FTX’s Gaming Strategy | Amy Wu

Foreign.

I'm here today with Amy Wu. You guys should probably know Amy, if you guys ever listen to crypto podcasts or if you spend any time on crypto Twitter. I hope that you would know Amy. Amy has an awesome background inside Venture Partners. Then an operator and CFO at News Cred, went over to Discovery where she was an exec, I think in Singapore. CFO of APAC, if I got that correct. Went over to LightSpeed, led investing in gamer and consumer and now she's at a really small little startup, you guys might have heard of it, ftx. She's leading venture, maybe also M and A, maybe also commercial initiatives, I don't know, we'll find out. And FTX Ventures launched recently with a $2 billion fund, I'm pretty sure. So Amy, how did I do there?

You did great, Yano. Thanks for having me on.

Yeah, of course. So Amy, all right, we're going to talk all the, all these fun things. Metaverse, crypto, gaming, all that fun stuff. I have to ask you on the record here, while we're recording, you missed the last podcast because you were working until 5am, so understandably we had to reschedule. I understand. What were you working on until 5am?

Well, I'm a bit nocturnal of a person and so my natural hours are just like, I feel like, you know, at night, kind of like post midnight, I'm usually jamming on like emails, everything I need to do because like during the day so many meetings, I think every investor kind of experiences that. And I really love like the quiet of the early hours to just get through stuff. So like, you know, I'm usually in the office with a few devs like around those hours and, and it's really awesome like you know, at ftx, like in the Bahamas here, like you know, we have about 100 people at the office and it's kind of cross functional. We've got some folks from customer support and like kyc, aml, like settlements and then also some engineering and commercial BD folks here. Um, Sam, I actually sit across from Sam in the office. Um, but I mean our office is actually quite small. Um, and, and so yeah it's, it feels like a hacker house actually. Um, we always encourage like companies to come out and visit us in the Bahamas. They can crash in our office and, and work out of here for a bit. Um, and there's like people coming in like you know, a lot of nocturnal devs and myself.

Nice, nice. That's awesome. I'm sure. Man, I gotta make a trip down there. That sounds like good vibes. So it was interesting prepping for this, right? Because there are so many angles that you can go with this. We can like metaverse, crypto gaming, like NFTs, which I think is where, where I want to take this. But you also manage this $2 billion fund and I'm assuming you're investing not just in gaming stuff, but like when I think like, oh, Amy, Amy's coming on the podcast. What should we talk about? Also I just want to start pretty much as high level as possible for you. Just like what is your framework for how you're viewing NFTs Gaming Metaverse. In my mind those all kind of coalesce around one thing, but you might tell me that you see them completely different. What's your framework for how you view this right now?

Yeah, it's a really good question. It's moving so quickly. I would say that, you know, for folks like myself that are, that have the fortune of really investing and working pretty deeply in it, the landscape is quite frankly changing almost on a daily basis and certainly a weekly basis. And I would say that I. So for context, you know. Yeah, I mean, so I'm not, I'm like, you know, heading up our $2 billion venture fund. And so from there we invest in across a lot of things, like we have multiple investors on the team. I focus a lot on web 3, so I am really deep in the NFT and gaming worlds, social tokens, et cetera. Others do defi and some of the other categories. And then also ftx, we are growing our gaming business as well and we have our NFT marketplace. And so this is a huge part of our operating plan and priorities on the FTX side in addition to ventures. And so we have this really interesting view into what large incumbent like Web2 companies are doing trying to get into Web3 and that like we actually are trying to power a lot of that transition with ftx. And then we're also investing in new teams that are building natively in Web3 kind of gaming NFTs and, and so it's pretty interesting to see these two parts of the world. So I would firstly like there is a separate movement happening in the NFT world and then in the gaming world and they're like the similarity is non fungible tokens. But I would say the use case and sort of the objectives and vision of some of these projects that are being built are quite different. So starting with the NFT side, what we're seeing is some projects breaking out and in Building brands, right? So if you think about, for example, bored at Yacht club, definitely cryptopunks, but I would say, like, projects have evolved quite dramatically in the last, like, nine to 12 months, I would say, or less than that. Nine months, right. Pixel Vault was actually only founded, I think, you know, maybe like May of last year. And basically what, what some of these, what some of these NFT projects are doing is building essentially a mainstream consumer brand. And, and I think aspirations would be like an LVMH or like Disney and becoming like, essentially like a. You're creating very valuable IP and IP that increasingly mainstream audiences know and, and are buying. We'll get to that in a second because there's some complications when the floor price is what, 250,000, you know, dollars and is actually quite inaccessible, right. To a lot of people, but then using that valuable IP and starting to spin out additional businesses from that. I find this fascinating. Like, we're, we're investing in projects. Like, this is like, I think this is absolutely a future model for NFT projects. And there's also a lot of innovation in IP rights. Right? So, for example, if I own one of these NFTs, like, do I need to give the core project rev share, like for me to do anything with this ip, Can I do whatever I want? Can I actually create a game with my own, like, nft? And I think that, like, some of these projects, like bored apes, have been really experimenting. For example, their framework is, you have an ape, you can do anything with that ip, you can create your own merch. And it has not been a paradigm that traditional brands have taken. They're very protective of their ip, but has done incredibly well for projects like board apes to really proliferate and extend awareness of the brand. And so, like, you know, really find that fascinating. And then you have like, the dao components as well, very closely tied with NFT projects because these projects are usually founded with a very decentralized, you know, ideology. And so, you know, they are launching daos or, or, you know, contributing members are creating daos and they're thinking through, like, what are the, what are the different, like, ways of conducting like basically a brand business, like in a Dow format. So I think, like, so much experimentation and, and innovation going on in this space right now, we're super excited to follow that. We're very excited to invest and so, you know, we'll love to continue meeting projects that are in the space. I would say there's like, we need more projects and more teams are trying to build the Next brand. What there is an overabundance of are picks and shovels businesses in this space. I understand the interest of teams to create that. However, I think there's something like 1,000 NFT marketplaces right now, if not more. And marketplaces have their flywheel businesses, maybe less so in Web three, but certainly, um, like, you know, there's not going to be a thousand successful NFT marketplaces. There might not even be 10 at the, like, you know, I mean, the.

Nature of marketplaces says there should be two. Right. Or maybe three.

Yeah.

And it's weird. It's weird. You actually, I actually thought that you would see this earlier with centralized exchanges, right? Like, if you look at like rideshare and you've got like Uber and Lyft. If you look at collectibles, you've got ebay. If you look at homes, you've got Airbnb, maybe like vrbo, which when you look at I, I, I, I actually thought that we were going to see like a consolidation, big more consolidation in centralized exchanges than we've seen in the past. Like, I thought by 2022 we would have like, FTX, maybe Coinbase and Kraken and Gemini and Binance and a couple others. There's still like hundreds of these things.

Yeah. But if you look at volumes, it pretty much is like, consolidating.

It is consolidating.

Yeah. And will increasingly be. So, I mean, there's like a very steep off from like the top. Let's Call it like 5 exchanges if you include like, you know, spot and derivatives volumes, like, very steep. And so I think the top five probably make up. I don't, I don't know what the latest is now, what it is like 90% of volumes, like, or like 80%, like, it's something like it's the majority of volumes.

Yeah. So this is interesting that you need more like more of the board apes, Right. Who are almost creating IP around this. And like, I guess you could make the comparison of Bored Apes to like, Supreme. I know you mentioned like, lvmh. LVMH is obviously one of the largest, like, largest brands in the world. And so I don't think, like Bored Apes is there yet, but obviously they're trying to do that. And I think, like Supreme. Yeah, yeah. You got to start some, you got to start somewhere though, right? You got to start somewhere. When you think about, you obviously have to put on your. I think a lot of folks maybe who are listening to this or on crypto Twitter are approaching it from their either like a retail investor lens or just like an artist and like a collector lens. Right. Maybe from a collector lens is the best way to look at it. When you're looking at it though, with your investor head on, how do you determine like, oh, this brand, this NFT project is going to create the next supreme or lvmh. Right.

Yeah. It starts with the core team and their vision. It really starts there. Like, I think there's a lot of people, you know, and I'm not saying like any of it is like a wrong approach. Like, like, I think it's like awesome for artists to like want to create a collection and it's a work of passion. It is like arts. Right. And that's very different than wanting to create a brand and different aspirations and playbook. And so we're, as a, as a venture investor, we're looking to back the ladder, I think as kind of like NFT investors, you could actually be investing in all of the above. Like the motivations of the founder, probably like less important other than the fact that like, you know, hopefully they're, we need to know that they are supportive, supporting the project. But I think in terms of trying to build a business around it and also what type of business? Decentralized one on the spectrum of like decentralization, right, or centralization, like that's. And how do you want to do it? Do you want to actually create a media business in house? Do you want to actually completely outsource like and, and lice. It's like a pure licensing business. The IP is what has value like in these businesses right now. And, and so this is like understanding the motivations, the vision, the. The playbook is strategy is where like I'm focusing a lot of time feels.

Like basically one thing that you can kind of keep coming back to as the underlying thesis behind crypto is that we're not doing things that differently. We're almost just speeding up the, we're just speeding things up by like a factor of like 10 or 100.

Right.

Like, if you look at just how financial markets were created in crypto versus traditional capital markets, we're, we're recreating a lot of capital markets right now. We're just doing it really, really quickly. And I think you're starting to see that with gaming, which obviously I want to talk to you about too. Right. Traditionally it takes like five to seven years to build a good game. I'm curious. One of the things we'll talk about later is like, does crypto 10x that or do you still need 5 to 10 years? I think my question here is like with NFTs to create something like supreme or create like LVMH. I don't actually know this but like it feels like 100 year brand to me. I don't know when they were actually created.

Yeah, absolutely. Yeah, I think so. On the gaming side, yes. It takes years to create a great game depending on the genre. Right. You can create a casual mobile game let's say in like I don't know.

Six months like wordle or whatever. This.

Yeah, there's no shortcuts to making a great game. Like there really isn't. I think crypto will like help with user acquisition and retention and also like deepen your game economy. Open your game economy, allow ownership of assets but speed up game creation. It does not and I think like people are really trying to like launch their games as soon as possible but it's like you actually like, you know, as an investor it doesn't faze me for a gaming team or you know, Web3 gaming team to like say like yeah, we're going to be building this for the next two years so that's great. Like I think it took like slim and at you know, at riot like seven years to build Valorant like and, and it was worth the time. I mean such an amazing game, right? Such a deep one and there's no shortcuts with that. Like you know I was investor in Splitgate which, which had a spectacular kind of like like phase two like launch out of beta and yeah it took me five years like and that's like pretty common because like typical games are so much deeper like on the AAA side than, than your. Than at least the current like casual like play to earn game is right now again like casual games are a great form factor whether it's Match three, I haven't really seen that yet. Match three like Web three game but certainly a lot of people are doing like auto battlers and, and like and like CC CTG type games and those are probably like a little bit faster to build. You can do it within a year and could also be great genres for, for crypto.

Let's get into gaming. I mean you strike me as someone who just seeing your smile and your passion talking about these games as someone who's not just investing in them but actually plays them as well. And I think, I mean maybe I'm wrong there but I think that one thing, I mean obviously you've played a lot of these games. The like I started playing like Axie. Right. Decent user experience. Not I think, you know, everyone kind of knows it's not like the best game in the world. Uh, and then one thing that was kind of like mind blowing for me was playing Defi Kingdoms which was again, honestly not that great of a game. But the game for me became Defi inside of the game. Right. The game was like okay, I can go farm, I can go get Yield. I can go, I can do go do. I can go on these quests. Right. I can actually I bought my player costs like a decent chunk of change, but it's an nft. So now the game and Kyle from Multicoin. No, it was Tushar from Multicoin talked about this on a podcast the other day. Like the game becomes optimizing Yield which is fun at least to some people. Like me it's really fun, but it's a completely different game.

Yeah, I think it's niche. Like I think there like a. A percentage of people who they find the fun. Like every game finds a fun and in some of these cases they found it. It just happens to be that that fun is optimizing yields and I consider them games because like again like grinding for minerals is also part of a game. Is that fun? Like I don't know, like it's a meaning behind it that's fun. Right? Like, like in an mmo. Like. And so I think this is a category. I think this is a interesting like web3 created genre of, of gaming that will continue to persist. And I think like there's like Yield Guild like guilds will be like kind of created around that and, and that will continue to persist. But this is I think a niche category. Like and the 2 billion gamers in the world are playing like casual mobile games and, and other and you know, shooters and other genres.

Yeah. How far are we from having games that are like fun and honestly addictive? Right. I used to game a bunch of. The reality is these games are pretty damn addictive. How far are we from having games that are like web3 native that are both fun and addictive?

So a lot of them are in built. Are being built right now. Right. And so I think or the end of this year there's going to be a few like really exciting projects launched by some of the biggest gaming companies in the world. Right. They're going to be like launching kind of like either like a forked version of their, of an existing game that they have that's already popular or you know, dropping NFTs and embedding NFTs into existing popular games. Like you'll be seeing that increasingly I don't think like Ubisoft and other like, I think like those are like kind of first forays into this. But generally like we're in conversation with most of the biggest gaming companies in the world like the, the CEOs and the executives and in these companies generally like are excited about the, the innovative power of like NFT tokens and, and they have been studying it and they've been thinking about how to organically and, and you know, sort of launch projects in the space like not as money grabs because gamers like can tell a difference immediately between money grab and, and something that's really like created with care and thought. But. And like, and then there's like studios with like amazing like stellar kind of like AAA backgrounds or like deep like mobile gaming backgrounds that are creating these as well that like like the timeline of anything from like 12 to like 36 months kind of launch. Right. Like it's. Yeah, these games take a long time to build.

Yeah. What's the approach to investing in these kind of. So like when I think about people who are going to market with this right now you've kind of got like the specific games. You've got like Alluvium and like Defi Land and Ember, Sword and Guild of Guardians and those kind of things. Like this is going to be a massive, massive year for tier one crypto games coming online. Right. But then you, you've got like another strategy which is like these almost houses, like gaming houses that are being created like Gala games and like Animoca and things like that. And then you've got. It's going to be from the other direction. Right. Where you just mentioned you're talking to all the big studios. I'm assuming all the big studios want to get into this. They just want to do it in the right way. Right. Once AXIE hit. That was the impact of Axie. Once Axie hit, every single game studio had to at least understand this stuff. And so what is the right approach from an investing from. From putting your VC hat on. Like are you investing in the game? Are you investing in the studio? Are you trying to like get in bed with the traditional studio who's now getting into crypto? What, what is that approach?

You mean the different approaches or like from, from builders?

No, I think like from an investing lens, yeah.

There's a lot of opportunities to invest. Like generally my thesis around crypto gaming investing is not that different from just traditional gaming investing. You Know it's an incredibly hit driven business and you can drive like temporary traffic to your game by heavily incentivizing them with NFTs or tokens and airdrops, et cetera. But that will not, there's no longevity in just that, right? You need the actual engagement and the actual gameplay. I mean like there are, and if you look at there's probably like there's north of 10,000 games that launch on Steam a year. There are so many games that launch in a year and most of them just like don't get any traction and, or they get temporary traction, they can't maintain it. And there's like a handful of games that defy gravity and are able to become like you know, played and get millions of players in kind of a couple of years span, let alone like 10 year span like an Eve online or like some of these big NMOs like World of Warcraft, like the Diablo franchise, like basically creating franchises, right. And cod, et cetera. And, and so like as an investor, you know, I love to invest in sort of like two dozen gaming studios. Whether some of them are spin outs from like existing incumbents that are excited about web3 or like indie studios that are spinning out. I think those can move faster in a lot of times. But not necessarily from like the conversations I've been having with like large publishers and, and then you just hope that like a few of them will like do well. Maybe you have like one or two hits from like two dozen investments, right? Like that is sort of, it's like the most power law dynamic like success like and I think like with web3 games and the rise of that last year, like there is a huge influx of capital into gaming suddenly and I think a lot of learning of like what it takes to succeed and create a hit. It's really difficult to build a game and as a gaming investor will also experience like you know, you have a hit like you, they, they have a massive spike in users when they, when they launch. Um, but if you didn't have the know how, if you launched a free to play game to actually operate, live, operate, create content like you, you will as quickly lose like 10 million players as you will have gained them. And, and so the, the knowledge necessary is like extremely deep and people generally don't just like figure this out from scratch. Like I think it takes an extraordinary team to figure that out. And that was riot basically. Like the founders like actually didn't have a gaming background but they were just, I mean they were extraordinary founders and then, and so like experience, game design experience if you're building a free to play game, like LiveOps experience, these are all things that like either like I would want to find on the founding team or something that they're keenly aware they need to bring in house.

Right. One thing that strikes me as different though from traditional gaming and crypto gaming is there are just more options to invest in crypto, right. Like if I, if I want to invest I see like a runaway game or something like that, I'm going to try to find who's, who's behind it, right. Whether it's like Sony Tencent, Nintendo, Microsoft Blizzard, EA Epic, etc. Right. And I'm going to invest in that, that maker. In crypto you can buy the in house NFTs, you can buy the token of the game, you can buy the token of the studio, you can buy equity in the studio.

Yeah, it's so true actually and it's interesting. We kind of do some of all the above. Primarily we're equity investors because I think you know, in sort of like the traditional like art of like venture investing these projects are looking for long term alignments, right. And supporters and people who will be there with them as they're thinking through critical, critical junctions in their decision making when to start a second game like etc. And so the most value add is to invest as equity investors and like really be along for the ride like long term but along the way you're totally right. We're definitely looking at the different areas like we can market, make their token, you know, at, at FTX and we can like, you know, like list, we can do token listings, we can invest into the NFTs and deal and a lot. And so those are definitely all avenues that we can deepen relationships.

Yeah, gaming has always been the like the thing that clicked for me in a way. Maybe that's just because I used to play games as a kid and like I remember playing Halo a bunch and like getting to you know, level 50 and then I got my like little skulls and I got my unique armor and then I could never take it out of the game when I went and played Call of Duty and like I just, maybe it just, I think it clicks for people this basically composability and just the like interoperability of these games. Right. I can do one thing in one game and then I can take the skins and I can, I won't lose the value in that game. I can take the value somewhere else. When you see something like, like Microsoft, right Like Microsoft's making some massive acquisitions in the gaming space. They're creating, they're going to create this big interoperable world where you've got all the best games are inside of one place. And you could see a world where they actually create interoperability between all of these games. Does that concern you? Do you think that world ends up getting bigger than crypto for the next decade and then it takes a long time, but crypto games overtake it eventually. Like, how do you see these, like the interoperability of Microsoft games playing in with the interoperability of these crypto games, if that makes sense.

Gaming companies have long thought about interoperability, right? Like Activision Blizzard has long had the portfolio of games where they can basically have like a sort and which they actually have, right? Like was it Thunder Fury, like Sword is like exists in a couple of their games. So when you talked about interoperability, there's like a. Do you actually just. Let's say I have some gun in one Activision game that I want to play in another one, or let alone like another studio. Like first, like, were the two games both like coded in Unreal engine? And so if it's not, if it's one's in Unity, one's in Unreal, like, okay, well how does that work in terms of porting over the game assets? And then let's say you solve that, you can, you can actually replicate the visual like the art of that object, right? You can call the same thing, but it could have completely different power and, and everything in another game. And so you basically get interoperability from like a, from like a item perspective, but it's not the same asset. Like, are you actually taking this literally the same item from one game to another. So then when you do that, like how does that work? Like, do you that that impacts the game economy of the second game? Like what are the powers imbued to that item? Like, you know, much easier is like you have a skin, you have like a shirt for your avatar. Interoperability of avatars, like probably makes sense. But again I would say like probably your porting over the image of that avatar potentially. And then like, and then that that avatar would have be subject to like many different rules for this new game. And so there's a lot of shades of gray and interoperability. I think it's super exciting. It's actually hard on the tech side. I think there needs to be like primitives built to facilitate this transfer. Like different assets actually like parts of like one Gaming item, like to have interoperability. And so there's definitely opportunity there for builders who want to build in that. And, and then you have like in web3 games interoperability, like just even having a game cross chain is something that is like really hasn't been like, you.

Know, having having anything cross chain, it appears is a little harder than people thought.

Exactly. So I think like there's a lot of challenges there. That which all is like separate from. Okay, now like, you know, Microsoft has this like one of the best like collections, you know, game collections in the world now. Right. If not the best, it's pretty much them or like versus Tencent, I think. And, and then, you know, it's amazing for game pass. It's like an absolute coup. Like they could do a lot with it like in terms of subscription pricing and access to games. Right. And, and I think that's. But I think it will take them years to like integrate like the teams fully and. But I think really looking forward to seeing like what Microsoft is going to do with their portfolio of like tremendous like games now. And that's very different from I think like just Web three games achieving interoperability within like one hood versus like across different games.

So just to make sure I fully understand the argument then is like that it's easier that it just becomes easier to create interoperability when you're essentially just building on one database. Is that right? Like the database being Eth or Solana or something like that and that hypothetically, yeah. Microsoft owns all of these things, but they're built on an entirely different stack.

Yeah, exactly, different stacks. Like basically different stacks even within one studio. Like, you know, Activision Blizzard. I think each of their, each of their games are, are kind of like you have kind of had their back end and sometimes these students, for example, supercell. Like the way that there's. Each of their studios are set up is that they have like a lot of autonomy. However, I do think like, and I was just talking with like a friend yesterday who's like a gaming exec who's talking about like, you know, they have like a few dozen studios within, within their kind of like the company and talking about like how they're thinking about building a gaming platform in which you can actually push out different game mechanics, different mini games, et cetera, across different games in a much more like ab testing, iterative way. And like then that is like, I think the precursor step to interoperability. I mean you could say that is. But, but the core challenge is the.

Technology one did this interesting episode last week with this guy Tom, Tom from Jane street and we were just talking about like the financial market stack, right? Like who, who owns the back end? What is the back end? Who owns the middleware? What is the middleware? Who owns the front end, what is the front end? Obviously front ends kind of like less of a moat than a lot of the other things. But what is the crypto, what is the gaming stack right now? Like who, who is this? Like where does Immutable X and like forte and like all these things like companies I see in the news and things like that. Like what is the back end and what is the middleware and what is the front end here? Well obviously the front end is the.

Game, but the front end's a game. And then there's like the game engine dictating like the core like gameplay and but then in the web 3 side like there's a couple of things to consider. Like there's like you know, do you want to, do you want to go the non custodial route or like the custodial route or something in the middle where you want both. And so when you're like a large gaming company, you're publicly traded gaming company like you will want like they're pretty much required if they want to go into crypto to KYC users for example, right? And if you're a small studio and like you're really not going to be under anyone's like watch at least while you're like small something like a kycing a user for example in certain cases like will actually slow you down in terms of traction. So how do you like get around that? This is an area that for me at FTX we are like closely watching, exploring like how do you like how do we stay completely compliant while also not while reducing as much player friction as possible like for these gaming studios. And so like in terms of the infrastructure, like you know, what are the things to consider? First of all you need a wallet and that can be custodial or noncustodial and that wallet is going to hold any sort of crypto assets, right. Whether it's an in game token eventually launched or you know basically fungible and non fungible assets and those will be sort of held on a blockchain of a scheming studios choosing. So for us ftx we're chain agnostic, we can work with a number of different chains. In some cases like Immutable X they have partnered with starkware and so that's the chain that you're going to get with them at least for now. And I think Forte also is chain agnostic as well. And others have their own sort of decision. I think Gala, I think some might have their own chain that they're trying to build. And like you know, there's Ronin for example, like Axio Infinity. In the future they have like third party games building on it. We'll probably want them to use Ronin for example. And so for ftx. So like basically like on our product side, if you're a gaming company that wants to like do anything, web3 we can provide everything except for the blockchain. And, and so like depending on which vendor infrastructure and vendor it is like they will provide different parts of that stack. Right. So and I think a lot of people have wallets. Like we do custodial wallet, we do non custodial wallet integration and then they can like facilitate a primary secondary NFT trading as well we have the NFT marketplace that can be fully white labeled. Like we also have like you know, licensing crypto, fiat on ramps like compliance. There's all of that. And then, and so I think there's. But the devil is completely all in the details, right? So if you think about like a gaming studio is thinking through, okay, well I want my player to have a seamless experience as possible. I already have accounts with my game and then if I, my player creates account then that tees up a crypto wallet on the back end. As a player I don't need to even deal with crypto. Like I, I can just play the game. I don't want to, to think about the fact that my, my in game currency is a token. I don't need to think about it. You know, like and, and I think like in the next two years if like as these like larger gaming companies are launching, you know, web three versions of their games, I actually think it's possible the vast majority of the players won't do anything with their crypto assets. Which is why like I mentioned the game, the gamefi element is, is a niche part of the audience actually like the much larger gamer population doesn't know anything about crypto, is skeptical about it, is worried about it and doesn't really want to think about it. They just want to play a fun game. And so, and so I actually am hugely bullish on gaming studios that want to obfuscate like some of these elements of crypto to provide the safe gaming experience. And then for the segments of their audience who do want to trade their NFTs and trade tokens, etc. Like are totally free and flexible to do it maybe through a dax, maybe through like FTX exchange, you know, whatever is the integration path that they want they choose to go down. But like it's like how you implement the crypto is actually where a lot of the thinking needs to be.

If I'm reading between the lines here, you've got like okay you've got the back end is like the blockchain, right? So you've got like Solana or Ether, whatever. The front end is the gaming FTX compliance, KYC, the wallet, NFTs, on and off ramps, exchanges that FTX can cover the entire stack, right? The entire middleware stack. And do you think that FTX's gaming business could actually be bigger than its markets business? Which seems crazy but when you look at the revenues of Sony I'm going to get these wrong but I feel like the range is probably 25 million and like 10 cents. Probably like their gaming revenue is probably like 15 billion or billion, not million. Like these companies are in like the tens to 30 of billion in gaming revenue. Could FTX is gaming business be larger than its markets business?

I mean it's possible. I will say that like you know our, our like you know we're not game makers, right? Like I think what we are is we, we are really great at like facilitating crypto transactions and having like we think like world class products to do so. So if you're like if somebody's going to buy a token or buy an FT and trade that and list that like that's where like the infrastructure side is where we really excel and then you know, and then also just like being the most compliant like we like to think company do. So I mean last year we spent $1 billion on licensing. You know there's very few companies that like else who have done that in crypto and this is licensing that we acquired or built out across the globe like over 160 countries. And so like I think that do we want to. We, we think that like in a future world with mainstream crypto adoption where like many companies are embedding crypto transactions in some way like and if we can power like a meaningful fraction of that, that can be bigger than our, that can absolutely be bigger than our exchange business. And of that like you know gaming we think is one of the most exciting and interesting categories because I mean I think last year there was like $200 billion of like you know, in game and game spend and if it's a fraction of that is going to be like crypto related and actually we think that crypto will actually increase the size of that pie significantly or has the, has the capability of. And, and if we can be a part of that from the transaction side, like yeah, it could be a really, a huge business for us, like really exciting and I think we're positioned well to do so.

What, what else outside of gaming is going to be big there for ftx? I think you guys did a deal with stock twits if I remember correctly.

Yeah. So in terms of like powering crypto transactions on the back end the right now like lots of fintechs and are looking at how to actually create a, the ability for their users to, to trade crypto like buy who sell and and these are some of these fintechs have like you know, tens of millions of users right now that either like they're serving them with like stocks or.

You know like revoluts and Monzo.

We would love to be their partner to power the crypto side and you know I think like we could do so in a very. There's a lot of different players that can do that and I think like the exchange though is a source of liquidity so we could do it at a more cost effective way for these partners like then almost any other partner they could go with.

And you come with the licenses too and Licenses, yeah. Back to the gaming side of things. Like one thing that strikes me as maybe not a good model is like I know everyone's really excited about Play to Earn but it feels like Play to Earn can extend into like pay to play which extends into like Pay to win. And pay to Win becomes very bad. Right? And pay to Win might be like oh, there's this like almighty sword and the sword costs a million dollars. And like okay, I'm CMS or like I don't know, three arrows or something and I come in and I like buy the almighty sword and I crush everybody. Like that ruins the game. Right? And I think like there's pay to have power and influence and that you see that all the time in games like pay to pay to have power to and influence and that's fine. But pay to win is really, really bad. How do games where real money is involved here for the first time ever. Like how do you, how do you stop that from happening?

Yeah, it's interesting because pay to win, Pay for power are mechanics that have like existed in games I guess Money.

Has always been in games. What am I talking about? Yeah, money.

Yeah, yeah, yeah. And like really web 3 what is it doing is allowing on the NFT side allows people to own their assets like truly own like you don't own a spaceship that is owned by the gaming company. You like, you know, you actually own that asset that you can port out of the game. Like and then two items opens the economy. These are really actually the two biggest like differentiation. Right?

Like a game ownership and an open economy.

Yeah, game economies are closed. Right? In fact like if you're like NetEase and you're like, you know you're or like whatever, you know you're a gaming company that has like operated MMOs for like a long time. Like you're like basically an expert in balancing different economies that you're introducing to your, your game. And, and suddenly like an open economy like because you can, people can trade that token like freely adds complexity. It, it reduces the levers that you have to balance this artificial economy you've created in your game. And so it's very difficult and complex. And gaming game economists are like having a lot of fun like thinking through like how to optimize this because on the one hand you can expand the economy. Suddenly you now have like a much more fine tuned instrument to allow. Like for example, if I'm a gamer I want to spend like $2 million into this game like today. I can't do that in almost any case. Like, and also like you know, with artificial economy building that also creates like weird incentives and then games very quickly iterate that out and correct the, the balance in the game. But like with an open economy you could really devastate like like a whole class of items that gamers had spent like you know, hundreds of hours grinding to, to like to like own and then really piss off like so many players. So it becomes a lot more complex. So these are the different things that like people are thinking about. But in terms of like pay for power for example, like something that has historically been in a lot of like eastern games and it turns out a lot of Chinese players like don't mind paying for power. Like some of the, and a lot of these games like cycle through pretty quickly and then there's like a new version of it and there's just different like game modes pay for like I think sorry, this is pay to win, pay for power. There's like a lot, there's like so many different versions of that. And like the perfect game basically allows some degree of pay for power. Like as in like I can pay $10,000 or something like that for some like strategy game and I can like level myself and accelerate the leveling up to a certain point. But if I want to basically be in the top like 10% or 20% like is completely skill based. I just become at like I now have the items and the ships or whatever like to compete against like the best to the best players but like who have maybe grinded thousands of hours in the game but like I will not be great without the right strategy or skill set. And pay for power is like a very common part of like most strategy. Like 4X, like you know, RPG games like almost all of them. I'm right. Like and actually it's only like kind of western free to play shooter games like or like you know like a MOBA is like League of Legends Fortnite that has no components like that and it's skin based entirely.

I feel like I hear a lot of arguments where it's like play to earn kind of hurts like play for the love of the game. But you're like look there's always been money inside of games. Like we just need to figure out better.

So it depends on your definition for what, what that is. Like I don't think play to earn is a monetization strategy. I think it is a user acquisition strategy that people are deploying. Like what is play to earn has been associated with this act of like yeah like launching in game token so that people can actually play the game and earn tokens and, and NFTs. But like honestly like play to earn. I mean like I can play Diablo and I can grind and I get a lot of gold and I can get items that's also play to earn. It's just like how do you define that? Right. And for Crypto I think of like playing for tokens and NFTs as like a just like it's like similar to like what people have been doing before except now I can own it and I can trade it.

But the difference is also now that like you can get, you can get like real. Real. I hate the word like real money.

But like because you can for that, right? Because like for example Valve and Blizzard also have their auction houses and in game marketplaces and you know, Targov like marketplace and then there's all. And then a lot of games actually Tarkov actually has for example a lot of gray market where people are trading, exchanging items like outside of the game because they haven't facilitated like in some cases like these games haven't facilitated player to P2P like trading. And so like in Fact, when Play to Earn came out, a lot of us were like, oh my God, it's basically just like the gold, like the, like the gray market. The gold gray market, like grinding business where like, you know, players in emerging markets are grinding for gold and then giving it to like, you know, like a Western wild player who's trying to play like, competitively, except that there's like a more formalized, like, you know, this.

Is just like the Axie Scholars.

Like, this is. There's like a scholar system and it's just replaced. It's more legitimized as what was like a gray market before.

If you extend this out like five to 10 years, you know, a million times more than I do about gaming. But like, what I'm hearing is like, if all this stuff works is like. And like play to earn works and all this stuff actually works, right then. And like, some people use this as like, their job, right? And like they're playing 10 different games and they're making more money. Like in that, with the AXI Philippines example, obviously is the one that really took off here. Are we just creating this like, utopia, right, where people are just playing games and making money and like, no one's working and. Because that's what it sounds like to me. And look, that's not a bad thing. But like, where am I, what am I missing here?

I guess I always think of gaming as like an entertainment category and in a cat and like a. Something that people do for fun and also to drive a lot of meaning, you know, like they, they, they make funds in the game. Friends in the game. Sorry. And like in like, yes, they can actually make, like, earn a living. I think, like, it's going to be. I don't really see a future in which like, people in Western markets can actually make a living with like, gains. I think like, in this metaverse vision in which like, people have digital jobs and getting and creating value and I don't like, you know, and actually having these jobs like that, I can see potentially completely supplementing revenues. In emerging markets, you could probably supplement the revenues. But I think one problem is like, inevitably, like, you're at odds. Like, the more players, for example, actually the more players there were that were just like driving salaries, right? The more people you needed to balance that economy by like, putting money into the game. And so you needed like, like you needed multiples of like, Western players are actually like, paying for the actual dollars, right? And so like, inevitably the bigger your game gets actually, like, people are earning less overall, but for Most games you want that because you want maximum players in the game. And the way that your gaming company, you own, you earn money is that people are spending in game. That's actually how you earn money. And, and anyone who's earning money from a living purpose, like, like that, that's, that's like almost value extracting. Like these people are taking revenues out of the game. And so that's why like I think like, listen, if I want to play car and I can play car and like grind for like NFTs, like in terms of fun game, like I'm probably going to do that instead of like not earning anything but like will it be my supplemental income? Probably not, right?

Oh my God. I completely agree with this take. Amy, I'm glad that you voice this. I, I kind of feel like this like idea of, or what it sounds like you're saying is like this idea of like, okay, like all these crypto games are going to be so big and the economics are going to be so different that, that people are just going to do this for a living. And what it sounds like you're saying is like, look just like in the way that defy is like not that different from TradFi, except it's just a better technology and better systems. Like gaming is still going to be gaming and it's entertainment and people are going to. There's going to be like hardcore users and power laws of games and things like that. And it's just like an improvement upon technology. But you're not fundamentally like reimagining how society looks.

Well, so I think like where people start talking about like what is the potential metaverse, right? Like that you could actually hold like you're creating actual value in the digital world. Like maybe like company is completely run remotely. Like, you know, they're all sitting in the digital world. You're selling like software to each other and it's like this intersection of like IRL and digital and, and maybe all of this is like being encompassed in a quote unquote game or like Metaverse company and you're driving a salary from that. Like that's earning a living. I think like purely fun, like games in the classic definition of that is for entertainment value and social value, right? And people are spending what, like two and a half hours per day like playing Roblox, like their users are. I mean people spend like, you know, like few hours a day in entertainment. So this can be a very large part of people's lives. It just doesn't need to be like all of their lives in order for this to be massive.

Any concern from your end that these gaming guilds get too much power, too much influence over the token economics, too much influence over the power users, Anything like that?

Yeah, I, I'm not worried because like, for now at least, I think that there's like a few different types of guilds. There's like the AXIE Infinity guilds like YGG and others like Play to Earn guilds. Right. That have come up like with the scholar model. And I would say like the largest guilds have like what, 20,000 players. Like, the largest games have like 150 million players. They are a tiny fract of like, you know, and I think that's where like people think that there's so much opportunity for these gaming guilds. But I think that finding, finding the assets, like, my concern with those guilds is that, like, are there other games outside of like axie in which like, you can really derive enough economics to supplement income, which is how these like, guilds work? And, and like, I think there needs to be more play to earn games that have really thought about their economics and tokenomics for that NFTs, like, for that to work. Right now there's not that many assets to buy other than Axie still. Right. Like in terms of like paying scholars. And. And so I think like, that the guilds will become more like stronger when there's more asset and game diversification. And then like, yeah, they can make or break like gamefi apps, but like, I think like, like these big like, like MMOs and. Or like mini royale. Like. Right. Like for example, one of our investments that have created. They have like their, their man. They're helping like, create their own guild system. And guilds have been part of like MMOs for like the last 20, 25 years. I would say 20 years. And, and that will. Those will continue. It's basically like organized players. Right. And competing against each other. It's very. It's deeply social and I'm super bullish on guilds because they have been successful for. In that. In that definition because they've been successful for 20 years.

Yeah. One of my takeaways from this episode is a lot of these things have already existed, like Play to Earn and gaming guilds. These are not new concepts that crypto folks introduced. These have been around for a long time. Last question for you, Amy. What are one or two or three games that you're super excited about to see launch this year that we should have our eyes on?

Oh, well, okay. So right now queued up. My list is Lost Ark, which actually isn't a crypto game, but is a. But, like, you know, I think it's taken up the gaming community by storm, and I'm really excited to put some hours into that. And I am, yes. I've been playing a lot of, like, Mini Royale right now. It's, like, really fun to play kind of, like portfolio company game. And Alex Paley, the founder, is awesome, and he's gonna be launching the land strategy part of his game. Like, the shooter part is already live.

And they did a good job. Mini Royale did a good job of, like, being a game and then introducing NFTs.

They did a really good job into.

The game, like, communicating with their fan base or with their users. I think that that's a good example of what some traditional games should look at as, like, a way to introduce crypto to your users.

People should absolutely, like, take a look at their playbook on how they did it. I think they did it really well and was super inclusive with their community and. And people really embrace it in the community.

Amy, you're the best. This was an awesome episode. I know you got to jump, so thanks again for coming on Empire.

Thanks.

Take care.