Welcome to Epicenter, the show which talks about the
technologies, projects and people driving decentralization
and the blockchain revolution. I'm Sebastian Inquitia and today
I'm joined by Robbie Ferguson. He's cofounder at Immutable,
Mutable as a platform for building Web three games.
And we're going to talk about Web 3 gaming today.
We're going to talk about the gaming market.
We're going to discuss also Immutable their whole developer
platform and some of their some of their products and
understanding where Web 3 gaming is going generally.
So Robbie, thanks for joining me today.
Thanks for having me. Is that pleasure to be here?
So yeah, tell me a bit about your background and like, how
you. Came to want to focus on Web 3
gaming. Yeah, of course.
So I've been building technology startups for the last decade as
a software engineer. Originally self-taught and most
days I built with my brother and my cofounder James.
In fact, we actually started out by building a League of Legends
betting application where you could automatically wager on
your own matches. So I think we had, you know, we
were massive grainers growing up I think with this thesis pretty
early on that. Games were incredibly important,
that the assets inside these games could be valuable, and
that there was something that was being locked away from
gangs, you know? Back then we didn't know the
technical architecture of that, but I remember even playing
Runescape on a shared account I had with my brother, and one day
I decided to take his account of the wilderness.
I think he had full dragon, and I scowled my Lost Doors items.
And I felt so bad that I went online and I spent all my pocket
money and I bought in game gold so that I could buy as I was
back. And the next day the account was
banned for real world trading. Six months later, Drug X rolled
out first party support for real world trading as long as the
issuance was centralized and controlled through them.
And so I think it was pretty obvious the, you know, the
impunity with which people. Regarded these economies and
made changes to them even though they were incredibly important
to people's lives and and to some extent their their
financial livelihoods. Even in web two economies where
it was limited to a database. In fact you make arguments that
the first ever sort of you know real world trading of digital
assets was probably World of Warcraft and indeed you know
Counterstrike go through this essentially Steam locked
database today did $32 billion in volume over the last few
years. So I I think it's obvious that
there's a problem. And also that there's a need,
there's a demand that all in the real world over, these assets
being traded or wanting to be traded and they're really not
being a good solution or infrastructure for it.
So we we, we started building more tech companies.
We got into the crypto space in 2014 with Bitcoin.
We basically just got exposure financially.
I thought it was kind of interesting.
I wasn't super obsessed, but when Ethereum came out, I became
a, you know, a believer. I remember using ether roll and
just becoming obsessed with this idea that someone could take
what, you know, a gambling company spends billions of
dollars or the government does, ensuring that the payouts on
slot machines are compliant. That they have the probabilities
rated between what their payout ratios are 88 to 93 cents here
in Australia, and they literally heuristically test this.
They have to air out the machines and then someone build
this little app called ether Roll.
It did all of that. Into underlines the code.
And then it did something that the companies and the government
could never do. It took the revenue streams from
this institution of this enterprise and it gave it to
every single person who used the protocol through tokens.
And I was just obsessed with this idea of decentralizing and
making companies cooperatives. I thought it was the way that
capitalist incentives could finally solve some of the
inherent problems in society. I was sold by this idea of a
decentralized Uber where all the riders could throw in the
network. Now turns out that did happen.
It just happened with on chain financial products because the
friction was much lower and you already have native product
market fit with these 100,000 defy freighters slash AirDrop
farmers slash early users of Web 3 today.
That's kind of your core and whales who are who are moving
money around and we we basically started building trading bots
for a few years. On top of Ploni X initially and
and then on decentralized exchanges.
But we always wanted to build something.
And so at the start of 2017, my brother and I wrote a white
paper called the Distributed Autonomous Bank or DAP, which
was effectively compound. And we hadn't solved all of the
collateralization problems of lending protocols.
I I don't think they're solved today even, but we are about to
launch it when. 5I CO's went to 50, went to 200 and we just got
very cold feet about the space from a Reg and compliance
perspective. We thought a bunch of people
were going to jail and we wanted to build something that would be
long term feasible and that we would be happy to grow
incredibly large without having the SEC knock on that all at
when it gets to a sufficient scale.
And So what? We scrapped that, but
serendipitously at the same time, the first of NFT's came
out in this idea of a crypto punk and.
We we saw these and we said this will be how gamers are in game
items and actually the way we we started was we built the first
ever multiplayer game on any blockchain.
It was fully on chain Logic came out in December of 2017.
It was called Etherbots and you could basically battle robots
and and win real. NFT's by by having your your
machines win. They were composable of four a
RC72 ones you had a fully on chain perk tree.
You can play a game today and it will cost you hundreds of
dollars, but it can never go down.
And so I think we learned pretty early on, you know watch you go
on chain versus watch it off and that really formed the thesis of
how we started to build immutable which was build first
party content much in the same way that Steam or Valve started
out with Counter Strike go. And then we're able to leverage
that knowledge and that sort of beachhead from the content
perspective into building a platform that everyone could use
and that really sold core needs. And so you know immutable today
we're nearly 300 people around the world, much more if you
include the the contracting on, on game development.
We have hundreds of games building on us and we we had
more than a billion dollars invested in games building on us
just last year and we significantly increased our
market share. Since then, with this Polygon
partnership, and we've raised, you know, hundreds of millions
from everyone from Temersec to to $0.10 versus investment in
the space. And our whole mission is how do
we deliver on this promise to to web through gamers and to gamers
worldwide on true digital asset ownership.
You said something in the beginning which you know kind of
struck me as interesting is that you you said that you were you I
think it was League of Legends that you you had bought this
gold and and then ended up buying some assets to sort of
make make good on your on having lost your brother's assets and
that that account was banned for real world trading.
What why do gaming platforms and game publishers prohibit or
you'll want to prohibit or keep or in the case of of this game
having then allowed real world trading.
Why do they want to keep that sort of centralized within
within their platform? So I think before now it the
technology hasn't existed. I think it's impossible to do
with databases. The availability of being able
to change something means that companies will and that means
you can't form third party trusted ecosystem.
Even if the current CEO wants to make a trusted third party
ecosystem, you know people can't trust the incentives and
financials enough to actually build real enterprises.
You saw this with Upskits, which is their $300 million third
party marketplace, the CS Go skins.
That basically went belly up when Valve implemented
Tradelocks, and they limited skins from being created more
frequently than once a week. And so I think there's actually
just this technological impossibility and political
impossibility with everything that doesn't rely on open,
trustless, immutable architecture such as Nft's.
But isn't that a design issue though?
I mean, so there may be the technology issue, but there's
also like the design aspect. So whether you're building on
the centralized database or you're building in a blockchain,
the designers of say the smart contract or the, and maybe this
is getting a little bit in the weeds here sort of early on, but
the design essentially is in the hands of the developer or the
issue of that game. And so couldn't you build a
similar sort of design in the game where you have like an
admin key, and that admin key gets to decide who is able to
trade or what the trading mechanisms might be?
You can. So I I think the technology is
only one half the picture. And the answer to that in web
three is I mean if you work really hard, you can make things
properly trustless and in general they're, they're much
more trustless. For instance, if if someone
doesn't change, they don't like, you know, people can kind of you
know fork those assets or we'll find out some other ways to
bring value to them. But in general, what we're
relying on is incentive alignment, which means that the
publishers have an incentive to grow the value of that ecosystem
and grow the value of those assets.
Because they now have access to things like royalties and
secondary market fees rather than having to rely on this old
model of I sell stuff I deprecate that and and make them
more useless by releasing more powerful stuff that people want
to buy every year and and so I I think it's it's a fair point and
it's it's certainly not you sort of overnight solved unless
they're doing fully on chain clusters games which you know I
certainly love this cycle I think we're seeing some
interesting experiments but it's web 2.5 games that are going to
go made straight first. But the second question in the
probably much more important one is just economics and
incentives. I think this model hasn't
existed before. I think it's difficult for games
companies to see how they can, you know for a long time
actually succeed off growing the value of these economies.
And you have to remember as well, like in game items being
the biggest portion of spend is also a reasonably new
phenomenon. Free to play gaming only came
out in the late 2000 and 10s and that's when you had in game
items as even something that was really important.
As a vast majority of monetization, the majority of
monetization is now in game items and we're we're sort of
seeing this pressure towards well how do we actually create
better economic standards and better property rights.
The game is because of this. But 20 years ago this was
completely irrelevant because these, you know, these sort of
economies were increasingly small and didn't have that much
relevance to to players. So I think the answer now is
it's a bit of both. It's.
How can we prove out to developers this is a better and
more aligned business model while at the same time you just
have innovative dilemma. People are going to be
disrupted. The goal we're going for is we
want gamers to demand property rights.
They play a game and they get given something in a database
that should be not good enough. And that's the point of which
it's no longer sort of market to have a game that runs on a
database rather than on open property systems.
Yeah, interesting. We can get a little bit more
into this a little bit later, but I just want to pull and
throw a little bit. You know, what is it that people
like me take a snap back here? Like what is it that people
understand the least about game development?
You know, this is whole, there's this whole kind of narrative
around web three games and how web three games are inherently
better than the the traditional model.
But like game development is a really, I mean it's a huge
industry. It's like a $200 billion
industry. Games and game development is
expensive and like, there's all these, there's all these
considerations around like licensing and publishers and
distribution. And I mean, it's a very complex
industry. What is it that people
understand the least about it that bears understanding if
they're going to be building a Web three-game or if they want
to go sort of in this direction? I think the first thing is
probably timelines and how they get produced.
The reason that D5 ball runs correlated so quickly with D5
innovation is Andrei Croneer can put together a test smart
contract and call it a productions one contract in a
week, right? Like it, You can build D5
applications very, very quickly. They're all open source, they're
highly composable, people can fork and and sort of remix
things. Building the gate is not at all
like that. It's like building a movie.
You have a budget of roughly minimum $5 million for anything
reasonable. Unless you're looking at truly
indeed, it's. All the way up into the hundreds
of millions of dollars and for sort of you know Bethesda
quality games and and even them you will not be able to produce
a Bethesda game unless you have the capabilities and processes
of Bethesda. There are very few studios with
sort of that internal capability and and risk tolerance and and
the time it takes is a lot longer.
And then you combine that with the power law of gaming, which
is that gaming, particularly free to play games, conform to a
power law, which means that the biggest game will have more
revenue or more players or more volume.
And #2 and and the end and the second biggest game will have
more than #3 and and so on to the end And what that means
actually is when you look at why we haven't had a hit or the one
hit we've had was was sort of axe which was sort of medium
sustainability obviously had a had a sharp drop off is there
simply hasn't been enough shots on goal and one hit is going to
dwarf everything else combined. You see this already in in Web
2, Counterstrike Go doing $32 billion in volume.
Over the last three years or in revenues you you see that same
topology Axeden is is roughly what 5 or 6 billion and
everything else is lower than that combined.
And I I think we're we're going to see that but the failure
rates are going to be incredibly high to start with 90 to 95%.
And so the reason we have such a broad platform players, we know
there are going to be so many shots on goal and all that
matters is they have sufficient funding to be one of those hits.
And then we just have to make everyone as successful as
possible and sort of focus on those top 100, top 200
opportunities and one of the biggest challenges then I mean
you said there's like 100 games on Immutable and we've seen
other games like AXI and there's a whole like sandbox ecosystem.
What have we learned so far about web Three games that we've
identified as like the biggest challenges to like hitting those
shots on goal and like really demonstrating that this new sort
of infrastructure and this new paradigm of gaming is inherently
better and making some positions here that you know than than
traditional games. I think there's probably 5 big
problems blocking successful games being ready now and
available. And we think about this problem
a lot and our goal is immutable, is to be the one stop shop that
we could solve everything for a mainstream developer.
If they want to build something, I'll go through and I'll say
where I think the like the market is at today.
So I think the five problems are security and choice of technical
architecture to user experience for onboarding mainstream
players 3. Developer Experience for
mainstream developers to build a successful blockchain game
without having to touch things like Salivity 4th.
Having a sustainable and easily built economy and five the game
design itself and and the the actual game production quality
kind of getting live and and that's the one we have the least
control over that takes time it takes game studios being built
and we've had a lot of that investment so that's kind of you
know in progress and and we're seeing stuff start to go live
and and we'll start to pick up the pace increasingly over the
next 12 months as the rest of the boy I think we've actually
made massive progress so. So the first one, security, I
think this is basically now solved and this was always
something we would never have to compromise on.
It's the reason we didn't go down the path of side chains.
Even then that was the most faded sort of VC thesis for how
you should build a valuable company with building an E
killer or an E alternative. And we always wanted to build on
the thing that already had liquidity and had the best
security and we wanted to do so inheriting that security, which
is why we're basically you know the first ZK roll up for NF T's
why we why we chose this architecture from day one.
The second is user experience, and this was in a really bad
place by the way, security. If you make the wrong choice
here, you know your platform is dead and you lose all brand sort
of security and trust with your customers.
So this is a nonviolable condition that companies have to
be incredibly careful about and and it doesn't just extend it to
inherit blockchain security, it's also the quality of your
wallets, are they self custodial, etc etc.
So I think that's really important decision.
Second is user experience. This is probably honestly the.
The more it's basic, but also the most important.
If you ask a mainstream gamer, I I you know, I even think friend
tech is a perfect example of this.
He was able to go viral within crypto and no further.
Because as soon as you have that viral coefficient which might
have been just above one with within web three, you cut it
down to like .1. As soon as you require anyone to
go through Web 3 on boarding, if you're required to learn what a
wallet is to bridge, you lose a huge amount of your uses. 90 to
95% of your uses. And so we need a way of making
this like downloading a game in the App Store and pay.
And I think we've come a very long way here.
We have Fiat on ramps and off ramps entering maturity.
We have things like immutable passport where you can literally
sign up to a wallet that's self custodial in another 5 seconds,
sign on with Apple, sign with Google, sign with e-mail.
And that's kind of our view for the long term is this has to be
completely invisible to the end user while still maintaining
self custody is the default. Otherwise, again, we're just
building a glorified database. Number three, I think developer
experience is really interesting and has been overlooked by the
vast majority of platforms and blockchains.
A lot of people have invested in better frameworks for writing
smart contracts, EVM compatibility.
They are important but they really service a hardcore use
case of DFI builders and people building.
Right now what our belief is is 95% of developers will just want
to build using APIs like Stripe and I think without that
usability. It's incredibly hard for this
thing to take off. I mean even you have like Co
finance advanced builders using early version of Vypar and then
having a reentrancy back that was not even really auditable
and so it's terrifying to build stuff using open smart
contracts. You have brand new security
concepts that do not exist in web.
Two things like reentrancy which are literally not sort of
concepts that you're encountering conventional
programming and then on top of everything you have immutability
and financial contracts that that inherently deal with money.
Which I think it's just terrifying.
And as somebody who was originally a web two engineer
and obviously had to learn celebrity and and build on chain
products, the 4th is economies. And this one is really
interesting because I think that had actually had a sustainable
economy went through, gaming would already be mainstream.
Because what you have in every shift in gaming is, and there's
been three major shifts in gaming over the last couple of
decades. You have the free to play shift,
the social shift, and the mobile shift.
And then within that you have different game designs emerging
based on each form of distribution.
But with each form of distribution, basically you have
early hypothesis, a few people taking bets and as soon as
someone has a mainstream success, there are 1000
copycats. That becomes the new default
form of distribution, huge in forms of investment and it
basically becomes a commodity. How to build a successful game
design for that game distribution or genre.
You saw this with FarmVille. You know FarmVille spawned the
social game genre. You had Mafia Wars also greater
by Zynga skin into 15 different games that were literally the
Mafia Wars code under the hood. They just had, you know, it's
skin for teenage girls with like a beauty salon, lots of
different other modes. And that's actually what we need
in Web Three. It actually had a sustainable
economy. I'm not throwing shade on
actually here, I'm just saying the reality of it was it was a
bet that became extremely viral and failed.
But if that was sustainable, suddenly we'd have all the
copycats like Stephen seeing sustained success.
And I I think that's what we need.
It's why we build immutable studios is that we have to force
ourselves to think through first from first principles.
How do we design an economy to be sustainable and and work with
things like you know the natural growth curves or or or churn at
different games. That's incredibly important and
that needs to be just super simple games should not have to
go and have to hire like 5PHD economists to succeed in web
three. It has to be like, oh cool, I'm
building a gatcha game. Here's like the open source
template for building a gatcha game.
I might add some tweaks and make it hit like engine impact, but
really I'm innovating on cool gameplay loops and retention,
not like some really intractable stuff around economies.
And then five. Actually, I didn't even touch on
this, but like liquidity, fragmentation is also a huge
problem. I realize I'm talking a lot, but
obviously there's something I'm passionate about now.
These are these are great points.
So liquidity fragmentation is is like the the hidden demon of the
blockchain today. It's the reason behind the fact
we even have these killers is because everyone says and the
fantastic article Chain Link Guard Chain Rotation thesis, you
know you have a bull run. The theory hits congestion.
Congestion creates the narrative fodder for someone to create an
each competitor saying it doesn't scale.
They raise cash because they need to bootstrap liquidity from
scratch. But that alternative blockchain
and then they able to seed, defy and create sort of artificial
metrics on that new blockchain in order to seed some interest.
And we've seen that happen time and time again with every single
bull bear run cycle. The difference with the next
cycle is we now have L twos and L threes that can scale
Etherium, the most secure and most liquid block train in the
world. And our vision is, well, how do
we just remove fragmentation whatsoever?
How do we make it so no matter what L2 or L3 you're using, no
matter what wallet you're using, no matter what marketplace
you're trading on, no matter what game you're trading in, you
can trade completely, atomically, completely
seamlessly with any other trade in the world.
And I I think that's incredibly important because everything I
just said, marketplaces, roll ups, wallets and user funds,
they're each fragmented to whatever particular product
using that particular time. And and so we're having no
network value credit from everyone depositing.
And like this is what Apple does.
Everyone thinks it's really easy to pay for things in the App
Store is. But at one point you actually
had to sign up and give them your credit card details, you
had to KYC or to register your username.
That's why you can double click with your face and you have to
do that for a million different times for a million different
like liquidity motors onboarding platforms in web three when we
just need everyone to come onto a single source and and start to
be able to use their funds everywhere.
I think that's kind of the the really important underlying
network that every bit of value has to be approving to I'm So
those are the five things we think about.
I think the majority of these are either solved will be sold
in the next six months. I'm so we're finally the point
where gains are actually capable of succeeding purely based on
the infrastructure that they're using.
So all these all these points like these five challenges you
cited when you were going through them, to me they just
seem like the same challenges. They're they're crypto
challenges. They're not just get crypto
gaming challenges, They're the the challenges for any crypto
adoption, whether that's social networks, whether that's Defy,
whether that's whatever application you want to build on
crypto. And I think.
Some of these are getting solved, right?
Onboarding is getting solved, security is getting solved,
liquidity fragmentation. I think we're in the early
stages of solving that with trust, minimized bridging and
stuff like that. I really think that that's gonna
be one of the big leaps ahead in the next cycle, the next four to
five years developer experience. We're doing quite a lot of work
here. I think on on a couple of
things, which is our global order book which basically
aggregates and propagates liquidity to every marketplace
that integrates with our wallet which is self custodial but
doesn't lock your liquidity per game, which is what the majority
of other sort of you know easy sign on wallets do as well.
Yeah, I want to talk about the wallet a little bit too.
Passport. But so I read on, I read on one
of your blog articles that it says that immutable so that you
guys sort of expect that 40% of the $200 billion gaming industry
will shift to what, three in 2 to 2 1/2 years That I read that
and I was like that is a very bold claim.
Do you think that in two to two to five years all of these
problems will be solved and there will be enough incentive
for? 40% of the gaming market
essentially to drop what they're doing and and move to web three.
I personally think this, this claim is is a little bit
optimistic. Yeah, I don't actually, I don't
necessarily agree with that claim set.
I think the timelines are a bit aggressive on that, but it could
be referring to points of the market being sort of the the
minimum bar of the amount which are in game items.
And you know our conviction is certainly that's going to shift.
I I I think it would take a decade to shift for for the
whole thing. But I think we'll start to see
it's snowball as soon as you have like.
I think the key inflection point is there's probably 2 coming up
right, The first hit that says sustainable.
And then second is this ability to go to cost like customers in
web two and say here's a much more effective model for running
your games and something we're not just choosing out of people
interested in building web Three games.
It's become something you can pitch to everyone and it's like
pitching them. Hey, you should also launch your
game on consoles, not just PC, because this is now a thing that
makes you way more money and is a way more successful way of
doing games. You guys were just at Games Con
in Cologne. So for those who don't know,
like Games Con is like the it's like the Dev Con of games,
right? It's this massive conference
that's. Happens in cloning every year.
Actually I was surprised to find out that it's more like a BDC
conference than the B2B conference, which I find it
interesting, but but basically it's like, you know the the
biggest games conference in the world, all the game developers
are there, all the big publishing houses that they
hold, the entire industry is there.
I'd like to get a sense from you like cuz I asked a friend who
was there. Like we're just down the street
from from from Ubisoft here. Like, I have a couple of friends
who who work there and so I was asking your friend like, hey,
like. You know, were there a lot of
with three games there and his sense was that there weren't
that many or like he didn't get a feel that a sense that that it
was, it was a big part of like the the narrative at the
conference this year. So I'm curious if if you like,
echo that sentiment and what is the general approach that
incumbents like Uvsoft, like 2K, like EA, like these big game
publishers, you know, how do they look at Web Three?
Are they adopting it? Do you know?
I I guess my question is like is it similar to the way sort of
finance looks at Defy, like they're a little bit reluctant
to adopt it, They think it's a little bit scammy or or are they
like wholeheartedly sort of like throwing a lot of resources than
this so that they can really sort of like be at the forefront
of this tech. There's certainly a big
difference I think in the promotional activities around
web three games just in terms of how much of A splash they're
looking to make versus last year.
There was so much hype last year.
People were trying to launch a lot of tokens and do a lot of
speculative up and primary sales, which meant a lot of
noise. I think people are now more
focused on building games that have realized, so can they
profitably grow and can they have sustainable economies?
I vastly prefer that. I think this is a very healthy
shift in the industry. The game developers we have
applying to us today are a very different profile of composition
than a year ago. A year ago was mostly D5 devs or
people who have been able to raise cash who were trying to
build a a game on top of it and some of them will succeed but
most of them don't have the experience and build like unless
you've shipped a game to you know 10 million people we're not
that interested in in sort of or or we rate our confidence of you
succeeding a lot lower I think is you know just inherit back
the game it's a very specialist job is is sort of shipping
successful games. The majority of people building
today are now people who have successfully built things before
who are incorporating web three in their economies and we must
prefer that and I think their their goal of sort of how do
they drum up as much fanfare prelodge as possible is less the
data point. We see service you know the last
four months which we call a cycle we've on boarded more
games than any other cycle in the middle history more than are
you know the peak run etcetera. And obviously part of this is
the increase in market share. But we are still seeing a very
healthy flow of sort of credible web to developers in terms of
how we think about the market and sort of incumbents
approaching. And I think there's two things.
What is there? You know some of the names you
mentioned already building a web.
Three, they've already launched projects.
I think the West will have a sort of by build partner
analysis approach, which is how do they hedge the risk in the
future of of knowing how to build successfully in Web 3
without throwing all their eggs in the basket, right.
Because it doesn't make sense that the beneficiaries of the
current model, they are the incumbents who are able to sell
$100 billion of digital assets without ever having to back the
value of those assets as a liability in the future without
having any ongoing obligations. So of course it's a model that
they're a fan of and these are risk minimizing enterprises.
But that being said, out of the top 20 Western developers, you
could think in the world, A-Team would have fulltime large teams
staff to look at Web three, whether it's now, whether it's
longer term because that Zynga announced Sugartown and
obviously some of these with with Asian roots.
But I think that kind of leads into how we see the large
studios in age. Approach this and you literally
have in Korea next on one of the largest gaming studios in the
world, putting the flagship IP Maple Story in the blockchain.
You have Fumio Kishadar, the Japanese Prime Minister saying
web three is the new form of capitalism and identifying Nft's
and Web 3 gaming as one of five core areas of national interest.
You have MUFG Mitsubishi Group investing in Web 3 gaming.
So we we see really interesting leading metrics from Asia and
this makes sense because Japan and Korea have always been to
the vanguard of shifts in distribution rather than
reacting to it. They were the ones who ushered
in the free to play new game design genres.
They're the ones who helped to usher in a lot of social gaming.
And I think they see themselves as, hey, if we can, you know, if
we can win on this and this will be a huge boon and and this is
the really important experimentation for the players
benefits. The final note I'll just say on
all of this said is like, I really believe Web Three, you
know, Web Two's margin is Web Three's opportunity and that's
the case in gaming. So the people who will be most
motivated are not number one, it's #2, it's the underdog.
And in gaming there's many of these and they're reasonable
sizes, but we think it's going to be just going the lights on
back here. We think it's going to be
companies who want to compete with the biggest incumbents the
world by leveraging the growth strategies of web three.
And we've just seen in my opinion the most interesting
real world of example of this of token driven user acquisition
ever play out, which is with World Coin where they were able
to effectively like bootstrap from nothing a giant token and
then leverage the paper FDV to incentivize 20 million people to
scan their readiness. Like say what you will about
whether you think this is Systopian or utopian.
It's an incredibly effective way to essentially do a vampire
attack in real life and then have massive incentives while
giving people ownership of the underlying network.
Cool. Well, let's this is really
interesting and I'd love to spend more time kind of like
asking talking about the market and where you think this is
going. But I do want to talk about the
tech a little bit and talking about it immutable as a as a
developer platform. You guys are doing some really
interesting things there and have just announced the ZK EVM
on Polygon. It just happens.
We got Sandeep on. Last week or two weeks ago to
talk about the polygons work in ZK.
So yeah, what is immutable as a product?
Like who is this product for? And like you know talk about the
different aspects of this product and how they're how
they're useful for people who want to get into it through
gaming. You know either Nude Web 3
developers that are looking to to build a game or existing
gaming developers that want to shift to the Web 3 economies for
sure. So Immutable is we describe it
as the one stop shop for web free games.
If they want to build anything, we can service it.
Everything from having an incredibly easy wallet to on
board their customers, to having the entire blockchain design
done for them to be able to use any marketplace instantly via
our global order book. So if you list an asset for sale
on immutable, it lists on every marketplace that interacts
immutable, which means you're vastly increasing your volume.
And it's a much better platform for marketplaces because they
have much more volume that they can take these on.
We have things like enforceable royalties and mints so that you
can easily run a primary sale or you can easily take ongoing
clips of assets no matter where they trade, if that's a really
important part of your business model, like it is for Digi
Didacu or some of these bigger games moving in from Web two.
And all of this kind of comes back to, we're trying to operate
at the most important layer of the stack where we can help
unify what would otherwise be 6 different technical choices.
And this is a really important reason behind why we did this
Polygon partnership. You know, at the end of last
year, Polygon was by far our biggest competitor for gaming.
We we both had roughly 40% market share.
We were both competing pretty viciously in market.
And you know, grand pricing was going up astronomically for top
deals. We had this vision of saying,
well, actually, there's no reason for us to have to
compete. We could have it so that players
can use the immutable platform and under the hood they could be
using the immutable ZKVM which leverages polygons ZKVM
technology and and by far they are the best developers of this
in in the world right now they're the closest to
production if Italica said this a couple of months ago and and
by combining the two we just simplified the developer choice
hugely. I I think that's why our our win
rate has essentially doubled over the last six months since
launching this partnership and why we've been able to have such
you know success in the market. And the reason I like that is it
means game these games spend less time wasting around what
technical infrastructure they use and more time building
quality games And then the final really important part to
immutable and I think probably what resonates with these game
developers the most is we are gamers and we build games.
I think the reason why even though we started out with far
less funding than any major blockchain in market, you know,
and and we pretty much until early last year didn't have any
war chest that was akin to these.
And obviously we now have a pretty sizable war chest.
The reason we are able to compete in and gain this market
share is you know the salon is the world.
The the, you know, EOS is whoever was relevant back then.
They cared about everything. They cared about winning Defy PF
P's, collectibles, gaming, RW, A's.
All we cared about was winning gaming and helping to usher in
you know real property rights for the 3.1 billion gamers
around the world. We had built several games
internally where we're now publishing three more.
And I think that radical focus meant that we built a product
that was fundamentally designed for this use case, but that we
also understood things on the economic side.
If they were struggling with the App Store, we were struggling
with the App Store because we were also at the coalface
building things with them. And I think that's been really
essential to the sort of DNA of our product and product teams
today as well. Let's talk about the underlying
platform here, So. I learned that there is
basically like 2 roll ups, right?
There's immutable X that's built on Starkware and you guys just
launched this ZK AVM on Polygon. Why did you shift to Polygon?
What was the impetus to do that and what will?
Is the idea for immutable X to be phased out?
Or you know are there still sort of like some types of customers
that along use immutable X, both are continuing to run, we
maintain and upgrade both of them continuously.
And I think you know stock X is an exceptional technology as
well and ultimately we needed to solve a couple of things and we
needed to solve an EVM compatible offering.
So before then the only ZK technology when we wanted to go
with CK security reasons was an app specific roll up which meant
you couldn't just use Solidity or copy paste your contracts.
For me that one and that was the choice that we had to make.
I'm very happy with that choice. But now we have the first ZKEV
M's coming on market and it's essential for us to have this
product offering. Ultimately we still think 90% of
developers will build using API's, but the people building
now and a lot of the hardcore more advanced game development
companies, D5 companies want to build with their own smart
contracts which means EVM compatibility makes this a lot
easier for them. But the second thing was more
pragmatic, which was sort of by by partnering with Polygon with
their CKVM technology, we were able to provide this joint
offering to game developers which was this end game tech
stack and also this end game commercial stack where they
could find it much easier rather than having to choose between
Polygon or Immutable, they could simply have a unified solution.
And I think that's, you know, pretty much everyone who's
originally deciding between the two has come to us and said it's
so much easier now. Like we find this much better,
we get support from both, we're able to be much more successful
in market. So I think partially a, you
know, a product decision. I think that that ZKVM
technology is exceptional. They obviously had what I think
is one of the most successful examples of M and A and the Web
3 history buying 3Z K teams two years ago and for roughly a
billion dollars all up and and those teams have now turned into
the kind of CK technologies by using today but also on the
commercial side. It just makes a ton of sense.
How is this going to improve the developer experience?
And I guess you know for for let's say like a traditional
game developer who wants to incorporate web 3 aspects into
the game, you know, they might choose something like immutable.
What's the learning curve for that developer to have to, you
know, learn to build EVM? Smart contracts?
All the concepts? That introduces security,
reentrancy, all these things, right?
That takes people years to learn.
How does that fair for traditional web gaming
developers that are entering the immutable ecosystem?
The cool thing is that you can use smart contracts if you want
to, but you don't have to and in fact you can sign up and create
a web free game while never writing a smart contract.
You can use APIs for minting and for trading.
You can basically use our template contracts and and soon
be sort of almost entirely automated for deployment of
collections and manage them via APIs.
With much more to share here with Immutable hub where
eventually you can manage all of this through a GUI and I I think
that is incredibly important. So our vision has always been
make this as dead simple as possible for developers.
We have a very high NPS on on that, but we're sort of working
continuously to to make that develop to make that easier.
And I think as soon as we hit this inflection point from this
being a really interesting sort of heavily funded niche of game
design to being a horizontal because this is not a vertical
right web through gaming is not going to be a category.
Web 3 is going to be the way you own assets and multiply games
and at that point this has to be like building incredibly easily
on Unity SDK or in Unreal or with Stripe like APIs.
And so a lot of what we also do is our ecosystem integrations.
We have integrations coming out-of-the-box from day one, the
ZKD and Main net for Unity and for Unreal where you can
basically leverage our SDK from day one.
Interesting and so talk about a bit about the SDK and what's
possible to do with the SDK like you know.
So you're building a game, Would you want to start using the NSDK
early on or is it possible to take like an existing game and
sort of like strap on the SDK in order to incorporate web three
mechanics? Yeah.
So look, the majority of the stuff right now is initiating
things like transfers, trades, mints, even things like forging.
So you take say 5 assets, you destroy them and you mint
something that it's required input output and that's like
upgrading say. You know, 5 common legals or
rarely 5 common gods and chain cards.
And we we've even launched things like pushing where you
can basically have this done automatically under the hood up
to a certain value threshold, which is how we think about the
centralization. And so users can always set kind
of almost the the parameters to how much they're happy for the
game to sign on their behalf. And then they can kind of say,
well, I, I want to, you know, specifically approve or sign
things about a certain value threshold, which to me makes a
ton of sense. And it's the right balance
between the two as long as they're always the ones in
control and the technology is architectured to be self
custodial. So the vision is you'll be able
to initiate all of this incredibly easily through like
Sdks we expose, through pretty much every version of Unreal of
Unity and obviously trying to work with the app stores as
well. What's it like working with the
app stores? Cuz I realize it's probably
well, one of the big challenges of for the for the Web 3 gaming
space is some of the barriers of having the work, particularly I
think with Apple or having Apple sort of approve certain types of
of applications. Is that getting better do you
think? Or are we still sort of the same
place we were a couple years ago?
So the trend is toward. More open permissions for app
stores, for digital assets and lower fees.
We will see exactly how that plays out.
I don't have a crystal ball, but you know she's some really
interesting things. One you have a lot of increasing
economic pressure. There are more alternatives able
to download things. You have the EU forcing side
loading within the EU, which say you know a really big deal of
apps. So you should be able to
download apps through to any App Store, not just the the one
provided on the device. You have Google basically
allowing NFTS inside of their apps, which I think was a pretty
landmark announcement. I mean that provided just a ton
of of sort of compliance, clarity to a lot of people
building and now a lot of people are building their sort of
Android first on boarding you have Epic Store which is very
pro web, three as well. You have you know 40, I think 20
web three games live on there. Godson chain went live in there
in the last few months, which is a massive source of distribution
so. I I think this is really
interesting sort of pressure mounting on the biggest
incumbents as to how they can actually clarify permissions and
fees. Ultimately you can use say the
iOS store today if you you do two things one is off platform
NFT's not used or usable the utility inside the game and the
2nd is you pay clips on these assets and and you know you just
kind of pay that the Apple tax it's very tricky obviously with
secondary markets went to to sort of add a tax onto it so.
I'm pretty bullish on where this is going to get to over the next
few years. I think there's already
sufficient clarity for people to launch mobile first games where
suddenly focusing on it. At this point, I think they may
be the first ones to mainstream success.
But that is kind of the the billion or trillion dollar
question is how will App Store rules interact with this open
ecosystem. So I'd like to also talk about
about passport, which is your, I guess like non custodial sign in
or identity solution. Yeah, what is passport and
what's what technology is it leveraging MPC?
Yeah, How does that work? It does.
So Passport is our easy onboard wallet that is completely self
custodial and is your universal wallet for every single game or
marketplace or wallet you interact with.
And this is our vision if there's Full Passport, the only
easy onboarding wallets you had. Used a single state MPC system
where in order to both maintain security but also have easy user
experience, they basically generated a new wallet per user
per game. They could give that game
escalated privileges for transactions because it was
localized to that games ecosystem, but it meant that for
security reasons you can't expand that to your general
funds. And this is obviously terrible
if a user plays 10 games. You have 10 different wallets
and there is no unified liquidity or network value being
created. If I'm onboarding into web
three, I can't use that cash to go buy assets from, you know,
another game like in Counterstrike Go.
I can't trade with someone in legal budgets particularly
easily. And so our vision with Passport
was to solve that problem while not compromising on self custody
and while not compromising on user experience.
And the way we solve this is with the multi Seq architecture
system. It leverages 2 Mvcs, one is in
Immutables custody and we actually act as basically a
guardian. So we basically will refuse to
sign transactions that don't comply with.
The either the economic missions that you've set or a general set
of sort of heuristics we use to to analyze bad behavior.
And of course the other one is the the user's self custody
which is held in cloud storage in in their legal self custody
by our MPC and and the multi cigar architecture and they can
kind of opt out of this. Early points means you can
default to self custody while still letting them sign up in
under 5 seconds. We've just run a B tests.
This converts 250% better than you know, your default wallet,
and we're looking to increase this drastically.
And then that's already huge. So you're already spending less
than 1/3 in user acquisition costs if you use passport versus
a traditional wallet today for one body.
So you say it's fully self custody.
I mean, I understand that. I mean, I'd say it's more of a
hybrid custody because immutable does have like another piece of
that Shard. So technically immutable could
if it wanted to with whole or sensor transactions, or I mean,
I guess probably not because you can't see the actual
transaction, you can just see the signature request, right?
Precisely. And they can always remove us
unilaterally. So there's no ability for us to
say, censor transactions if we really wanted to.
OK, the user can remove you from the MPC.
So it's an opt out system, right.
OK. And are there because I mean
we're dealing with like users that are fairly, you know, not
like necessarily super technical.
Are there ways for the user to recover their?
Like are the recovery mechanisms?
Say the user loses access to to their.
Is it like a like an e-mail login or like?
How does it work on the user side?
Yeah, so we we use Oauth at the moment.
So you can log in with Apple, you can log in with Google, you
can log in with your e-mail exactly, and it's registered to
your address, OK. And so the and.
So the user then sort of like backs up their Shard in any
number of you know cloud providers.
It's encrypted like with the password I guess.
Yes, ultimately that's automatically set like saved in
the MPC database associated with your e-mail.
If you can access your e-mail, you can access that and that
wallet. But our vision here is really
where. So you can be able to like zero
to 100 or $200.00 of value if you want to store large chunks
of value. We think that's the point.
You say, well, hey, here's the options available to you.
Here are the risks associated with each.
I think that's kind of the way it needs to be done, Okay And
are there options? I mean can you use this?
Also decide like I don't want to use passport like I have a
Ledger, I have some other custody solution I might use
like an MPC wallet or like a custody solution so you can log
in with that as well. Yeah, absolutely.
We support everything out-of-the-box.
Passport is just the offering that we have.
I think the nice thing with passport is because.
It integrates in a vertically integrated manner with our
control of say like the ZK technology and the order book
and the wallet. We can do things like say you
know shared sequencing or crosswalk liquidity in really
seamless ways that other platforms can't because they
only have one layer in the stack.
And so our vision is no matter what asset you're trading on any
marketplace, on any game, on any roll up using any wallet, you
could do so atomically and seamlessly.
With no loss in security or sort of custody with anyone else.
And this is this vision of this sort of universal liquidity for
digital value. Yeah, talk a little bit more
about you. We talked about this before the
show, the enforceable royalties. What's that about?
Yeah. So this is obviously pretty
topical and you have the marketplace wars over the last
couple of years first? As you had the blurs and the the
XDY choose, the world basically say hey we're not going to
respect royalties and suddenly soak up a huge chunk of pro
trading volume. Then you have oversea car with
some solutions and and sort of you know contracts people use to
to make sure that they can only be traded these collections on
royalty respecting marketplaces and and smart contracts.
I think this is all indicative of the fact that this really has
to be sold in the product layer. Just to kind of understand the
problem here. The problem is that when you
have assets that are tied to royalty, so like I I, I create
like some some suite of assets I I put those out on say open sea
unless that contract has royalties built into it at the
contract level you're sort of trusting the the the platform to
extract and deliver the royalties that and and that's so
the issue where if you take those assets somewhere else if
you like just you know send them to someone those royalties are
not being perceived by the the some of the creator.
Precisely. So basically, it's really hard
to enforce royalties with traditional NFT smart contracts
and NFC marketplaces. There have been various sense of
solving this, but ultimately it appears as though the game
theory, particularly on a theory in layer one, is to converge
toward a zero or no royalties world.
Because that's the world in which you have to be in order to
have any meaningful market share as a marketplace.
All these pro traders who join the vast majority of all today,
our approach has kind of been from day one make this
enforceable at the protocol level which we can we can do due
to sort of a couple of things we designed on immutable exits
because we have a single sequencer, we can kind of
enforce these royalties from day one with immutable C, KBM.
It's going to be more of a decentralized solution where?
We're we're actually sort of engineering the ways that smart
contracts respect royalties and people can cannot do and but I
think both the principles are we firmly believe that enforceable
royalties have to be available protocol wide in one of the
marketplaces to be able to fairly compete and gain their
market share and gain developers to be rewarded.
And the the thesis is quite simple, which is you know, if
you have a counterstrike go or mad at the gathering.
Mad at the gathering has an estimated secondary market cap
of. 10 to $20 billion of cards. But every year they've got to
make new, more impressive cards than everything else in
existence, making them less than I got to sell my old Magic
cards. Yeah, like that.
They, they're tremendously valuable, right.
But MTD, the company has no way of tapping into that, the value
of what they've created. That's why they have to
basically dump on everyone else every year by creating this new,
more powerful stuff. And so suddenly we can have a
business model that doesn't rely on that.
That's like, hey, magic just gets 5% of every trade.
Magic's only incentive would be. Increase volume, which might
mean make new cars that make the game better and grow the player
base. It might mean throwing more
tournaments, might mean creating an E sports league, whatever
they can do to increase the the value to players of that
economy. And so you have complete
incentive alignment even though it can be an incredibly
profitable system. So that that's why I've been so
passionate about it is it actually enables a much better
more incentive aligned business model that we must protect in
order to you know essentially not have adverse selection or
this kind of you know. Tragedy where we we do a short
term benefit to players by giving them cheap trades and
there's no incentive for game developers to build or to build
based on this much Better Business model.
So why is it that this is not enforceable at the smart
contract level? I mean couldn't we just build
like a better year year C 721 kind of contract or that would
enforce royalties? Is that possible?
It is, but it's just very hard to enforce if the collections
themselves aren't originally a sort of.
And written to be to be opt into those smart contracts.
And so a lot of the volumes say in NF T's has been the legacy
collections which weren't incorporated into this.
So I think that's partly what what has given this decision
with Open C But be that the the kind of more simple solution is
if it's relying on individual say marketplaces or individual
collections to make this decision, it's just going to be
an incredibly fraught debate. The answer just has to be sort
of protocol wide. This is an available standard
that that can be enforced. OK.
So you guys enforce this by having a sequencer include the
the sort of the royalty or like extract the royalty when when
building the block? Precisely so.
That's on a mutable X, on stock X at absentee rollout.
But we can do that on a mutable ZKDM.
We're going to have a slightly different approach.
I think we'll be we'll be sharing more details.
OK, cool. So I want to talk a little bit
about the token. So this, this IMX token which is
actually like yeah trading today and you know I checked there's
like $13 million of trading volume somewhere around that.
And you know actually I found the token price like you know
over time has stayed I guess like pretty consistent except
for you know 11 peak where I guess probably during the during
the bull market but hasn't hasn't lost a lot of its value
compared to I guess like when it was initially launched.
So I guess that's it's a good thing.
I guess how much do you think of that volume is speculators and
how much is tied to actual platform activity?
I guess maybe a prequer source to that question is what's the
token use? What's the utility of the token?
Yeah. Look, so the token's utility is
basically immutable, operates very differently to most of the
blockchains in terms of our business model, rather than
having say, sort of this. L1 chain thesis and around value
occurring to the token, the chains and we will obviously
IMAX is going to be the call gas currency of the beautiful C KBM.
I think we're now you know capture a lot of that narrative
which is really interesting. But our philosophy has always
been we think a much better and much more aligned business model
is to make the most liquid value add platform possible for web
two games and take 2% of every trade.
And in this way we can build something that has completely
aligned incentives developers. When they make money or when
users trades, we're making money and every single time those
assets are traded 20% of the fees must be paid for an IMAX.
And so I'm actually actually has sort of you know clear
fundamental utility which I think is you know people can
sort of look at that and sort of you know build their utility
models around and rather than. Sort of alternatives in in
market. So that's that's our utility
that's been the clear goal since day one is to really have this
integral into the protocol and and how we add value to every
single thread. And then yeah, the, the volume,
you know how much of the volume you think is or do you have a
sense of is that something you're tracking somehow?
I mean like how much of that is tied to actual activity on the
platform and how much of it is speculative?
Well, the vast majority would be people.
Trading based on what they sort of perceive the utility to be.
I wouldn't necessarily call that speculative, but I can up to the
reader's interpretation. I think the most important thing
is this thing has a clear right kind of that we've set in stone
since day one. And our vision is to construct
really just some of the most sensible tokenomics in the
world. So the few things that really
excite me about. The token, and obviously
immutable, you know doesn't generate this.
This is run by the Digital World Foundation but is 1.
Every single person who trades unimmutable can own part of the
protocol. And that's because every single
time the trade you're owning IMAX tokens.
And the vision of this is really cool because you have 3.1
billion gamers. If this takes off, everyone can
own a part of this open ecosystem of what the future of
digital property ownership is going to be.
And that's that's probably my my favorite thing.
And the second thing you know you talked about how the the
price has been quite stable. Obviously you're not here to
comment on prices but the the circulating supply is much
higher than most alternatives. It's it's, it's sort of used a
lot more and we've been able to maintain that ranking or improve
that ranking from 150 to 50 over the last year in circulating
supply even despite everything I'm locking.
I think that's because it's sort of the you know the the utility
in the long term alignment we have from holders today.
And then the final thing I'd say.
Is that obviously the vast majority of I MX allocated to
ecosystem grants. The vast majority of these
grants, all of which are issued by the foundation, are almost
completely under written. So we don't just give them out
to games in exchange for grants. The games actually have to
deliver volume to the protocol in order to earn those grants.
And right now, in order for roughly 180 million of tokens
which have been allocated over $12 billion in protocol volume
has to be achieved in order of them to even be given out.
So in terms of ecosystem allocations we run, you know,
the recommendations here are incredibly efficient in terms of
how they're structured for grants versus returns.
And game developers love it because they know that
ultimately you know that there's no supply just going out there,
no value being bought. Everyone has to contribute to
the ecosystem in order to sort of end up owning part of the
protocol, which I think is really important.
Very cool. Yeah, I mean maybe the wrap up
here, what is the, yeah, what's the road map and what should
people be looking into when it comes to immutable?
How can people follow the protocol also in the project?
And yeah, any any final thoughts?
Yeah, look, test that just went live 2 weeks ago.
We have pretty much every game on the platform signed up to
Passport. We've just done our biggest
quarter of onboarding games ever.
In the company's history off the back of this Polygon
announcement, basically you know increase the album rate by 75%
and we've got over four years of runway way over the long term
with the face of a year to get that hit before and we're here
to change digital ownership for good and and the thing I'd say
is look coming up we have main net in quarter four we've got
God's Unchained going mobile end of this year, Gold of Guardians,
Shad Bound, Infinite Victory all immutable titles being published
this year. And we've got a ton of our
biggest games on the platform. On the rise, yeah, across the
ages #1 in in France strategy game and in Australia you have
Illuvium going out of that open beta imminently.
Probably one of the most hyped games in in Web 3 right now.
I'm we're really just excited by the continued raise of the
caliber of quality of games right now.
And you know, as I said, you can't play the magic wand on the
timelines, but. It's pretty clear that a single
hit is going to pull gasoline on everything and catalyze what has
already been a very heavily invested in categories.
So personally, we're actually thrilled with the pace and
progress of things. I think it's just continued to
build to despair and help people get to these hits faster, more
profitably and more sustainably. Great.
Robbie, thanks for coming on and telling us all about Immutable
and also I've learned a ton about about web through gaming.
So this has been great. Thank you.
Thanks for having me. Pleasure.
Thank you for joining us on this week's episode.
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