TOKEN2049 - Content and NFTs: Why Bill Gates was Right - Yat Siu (Animoca Brands)

so first my name is yet I know it's a getting too sleepy afternoon so get some energy in here anyway my talk today is more about use cases for blockchain in this case why we think content will be king again with n of T so let me just give you a little bit of an introduction this one in 1996 Bill Gates penned an essay where he said content was king why did he say that well 96 was roughly the time when the Internet actually was similar to where blockchain is today when you think about internet access there were about 36 million online users at that time mostly on dial-up today on blockchain maybe 30 odd million wallets and he saw what all of us generally see in this conference a future he saw that the internet was going to connect all of us and because of that we would all be able to receive content at very low transport cost in short this was a new content economy you were able to make content it was a big company or smoke or a small start-up and you could participate in this economy because the distribution of content would be so cheap and then he said content is king whether this is software games you know movies music everything would basically grow to to grow because out on this new content revolution but what Bill Gates may not have quite fully understood at the time is that while the cost of transport came down to almost zero the cost of discovery went up exponentially and we see this today when when you look at the App Store when you look at other forms of content discovery so for instance this is when Jonathan Perelman came up with a counter quote just twenty two decades later he said content is king but this ruched distribution is Queen and she wears the pants in fact what he really said was you may have the best content in the world but if nobody can find you it's worthless right can there be a game of Thrones if it wasn't for HBO can there be a Rovio without the smartphone a Mario without Nintendo right this was not the future that people envisioned when the internet came of out people thought everyone can participate in this everyone can be making content but instead we're now the anyone who's making content has become strangled in this world of distribution so the dis it's the distributors that decide what you want not the content creator and perhaps the most obvious example in this is music wide if you look at Spotify if you look at the artists they're not making much money even though billions of their streams are being delivered it's a real problem for content creators so it's been switched and we think through the blockchain this can change now before I go into the meat of the conversation very quickly why do we think we know anything about this well we're game company originally we're one of the top and 50 game companies in the world according to Pocket Gamer were public company that is probably the only game company that's public that is embraced blockchain because we saw this future we've done over 13 blockchain partnerships and we're led fortunate to be led by a very strong management team and if you want to go check us out on the web you can do that later but you know we're big believers in this and the reason we got into this is because of crypto kiddies so I'm sure everyone in this room will have heard of crypto kiddies otherwise why are you here right however you know our studio in Vancouver was involved in fact our head of games in the u.s. is one of the cofounders of crypto kitties and so we became investors in the spin-off that became diaper labs and also the distributors for Greater China and also the ones who put cryptic eighties in the HTC phone and so forth so that was a beginning almost well well actually over a year ago and what we saw was for those of you who might remember there was so many transactions millions of dollars 25 million dollars of transactions in a very short period of time and brought aetherium on its knees and people quickly sort of were like whoa actually gaming could be a really good use case for blockchain but the other thing that was also interesting is this opportunity of this invention which was the non fungible token which are going to shortly so let's talk about n of T's and content so I'm not gonna go to deep deep into this because I'm thinking you should know this but in general if you don't all you need to know it's a non fungible token it's the opposite of a fungible token as it it's not like Bitcoin and aetherium it is unique it is scarce it means that there is an attribute inside this token that is only for that token now the real-world parallel would be like art take an example for a Picasso it's worth 10 million 20 million you don't know but the reason why it's valuable is not only because it's the only Picasso but because someone out there validated it they said you know through the provenance through the curator through the you know you know verification of other people that this Picasso is the only one out there therefore it is valuable it's in this museum is in the Louvre or it's in whatever and maybe it's worth 10 million dollars now what the blockchain does here is it can do exactly the same thing in terms of giving it the provenance the validation you can say this particular crypto Kitty is the only one in the world with only this color pattern and only this unique feature now what that means is that you are assured that this cat is unique is it worth ten dollars or is it worth a hundred thousand dollars the most expensive cat was sold for a hundred forty thousand US dollars for those of you who may remember or have read the headline news so now if you imagine this environment in something like whoops sorry let me go to step out of here so if you imagine this environment in something like games and how quickly goes slowly there into our project the sandbox but it's imagine a game in the future where you're playing and the items inside the game are not in fact unlimited they are scarce by nature every one of you who has played games will understand that a game has an economy whether it's an online game of World of Warcraft or again my fortnight or one of our own games like you know crazy Kings there's an economy inside that game but what are the problems that games have is that the economy is run very much like the Venezuelan government in other words when you need to have currency we just go and make a billion more coins and eventually for those who play the game long enough they become ultra billionaires which you may have experienced if you've been in the game for a long time and the result of course is that for any new player that enters that game economy it will feel like he's entering downtown Manhattan at childbirth and he can afford nothing every piece of item and clothing or thing that he wants to purchase has to cost millions because you can't burn the currency fast enough hyperinflation and games tend to ultimately die after five to seven years as a result of that now if however inside a game for instance you have items that were scarce let's say there's only a thousand of these kind of guns the gun content company is not actually able to produce any more of these guns we had this specific example with crypto kitties where we bundled two crypto kitties into the HTC phone and we had to explain to them that actually you have to pay 15 dollars for pair of cats for every phone that was sold and that idea that you had to actually pay for digital cat you know into a phone was at an early stage is kind of incomprehensible because can I just take a copy of that to put it there no you can't right because the cat is unique in fact we don't have enough cats we have to buy them from the market so a player would now own an item that he or she can sell to another player now that idea how does that change the concept of engagement in the game the ownership of that game as a player the retention mechanism will increase and the value will also go up so I want to give you an example of something that we're working on specifically called sandbox which is basically Minecraft on the blockchain and it's basically how we envision the gaming future to look like in a live project it's one it's something that will is already in beta and the full launch will happen sometime in summer it's basically minecraft voxel builder style every item in there is true ownership the non fungible tokens there's a currency in there called sand and there's a decentralized marketplace and what we decided to do here is much like Minecraft we allow the consumer to actually make their own items just like in Minecraft but every item you craft is a non fungible token whether it's the pickaxe made by you or the pickaxe made by someone else that's entirely up to you whether you think that's valuable or not but the utility in the use case may be the same or could be unique that's entirely up to how you decide to design this but what's fascinating now is that if you've made this work in our game the sandbox now because it's an N of T you can export it to any other game environment that supports it because essentially it's like an open item right so this is important because when you think about games and virtual ownership inside existing games you actually own nothing this is one of the biggest problems that our industry has because this ownership problem we have is that it's like you going into H&M and buying some clothes and if H&M shuts down your clothes disappear this is the virtual world right now but in in in games that's what happens but you don't need this doesn't have to happen I have a no item I should be able to own it even if I don't use it I still get to store and keep it now the reason we picked this style is important for us which is essentially like digital Legos volumetric pixels because you give anyone a digital sort of volumetric style Lego and they can build something beautiful but if you ask them to draw something you need to have skill oh you know how to use Photoshop or you need how to draw and so if you look at things like roblox or minecraft or Lego you give them a bunch of bricks and everyone can build something inside we will allow people to also create their own game experiences now I think this is interesting because you can create your own utility for the items you create so imagine you made some end of tees you can use it in our sandbox game or you can use it in games you've created yourself in other words the items you crafted you can make your own utility inside the game for specific purpose right this is something that allows for user-generated game content and game creation as well so you would you see and what we believe and this is where I think fundamentally were we think the world of gaming will change and actually content in general is that because of non-tangible tokens content will become the platform now if you think about today how do you discover content you go Netflix you go an Apple App Store you're gonna Google Play and you find the content and somehow it decides that this piece of content is relevant for you right or you might go to an influencer but actually if you own items that were digital that were permanent why shouldn't the content find you based on what you own and so the way we see it is that once you have digital ownership of items and it's and it's discoverable that way companies will make content for you because of what you own so I'll give you an example for those of you who may have played and a world of warcraft players here anyone all right two hands not many gamers here anyway it used to be very good so as a ratio pretty well good actually but hey it used to be one of the biggest online games out there right like 10 20 30 40 million players but the game got less popular but people spent you know hours and hours on time of this like years of their life minting and creating these items but they're all virtual they mean nothing now they've stopped playing the game but it's a community of tens of millions of users that have items in that game if all these items were actually on the blockchain they were non fungible tokens would there be another game company that will come out and say hey I'm gonna take these these these are community that has all these items and make content for them because I want those users to play my game I'm going to make my world compatible with world of warcraft and we think this is how it's gonna be because it's a great way for discovery it's not centralized it's actually decentralized in a way you know I know it's a community and a community could be a community of millions or community of just hundreds of thousands and so you could have ecosystems around the content platforms that is made in other words these non fungible tokens will make that reality possible so whether it's playing on the sandbox playing on you know our own crazy Spencer Azure some Garfield games it doesn't really matter right they can the developer can choose to do that and of course one added element is that every game will now have a marketplace right because while you can trade the items outside of the world universe inside the game there is a Marketplace effect and in fact World of Warcraft has shown in the past that marketplace effect can work the problem is there was no scarcity it was unlimited items so the auction house effectively what it used to be called had to be shut down because nobody cared about it because every item was anyway abundantly available so why would I pay for that all right so let me and then we've recently launched this two million dollar creator fund which we pay both in Fiat and tokens to encourage development in this area so if you want to check it out you know on a sandbox tour game you can go on and see if you want to create items with our UGC non fungible token creator and make items you know for sandbox and in the form of non tangible tokens to try to promote that area okay so let me leave you with this last final thought this is our industry the gaming industry in total it's actually a 138 billion dollar industry freemium mobile games is seventy billion dollars okay that's the world we are in right now what a lot of people don't quite understand is that that seventy billion dollars comes from less than 3% conversion so if anyone knows candy crush or fortnight or has played any of these games 97 to 99 percent don't pay anything it's entirely driven by that single-digit percentage which means that if you're able to convert a single percentage more of the playing audience it's a twenty to twenty five billion dollar market opportunity and so our premise is that this is going to change our industry and digital items massively because of this ownership issue today you're making content and you own nothing right I mean when you play a game why would you pay for that it's not just it's fun but it's also frivolous it has no value but if you knew that the game that you're playing and you're spending money on actually has value you might sell it on maybe this profit but at least it's permanent it's tangible then would you be willing to convert more and point is we think that the conversion rate is not going to go from one or two or three percent to 4 percent it should go to 10 or 15% because the hours of time people spend is significant and there's the element of oh I need that item I have to buy it from somewhere so we think it will turn the gaming industry from like a hundred thirty eight billion dollar industry to a significantly larger one as a result of that and so if we are right then content will be king again thank you very much [Applause]