Exclusive Interview with Yuliverse CEO / Senior Investment Banker Chris Gu Er Master

About GokuShow:

GokuShow is a program focused on conversations with Web3 entrepreneurs, initiated by Web3 blogger Dog Brother (@Gokunocool). It aims to provide a stage for all Web3 entrepreneurs to showcase themselves, understand the stories behind them, and create a warm-hearted show.

Host: GoKu Dog Brother https://twitter.com/gokunocool

Guest: Chris Ancient Master: https://twitter.com/0xAncientTwo

Project Party Yuliverse: https://twitter.com/TheYuliverse

"Pokémon Go of the Web3 world," "Leading IRL virtual universe game," "Top 3 blockchain games in Japan," "A star-backed project supported by LIF Capital, Animoca Ventures, and Hong Kong Cyberport"…… With all these accolades, the CEO of Yuliverse—Chris, known as "Ancient Master," guest stars in the third episode of GoKuShow. From being a million-dollar investment banker forced to transition to Web3 entrepreneurship, to creating a Web3 star game project with an extremely low user education threshold, Chris Ancient Master shares his observations and insights in this industry, from not understanding Web3 operations to building a community that once exceeded Twitter in numbers.

Highlights:

• Project cold start, bottom-up, starting from the community.

• Mainstream chain games, including previous P2E projects, mostly adopt mining machine types, but compared to physical mining machines, there is a significant flaw, such as the need for power support and susceptibility to damage when purchasing physical mining machines. Virtual mining machines do not have these two issues, thus possessing perpetual life characteristics.

• The core of solving the death spiral is not to use a nested doll logic, but rather "value conversion," which means transforming existing communities, users, and investors into something more valuable, making this value market more magnificent.

• Lacking framework marketing methods, simply relying on channel promotion is not enough. The best method is still to guide users to gradually participate through airdrops, attracting and retaining them step by step. If you can effectively utilize this strategy, your project's chances of success will increase by 50%. Therefore, choosing the right channels and combining effective marketing strategies is key to project success.

• To maintain liquidity and cash out when needed, it is essential to set a reasonable volatility ratio. This healthy adjustment framework is crucial; although there may be changes, the basic principles remain consistent.

• The smartest players find it difficult to truly embrace consensus because they struggle to give up their interests in the face of money.

• In Web3, you can directly use your airdrops to attract users without needing cash investment. This is one of the biggest advantages of Web3.

• Collecting is a human desire, and the earliest Web2 applications also satisfied this desire for collection, such as grabbing parking spots and harvesting crops. This gamified behavior is very sustainable, in contrast to the short lifespan of games; gamification is an eternal process.

• I only need to say one sentence to people: "We are the WEB3 version of Pokémon Go," and they immediately understand how to play this game. This is very important because if the product threshold is too high and the learning cost is too great, user conversion will become very difficult.

The following content is from the GokuShow live discussion:

1. Million-Dollar Investment Banker Forced to Transition to Web3 Entrepreneurship

Dog Brother: Can you briefly talk about your entrepreneurial experience?

Chris Ancient Master: Of course, I used to work in investment banking, and the income level was decent, but the market was greatly affected after the COVID-19 pandemic. Since I previously worked on IPOs, I found that many domestic companies wanted to go public in Hong Kong, especially in the pharmaceutical, technology, and internet sectors. However, the pandemic caused financial statement issues, and business volume plummeted. The real estate company I was working for also faced problems, which led me to consider entrepreneurship. Since I had some research in metaphysics, I realized that the changes in the coming year would be significant and could be passive, such as being laid off. So I decided to start a business, investing in a location-based social app, transitioning from Web2 to Web3. This decision turned out to be very fortunate; otherwise, I might still be looking for a job.

Dog Brother: Why choose the gaming sector?

Chris Ancient Master: I personally enjoy playing games and have been playing for decades, from the earliest Age of Empires to CS, LOL, DOTA, and Nobunaga's Ambition. Later, I found my fingers were not as nimble, so I switched to strategy games like Hearthstone. In 2018, I participated in the Chinese, Asian, and American servers. There are also many TCG gamefi projects in the Web3 space, such as Illuvium and Skyweaver, which are trading card games where each card has trading value. I play card games not to collect cards but just for fun, ideally to relax. The learning cost for TCG card games is relatively high because the entire system needs to be learned.

Dog Brother: You are a bit like NetEase's Ding Lei, starting a business to play everything you want to play, focusing on playing. How did you create the Yuliverse project?

Chris Ancient Master: I was previously a small investor, but due to the pandemic, I couldn't continue, so we decided to reorganize the team and transition to Web3. We were quite proficient in Web2, so product iteration was quick, and soon our app was launched on Apple and Google. Although developing an app is costly, we wrote it in native code, outputting a set of code for Android and Apple, and our product capabilities were quite strong. However, we knew nothing about Web3 at first, so we sought outsourcing to help with smart contracts, but the quality was poor. Therefore, we spent three months deeply learning blockchain technology ourselves, and later everything was developed in-house.

Dog Brother: You raised a lot of star capital, including investments from the Hong Kong government. Before securing capital, were you operating with your own funds?

Chris Ancient Master: Yes, if we had entered this sector a year earlier, we wouldn't have struggled so much. But on the other hand, perhaps because funding was too easy to obtain, we became less diligent. When we first started preparing for financing, the Luna incident occurred, followed by the FTX event. We initially began looking for investors in early 2022, and it wasn't until early 2023 that we completed the financing. This period coincided with the token 2049 event, and the entire financing process took nearly 10 months. During this time, we had already completed product development, successfully established a seed community, completed the cold start, and captured the first wave of traffic from NFT FREE MINT and seed users.

2. Project Cold Start: Founder's Mental Journey and Strategy Discussion

Dog Brother: What should be done during a project's cold start?

Chris Ancient Master: We had no accumulation; we came from WEB2 and had no resources. If you have some resources in Web3, you can actually rely on BD to support and get the first wave of seed users. We purely built from the community.

There are essentially two directions for a project cold start: the first is bottom-up, starting from the community, which gives you many opportunities and time to experiment and learn. Each product point is different, and you need to achieve product-market fit, integrating with user personas. Moreover, the biggest difference between Web3 products and Web2 products is that the user groups are different; I am not just a user but also an investor. Therefore, you need to use the economic model as the core to unfold, rather than just making a product first. The economic model drives the product, not the other way around. The second is if you are very familiar with the gameplay and have previously worked on several projects, it is best to approach it from the top down. In the Web3 space, these two methods are relatively easy to succeed; everything else is quite difficult, and the worst is being stuck in between.

Dog Brother: I want to remind you that many project parties really make mistakes. Although they have accumulated in WEB3 and know many channels and communities, if your project does not run from the bottom up, and you have not deeply connected with the community, without a good slogan or a memorable phrase, then your first impression, including brand PR and product quality, will not pass. You can spend money to find channels, and you can indeed find very popular channels, but you won't retain users. You need to have a consensus, which can be an asset issued or the founder's IP, and then invest in channels at the right time. Many project parties spend tens of thousands of dollars to throw their budget at various KOLs and chain game communities globally, but in the end, people still can't remember them.

Dog Brother: Have you experienced this stuck-in-between phase?

Chris Ancient Master: Yes, it was last year, from July to October. During this time, we spent a lot of time learning, not making money. NFTs were basically user-generated, and we did not profit from NFTs, completely going for a fair launch, which made it difficult to maintain price expectations. If we had pushed for a governance token earlier, the entire project and investment might have gone down the drain. It was a process of feeling our way across the river, with opportunities for trial and error and learning. By November last year, we seized the opportunity to start the first wave of airdrops, and now our Twitter followers have increased from 180,000 to nearly 500,000, without using third-party platforms, and our self-built website conducted the airdrop, with Discord users approaching 300,000. In fact, we have more users on Discord than on Twitter.

If the team has members with investment banking experience, the advantage lies in understanding how to handle investor relations; every team needs such a person. But it is best if this person is still the founder, or at least a co-founder, otherwise, it will be difficult to communicate smoothly with investors. Additionally, good character is also crucial; besides ability, collaboration with the team is indispensable.

Dog Brother: During the project's cold start, were there any bittersweet stories?

Chris Ancient Master: I think anyone who has done a startup will have some bittersweet feelings. In a project, if you solve the cold start problem, subsequent issues are not a problem; you can take action with limited resources. I really like a blogger, "Crypto v," (https://x.com/thecryptoskanda/status/1754671284095709301?s=20) who is the founder of the three-pan theory, categorizing token economies into three types: Ponzi, mining machine dividend, and mutual aid. You need to clarify which model the product will adopt, and everything should revolve around this; the entire narrative serves this purpose. Mainstream chain games, including previous P2E projects, mostly adopt mining machine types, but compared to physical mining machines, there is a significant flaw, such as the need for power support and susceptibility to damage when purchasing physical mining machines. Virtual mining machines do not have these two issues, thus possessing perpetual life characteristics. In July last year, Stepn changed NFTs to have life, mimicking this concept.

Dog Brother: Let me clarify this. First, if a project is profitable and wants to distribute dividends to retail investors through TOKEN, this violates the SEC's attributes; only gray market projects are suitable for this logic. If a legitimate project party uses this logic, basically, if you grow large, you will be targeted by the SEC, which violates securities laws, and it is no longer a simple NFT.

Secondly, if mining itself has no wear or tear, and you are just extracting from the entire economic model, this will also create a problem where the model cannot cover existing users, which tests the ability of the incremental market. The core of solving the death spiral is not to use a nested doll logic, but rather "value conversion," which means transforming existing communities, users, and investors into something more valuable, making this value market more magnificent. You will find that many small but beautiful projects are passively pushed to transform and change, and then the whole thing grows larger. Conversely, if a project starts out very grand, you will find it increasingly difficult. Therefore, I suggest that all projects keep their scope smaller in the early stages, build up the early community first, and then expand.

Dog Brother: Does the Yuliverse team have high monthly costs?

Chris Ancient Master: About 40 people, around $130,000 a month, operating in Malaysia and Hong Kong. We have framework marketing methods, including cross-industry cooperation, different companies, and different project collaboration methods.

In project operations, planning and execution are crucial. Typically, we will arrange work plans for the next two months or even a month and a half in advance to ensure that the entire operation process is orderly. When one phase is nearing completion, we will start preparing for the next phase's plan. In the early stages of the project, 80% of the technical investment should support market expansion and operations, rather than just focusing on product development. Because if the product team only focuses on developing the product and neglects aspects like traffic generation, incentives, and frameworks, it will inevitably lead to failure. The entire user conversion chain should be designed early on, integrating the issuance of NFTs or TOKENS with product incentives to ensure smooth product promotion and user conversion. This comprehensive planning and execution strategy can effectively enhance the project's success probability, ensuring smooth development and good performance.

Dog Brother: In the Web3 world, choosing quality channels is crucial. Why do people prefer to use Twitter over YouTube? Why does TikTok have many users but choose to post content on Twitter? This is because Twitter is essentially an information flow platform, while TikTok is a short video platform. From the perspective of visual communication, there is an essential difference between the two, namely the degree of information fragmentation. The degree of information fragmentation on Twitter is even higher than on TikTok. If your project cannot attract users to stay, even if you invest a lot of resources, it will be in vain. Therefore, if you lack framework marketing methods, simply relying on channel promotion is not enough. The best method is still to guide users to gradually participate through airdrops, attracting and retaining them step by step. If you can effectively utilize this strategy, your project's chances of success will increase by 50%. Therefore, choosing the right channels and combining effective marketing strategies is key to project success.

3. Airdrop is Crucial When Designing Tokenomics

Dog Brother: Can you elaborate on tokenomics?

Chris Ancient Master: First, this can be divided into two types. One is long-term development, and the other is short-term "rug pull" operations. If you choose long-term development, you need to be clear about the source of funds, understand the flow of funds after entering the platform, and the proportion that users will take.

Additionally, to maintain liquidity and cash out when needed, it is essential to set a reasonable volatility ratio. This healthy adjustment framework is crucial; although there may be changes, the basic principles remain consistent. Otherwise, it will be difficult to control risks. Lastly, avoid the situation where funds run out without knowing the source of profits. In Web2, the position of an actuary is very important in gaming companies, as their job mainly involves predicting the fluctuations of asset values over specific periods, including potential triggering behaviors.

With the rise of Web3, the demand for such positions is also increasing, and actuaries with annual salaries exceeding one million are no longer rare. Therefore, it is recommended that game planners with strong mathematical abilities actively embrace Web3 and seize this development opportunity. A detailed understanding and correct application of Tokenomics will positively impact the long-term success of the project.

Dog Brother: I remember at the end of 2022, we discussed how GameFi could break free from the death spiral. The discussion was very heated, and ultimately we proposed some solutions, one of which was to first establish a points platform and then conduct airdrops. Everyone is very clear about the operations of this account, so this problem can actually be solved.

I have always believed that the dual-token logic puts a lot of pressure, and a slight misstep can lead to many flaws. Moreover, the smartest players find it difficult to truly embrace consensus because they struggle to give up their interests in the face of money. However, you must show your charm; only when you display your charm can your consensus truly shine. Therefore, in Web3, many teams from Web2 encounter adaptation difficulties after entering.

The most important point is that these teams do not understand asset promotion. The breakout effect and enhancement of consensus brought by a star-level asset cannot be measured by how much advertising budget is spent. If you can successfully pull your core asset, even if it is only for 20 days, the whole world will recognize your project. This indicates that asset promotion and influence are crucial for the success of GameFi.

Chris Ancient Master: Looking from the top down, in Web3, all token economies that go public need to reserve airdrops. This is like a user funnel, which can bring in the most users first. These users become your airdrop users, meaning they are stakeholders. They may develop an interest in your product and conduct research; otherwise, you are likely to lose this batch of users. Therefore, airdrops can be understood as the operations you need to spend money on to attract users, buy users, and convert them in Web2. In Web3, you can directly use your airdrops to attract users without needing cash investment. This is one of the biggest advantages of Web3.

However, before the airdrop, it is essential to consider how each level of the user funnel is formed. Only by clarifying each link of the funnel can you better attract and convert users. Therefore, reserving airdrops is a very important aspect in Web3.

Dog Brother: How did you come up with the idea to work on LBS?

Chris Ancient Master: There are actually several reasons. First, we chose this product form because we have relevant foundations and accumulations. The second reason is that I have played similar products before and read an article about "collecting is a primitive human desire." You can imagine that when you play a game, sometimes you encounter treasure chests, and you can't help but want to open them; or you see a door and want to go in and take a look. In fact, this behavior is not fundamentally different from squirrels collecting acorns; it all stems from human nature. Collecting is a human desire, and the earliest Web2 applications also satisfied this desire for collection, such as grabbing parking spots and harvesting crops. This gamified behavior is very sustainable, in contrast to the short lifespan of games; gamification is an eternal process.

Another reason is that we chose the easiest-to-understand game as a reference, which is Pokémon Go. It has 150 million users worldwide, and if we can convert 1% of them, that would be 1.5 million users, which is a very large number in the Web3 space. I only need to say one sentence to people: "We are the WEB3 version of Pokémon Go," and they immediately understand how to play this game. This is very important because if the product threshold is too high and the learning cost is too great, user conversion will become very difficult. Based on these considerations, we ultimately determined this product form.