Dialogue with Yuga Labs CEO: We are more like the Tencent of Web3, continuously changing the rules of NFT games

Interview: Jack, BlockBeats

Organized by: Luccy, Joyce, BlockBeats

Edited by: Jaleel, BlockBeats

In recent months, the trading volume, new issuance volume, and blue-chip NFT prices in the NFT market have been continuously declining, with BAYC repeatedly falling below 24 ETH. Whenever anyone in the crypto circle talks about NFTs, Yuga Labs is an unavoidable topic.

As the leader in the NFT space, the NFT brands incubated by Yuga Labs firmly occupy the blue-chip rankings. Over the past year, while Yuga Labs has launched Dookey Dash and the Bitcoin NFT series TwelveFold, these new narrative gameplay elements have only attracted brief attention and liquidity from players. Sentiments like "the darkest hour for NFTs" and "NFTs are dead" are still prevalent.

During the Token2049 conference in Singapore, BlockBeats frontline reporter secured an exclusive interview with Yuga Labs CEO Daniel Alegre, delving into topics such as the narrative of NFTs and Yuga Labs' ecological layout.

Has the NFT narrative really come to an end?

Before joining Yuga Labs, Daniel Alegre initially worked in the music industry, with his family involved in broadcasting. He then transitioned to Google, where he worked for 16 years, responsible for establishing Google in China in 2005 and operating Google Asia, launching many businesses in the Asia-Pacific region. In March 2020, Daniel Alegre joined Blizzard as President and COO, participating in the development of well-known game brands such as Call of Duty, World of Warcraft, Diablo, Overwatch, and Candy Crush.

On April 1 of this year, Daniel Alegre announced on his personal social media that March 31 was his last day working at Activision Blizzard, and he would officially start as CEO of Yuga Labs the next day, generating significant discussion in the community.

BlockBeats: Regarding the current state of NFTs, do you believe the narrative of NFTs has come to an end?

Daniel Alegre: No, of course not. It's a misunderstanding that the valuation of the NFT space is based on the valuation of PFPs. Just a few weeks ago, some BAYC NFTs sold for over a million dollars. People were asking Jeff Bezos in 1998 whether e-commerce was dead, and he replied, "No, of course it's not dead," even when everyone thought Amazon would fail.

But if you look at the evolution of NFTs and their real value and function, you'll understand that NFTs are a clear value proposition. Their value is so high that holders of bored apes are now using them not only as PFPs but also for community brand building.

Therefore, for Made by Apes, we have over 900 holders utilizing their PFPs to create independent businesses, effectively leveraging the entire community for brand building. What they are doing is establishing various businesses, from selling alcohol and water to clothing, digital cards, hamburgers, and more. The entrepreneurial spirit exhibited by our NFT holders is, I believe, very unique, as they are creating a whole new ecosystem, similar to the ecosystem Amazon built in e-commerce.

How Yuga Labs Established Itself as the Ruler of NFTs

Founded in 2021, Yuga Labs is an NFT and cryptocurrency marketing and development company, with its first product, BAYC, starting sales in April 2021, creating one of the most influential projects in NFT history. Not just BAYC, Yuga Labs' renowned NFT projects also include MAYC, BAKC, Cool Cats, World of Women, and more. After acquiring the IP of CryptoPunks and Meebits, the entire crypto community was swept into a frenzy.

In March last year, the parent company of Bored Apes, Yuga Labs, completed a $450 million financing round at a valuation of $4 billion, led by a16z, with participation from Animoca Brands, Thrive Capital, FTX, MoonPay, and others. From starting with a single image to a $4 billion valuation, with stars from sports, entertainment, and VC flocking to it, acquiring well-known IPs, and launching Ape Coin, Yuga Labs has become a true ruler of NFTs.

Related article: 《The Origin of Yuga Labs' $4 Billion Story: "Let's Make an NFT"》

BlockBeats: We do see some people printing their ape NFTs on water bottles or various types of drinks. But if the price of NFTs drops, people may be less willing to associate them with brands. What are your thoughts on this issue?

Daniel Alegre: I disagree with that. Just a few days ago, I saw a coffee-making robot at the San Francisco airport. My son pointed out, "Look, there's a BAYC." Then I noticed someone displaying their BAYC on the screen. So it's not that people are unwilling to utilize their PFPs.

The trading volume of BAYC shows that 92% to 93% of holders are unwilling to sell their BAYC. Therefore, the actual $ape being traded in circulation is relatively small; people hold $ape because they see value in it, the value in community and community connections, and the personal value derived from the brand built together with the community. On top of that, you can see a complete ecosystem emerging, with many developing business enterprises.

BlockBeats: Has Blur disrupted the atmosphere of NFTs or the overall NFT market? After all, only Blur can expand their brand or visibility through licensing, while projects like Azuki or Pudgy Penguins, although performing slightly better, haven't truly benefited from BAYC.

Daniel Alegre: Yes, we focus on one thing, which is telling good stories, building good communities, and everything else stems from that. Especially in BAYC, the model we adopted is disrupting the traditional concept of intellectual property. In a normal media company environment, you create IP and license it in very specific ways. For example, you can use Mickey Mouse's image to make sweatshirts and profit from it, but if you want to open a restaurant, you wouldn't build it around Mickey Mouse. Here, we are actually letting the community help build the brand; they own the brand and can truly push it forward, while we just need to support them. Additionally, we have built some experiences for the community based on Web3 or not based on Web3. What we do with Made by Apes is support the businesses of the entire ecosystem, and they are also creating offline businesses.

We want them to succeed. It's all about community and connections. We built Otherside because community members told us they wanted to create a place where community members could connect, and on that basis, we also provide unique experiences.

BlockBeats: So you fundamentally disagree with practices like CC0, which do not obtain permission for creation, commercialization of NFTs, and other uses. How should we utilize them?

Daniel Alegre: What surprises me is the level of entrepreneurial spirit in the community. I knew the community would be very strong, and users would connect with each other and be committed to the community. What I didn't expect was that many people are utilizing what they have built together in the community to turn it into something very interesting. Moreover, the reason I came to the Asia-Pacific region is that I know there are many community holders here. In the early days, this was just a company that had been established for two years, and we were more focused on business in the United States. But when I became CEO, the first thing I said was that the next ApeFest (the annual ape community event) would not be held in the United States but in the Asia-Pacific region. I believe this was the right decision because the community's closeness in this region is very considerable, and it also provides us with an opportunity to expand the community.

BlockBeats: Building a brand in Web3 is indeed very difficult, especially when it comes to expanding influence into Web2. Many friends in the Chinese community are also building NFT brands, but many have left because they couldn't successfully establish a brand and strong community through NFTs, ultimately returning to the Web2 industry, as Web3 hasn't provided them with enough income to survive. What are your thoughts on this? How do you survive and build a brand?

Daniel Alegre: I think the mistake these companies make is treating the NFT industry as a revenue opportunity, thinking about how to profit from it. If you look at it from this perspective, you might launch an NFT, but there is too much noise in the market. You might think this one isn't useful, one made a little money, another made a lot, but then what?

Yuga Labs has been built from the beginning with the idea of being a continuous interaction and community-building entity, which is why it is called BAYC. When the community feels that they are not only being listened to and connected, but that the experience will continue to evolve, they will remain enthusiastic and help build the brand, and of course, this is not an easy thing to do. As a company, we should focus entirely on storytelling and building connections; if you do it well, you can establish long-term relationships. But we do not look at this issue from the perspective of current NFTs or NFTs from 12 months ago; we see it as a long-term commitment, and we want to continue to maintain and build this enthusiasm and connection in the years to come.

Yuga Labs is More Like Tencent in Web3

BlockBeats: Some say that one of Yuga Labs' significant achievements is having many celebrities stand by this brand, but others say this is a carefully orchestrated strategy by the team, such as gifting ape NFTs to these celebrities as a clever marketing tactic. What is the thought process behind this strategy?

Daniel Alegre: In fact, we have nothing to do with celebrity endorsements or owning ape NFTs, or pushing anyone to buy ape NFTs; they purchase them spontaneously because they resonate with this art and appreciate its uniqueness. I think that's what makes it special.

Ultimately, it all comes down to whether you have a good story and excellent artwork. This art is innovative and can truly resonate with people from all over the world, whether in the Asia-Pacific region, the United States, the Middle East, or Europe, from the top celebrities to the quietest individuals, they all find a sense of belonging.

Speaking of ApeFest, we will hold ApeFest in Hong Kong in early November. The special aspect of this ApeFest is that we have added an extra day of activities, inviting creators, community members, and potential new members to experience the significance of joining BAYC. We care not only about developing the community but also about enhancing the connections among community members. I believe that as a leader in this field, it is also important to show people the value of joining such a successful brand, so that more people can experience the fun of Web3.

BlockBeats: Another very important question for us is, where do you think Yuga Labs' primary revenue model will come from in the future?

Daniel Alegre: Frankly, I think it's unpredictable. What I can see now ranges from new minting to secondary royalty income, to the in-app purchase experiences we are building in Dookey Dash and Heavy Metal Forge, as well as revenue sharing agreements with third-party partners like Gucci, and likely new revenue sources that I can't even imagine.

BlockBeats: If you were to compare Yuga Labs to a Web 2 company, which one do you think is most similar? Which one is closest?

Daniel Alegre: That's a great question. We can feel that Tencent's development in gaming, social connections, content, etc., is very strong; we have some aspects that are similar to Tencent's evolution, but there is a significant difference, which is the sense of belonging and community awareness. But that's my understanding of Tencent five to ten years ago, so I don't know what Tencent's actual situation is now. However, in the digital space, I haven't found any other company that compares to this level of community and connection; it's a way of community brand building and brand connection that even the most loyal fans of Elvis Presley, Britney Spears, and BTS don't have. The closest example I can see is the level of connection that fans of major artists have, but they go further to embrace it, wanting to build and strengthen that connection for the benefit of others and themselves.

The Future Ecological Landscape: Where Will Yuga Labs Go?

Starting this year, Yuga Labs' layout seems to have changed. On January 12, Yuga Labs officially announced the launch of a new game "Dookey Dash" on January 18, and the minting of the game participation ticket "BAYC Sewer Pass" will begin the day before the game opens. This is the third phase of the new storyline within the BAYC ecosystem and the preparatory phase for the launch of the first interactive game in this storyline.

Similar to Temple Run, Dookey Dash is an "endless runner" game. The game has no endpoint, and the difficulty increases as the distance covered increases. The game will be a web-based game, playable on both PC and mobile devices, but it requires holding a "BAYC Sewer Pass."

Related article: 《BAYC New Storyline in Progress: How to Play the New Game Dookey Dash and the Game Ticket BAYC Sewer Pass》

On June 21, the official Twitter of BAYC Yacht Club released a promotional video for the new game "HV-MTL Forge." "HV-MTL Forge" is a space-building game centered around Yuga Labs' latest mech NFT series HV-MTL, allowing players who hold HV-MTL to access and customize their own unique spaces within the game, upgrading their HV-MTL to new forms through gameplay.

Seven days later, the "HV-MTL Forge" game officially launched. On the eve of the launch, Yuga Labs co-founder Garge.eth posted a lengthy message on his personal Twitter, discussing thoughts on this game, the earlier "Dookey Dash," and some reflections on Yuga Labs' game development plans. Two years after the release of BAYC, Yuga Labs had the idea of making games, and although it was never executed, that thought has always existed, and the contemplation of games has not stopped.

Following "HV-MTL Forge," the open beta test of Yuga Labs' Legends of the Mara (LotM) game will start in September, providing new NFTs and a broader metaverse experience for Otherdeed virtual land NFT holders. "Legends of the Mara" is a "collection-based 2D strategy game," while "Otherside" itself is a large 3D game. LotM will also reveal more information about Kodas, a small bipedal creature that exists on 10% of the initial 100,000 Otherdeed lands.

Building Culture and Community on the Chain

BlockBeats: Another question often raised by many NFT entrepreneurs is that they view Yuga Labs as a spiritual mentor in building Web3 brands. But now they see Yuga Labs also turning to the gaming field. Therefore, they need to choose between building a brand for NFT projects or games. How do you choose? Why turn to the gaming field?

Daniel Alegre: I want to tell the friends asking the question that Yuga Labs is not a gaming company. Our mission is to build culture on the blockchain, which means telling stories, showcasing art, providing experiences, and building community.

The reason we provide gaming experiences for the community is twofold: first, many of our holders have a strong interest in gaming; they understand Web 3 and its value, so we created games that connect them together, and they enjoy these games. Dookie Dash is a game we designed for Heavy Metal Forge, and tomorrow (I believe it's tomorrow) it will enter its final season. This game actually connects the community together, and for us, it's also an opportunity, just like I mentioned with ApeFest. It's an opportunity to show those unfamiliar with Web3 what you can experience in gaming, shopping, videos, and more.

We start with games because it's the simplest way to explore what Web3 can do, showing gamers that through Web 3, I can have digital ownership, trade assets in games, and use my character across different games. These have been issues in previous games, which I personally experienced at Activision Blizzard. The closed model of games means that as a player, you invest money but never get any return, or the results of your hard work can never be exchanged. This is a unique problem in the gaming field, and Web 3 will bring a unique evolution in this regard.

BlockBeats: Although BAYC is a highly recognized community brand, community members can already start connecting and interacting with each other without games. Moreover, as the number of other IPs owned by Yuga Labs increases, the community continues to expand. Another way to expand the community, like Azuki, is through trading low-priced NFT IPs. I've noticed these two obvious differences, such as in the narratives of BAYC and GameFi, where users can utilize or monetize their gaming tools or equipment. What are your thoughts on this situation?

Daniel Alegre: I don't know if you're a member of a country club, but if you look at the membership system of a country club, you can understand our view on community development. You join this country club to interact with other members. You meet them in the main building, have drinks, and socialize. Then some people might say, "I actually enjoy playing golf; would you like to play together?" Great, let's go play golf. Then you start to build your social circle and truly engage in the sport of golf. That's what we are doing.

BlockBeats: Why don't you consider collaborating with other games?

Daniel Alegre: That's exactly what we are doing. We have created and launched our own games, and we are now starting discussions with third-party game developers to create unique experiences for our community. This is something we will definitely do. This is also why we are spending so much time in the Asia-Pacific region, as many of the best games and game companies in the world are located in this area.

BlockBeats: So, at least in the short to medium term, is Eugalyptus focused on building a platform for games?**

Daniel Alegre: While we provide gaming experiences, our absolute focus remains on storytelling, engagement, and community. Whether it involves NFT minting, gaming experiences, or partner experiences, such as the partnerships with brands like Gucci that allow you to truly experience a Gucci-like experience, these are all things we are building. Our current focus is not just on games but on considering multiple aspects comprehensively.

BlockBeats: So, what will the future ecosystem of Yuga Labs look like, where NFTs may include IP, games, and other series?**

Daniel Alegre: That depends on which series you are talking about. Obviously, we have CryptoPunks, orbits, and BAYC. For BAYC, I think our vision for evolution is to establish digital connections on one end, while on the other end, the evolution is that you will continue to have new experiences; no one knows what it will look like three years from now. But we are actually supporting the community so that they can engage with third-party partners in co-building. It could be gaming, shopping, augmented reality (AR), or virtual reality (VR); we want to enable the ecosystem to build itself rather than us building it. At the same time, ensuring community connections and ongoing storylines is what keeps our various communities connected. So it’s more like a metaverse digital evolution of our platform, infused with strong community elements.

A "War" with OpenSea: Is the PFP NFT Market Heading in the Wrong Direction?

On August 18, OpenSea announced that starting August 31, it would implement optional royalties, with all previously issued NFT series being subject to mandatory optional royalties after February 29, 2024.

OpenSea's move is quite puzzling, as it previously allowed NFT project parties to make choices, filtering out zero-royalty markets like Blur, but now it is turning to optional royalties and indirectly embracing zero royalties. Previously, OpenSea seemed to stand by creators, rooting itself in cultural tracks, providing support for new projects (like Launchpad), and forming differentiated competition with Blur outside of trading. However, OpenSea's actions have drawn criticism from Yuga Labs, leading to a halt in support for OpenSea's Seaport protocol.

This matter has also attracted the attention of many community members. How will things develop? Will OpenSea make changes? Or will Yuga Labs have its own NFT trading market like Pudgy Penguins, or settle with $APE?

BlockBeats: I know you have expressed many views on the NFT trading tax cap issue at OpenSea. Do you think the entire PFP NFT market is heading in the wrong direction?

Daniel Alegre: It's not just you; I am also very concerned about the entire NFT ecosystem. The importance of secondary royalties lies in creating an economic business model for creators to incentivize them to create in Web 3. The more we can incentivize them to invest in this space and create unique opportunities, the more everyone benefits from it. Whether it's consumers who have the opportunity to access these works, or the ecosystem built around creators or the creator economy, or companies like Yuga Labs that can help facilitate connections between communities. So, I am very disappointed with the direction OpenSea has taken, and I publicly expressed my views on Twitter: we are committed to finding ways for creators to receive the rewards for their hard work.

BlockBeats: How do you consider FutureHub, and are you considering establishing your own NFT market?

Daniel Alegre: The first thing to do is to ensure that we can establish partnerships with markets that support secondary royalties and help them grow, it's that simple. Regarding whether we are considering establishing our own NFT market, we are committed to finding the right solutions, ideally with others in this space helping to develop and build. The core issue remains caring for creators and protecting their livelihoods, and we will do everything we can to achieve that.