviewed by ChainCatcher.

Yat Siu mentioned that the crypto market from 2018 to 2020 was actually worse than it is now, and the current market conditions will lead to a certain degree of consolidation, allowing more capable players to play a larger role and showcase their talents. Animoca will continue to grow and expand in such a market environment.

1. ChainCatcher: What potential impacts has the collapse of FTX brought to the Web 3 gaming industry?

Yat Siu: The FTX incident has now progressed to the point of SBF's arrest. Frankly speaking, the biggest loss brought by FTX is not financial; the financial losses caused by the collapse of Terra were much greater. However, due to FTX's high profile, the industry has suffered more in terms of reputation.

Moreover, the collapse of FTX represents a "systemic loss," particularly affecting many institutions in the United States. Of course, there has also been a significant impact in regions like South Korea, Japan, Hong Kong, and Taiwan. But the scope in the U.S. is clearly broader, with mainstream media discussing FTX and SBF, while mainstream media in Asia seems to have moved on from these topics.

The collapse of FTX is becoming a Western narrative, which may lead to a more negative response from the U.S., such as tighter regulations. The current impact is more political than financial. In contrast, Asia presents a different picture; for example, Southern East Ying will launch its first Bitcoin and Ethereum futures virtual asset ETF on the Hong Kong Stock Exchange on the 16th, shortly after the FTX incident. This is why Asia is currently able to take the lead, not only in terms of funding but also in product development. The narratives in the East and West have diverged. I believe that the fact that mainstream media in the East is no longer overly discussing or focusing on FTX is actually a significant progress.

As for the impact of the FTX collapse on Web3 gaming, I personally believe it is not substantial. For gaming companies, 2022 has been a major "Funding year," with over $3 billion invested in this field, and this money is sufficient to build some great games. We will see some results in 2023.

This year has indeed been a tough one for the crypto industry, with inflation caused by war and the collapse of well-known crypto companies like Three Arrows and FTX. But people are still building, and the industry continues to move forward. So, as the old saying goes, "What doesn't kill you makes you stronger," events like FTX will make the crypto industry more resilient. After every "FTX incident," every participant in the industry is actually being pushed towards decentralization. For example, after FTX, other companies are now being asked to publicly prove their reserves and are seeking self-regulation. This was something we found difficult to achieve six months ago.

I am an optimistic person; although FTX is a tragedy, on the other hand, it is these setbacks that will make the crypto market stronger in 2023.

The situation is not as bad as it seems. Take us for example; Animoca is still making investments and transactions. Although some projects and companies are indeed valued lower than before, at least you can still raise funds, and it hasn't reached the point of complete liquidity exhaustion.

2. ChainCatcher: What are Animoca's investment themes or strategies during this sluggish phase of the crypto market?

Yat Siu: Our core mission remains to provide true "digital property rights" for everyone. We are constantly looking for and building it, and we are also seeking founders who believe in establishing digital property rights in an open manner.

We invest in various metaverses, but we will not invest in metaverse platforms with closed ecosystems like Meta. We believe more in network effects; currently, Animoca has over 380 portfolio investments, and we support all open and digital metaverse projects.

As for oligarch entrepreneurs transitioning from Web2 to dominate Web3, we are not optimistic and do not support them. For them, the way to win is a zero-sum game. However, we do not believe it has to be this way; in Web 2, establishing a monopoly essentially means seizing resources, but the monopoly of blockchain resources is on-chain and cannot be monopolized.

For example, we were one of the early investors in OpenSea, which is doing well, but it cannot guarantee that OpenSea will always be number one, as other platforms can also reach every customer of OpenSea. Just like Alibaba can pursue Amazon's customers, Amazon can also attract Alibaba's customers. Such competition is actually better for customers. Therefore, we need to invest in things that create value for the entire value network and not invest in any closed content.

A common term we often discuss is Web 2.5, but what is Web 2.5? Or what are Web 2.4 and Web 2.6? Many people from Web2 want to take money from Web3 but still control it like Web2, which would be disastrous. For instance, we encountered issues using WEMIX in South Korea; they merely viewed tokens as a way to make as much money as possible and provide as much return to shareholders as possible, rather than considering their community. For investors and Web2 transitioning entrepreneurs, the question is whether to choose Web2.4 or Web2.6? We must ensure we support the right projects.

Unfortunately, many companies benefit from the ecosystem but do not share it. We need to invest in companies that believe in shared network effects.

3. ChainCatcher: What considerations led to Animoca Brands' recent plan to launch a $2 billion dedicated metaverse fund, Animoca Capital? How will this dedicated fund differ in investment strategy from Animoca Brands' existing investment business?

Yat Siu: Currently, this fund is still in the planning stage and has not completed its financing; in fact, this fund is part of our plans for next year. Animoca Capital focuses on projects in the later stages. We already have many unicorn projects in our portfolio, and many projects have grown larger than our scale at this stage, so the funding support from Animoca Capital is not very significant.

However, we have many institutional investors who want to participate in investments in these large companies, which is where a fund like Animoca Capital becomes meaningful. Previously, we directly introduced these projects to investors, which was a lot of work, but through Animoca Capital's direct investment, these issues can be simplified. Having subsequent investment opportunities is also a pursuit of Animoca Capital.

4. ChainCatcher: Meta, which is also heavily investing in the metaverse, has found itself in a difficult position. Can you share your views on Meta's metaverse strategy?

Yat Siu: Meta is trying to control the metaverse by establishing its own "closed system" and has spent enormous amounts of money to do so.

But we have not; everything we do is moving towards decentralization. While we have The Sandbox, we have also invested in other metaverse projects. The outside world discusses why we invest so much in our competitors. But in my view, they are not competitors; they are partners that need to operate together in the same open network. This is a very different "philosophy."

The challenge Meta faces is that they must recreate the blockchain and rebuild an ecosystem governed by rules shared by millions of people. The cost of establishing new experiences in this ecosystem will be shared by millions of people, and since Meta needs to recreate everything, the costs and fees will be very high. But my point is that no matter how much they spend, it won't be enough. When users can have a better experience in The Sandbox and earn decent returns, why would they go to Meta for a poorer experience and have nearly 50% of their income taken away? Therefore, Meta is somewhat "fighting a losing battle."

5. ChainCatcher: What are Animoca's plans for next year? How do you view bull and bear markets?

Yat Siu: Looking back at the crypto market in 2018, 2019, and 2020, you will find that those were the worst times for the crypto market, even worse than now.

Fundamentally, I do not believe the crypto industry has problems; there are just some bad participants. It is precisely because of the continuous occurrence of black swan events that the industry becomes clearer. In fact, I believe it is more difficult for projects to raise funds in a bull market; after all, everyone is raising funds, unless you are a very good project or have a great product.

For investors, the ability to conduct due diligence and analyze businesses in a bull market becomes less important; everyone is chasing, so ironically, analyzing businesses becomes more difficult in a bull market.

Additionally, in terms of products, we have acquired some companies and are transitioning them to Web3, such as our recent acquisition of the music metaverse platform Pixelynx. Frankly speaking, these deals are only possible in the current market conditions because the valuations of projects are lower, presenting a great opportunity. The recent acquisition of 10KTF by Yuga Labs follows the same reasoning. So, the current market conditions will promote a certain degree of consolidation or allow more capable major players to play a larger role and showcase their talents. Animoca will continue to grow and expand in such a market environment.

In a buyer's market, project parties have to work hard to compete for all resources (such as refining projects, etc.), which I think is a good thing. There are many "business plans" in a bull market, but very few true builders.

So I believe this is a normal cycle and a very healthy thing that will provide time for people in the industry to lay a more solid foundation. Whether in crypto, blockchain, or the broader Web3, we are rapidly transitioning to a new cycle. After all, this year we have already completed 4 or 5 cycles, oscillating between recession and prosperity, and the crypto market is accelerating its development.

The current crypto market is very similar to the burst of the internet bubble in 2001. At that time, people saw the value of internet companies rising and said that the internet was too inflated or questioned "who needs the internet," but fundamentally, more and more people began to use email and go online. Under this premise, costs must be lowered while actual utility increases, and the same will be true for Web3.

6. ChainCatcher: For participants in the crypto market who have almost lost confidence, what experiences or advice can you share?

Yat Siu: First of all, I think it's important to reflect on why you entered this field. This also helps us think about who the true builders in crypto are.

For example, those represented by SBF who entered crypto with the initial motivation of arbitrage had the wrong motivation; they would not care about what the mission of crypto is. This was also true in the internet era; those who simply wanted to make money would quickly leave when the industry faced difficulties.

True builders believe in the purpose of what they are building and think about whether they are creating a better framework for society, whether they are facilitating trade, or whether they are bringing more fairness to people around the world, among other valuable missions.

If there is such a firm belief or mission, any difficulties encountered now are only temporary.