theCUBE + NYSE Wired: Crypto Trailblazers | Yat Siu, Animoca Brands

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More from theCUBE + NYSE Wired: Crypto Trailblazers

Yat Siu

Chair

Animoca Brands

play_circle_outline Core projects like The Sandbox, Mocaverse, Open Campus, and RWAs

play_circle_outline Faster and Easier Transactions: Utilizing Stablecoins to Enhance Efficiency in the Industry

play_circle_outline Tokenization of real-world assets versus creation of network assets

play_circle_outline Tokenizing Networks: Maximizing Value through Vertical Integration, Meme Coins, and Attention Economy

play_circle_outline Ownership environment with tokens, community empowerment, value creation.

play_circle_outline Future of capitalism with tokens, ownership by customers and stakeholders.

play_circle_outline Maximizing Value: Navigating Challenges in Token Economics for Network Growth and Customer Acquisition

play_circle_outline Building sustainable network effects in tokenomics

play_circle_outline Revolutionizing Finance: Democratization Through Blockchain Technology

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Yat Siu, Animoca Brands

Yat Siu

Chair Animoca Brands

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>> Hello everyone. Welcome back to theCUBE. We are here in New York City, theCUBE plus NYC Wired. We are breaking down all the crypto trailblazers. We've had an ongoing series of the folks making it happen, pioneering and blazing the trail in crypto, decentralized infrastructure and enabling this next wave of applications in, whether it's tokens for value, decentralized infrastructure, immutable smart contracts. The world is changing and the crypto trailblazers are doing it. Yat Siu is here, chairman and co-founder of Animoca Brands. Very diverse, very broad, but very successful pioneer and trailblazer. Yeah, thank you for joining us here in theCUBE at our NYSC studio. Of course, we've got Palo Alto connecting Silicon Valley and Wall Street. Thanks for coming into the Trailblazers.

Yat Siu

>> Thank you for having me. It's a great honor to be here.

>> So your company has got so much going on, so just take a minute to explain how you guys are organized. You've got a lot going on. You have an investment company, a variety of different brands and things. Explain what you guys do, then we can get into some of the things about importance of tokens and some of the important things in the industry right now.

Yat Siu

>> Sure. Yeah. Very quickly, Animoca Brands is, I guess you could say, sort of a conglomerate in the Web3 space. We have a digital asset advisory business that basically focuses on helping projects launch tokens. Particularly from our portfolio, we have an investment arm that has over 540 investments and growing in the Web3 space, making us probably one of the largest Web3 investors, particularly in the areas of culture, entertainment and the arts, but of course also going into technology layers, AI dependent and so forth. We also have our core projects. You've probably heard of The Sandbox, famous for gaming and Metaverse, but also the Mocaverse, which is our digital ID and reputation system, Open Campus, which is basically how we're basically trying to solve blockchain in the world of education, things like student loans, for instance, right? And then of course we have RWAs as well. So we just recently announced a partnership with Standard Chartered and Hong Kong Telecom to launch a stablecoin, which would be one of the very first, I would say, if not the very first central bank licensed stablecoin in the world. So we're a very diverse group all over the world. I think most people don't really realize, though we have of course a big presence in places like Hong Kong, we're actually an Australian corporation, so we're quite an international firm. And what's also interesting about us is that we're actually a public company, which is also different from a lot of companies like us. So in a way, we operate almost like a DAO. We have close to 3000 shareholders, and for big decisions we have to make shareholder votes, and there's only one class of common shares as well. So in a way, you could translate this almost like a token, even though of course it's not.

>> It's super exciting and it's so impressive what you have done because in this market, obviously there's a good climate in the US, but all the work that you've done has been very foundational, and I know how hard it is. We've seen the market. There's infrastructure, there's laying down platforms. Again, it's open, so you have an open public market there, plus the diversity. It's a huge accomplishment and it's just the beginning. And I want to get your thoughts on that because as you look at what you laid down in your kind of foundation, what's going on in the industry, because now you have kind of a mood change, certainly in the US, and now entrepreneurship is booming, but those core set of services are being laid down. It's a lot more work to do. Where are your focus? What's your optimization right now? What are you thinking about?

Yat Siu

>> So I guess the principle of the mission of the company has always been around delivering digital profit to all, and that's really the core mission. And as you may know, we started off initially with gaming and we still think gaming is going to be massive in a sense that people are actually, from a virtual standpoint, they understand virtual currency, they think of skins as assets, even though you can't trade them inside your popular games, but when they're NFTs or when they're tokenized, you could do that. And I think when you think about what happened between 2019 all the way up until '21, '22, one of the most misunderstood areas is that gaming continues to be actually one of the fastest growth areas in Web3 in terms of numbers of users. But what are we focused on? Well, what we came to realize over time was that the Web3 space was growing. I mean, when we first started, Bitcoin was like $3,000, right? Bitcoin is now I think back at 88,000 for instance, right? So that gives you a little bit of a proxy of the growth of exactly where the space is going, and that's affected our industry, affected our revenue, it's affected our growth in a very positive way. But I think people sometimes miss, and I think we were also learning this, that the path, the real secret around understanding the space and benefiting from this is actually becoming more financially literate. So we saw these experiences, when people were paying Web3 games, they started learning about money, and then they started entering the space. And actually, what we need in our industry is much more mass adoption. And so we've been focused around how do we bring more people into the ecosystem, and we can do this by making them more financially literate and letting them understand about money and value and so forth. Think about our kids. How did they learn about money? It wasn't school. School didn't teach anything about money, but maybe it's because they're trading Pokemon cards or our generation was trading baseball cards. Actually, that's how we learned about that. And then we started to be interested in things like investing and cash flow and all that kind of stuff. That's actually how we developed.

>> It's funny you mentioned gaming. When my kids were younger, they would collect the goods inside the games, and I would just kind of do the old Trading Places line, "Buy low, sell high," right, but that concepts just stuck in their head. But now they're online. Then unbeknownst to me, they just, "Okay, buy it low and sell it high," and then they understood scarcity of certain items as things supply and demand. So it's an immersive experience, and the key is they're connected. And I think the gaming is a really good way to kind of illustrate how the real world will evolve. Gaming is going to be huge. I mean, they're digital natives.

Yat Siu

>> 3.4 billion people in the world.

>> They're connected. Economy's built in, so it's perfect for this anyway.

Yat Siu

>> I think one of the things that people in the gaming world often fully understand that there's an entire financial economy that exists inside the games that's just not been exposed. And what blockchain actually does, it exposes that to everyone. But of course, there's other areas that's developed. The financial sector is being completely revolutionized by blockchain technology, stablecoins, perhaps being perhaps one of the biggest innovations in that space. And I expect with a much more positive framework that we have now in the US and emerging, I think the big thing that we need to still have some clarity about in the US is defining basically what our utility tokens, what tokens are securities, what are not. I mean, I know there's talks, there's indications, but that clarity will be very important because what that will then do is it'll open up the floodgates for basically at least every major US firm, if not the rest of the world, to say, "Okay, here's a framework that we understand. Our legal, our GCs, they can all sign off and we can now basically start doing that." And we think that the future will be completely tokenized, as in everyone's going to be involved in a token, launching a token in the same way that everyone has a website or has an online presence, right? It's basically we think inevitable.

>> It's interesting. When the internet came out, I was kind of younger then. I was kind of in my prime. I guess you would say that from a tech and business perspective. And all the early waves happen, there's always the early adopters that follow the money and they're completely dogmatic around whatever protocols. They just want to make money. And usually it's an underbelly kind of market, something that's not mainstream, whether it was adult or other things because they just want to make money and they're focused on and they use the best technology. I think gaming has become, outside of some of the things that have been kind of washed out in terms of fraud and all the bad stuff that's happened in the web, but gaming truly is an early adopter market on-

Yat Siu

>> It is....

>> everything.

Yat Siu

>> Absolutely.

>> Human interaction, culturally, technology. It is the canary in the coal mine. Do you agree with that?

Yat Siu

>> Absolutely. So first of all, I think just on your first comment, I think when you describe that, actually what you're really describing is capitalism, right?

>> Exactly.

Yat Siu

>> And at the root, what capitalism has been responsible for, really the growth and entrepreneurialism and innovation in places like America. In fact, America being the global leader in capitalism is a great demonstration of what happens when you do that, right? And I guess we're here at the NYC. So yes, clearly it fits very much so. But when it comes to gaming just specifically, I would say look no further than NVIDIA. In fact, the reason, and I think this is so fascinating about innovation, the reason why we have these AI chips today is not because NVIDIA said, "Let's build AI chips," in the early days. It's because, "Let's build great GPUs that people can play great games with and experience better game experiences." And so there's an interesting correlation between us as humans, and I think this is very important for innovation, is that a lot of people focus on utility, and that's important, but the utility isn't necessarily just thinking about how can I use it in a functional manner, but actually what pleasure, enjoyment, entertainment do I receive from that? That actually drives us more as humans. So it's the fun and whimsical things that actually surprise us and create innovations that then lead to something great. So for instance, even for things like the keyboard that we have today that we're using, we can say, "Oh, it evolved from the typewriter that we use from work," but actually, the very origin was really the keyboard of a harpsichord. It was a musical instrument, and the very first typewriter that we see was actually an iteration of a piano keyboard. That's what it looked like, right? So again, we started with something that we enjoyed, which was music, culture, entertainment, something whimsical, something fun, and then basically evolved in that innovation, and the story of gaming is exactly the same. Not only does it bring billions of people together, which pushes technology forward in terms of latency and technology and so on, the demand is, "I want to play this game better," which basically created demand for buying GPU chips from NVIDIA, which gave them the revenue growth and development that ultimately turned out that, "Oh wow, these sort of GPU floating point computations are actually a really good device for AI." And it's also interesting to note that, remember when NVIDIA was starting to grow, actually the leading chip company was Intel. And because Intel basically decided not to focus on gaming, not focusing on the consumer culture entertainment side of things, ultimately they lost out, and I think we see the story time and time again.

>> I think the gaming miss and then the focus not on Apple killed Intel, because they lose volume.

Yat Siu

>> Yes.

>> It's a volume game. Chips are volume.

Yat Siu

>> But remember, what are both of these business? Even if NVIDIA is arguably a B2B business in terms of selling its GPUs, actually, its roots are consumer business and Apple is a consumer business as well.

>> Yeah, you bring up so much there. It's just a great comment. I love that cultural angle, and I think gaming is a great indicator because it also forces the technology to change because when you had the early days of gaming, you would say, "Okay, let's store it in a database. We'll keep track of everything." Now, at that point, I think Hadoop was the big data store at the time, but it was a hard problem. Things just cropped up, first generational problems that made the owners of the games go, "Well, why can't we have an economy?"

Yat Siu

>> Yes.

>> "Why can't we have skins and currency in the game? Great, we'll code it up. We'll get a database. Well, that's not going to work." And then so you start to see that evolution. That's where the innovation happens, as you point out. And so take that forward today. You mentioned money. Okay, the New York Stock Exchange. Stablecoins, you mentioned stablecoins. A lot of people don't even know what stablecoins are. They see coins, meme coins and other things, so you're not seeing that shift over. It's kind of gamification. We all know the GameStop generation here in Wall Street. Explain the importance of stablecoins, and then I want to get into the mechanism of tokens because this is where the things really go next level, certainly on the token side with games and blockchain. That creates some value, but first, explain stablecoins and why that's so important for the industry.

Yat Siu

>> Yeah. I mean, I would say maybe the simplest way from a consumer perspective why stablecoins are so important is that stablecoins are not... It's tokenization of money, but really what it is, it's translating something that the rest of the world understands, which from their perspective is stable, let's call it the US dollar currency, that is essentially in effect from their perspective, pegged to a token that can then be used in a virtual digital economy, but it turns out that actually it makes transactions faster and easier around the world. For instance, think about when you do a wire transfer, right? It takes a long time. You have to go through many intermediaries, you have to pay fees, versus I'm just basically transferring a token that is representative of that value, which I can then redeem if I wanted to back into FIAT, for instance.

>> Transactions.

Yat Siu

>> It's really transactions. And that's really, when you think about it for blockchain, one of the primary use cases around that. It basically makes the money much more liquid, much more accessible as well, right? That's the other thing. For instance, when you look at places like there's over a billion people that are unbanked. They do not have a bank account. They can't have a bank account.

>> They have a mobile phone.

Yat Siu

>> They have a mobile phone, but they can't have a bank account because maybe they only make five or $10 a month and that's just simply not enough money for a bank to sustain, but with a wallet and with tokens and -

>> Or they have a lot of crypto and were debanked.

Yat Siu

>> Yes. Well, that's a different story, but yes, there are some stories around that too.

>> Well, it's digital economy. It's digital currency because as a digital realm, you guys are doing all the work in the area from the metaverse into other things. It's like there is a digital culture. There's digital goods. There are digital assets, art, gaming. What's the bank for that?

Yat Siu

>> Yeah, that's absolutely true. And also I think, and so we're quickly going towards tokens. There's a new type of asset class that's developed in the digital world, which are basically these network assets. And I think there's a distinction therefore between a stablecoin, which is a real-world asset tied in terms of the dollar or maybe what some people are trying to do with real estate or with art. That's sort of an RWA component, and that's tokenization of existing assets versus the creation of really new assets or assets that could have capital formation but couldn't pre-tokenization. And before I even go into the value of the network assets, let's just talk briefly about virtual assets as they are, right, because that's the most common misunderstanding and criticism is like, oh, well, Bitcoin's virtual or this SAND token or this MOCA token is made out of thin air. What is it worth, that kind stuff, because it's virtual, I can't hold it. I can touch it, I can feel it. It's not like real estate or something. But when you think about what is the most valuable thing today, it's intellectual property. And intellectual property is propped up by by copyright trademark laws, that type of stuff. That is entirely virtual. There's nothing physical about IP rights. Someone came up with the idea. Sure, it creates value, yes, but it was something that someone invented that was entirely virtual, as it were. Music is a good example. If we didn't have music that we could legally protect in terms of someone's ownership in that, then you wouldn't have capital formation and it wouldn't become investable. A bank wouldn't be able to give you a loan to create a music business, for instance, because it's not an asset, right? But because we can now protect music rights, a musician has a way forward, a creator can produce a product which then has value that is investable as an asset. If you didn't have IP rights, then you wouldn't have Taylor Swift, you wouldn't have Michael Jackson, you wouldn't have The Beatles, and guess what happens? Not only wouldn't you have these great successful artists, you wouldn't have a music economy. There would be no industry and everyone would be poorer for it because we wouldn't enjoy music, more innovation in the space. And so you advance that today in terms of whether this is AI or technology, software development. That's actually ultimately all virtual. So we already exist in the world. And I think what they call, I guess in the traditional world, goodwill or intangible, that's roughly I think 70 to $80 trillion in size in the US alone. I mean, the entire market value of gold is I think 13 trillion, right? So really the intangible sort of, let's call them cultural as well, IP-based assets are already the bedrock of basically the most advanced economies in the world.

>> You mentioned Bitcoin earlier. People can relate to Bitcoin as a store of value. Everyone kind gets that. Stablecoin is going to be a mechanism to translate in dollar. Okay, mainstream, maybe a stopgap, but it's a good thing. I like stablecoin. I'm totally for that.

Yat Siu

>> Of course.

>> Bitcoin, Stablecoin, great mechanisms to get stuff done, get liquid, maybe get exchange, get your money, whether it's FIAT or whatever, store of value. You're getting into the creation side of assets. You mentioned music, art, content. We give it away for free. We have a token. People can remix it because we're open source, right? We want that to happen. But you're right, industries can't form unless there's some structure. This is where tokens become super valuable.

Yat Siu

>> Absolutely.

>> This is where blockchain becomes super important from an infrastructure storage perspective. I'm simplifying it obviously, and then the ecosystem. You've essentially built a vertically integrated conglomerate. You've got investments, you've got advisory, you have all these mechanisms, these things. You're building your own kingdom of-

Yat Siu

>> Yeah. So we wouldn't like to call it a kingdom in the spirit of decentralization.

>> things can form there, but when you start getting into tokens, an entrepreneur can build with you, next to you.

Yat Siu

>> So let me just... Let's talk a little bit about tokens, right? Because tokens are a different type of virtual property, and in most cases, they represent essentially a network asset that is a way in which you can quantify the value of the network effect present, which by the way is another way to say it, it's a proxy for the attention economy. So we can sit here and laugh all day about meme coins, and many of them are laughable -

>> They're funny. I'm not against meme coins, but it's just like a baseball card to me.

Yat Siu

>> Yes. But I think the thing to think about meme coins as well is just, it's like attention. You can have your 15 minutes of fame or you can have a long-lasting enduring fame.

>> Yeah, exactly. Good point.

Yat Siu

>> And so there will be many of those moments that come out and there is a value that may be valuable for 10 minutes or maybe valuable for the long term versus a certain type of projects that have much more attention and maybe much more, I guess, value beyond that -

>> Durability.

Yat Siu

>> Look at GameStop, right? I mean, GameStop is an example of a stock that has become a meme in many ways, and its value is not based on the traditional impact that you think in terms of P multiples and so on, but there is a network effect embedded represented in the shares with that community, and that's what tokens represent today as well. Now, the reason why this is important is because network effects are everywhere. Every business has a network effect. Even when you're putting out content for free, as you call it, you're not actually... Nothing is free.

>> Yeah. Nothing is free.

Yat Siu

>> So when you're giving content out for free, what are you really trying to get? The bargain here, really where everyone's trying to get that bargain is to say, "I'm giving you free content so that you become my customer for the future or that you become my audience." What are you doing? You're building a network. You're building a network effect, right? Even if you're a small restaurant or a small bar or a small shop, what do you want? You want attention, you want audience, you want customers. So you're building essentially that, right? And the advertising industry in Web2 has become the way in which you basically draw attention to you, right? And so they've become the gateways for that. And the reason why they're the largest companies in the world is because they own the network effect. And so what Web3 does, it allows you to actually finally build network effects of your own that you can own and you can leverage, and partnership and the fact that they could be tradable is just another element of making it a much more freer market.

>> And there's no pipes laying down. It's digital. It's on the internet, so there's no physical plant. I mean, network effects are taking advantage of existing networks.

Yat Siu

>> Or it's actually growing new networks. So the value of a network effect, and the reason why, for instance, blockchains are powerful is what builds networks is actually the ability to do more with it. So when you look at, for instance, some of the first network effects that are out there, people gave good examples around that, around telephone lines, people being able to make connections and all that kind of stuff, right? But today, actually because of composability, you can actually build bigger networks from within what may seem to be a small network, because innovation can happen within the network in and of itself, right? You see this with basically Web2 platforms like Reddit where the Reddit subgroups could be maybe bigger than maybe the platform in and of itself, or drive that, or you see it with user-generated games like Minecraft or Roblox, you see that same effect. And with tokens, because you can build and compose on top of them, you're adding layers of network effects, making them deeper, more powerful and more valuable.

>> This is what I love. Let's stay on this because this is where I think the dots connect on tokens and the value. Put aside tokens in the tech world, like NVIDIA tokens for AI neural networks and all that stuff, you're talking about instrumenting network effects with tokens.

Yat Siu

>> Correct.

>> That is a significant key thing, so it's all... The internet's free.

Yat Siu

>> Yes.

>> Apps can be free.

Yat Siu

>> It's open. That's the other key thing. And it's openly composable. So for instance, let's say you have a network effect that you want to target in Instagram, because they have a network and you want to build on it.

>> And they own that.

Yat Siu

>> And they own it, so you can't build on the network of Instagram without their permission and they can de-platform any time. So ultimately, whatever network effects you're building actually is to their benefit. Essentially they're the rent seekers and everyone else, all the creators that are building content on top of it, they're actually building the network, they're creating the value, and then they leverage it for that purpose.

>> And they could be de-platformed-

Yat Siu

>> Anytime.

>> Anytime.

Yat Siu

>> Anytime, right?

>> This is a perverse incentive, and actually antithetical to the value of human society because the value creator is being exploited.

Yat Siu

>> And I would argue it's also-

>> I mean, that's a little bit over the top, but-

Yat Siu

>> No, but actually, I don't think it's over the top because ultimately, and I think many people don't understand this, is that these platforms are actually anti-capitalist. They've essentially created their monopolies and essentially created really not a transparent market. Capitalism requires a transparent market. But actually what you see in platforming on Instagram, for instance, when you're buying advertising, are you actually buying advertising from the person you're buying ads from? No, you're using an algorithm that doesn't work in the benefit of the parties involved, but really just to the benefit to the platform who adjudicates between what they should or shouldn't do, but you're basically to the benefit not of the buyer or the seller in this case.

>> And this creates an asymmetrical environment where the platforms-

Yat Siu

>> It's not a market.

>> It's not a market.

Yat Siu

>> It's not a market.

>> It's not a market.

Yat Siu

>> It's not a market.

>> So let's get into how markets are going to develop. Let's use your example, my example. We provide free content. You're exactly right. We have free content because I guess like open source, we all monetize around the edges and make a marketplace of ideas. Let content flow, see what happens, and we have a great network effect. Now, if we had a token, CUBE Coin, which we had, we didn't chip it yet, but the goal would be that's an infrastructure. We're creating value, and if people want to endorse that, they can sign up for our tokens, like a game.

Yat Siu

>> Exactly. Correct, right.

>> And then I would now have media infrastructure.

Yat Siu

>> And the other thing that's really important here is that you create an ownership environment between your community that truly owns it. And that's kind of interesting because even when you talk to a creator who is building their network on Instagram, they're not going to say, "Oh, I'm renting my platform. I'm renting it." They think they own it, but in fact they don't, right? And that's the thing. But the reason they invest and provide so much effort is because they're trying to build something that they could own, right, not just their brand, but the platform in itself. Now, with tokens, you really own it. It's the same technology that allows you to say, "Hey, the Bitcoin I own is really sovereignly mine," and that actually is what it means for the network growth and the network effect.

>> And you mentioned GameStop. I want to go back to the GameStop because I think what that shows is that the collective could move the market. So if I'm a creator on Instagram, Instagram feeds you just enough ad revenue, by the way, on CPMs of Web 2.0, by the way. It's not even valuing the valuation of the assets. Say I got 10 million subscribers. I'm a consumer, or I'm that one million in B2B, that's worth 30 to $50 million valuation if I was a VC. I'd be like, "Yeah, but I can't invest in you on that platform because you could be de-platformed, so there's a huge risk."

Yat Siu

>> Right. And it's not yours.

>> So I need to domicile somewhere.

Yat Siu

>> Yeah.

>> So if I'm going to do that, that's what capitalism would do is say, "I'm going to build my own "-

Yat Siu

>> It has to be your own asset....

>> "And I'm going to command the audience that trusts me to my place." That's what GameStop basically did. They took over a company and then made a meme stock. As a creator-

Yat Siu

>> Maybe just to draw on this point, I think what happened there is it became a community-owned stock, right?

>> Community-owned stock. Yes.

Yat Siu

>> And I think to me, there are however limitations around doing this because can you imagine that GameStop could have 10 million shareholders? Very hard, right, but you can imagine 10 million token holders, right? So this is kind of where we think the future will go.

>> Explain. This is important.

Yat Siu

>> Which is basically, imagine what the world will look like in the future. Is it going to be shareholder corporations the way you see today? We actually think it's going to be much more like a stakeholder environment where your customer and your, let's call it equity holder or whatever, they're all part of the same pool that is being serviced essentially through something that scales much more, which is basically token holders. Ethereum can have millions of token holders, for instance, because of the fact that as a system that scales and there's actually ownership across millions of users, you can actually manage and do that, which basically also gives much more community empowerment, because for instance, in our case, we're a public company. We have thousands of shareholders. However, if we want to make a decision that we have to give to shareholders, we have to print the damn prospectus. It takes like 28 days notice, actually much more because you've got legal, all that kind of stuff, right? Probably the most we can ever do to go to our shareholders for an opinion is maybe four or five times a year, right?

>> It's a lot of work.

Yat Siu

>> Right. But if you use blockchain and tokens, you can not only do that if you wanted to every day, although that might be excessive, maybe at least once a week or once several times a month, you can do that at the scale of tens of millions of users. Now, imagine a future where every person that is a customer is also an owner. That's actually what tokenization enables, right? So that means you could have billions of people essentially be owners of the network that they helped construct because they're adding value to that. And we actually think also that's actually the way in which we can solve for a better form of capitalism. And that's important because right now, this concentration of wealth has caused all these problems around the people at the bottom saying, "This is unfair. Tax the rich," all that kind of stuff, but that has to do with the lack of inclusivity. It's committed with lack of financial literacy, but it's also, "How do I get access to that?"

>> It's a structural issue too. You mentioned intellectual property earlier as a virtual construct to make the market for music, as your example. That was conceived because the old way of doing things was not tokens. So the idea of tokens is to take the intermediaries out of the question if we don't need them. Smart contracts could be between two people or tokens could represent a corporate structure. Is that happening now? Because DAOs came out. DAOs were very effective. Some people love DAOs, some don't. It's a little bit more community-oriented. It could be unwieldy. Are DAOs still relevant? And is tokens becoming the new DAO concept?

Yat Siu

>> So the only way to really operate a DAO effectively is still through tokens because as I mentioned, it's about the scale in which people can run governance. And DAOs are messy, but guess what?

>> More open source projects.

Yat Siu

>> Democracy is messy, right? And so do you prefer to be an environment where your voice matters or do you want your environment, someone tells you what to do every day? And there's people who choose either or. So I'm not saying that DAOs is for everyone in the same way that one could argue that the democratic framework that you have in America, for instance, isn't for everyone, right? Americans might disagree, but there's people outside of America who would say, "I prefer someone to tell me what to do." So that's a choice that you have. The key is it's a person's choice to live a certain way or the other. But let's look at DAOs by the numbers, right? DAOs today govern roughly between 50 to 20 billion of value, but by roughly 12 million users. Now, tell me which other framework exists in the world where 12 million users have a vote in assets of excess of 10, $20 billion?

>> Not many. Zero.

Yat Siu

>> I would say none.

>> Are there yields in those tokens or is it more voting power or is there economics behind it?

Yat Siu

>> No. Well, the economics behind it is that how the token is governed creates a certain reward for the user, not necessarily for all projects, but it's like, for instance, what should a staking reward be, or who should I give funding grant? Why would I give a funding grant? Because it would help the token project that hopefully will accrue value to the token. It's decided by the community, right? And I think the criticism that some people have is like, "Oh, but it's not centrally organized. There's no person really accountable. And again, it depends on the organization. The point being though, that who owns Bitcoin? Who owns Ethereum, right? At the end of the day, we're talking about ecosystems that are worth, in the case of Bitcoin, in excess of a trillion dollars, and it's not owned by anyone.

>> It's clearly working. I mean, obviously you can throw cold water on it at some level, but at the end of the day, you can't deny the results. It's the same in open source software. I remember-

Yat Siu

>> Correct.

>> There's some projects that do great, Apache, Linux Foundation. If you ever seen how the sausage is made in those things, it can be messy, to your point, but that's a feature, not a bug.

Yat Siu

>> Exactly.

>> So it's not necessarily a bad thing.

Yat Siu

>> And what happened was that basically through this inclusivity and this participation really brought the wisdoms of crowds into it where first thousands, then hundreds of thousands, then millions of coders started coming in and contributing to something in a way that no organization can really compete with. And this to me is why blockchain is so powerful. Maybe the simple way to think of blockchain is it's establishing a rule set in which the rules of the game is known for all. And maybe we can argue that first generation of tokens, the rules were just too simple, right? You own it, you don't own it. Maybe that's the basic, right? Proof of ownership. However, as smart contracts develop, as chains develop, we can actually get more rules that are built around them, but the key is the rules of the game are known by all, right? And I think this is the challenge that we have when-

>> They're like protocols.

Yat Siu

>> Well, again, what is a protocol? A protocol-

>> Is rules....

Yat Siu

>> is establishing rules of a form, which is basically the foundation of societies, right? I mean, the reason why this works is because you have a rule of law, and generally, while there may be an argument around it, generally 99 out of a hundred times, you know what to do, what is the right thing to do because of the rules that are established.

>> Yeah. Let's talk about token economics, because now we're talking capitalism. Okay, there's rules of engagement. Tokens are good, tokens are great. Everyone should really research this if they want to be in on this next wave.

Yat Siu

>> Done the right way.

>> Done the right way.

Yat Siu

>> Because it's the same thing with capitalism. Capitalism done the wrong way has wreaked a lot of havoc.

>> There's two sides to that coin.

Yat Siu

>> Right. Exactly. Yes.

>> Again.

Yat Siu

>> So tokens function exactly the same way.

>> Don't judge what you see, look where the puck is going, as they say. Talk about token economics, because this has come up a lot. You mentioned tokens owners. There's treasury also. There's an economic value now coming out of this. You mentioned some of the things. What is token economics? How should people think about token economics today and how do you see it evolving as the basis for the underlying kind of economic models of how things function?

Yat Siu

>> So taking away RWAs for a moment, because that's obviously tied to a different asset, generally, I go back to the whole point around what builds value into a token is the network effect, which means that whatever token economics you're building has to be around, how do you construct the most value into the network, which normally when you think of air drops, is one of the reasons why so many token projects have done such massive air drops because they're acquiring customers. So they're saying, "Hey, I'm going to give you all these tokens so you become my customer and use it," and that basically forms a part of the initial network. The problem of course is that when they actually go into the product or they have a token, that's great, but then there's no purpose or use for it, then they might just sell it or move away, and it turns out that the network couldn't be formed, right? So that's the principle idea around it though, which is that you need to basically build network effects. So the rules around this is building sustainable network effects, which means in tokenomics, and I don't want to talk about ratios and percentage because really those don't matter as well, right? Some people say give most of the community, some people give 10% of the community. We can see over the last several years, the most successful tokens don't have a formula in terms of the token ratios. That doesn't matter as much. What matters much more is the mission of the token, and then whether the tokenomics in question actually is fulfilling that mission.

>> And then you're talking about utility too, right, because-

Yat Siu

>> Yes.

>> There's tokens, because I mean, some people think of it like stock, right?

Yat Siu

>> No, no, no, no.

>> No? It's not like stock. It's-

Yat Siu

>> So there is-

>> Is there a pool of tokens?

Yat Siu

>> So maybe the way that I explain it to some people is that if you are a shareholder on Facebook, it gives you no influence on Instagram. If you have a million followers on Instagram, it gives you no sort of financial benefit, right? Those two are not connected, and that's the issue of having shares per se. There's no connection between the network, but a token is both. A token is something that is connected essentially to the network. Means that you build influence in the network because you accrued reputation and token value. But at the same time, there is a financial benefit that accrues to you because you contributed value to the network, or the network in and of itself grows as well.

>> And the token goes up in value.

Yat Siu

>> It could go up in value depending whether the network goes up in value. So for instance, when you think about Ethereum as an example, when people think about Ethereum from the perspective of owning it and not necessarily using it, what are they hoping for? They're not hoping for yield, they're not hoping for some dividend or some profit or some higher gas fee. What they're hoping for is that Ethereum will be more adopted, more widely used, more accessed, and that's really about growing the network. And this is where the utility comes in. What is the reason it does that? Oh, because there's this DeFi protocol in Ethereum or all these L2s are building and growing all these users or these new financial protocols establishing or these games that are launching on Ethereum or Ethereum L2s, they're growing. Therefore, ergo Ethereum as a base foundation will grow as well, right? It's not that different from -

>> Yeah, and the apps are coming, so the usage of Ethereum actually is up if you look at it right now.

Yat Siu

>> Yes, correct.

>> So that's a good thing.

Yat Siu

>> Correct. Exactly.

>> That's a telegraph set to value.

Yat Siu

>> It's an example of showing, "Ah, okay, fine. The network is growing and therefore owning that asset as a network asset," because Ethereum ultimately for the L2s is the fundamental security layer for them, and therefore, if you do believe that that's necessary, which I think we all do, then Ethereum over time will continue to accrue value. It has the deepest TVL, which is another form of network effect.

>> So back to token economics, there are network effects, so let's say I want to do a coin or you have a project, you have to figure out a treasury, you give away a certain pool? Is there a percentage? So it's not like stock. I mean, corporate governance aside, Facebook is a great example. You have no influence on Instagram for your stockholder. You just get either a dividend and a stock price goes up and you buy or sell-

Yat Siu

>> Right, security financial.

>> Move that aside. But tokens are distributed, so it's kind of like there are economics involved.

Yat Siu

>> And they can be earned as well, right? Yes.

>> Earned and distributed, so the economic piece of that token economics is, is it structured like a cap table almost where it's like there's a pool, there's a treasury? I've seen examples-

Yat Siu

>> Yeah. So I would say it really depends on the project. So for instance, from us, from the digital asset advisory standpoint, we advise in tokenomics as well, and when we look at a project, we say, well, what's the nature of the project? Does it make sense to have... A very common decision that some people try to do is make it fixed supply. The reason why is because they are influenced very much by Bitcoin. It's like, okay, fixed supply, steady, all that kind of stuff, therefore-

>> Value it creates, yeah.

Yat Siu

>> accrual, that kind of stuff.

>> Scarcity.

Yat Siu

>> Scarcity. That's one.

>> Yeah. I like that.

Yat Siu

>> But maybe for the project in question, it's the wrong thing to do, right? For instance, because if you have the value accrued much too aggressively at the beginning of a project, then you're actually pricing out new adoption and you're hurting the network effect.

>> So it's a goal, mission-based.

Yat Siu

>> So it's mission-based.

>> Yes.

Yat Siu

>> So every token project is mission-based. So Bitcoin store value absolutely makes sense because it's fixed. But if you're something that's trying to grow, for instance, like Ethereum, then actually fixed supply might be a problem.

>> So you'd work backwards from the mission. That's your advice.

Yat Siu

>> The mission is key. And then you work with parties like ourselves or others to determine how this mission can be best looked at. And it's not just economics. And you could also argue that economics is somewhat philosophical. There's a lot of philosophy involved, there's a lot of context necessary for the project to understand what they want to do. And I think it's companies as well in terms of the mission. If it's purely financial, it's easy.

>> How could people learn about this? What would you recommend? Because there's so much going on because it's super important, tokens. So there's mission involved. You mentioned this philosophy, culture, what kind of environment you want to have.

Yat Siu

>> Absolutely.

>> What kind of network is it?

Yat Siu

>> Yeah. So I mean, there's a lot of public resources, but for instance, I think at Animoca Brands, we actually post research for instance, so you can come take a look at our X account. We have videos on a constant regular basis, our tokenomics teams.

>> And you also invest in a lot of projects too.

Yat Siu

>> We invest in a lot of projects as well, but we have a tokenomics team that talks about token designs and so on, so come listen to that. But there's also great resources on platforms like other media platforms in Web3. So yeah, lots of resources out there.

>> Well, thanks for doing a rabbit hole dive on that, token economics. Always love going down that rabbit hole. Super important. I think tokens are great. Yeah. Talk about your success, not from the sense of your success, but what have you learned. You guys have done a lot of great work in a time where it was hard and it was very foundational. So really hats off to you guys on that. But where are you now? What's the landscape look like? You got a lot going on. What are you thinking about? Where's your head at? What's on your mind? What's your goals? What are you focused on most right now personally and also in the business as you navigate and continue to build out? Because this is just the beginning. I mean, there's more community involved.

Yat Siu

>> It is the beginning, right? So maybe just painting the field a little bit, I think of the space in Web3 very similar to how the internet was in 2001, 2002. So the framing of Animoca Brands and the whole mission around digital property rights is actually we do believe that if we succeed, and I think we're getting there in what we're doing, we will create truly a better world, one where there's more common ownership. We think we'll solve the problems we have in capitalism. We think we'll create a much more fairer society through tokenomics because of accessibility. The key thing, and sometimes people in this space often forget to say, what blockchain does and what tokenization does, it democratizes access to financial instruments that were simply not there before, and it also creates assets out of things that had value but that couldn't be assetizable before, couldn't be of our capital value, right, like intellectual property, right? So I'll give you some examples. With Open Campus, we have teachers who basically would create their educational content as a capital asset through the form of an NFT, right? And I think most people think of NFTs like Bored Apes and Mocaverse and Pudgy Penguins or land and Sandbox, and that's one representation. Those are cultural status goods and that's absolutely relevant, but people don't talk enough about how NFTs could actually be containers of IP value. And what happens when someone has something that might only make 10 or $20 a year and that turns into a capital asset, someone could pay a 100 or $200 for it because he's happy to get their 20% yield on that one, right? And that was the foundation of property. I mean-

>> It's happening.

Yat Siu

>> It's happening. And then because of that, a bank can come in and finance it or a third party investor can say, "Hey, I'll finance that and get some return," and all that kind of stuff. So those entire economies develop because of that, right? And so that's kind of where we think the future will go. So what are we focused on? Well, we're focused on the things where we think there's gaps. So for instance, with Mocaverse, which is focused on digital ID, which is really, we think of it as our reputation stack, but the reason we're focused on that is because we take everything from the lens of an economy, so how do we build a better functioning economy while in the real world it's based on trust? The fact that you can go to a local baker and buy a bread and he gives you the bread and then takes your money as opposed to the other way around, both of you need to have trust, right? I mean, we take it for granted, but it's actually fundamentally very much trust-driven. I'm giving you money. How do I know you're not going to run away with it? You're giving me bread. How do you know I'm just going to run out with the bread and not-

>> Exactly. Yeah....

Yat Siu

>> sort of do business with you, right? There's a framework of trust, and it's proven statistically as well, and I guess sort of economists as well, that any society that has a high level of interpersonal trust has the highest GDPs, right? And in countries that have very low trust, there's no GDP, there's no economy because I can't trust doing business with you, right? And so that's really missing in Web3 to make it that next level.

>> This trust network is really critical.

Yat Siu

>> Yes, exactly, right? And so in Web2, trust networks are built by the platforms in the form of these ratings. Your Uber driver, your Amazon seller or buyer ratings, you've got three or four or five stars out of five and therefore I know I can trust you, but it's a very imperfect mechanism.

>> Yeah, and it's a black box.

Yat Siu

>> And you can game it and all that kind of stuff, right?

>> It's a total black box and it's not owned.

Yat Siu

>> And also it's not transferable. It's not interoperable. My seller rating on Amazon has zero meaning in Facebook, has zero meaning on Instagram, has zero meaning on Uber. There's no connection whatsoever. And just quickly on that, on blockchain with a decentralized ID that we're doing on Mocaverse, that type of reputation layer is not only owned by you and you get the benefits for that in the form of data rights, it's transferable and it's usable by others. So other platforms can leverage the reputation that you've built, and this is really important because when I want to do business with you, and I don't know who you are because you're anonymous or you're privacy-preserving, but I need to know your reputation, and that actually I think gets solved with blockchain because with zero-knowledge proof, we can do this in a way where you preserve your privacy but still enable that trust.

>> That is a huge thing. And I totally agree with you 100%. The reputation is earned, not bought.

Yat Siu

>> Correct. It's earned. And also what's interesting is once you have reputation, you will do everything to keep it, which is very different, by the way, when you talk about purely money. If someone makes money in one area, they'll just extract and make money somewhere else if there's no consequences. But if your reputation is at stake, then you will be careful. And that's the foundation of really .

>> And that's a good equilibrium, right? That puts people on check. That's the bread example.

Yat Siu

>> Correct. Exactly.

>> Hey, you're a customer coming in. You pay all the time and I know where you live.

Yat Siu

>> Yes. Exactly, exactly.

>> That's a face-to-face paradigm. But that goes to digital too because it's first party.

Yat Siu

>> It is. But also because we can't quantify reputation in a pure dollar sense, in a numerical sense, it's been hard for people to think of it as value. But think about it. What is your reputation? It's everything, right? It's the reason why people don't want to leave a country, for instance, after being there for 30 years, even if the country might be going to shit, because it means they have to start from scratch. Well, what's the fear? The fear is everything I've built, which is what? It's not your assets. It's your reputation, it's your network. It's the people you have and you have to start all over again, and so many people in the world prefer to stay maybe in worse places because that historical reputation has been so invested in that moving to a new country and starting from scratch -

>> And switching costs.

Yat Siu

>> Switching costs are tremendous.

>> Switching costs.

Yat Siu

>> It's the most expensive, switching costs.

>> Yeah, that's a great point. It's interesting. We're looking at saving democracy because we've been approached because news and information is happening in the US and we're open source, so we're looking to expand that so tokens would be a great value there. We've got video. There's also local news, so news is changing. All of these structures, the old structures are being torn down. You mentioned a few of them, digital.

Yat Siu

>> That's right, yes.

>> And so I want to get your thoughts on this because I keep coming back to this. I'm in my 50s. Open source was never around in college.

Yat Siu

>> That makes two of us.

>> So I lived in proprietary software world, which meant we would steal software, share it with our friends, try not to get caught. If a company was started and went out of business, that software was lost with it, goes into bankruptcy, all these mechanisms. Media is proprietary, right? So these platforms are proprietary because they control everything.

Yat Siu

>> Yes.

>> So there's a proprietary open kind of dialogue going on where it's like open is good, proprietary is bad. That's my thesis. So give me your perspective on this because it's not direct translation, but all the benefits of open networks and open concepts where tokens are now empowering new dynamics.

Yat Siu

>> I think the way that maybe the, let's call it summarized version of what you're describing is centralized versus decentralized. So proprietary versus open is really centralized versus decentralized. And what is the power of decentralization? It's checks and balances, it's common ownership, it's distribution of power, influence, and it's longevity. So a lot of people would say, "Oh my goodness, but if I sort of decentralize it and distribute it across, am I not actually weakening it?" But actually you're strengthening it funnily enough, because what happens is that the network is more commonly owned, which means more people have a vested stake in it. So if only one person is interested in success -

>> And by the way, you said portable reputation too.

Yat Siu

>> Correct.

>> So it's interoperability.

Yat Siu

>> It's interoperability, right? So the more people have that have a vested stake in it, the more they want to make sure it survives. And if only one person or one entity cares about the survival, then it's all dependent on that person or entity. And if it goes away, to your point, then everything goes away with it. So really to make something last, it has to go to common ownership. It must. I mean, if you think of it from this construct of nations and countries, the fact that citizens feel they have a common ownership in their country is why it lasts.

>> And it's interesting too, and we have to wrap up and I know you got a busy schedule, we appreciate you coming in on theCUBE pod here, is you can let capitalism thrive in that environment because transparency is there.

Yat Siu

>> Yes.

>> So you-

Yat Siu

>> It's in market. Yes.

>> You got enough market structure just to get the behavior going, but let it go. A marketplace is an open forum of transactions.

Yat Siu

>> Correct. Yeah. And it opens up, I think, a better form of capitalism because more people can participate. Again, it's the democratization and the access of that. Over time, we've created much more harder frameworks for people to participate financially, and blockchain basically opens it up.

>> Well, we're at Wall Street here. They're making big trades. You heard when the trades go, it gets loud. They yell at each other. I love it. That's like Trading Places to me. Love the commentary. Yeah. Thank you so much for coming on.

Yat Siu

>> Thank you for having me.

>> Really appreciate you.

Yat Siu

>> Thank you.

>> Really love the work you've done. Again, you've laid down some serious work there, foundation of body of work and the investments. Got great work to continue to do. We appreciate what you do. Thank you.

Yat Siu

>> Thank you.

>> All right, I'm John Furrier here with theCUBE. NYSE, it's our Wall Street studio. NYSE Wired and theCUBE bringing you all the action. Thanks for watching.

Yat Siu, Animoca Brands

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>> Hello everyone. Welcome back to theCUBE. We are here in New York City, theCUBE plus NYC Wired. We are breaking down all the crypto trailblazers. We've had an ongoing series of the folks making it happen, pioneering and blazing the trail in crypto, decentralized infrastructure and enabling this next wave of applications in, whether it's tokens for value, decentralized infrastructure, immutable smart contracts. The world is changing and the crypto trailblazers are doing it. Yat Siu is here, chairman and co-founder of Animoca Brands. Very diverse, very broad, but very successful pioneer and trailblazer. Yeah, thank you for joining us here in theCUBE at our NYSC studio. Of course, we've got Palo Alto connecting Silicon Valley and Wall Street. Thanks for coming into the Trailblazers.

Yat Siu

>> Thank you for having me. It's a great honor to be here.

>> So your company has got so much going on, so just take a minute to explain how you guys are organized. You've got a lot going on. You have an investment company, a variety of different brands and things. Explain what you guys do, then we can get into some of the things about importance of tokens and some of the important things in the industry right now.

Yat Siu

>> Sure. Yeah. Very quickly, Animoca Brands is, I guess you could say, sort of a conglomerate in the Web3 space. We have a digital asset advisory business that basically focuses on helping projects launch tokens. Particularly from our portfolio, we have an investment arm that has over 540 investments and growing in the Web3 space, making us probably one of the largest Web3 investors, particularly in the areas of culture, entertainment and the arts, but of course also going into technology layers, AI dependent and so forth. We also have our core projects. You've probably heard of The Sandbox, famous for gaming and Metaverse, but also the Mocaverse, which is our digital ID and reputation system, Open Campus, which is basically how we're basically trying to solve blockchain in the world of education, things like student loans, for instance, right? And then of course we have RWAs as well. So we just recently announced a partnership with Standard Chartered and Hong Kong Telecom to launch a stablecoin, which would be one of the very first, I would say, if not the very first central bank licensed stablecoin in the world. So we're a very diverse group all over the world. I think most people don't really realize, though we have of course a big presence in places like Hong Kong, we're actually an Australian corporation, so we're quite an international firm. And what's also interesting about us is that we're actually a public company, which is also different from a lot of companies like us. So in a way, we operate almost like a DAO. We have close to 3000 shareholders, and for big decisions we have to make shareholder votes, and there's only one class of common shares as well. So in a way, you could translate this almost like a token, even though of course it's not.

>> It's super exciting and it's so impressive what you have done because in this market, obviously there's a good climate in the US, but all the work that you've done has been very foundational, and I know how hard it is. We've seen the market. There's infrastructure, there's laying down platforms. Again, it's open, so you have an open public market there, plus the diversity. It's a huge accomplishment and it's just the beginning. And I want to get your thoughts on that because as you look at what you laid down in your kind of foundation, what's going on in the industry, because now you have kind of a mood change, certainly in the US, and now entrepreneurship is booming, but those core set of services are being laid down. It's a lot more work to do. Where are your focus? What's your optimization right now? What are you thinking about?

Yat Siu

>> So I guess the principle of the mission of the company has always been around delivering digital profit to all, and that's really the core mission. And as you may know, we started off initially with gaming and we still think gaming is going to be massive in a sense that people are actually, from a virtual standpoint, they understand virtual currency, they think of skins as assets, even though you can't trade them inside your popular games, but when they're NFTs or when they're tokenized, you could do that. And I think when you think about what happened between 2019 all the way up until '21, '22, one of the most misunderstood areas is that gaming continues to be actually one of the fastest growth areas in Web3 in terms of numbers of users. But what are we focused on? Well, what we came to realize over time was that the Web3 space was growing. I mean, when we first started, Bitcoin was like $3,000, right? Bitcoin is now I think back at 88,000 for instance, right? So that gives you a little bit of a proxy of the growth of exactly where the space is going, and that's affected our industry, affected our revenue, it's affected our growth in a very positive way. But I think people sometimes miss, and I think we were also learning this, that the path, the real secret around understanding the space and benefiting from this is actually becoming more financially literate. So we saw these experiences, when people were paying Web3 games, they started learning about money, and then they started entering the space. And actually, what we need in our industry is much more mass adoption. And so we've been focused around how do we bring more people into the ecosystem, and we can do this by making them more financially literate and letting them understand about money and value and so forth. Think about our kids. How did they learn about money? It wasn't school. School didn't teach anything about money, but maybe it's because they're trading Pokemon cards or our generation was trading baseball cards. Actually, that's how we learned about that. And then we started to be interested in things like investing and cash flow and all that kind of stuff. That's actually how we developed.

>> It's funny you mentioned gaming. When my kids were younger, they would collect the goods inside the games, and I would just kind of do the old Trading Places line, "Buy low, sell high," right, but that concepts just stuck in their head. But now they're online. Then unbeknownst to me, they just, "Okay, buy it low and sell it high," and then they understood scarcity of certain items as things supply and demand. So it's an immersive experience, and the key is they're connected. And I think the gaming is a really good way to kind of illustrate how the real world will evolve. Gaming is going to be huge. I mean, they're digital natives.

Yat Siu

>> 3.4 billion people in the world.

>> They're connected. Economy's built in, so it's perfect for this anyway.

Yat Siu

>> I think one of the things that people in the gaming world often fully understand that there's an entire financial economy that exists inside the games that's just not been exposed. And what blockchain actually does, it exposes that to everyone. But of course, there's other areas that's developed. The financial sector is being completely revolutionized by blockchain technology, stablecoins, perhaps being perhaps one of the biggest innovations in that space. And I expect with a much more positive framework that we have now in the US and emerging, I think the big thing that we need to still have some clarity about in the US is defining basically what our utility tokens, what tokens are securities, what are not. I mean, I know there's talks, there's indications, but that clarity will be very important because what that will then do is it'll open up the floodgates for basically at least every major US firm, if not the rest of the world, to say, "Okay, here's a framework that we understand. Our legal, our GCs, they can all sign off and we can now basically start doing that." And we think that the future will be completely tokenized, as in everyone's going to be involved in a token, launching a token in the same way that everyone has a website or has an online presence, right? It's basically we think inevitable.

>> It's interesting. When the internet came out, I was kind of younger then. I was kind of in my prime. I guess you would say that from a tech and business perspective. And all the early waves happen, there's always the early adopters that follow the money and they're completely dogmatic around whatever protocols. They just want to make money. And usually it's an underbelly kind of market, something that's not mainstream, whether it was adult or other things because they just want to make money and they're focused on and they use the best technology. I think gaming has become, outside of some of the things that have been kind of washed out in terms of fraud and all the bad stuff that's happened in the web, but gaming truly is an early adopter market on-

Yat Siu

>> It is....

>> everything.

Yat Siu

>> Absolutely.

>> Human interaction, culturally, technology. It is the canary in the coal mine. Do you agree with that?

Yat Siu

>> Absolutely. So first of all, I think just on your first comment, I think when you describe that, actually what you're really describing is capitalism, right?

>> Exactly.

Yat Siu

>> And at the root, what capitalism has been responsible for, really the growth and entrepreneurialism and innovation in places like America. In fact, America being the global leader in capitalism is a great demonstration of what happens when you do that, right? And I guess we're here at the NYC. So yes, clearly it fits very much so. But when it comes to gaming just specifically, I would say look no further than NVIDIA. In fact, the reason, and I think this is so fascinating about innovation, the reason why we have these AI chips today is not because NVIDIA said, "Let's build AI chips," in the early days. It's because, "Let's build great GPUs that people can play great games with and experience better game experiences." And so there's an interesting correlation between us as humans, and I think this is very important for innovation, is that a lot of people focus on utility, and that's important, but the utility isn't necessarily just thinking about how can I use it in a functional manner, but actually what pleasure, enjoyment, entertainment do I receive from that? That actually drives us more as humans. So it's the fun and whimsical things that actually surprise us and create innovations that then lead to something great. So for instance, even for things like the keyboard that we have today that we're using, we can say, "Oh, it evolved from the typewriter that we use from work," but actually, the very origin was really the keyboard of a harpsichord. It was a musical instrument, and the very first typewriter that we see was actually an iteration of a piano keyboard. That's what it looked like, right? So again, we started with something that we enjoyed, which was music, culture, entertainment, something whimsical, something fun, and then basically evolved in that innovation, and the story of gaming is exactly the same. Not only does it bring billions of people together, which pushes technology forward in terms of latency and technology and so on, the demand is, "I want to play this game better," which basically created demand for buying GPU chips from NVIDIA, which gave them the revenue growth and development that ultimately turned out that, "Oh wow, these sort of GPU floating point computations are actually a really good device for AI." And it's also interesting to note that, remember when NVIDIA was starting to grow, actually the leading chip company was Intel. And because Intel basically decided not to focus on gaming, not focusing on the consumer culture entertainment side of things, ultimately they lost out, and I think we see the story time and time again.

>> I think the gaming miss and then the focus not on Apple killed Intel, because they lose volume.

Yat Siu

>> Yes.

>> It's a volume game. Chips are volume.

Yat Siu

>> But remember, what are both of these business? Even if NVIDIA is arguably a B2B business in terms of selling its GPUs, actually, its roots are consumer business and Apple is a consumer business as well.

>> Yeah, you bring up so much there. It's just a great comment. I love that cultural angle, and I think gaming is a great indicator because it also forces the technology to change because when you had the early days of gaming, you would say, "Okay, let's store it in a database. We'll keep track of everything." Now, at that point, I think Hadoop was the big data store at the time, but it was a hard problem. Things just cropped up, first generational problems that made the owners of the games go, "Well, why can't we have an economy?"

Yat Siu

>> Yes.

>> "Why can't we have skins and currency in the game? Great, we'll code it up. We'll get a database. Well, that's not going to work." And then so you start to see that evolution. That's where the innovation happens, as you point out. And so take that forward today. You mentioned money. Okay, the New York Stock Exchange. Stablecoins, you mentioned stablecoins. A lot of people don't even know what stablecoins are. They see coins, meme coins and other things, so you're not seeing that shift over. It's kind of gamification. We all know the GameStop generation here in Wall Street. Explain the importance of stablecoins, and then I want to get into the mechanism of tokens because this is where the things really go next level, certainly on the token side with games and blockchain. That creates some value, but first, explain stablecoins and why that's so important for the industry.

Yat Siu

>> Yeah. I mean, I would say maybe the simplest way from a consumer perspective why stablecoins are so important is that stablecoins are not... It's tokenization of money, but really what it is, it's translating something that the rest of the world understands, which from their perspective is stable, let's call it the US dollar currency, that is essentially in effect from their perspective, pegged to a token that can then be used in a virtual digital economy, but it turns out that actually it makes transactions faster and easier around the world. For instance, think about when you do a wire transfer, right? It takes a long time. You have to go through many intermediaries, you have to pay fees, versus I'm just basically transferring a token that is representative of that value, which I can then redeem if I wanted to back into FIAT, for instance.

>> Transactions.

Yat Siu

>> It's really transactions. And that's really, when you think about it for blockchain, one of the primary use cases around that. It basically makes the money much more liquid, much more accessible as well, right? That's the other thing. For instance, when you look at places like there's over a billion people that are unbanked. They do not have a bank account. They can't have a bank account.

>> They have a mobile phone.

Yat Siu

>> They have a mobile phone, but they can't have a bank account because maybe they only make five or $10 a month and that's just simply not enough money for a bank to sustain, but with a wallet and with tokens and -

>> Or they have a lot of crypto and were debanked.

Yat Siu

>> Yes. Well, that's a different story, but yes, there are some stories around that too.

>> Well, it's digital economy. It's digital currency because as a digital realm, you guys are doing all the work in the area from the metaverse into other things. It's like there is a digital culture. There's digital goods. There are digital assets, art, gaming. What's the bank for that?

Yat Siu

>> Yeah, that's absolutely true. And also I think, and so we're quickly going towards tokens. There's a new type of asset class that's developed in the digital world, which are basically these network assets. And I think there's a distinction therefore between a stablecoin, which is a real-world asset tied in terms of the dollar or maybe what some people are trying to do with real estate or with art. That's sort of an RWA component, and that's tokenization of existing assets versus the creation of really new assets or assets that could have capital formation but couldn't pre-tokenization. And before I even go into the value of the network assets, let's just talk briefly about virtual assets as they are, right, because that's the most common misunderstanding and criticism is like, oh, well, Bitcoin's virtual or this SAND token or this MOCA token is made out of thin air. What is it worth, that kind stuff, because it's virtual, I can't hold it. I can touch it, I can feel it. It's not like real estate or something. But when you think about what is the most valuable thing today, it's intellectual property. And intellectual property is propped up by by copyright trademark laws, that type of stuff. That is entirely virtual. There's nothing physical about IP rights. Someone came up with the idea. Sure, it creates value, yes, but it was something that someone invented that was entirely virtual, as it were. Music is a good example. If we didn't have music that we could legally protect in terms of someone's ownership in that, then you wouldn't have capital formation and it wouldn't become investable. A bank wouldn't be able to give you a loan to create a music business, for instance, because it's not an asset, right? But because we can now protect music rights, a musician has a way forward, a creator can produce a product which then has value that is investable as an asset. If you didn't have IP rights, then you wouldn't have Taylor Swift, you wouldn't have Michael Jackson, you wouldn't have The Beatles, and guess what happens? Not only wouldn't you have these great successful artists, you wouldn't have a music economy. There would be no industry and everyone would be poorer for it because we wouldn't enjoy music, more innovation in the space. And so you advance that today in terms of whether this is AI or technology, software development. That's actually ultimately all virtual. So we already exist in the world. And I think what they call, I guess in the traditional world, goodwill or intangible, that's roughly I think 70 to $80 trillion in size in the US alone. I mean, the entire market value of gold is I think 13 trillion, right? So really the intangible sort of, let's call them cultural as well, IP-based assets are already the bedrock of basically the most advanced economies in the world.

>> You mentioned Bitcoin earlier. People can relate to Bitcoin as a store of value. Everyone kind gets that. Stablecoin is going to be a mechanism to translate in dollar. Okay, mainstream, maybe a stopgap, but it's a good thing. I like stablecoin. I'm totally for that.

Yat Siu

>> Of course.

>> Bitcoin, Stablecoin, great mechanisms to get stuff done, get liquid, maybe get exchange, get your money, whether it's FIAT or whatever, store of value. You're getting into the creation side of assets. You mentioned music, art, content. We give it away for free. We have a token. People can remix it because we're open source, right? We want that to happen. But you're right, industries can't form unless there's some structure. This is where tokens become super valuable.

Yat Siu

>> Absolutely.

>> This is where blockchain becomes super important from an infrastructure storage perspective. I'm simplifying it obviously, and then the ecosystem. You've essentially built a vertically integrated conglomerate. You've got investments, you've got advisory, you have all these mechanisms, these things. You're building your own kingdom of-

Yat Siu

>> Yeah. So we wouldn't like to call it a kingdom in the spirit of decentralization.

>> things can form there, but when you start getting into tokens, an entrepreneur can build with you, next to you.

Yat Siu

>> So let me just... Let's talk a little bit about tokens, right? Because tokens are a different type of virtual property, and in most cases, they represent essentially a network asset that is a way in which you can quantify the value of the network effect present, which by the way is another way to say it, it's a proxy for the attention economy. So we can sit here and laugh all day about meme coins, and many of them are laughable -

>> They're funny. I'm not against meme coins, but it's just like a baseball card to me.

Yat Siu

>> Yes. But I think the thing to think about meme coins as well is just, it's like attention. You can have your 15 minutes of fame or you can have a long-lasting enduring fame.

>> Yeah, exactly. Good point.

Yat Siu

>> And so there will be many of those moments that come out and there is a value that may be valuable for 10 minutes or maybe valuable for the long term versus a certain type of projects that have much more attention and maybe much more, I guess, value beyond that -

>> Durability.

Yat Siu

>> Look at GameStop, right? I mean, GameStop is an example of a stock that has become a meme in many ways, and its value is not based on the traditional impact that you think in terms of P multiples and so on, but there is a network effect embedded represented in the shares with that community, and that's what tokens represent today as well. Now, the reason why this is important is because network effects are everywhere. Every business has a network effect. Even when you're putting out content for free, as you call it, you're not actually... Nothing is free.

>> Yeah. Nothing is free.

Yat Siu

>> So when you're giving content out for free, what are you really trying to get? The bargain here, really where everyone's trying to get that bargain is to say, "I'm giving you free content so that you become my customer for the future or that you become my audience." What are you doing? You're building a network. You're building a network effect, right? Even if you're a small restaurant or a small bar or a small shop, what do you want? You want attention, you want audience, you want customers. So you're building essentially that, right? And the advertising industry in Web2 has become the way in which you basically draw attention to you, right? And so they've become the gateways for that. And the reason why they're the largest companies in the world is because they own the network effect. And so what Web3 does, it allows you to actually finally build network effects of your own that you can own and you can leverage, and partnership and the fact that they could be tradable is just another element of making it a much more freer market.

>> And there's no pipes laying down. It's digital. It's on the internet, so there's no physical plant. I mean, network effects are taking advantage of existing networks.

Yat Siu

>> Or it's actually growing new networks. So the value of a network effect, and the reason why, for instance, blockchains are powerful is what builds networks is actually the ability to do more with it. So when you look at, for instance, some of the first network effects that are out there, people gave good examples around that, around telephone lines, people being able to make connections and all that kind of stuff, right? But today, actually because of composability, you can actually build bigger networks from within what may seem to be a small network, because innovation can happen within the network in and of itself, right? You see this with basically Web2 platforms like Reddit where the Reddit subgroups could be maybe bigger than maybe the platform in and of itself, or drive that, or you see it with user-generated games like Minecraft or Roblox, you see that same effect. And with tokens, because you can build and compose on top of them, you're adding layers of network effects, making them deeper, more powerful and more valuable.

>> This is what I love. Let's stay on this because this is where I think the dots connect on tokens and the value. Put aside tokens in the tech world, like NVIDIA tokens for AI neural networks and all that stuff, you're talking about instrumenting network effects with tokens.

Yat Siu

>> Correct.

>> That is a significant key thing, so it's all... The internet's free.

Yat Siu

>> Yes.

>> Apps can be free.

Yat Siu

>> It's open. That's the other key thing. And it's openly composable. So for instance, let's say you have a network effect that you want to target in Instagram, because they have a network and you want to build on it.

>> And they own that.

Yat Siu

>> And they own it, so you can't build on the network of Instagram without their permission and they can de-platform any time. So ultimately, whatever network effects you're building actually is to their benefit. Essentially they're the rent seekers and everyone else, all the creators that are building content on top of it, they're actually building the network, they're creating the value, and then they leverage it for that purpose.

>> And they could be de-platformed-

Yat Siu

>> Anytime.

>> Anytime.

Yat Siu

>> Anytime, right?

>> This is a perverse incentive, and actually antithetical to the value of human society because the value creator is being exploited.

Yat Siu

>> And I would argue it's also-

>> I mean, that's a little bit over the top, but-

Yat Siu

>> No, but actually, I don't think it's over the top because ultimately, and I think many people don't understand this, is that these platforms are actually anti-capitalist. They've essentially created their monopolies and essentially created really not a transparent market. Capitalism requires a transparent market. But actually what you see in platforming on Instagram, for instance, when you're buying advertising, are you actually buying advertising from the person you're buying ads from? No, you're using an algorithm that doesn't work in the benefit of the parties involved, but really just to the benefit to the platform who adjudicates between what they should or shouldn't do, but you're basically to the benefit not of the buyer or the seller in this case.

>> And this creates an asymmetrical environment where the platforms-

Yat Siu

>> It's not a market.

>> It's not a market.

Yat Siu

>> It's not a market.

>> It's not a market.

Yat Siu

>> It's not a market.

>> So let's get into how markets are going to develop. Let's use your example, my example. We provide free content. You're exactly right. We have free content because I guess like open source, we all monetize around the edges and make a marketplace of ideas. Let content flow, see what happens, and we have a great network effect. Now, if we had a token, CUBE Coin, which we had, we didn't chip it yet, but the goal would be that's an infrastructure. We're creating value, and if people want to endorse that, they can sign up for our tokens, like a game.

Yat Siu

>> Exactly. Correct, right.

>> And then I would now have media infrastructure.

Yat Siu

>> And the other thing that's really important here is that you create an ownership environment between your community that truly owns it. And that's kind of interesting because even when you talk to a creator who is building their network on Instagram, they're not going to say, "Oh, I'm renting my platform. I'm renting it." They think they own it, but in fact they don't, right? And that's the thing. But the reason they invest and provide so much effort is because they're trying to build something that they could own, right, not just their brand, but the platform in itself. Now, with tokens, you really own it. It's the same technology that allows you to say, "Hey, the Bitcoin I own is really sovereignly mine," and that actually is what it means for the network growth and the network effect.

>> And you mentioned GameStop. I want to go back to the GameStop because I think what that shows is that the collective could move the market. So if I'm a creator on Instagram, Instagram feeds you just enough ad revenue, by the way, on CPMs of Web 2.0, by the way. It's not even valuing the valuation of the assets. Say I got 10 million subscribers. I'm a consumer, or I'm that one million in B2B, that's worth 30 to $50 million valuation if I was a VC. I'd be like, "Yeah, but I can't invest in you on that platform because you could be de-platformed, so there's a huge risk."

Yat Siu

>> Right. And it's not yours.

>> So I need to domicile somewhere.

Yat Siu

>> Yeah.

>> So if I'm going to do that, that's what capitalism would do is say, "I'm going to build my own "-

Yat Siu

>> It has to be your own asset....

>> "And I'm going to command the audience that trusts me to my place." That's what GameStop basically did. They took over a company and then made a meme stock. As a creator-

Yat Siu

>> Maybe just to draw on this point, I think what happened there is it became a community-owned stock, right?

>> Community-owned stock. Yes.

Yat Siu

>> And I think to me, there are however limitations around doing this because can you imagine that GameStop could have 10 million shareholders? Very hard, right, but you can imagine 10 million token holders, right? So this is kind of where we think the future will go.

>> Explain. This is important.

Yat Siu

>> Which is basically, imagine what the world will look like in the future. Is it going to be shareholder corporations the way you see today? We actually think it's going to be much more like a stakeholder environment where your customer and your, let's call it equity holder or whatever, they're all part of the same pool that is being serviced essentially through something that scales much more, which is basically token holders. Ethereum can have millions of token holders, for instance, because of the fact that as a system that scales and there's actually ownership across millions of users, you can actually manage and do that, which basically also gives much more community empowerment, because for instance, in our case, we're a public company. We have thousands of shareholders. However, if we want to make a decision that we have to give to shareholders, we have to print the damn prospectus. It takes like 28 days notice, actually much more because you've got legal, all that kind of stuff, right? Probably the most we can ever do to go to our shareholders for an opinion is maybe four or five times a year, right?

>> It's a lot of work.

Yat Siu

>> Right. But if you use blockchain and tokens, you can not only do that if you wanted to every day, although that might be excessive, maybe at least once a week or once several times a month, you can do that at the scale of tens of millions of users. Now, imagine a future where every person that is a customer is also an owner. That's actually what tokenization enables, right? So that means you could have billions of people essentially be owners of the network that they helped construct because they're adding value to that. And we actually think also that's actually the way in which we can solve for a better form of capitalism. And that's important because right now, this concentration of wealth has caused all these problems around the people at the bottom saying, "This is unfair. Tax the rich," all that kind of stuff, but that has to do with the lack of inclusivity. It's committed with lack of financial literacy, but it's also, "How do I get access to that?"

>> It's a structural issue too. You mentioned intellectual property earlier as a virtual construct to make the market for music, as your example. That was conceived because the old way of doing things was not tokens. So the idea of tokens is to take the intermediaries out of the question if we don't need them. Smart contracts could be between two people or tokens could represent a corporate structure. Is that happening now? Because DAOs came out. DAOs were very effective. Some people love DAOs, some don't. It's a little bit more community-oriented. It could be unwieldy. Are DAOs still relevant? And is tokens becoming the new DAO concept?

Yat Siu

>> So the only way to really operate a DAO effectively is still through tokens because as I mentioned, it's about the scale in which people can run governance. And DAOs are messy, but guess what?

>> More open source projects.

Yat Siu

>> Democracy is messy, right? And so do you prefer to be an environment where your voice matters or do you want your environment, someone tells you what to do every day? And there's people who choose either or. So I'm not saying that DAOs is for everyone in the same way that one could argue that the democratic framework that you have in America, for instance, isn't for everyone, right? Americans might disagree, but there's people outside of America who would say, "I prefer someone to tell me what to do." So that's a choice that you have. The key is it's a person's choice to live a certain way or the other. But let's look at DAOs by the numbers, right? DAOs today govern roughly between 50 to 20 billion of value, but by roughly 12 million users. Now, tell me which other framework exists in the world where 12 million users have a vote in assets of excess of 10, $20 billion?

>> Not many. Zero.

Yat Siu

>> I would say none.

>> Are there yields in those tokens or is it more voting power or is there economics behind it?

Yat Siu

>> No. Well, the economics behind it is that how the token is governed creates a certain reward for the user, not necessarily for all projects, but it's like, for instance, what should a staking reward be, or who should I give funding grant? Why would I give a funding grant? Because it would help the token project that hopefully will accrue value to the token. It's decided by the community, right? And I think the criticism that some people have is like, "Oh, but it's not centrally organized. There's no person really accountable. And again, it depends on the organization. The point being though, that who owns Bitcoin? Who owns Ethereum, right? At the end of the day, we're talking about ecosystems that are worth, in the case of Bitcoin, in excess of a trillion dollars, and it's not owned by anyone.

>> It's clearly working. I mean, obviously you can throw cold water on it at some level, but at the end of the day, you can't deny the results. It's the same in open source software. I remember-

Yat Siu

>> Correct.

>> There's some projects that do great, Apache, Linux Foundation. If you ever seen how the sausage is made in those things, it can be messy, to your point, but that's a feature, not a bug.

Yat Siu

>> Exactly.

>> So it's not necessarily a bad thing.

Yat Siu

>> And what happened was that basically through this inclusivity and this participation really brought the wisdoms of crowds into it where first thousands, then hundreds of thousands, then millions of coders started coming in and contributing to something in a way that no organization can really compete with. And this to me is why blockchain is so powerful. Maybe the simple way to think of blockchain is it's establishing a rule set in which the rules of the game is known for all. And maybe we can argue that first generation of tokens, the rules were just too simple, right? You own it, you don't own it. Maybe that's the basic, right? Proof of ownership. However, as smart contracts develop, as chains develop, we can actually get more rules that are built around them, but the key is the rules of the game are known by all, right? And I think this is the challenge that we have when-

>> They're like protocols.

Yat Siu

>> Well, again, what is a protocol? A protocol-

>> Is rules....

Yat Siu

>> is establishing rules of a form, which is basically the foundation of societies, right? I mean, the reason why this works is because you have a rule of law, and generally, while there may be an argument around it, generally 99 out of a hundred times, you know what to do, what is the right thing to do because of the rules that are established.

>> Yeah. Let's talk about token economics, because now we're talking capitalism. Okay, there's rules of engagement. Tokens are good, tokens are great. Everyone should really research this if they want to be in on this next wave.

Yat Siu

>> Done the right way.

>> Done the right way.

Yat Siu

>> Because it's the same thing with capitalism. Capitalism done the wrong way has wreaked a lot of havoc.

>> There's two sides to that coin.

Yat Siu

>> Right. Exactly. Yes.

>> Again.

Yat Siu

>> So tokens function exactly the same way.

>> Don't judge what you see, look where the puck is going, as they say. Talk about token economics, because this has come up a lot. You mentioned tokens owners. There's treasury also. There's an economic value now coming out of this. You mentioned some of the things. What is token economics? How should people think about token economics today and how do you see it evolving as the basis for the underlying kind of economic models of how things function?

Yat Siu

>> So taking away RWAs for a moment, because that's obviously tied to a different asset, generally, I go back to the whole point around what builds value into a token is the network effect, which means that whatever token economics you're building has to be around, how do you construct the most value into the network, which normally when you think of air drops, is one of the reasons why so many token projects have done such massive air drops because they're acquiring customers. So they're saying, "Hey, I'm going to give you all these tokens so you become my customer and use it," and that basically forms a part of the initial network. The problem of course is that when they actually go into the product or they have a token, that's great, but then there's no purpose or use for it, then they might just sell it or move away, and it turns out that the network couldn't be formed, right? So that's the principle idea around it though, which is that you need to basically build network effects. So the rules around this is building sustainable network effects, which means in tokenomics, and I don't want to talk about ratios and percentage because really those don't matter as well, right? Some people say give most of the community, some people give 10% of the community. We can see over the last several years, the most successful tokens don't have a formula in terms of the token ratios. That doesn't matter as much. What matters much more is the mission of the token, and then whether the tokenomics in question actually is fulfilling that mission.

>> And then you're talking about utility too, right, because-

Yat Siu

>> Yes.

>> There's tokens, because I mean, some people think of it like stock, right?

Yat Siu

>> No, no, no, no.

>> No? It's not like stock. It's-

Yat Siu

>> So there is-

>> Is there a pool of tokens?

Yat Siu

>> So maybe the way that I explain it to some people is that if you are a shareholder on Facebook, it gives you no influence on Instagram. If you have a million followers on Instagram, it gives you no sort of financial benefit, right? Those two are not connected, and that's the issue of having shares per se. There's no connection between the network, but a token is both. A token is something that is connected essentially to the network. Means that you build influence in the network because you accrued reputation and token value. But at the same time, there is a financial benefit that accrues to you because you contributed value to the network, or the network in and of itself grows as well.

>> And the token goes up in value.

Yat Siu

>> It could go up in value depending whether the network goes up in value. So for instance, when you think about Ethereum as an example, when people think about Ethereum from the perspective of owning it and not necessarily using it, what are they hoping for? They're not hoping for yield, they're not hoping for some dividend or some profit or some higher gas fee. What they're hoping for is that Ethereum will be more adopted, more widely used, more accessed, and that's really about growing the network. And this is where the utility comes in. What is the reason it does that? Oh, because there's this DeFi protocol in Ethereum or all these L2s are building and growing all these users or these new financial protocols establishing or these games that are launching on Ethereum or Ethereum L2s, they're growing. Therefore, ergo Ethereum as a base foundation will grow as well, right? It's not that different from -

>> Yeah, and the apps are coming, so the usage of Ethereum actually is up if you look at it right now.

Yat Siu

>> Yes, correct.

>> So that's a good thing.

Yat Siu

>> Correct. Exactly.

>> That's a telegraph set to value.

Yat Siu

>> It's an example of showing, "Ah, okay, fine. The network is growing and therefore owning that asset as a network asset," because Ethereum ultimately for the L2s is the fundamental security layer for them, and therefore, if you do believe that that's necessary, which I think we all do, then Ethereum over time will continue to accrue value. It has the deepest TVL, which is another form of network effect.

>> So back to token economics, there are network effects, so let's say I want to do a coin or you have a project, you have to figure out a treasury, you give away a certain pool? Is there a percentage? So it's not like stock. I mean, corporate governance aside, Facebook is a great example. You have no influence on Instagram for your stockholder. You just get either a dividend and a stock price goes up and you buy or sell-

Yat Siu

>> Right, security financial.

>> Move that aside. But tokens are distributed, so it's kind of like there are economics involved.

Yat Siu

>> And they can be earned as well, right? Yes.

>> Earned and distributed, so the economic piece of that token economics is, is it structured like a cap table almost where it's like there's a pool, there's a treasury? I've seen examples-

Yat Siu

>> Yeah. So I would say it really depends on the project. So for instance, from us, from the digital asset advisory standpoint, we advise in tokenomics as well, and when we look at a project, we say, well, what's the nature of the project? Does it make sense to have... A very common decision that some people try to do is make it fixed supply. The reason why is because they are influenced very much by Bitcoin. It's like, okay, fixed supply, steady, all that kind of stuff, therefore-

>> Value it creates, yeah.

Yat Siu

>> accrual, that kind of stuff.

>> Scarcity.

Yat Siu

>> Scarcity. That's one.

>> Yeah. I like that.

Yat Siu

>> But maybe for the project in question, it's the wrong thing to do, right? For instance, because if you have the value accrued much too aggressively at the beginning of a project, then you're actually pricing out new adoption and you're hurting the network effect.

>> So it's a goal, mission-based.

Yat Siu

>> So it's mission-based.

>> Yes.

Yat Siu

>> So every token project is mission-based. So Bitcoin store value absolutely makes sense because it's fixed. But if you're something that's trying to grow, for instance, like Ethereum, then actually fixed supply might be a problem.

>> So you'd work backwards from the mission. That's your advice.

Yat Siu

>> The mission is key. And then you work with parties like ourselves or others to determine how this mission can be best looked at. And it's not just economics. And you could also argue that economics is somewhat philosophical. There's a lot of philosophy involved, there's a lot of context necessary for the project to understand what they want to do. And I think it's companies as well in terms of the mission. If it's purely financial, it's easy.

>> How could people learn about this? What would you recommend? Because there's so much going on because it's super important, tokens. So there's mission involved. You mentioned this philosophy, culture, what kind of environment you want to have.

Yat Siu

>> Absolutely.

>> What kind of network is it?

Yat Siu

>> Yeah. So I mean, there's a lot of public resources, but for instance, I think at Animoca Brands, we actually post research for instance, so you can come take a look at our X account. We have videos on a constant regular basis, our tokenomics teams.

>> And you also invest in a lot of projects too.

Yat Siu

>> We invest in a lot of projects as well, but we have a tokenomics team that talks about token designs and so on, so come listen to that. But there's also great resources on platforms like other media platforms in Web3. So yeah, lots of resources out there.

>> Well, thanks for doing a rabbit hole dive on that, token economics. Always love going down that rabbit hole. Super important. I think tokens are great. Yeah. Talk about your success, not from the sense of your success, but what have you learned. You guys have done a lot of great work in a time where it was hard and it was very foundational. So really hats off to you guys on that. But where are you now? What's the landscape look like? You got a lot going on. What are you thinking about? Where's your head at? What's on your mind? What's your goals? What are you focused on most right now personally and also in the business as you navigate and continue to build out? Because this is just the beginning. I mean, there's more community involved.

Yat Siu

>> It is the beginning, right? So maybe just painting the field a little bit, I think of the space in Web3 very similar to how the internet was in 2001, 2002. So the framing of Animoca Brands and the whole mission around digital property rights is actually we do believe that if we succeed, and I think we're getting there in what we're doing, we will create truly a better world, one where there's more common ownership. We think we'll solve the problems we have in capitalism. We think we'll create a much more fairer society through tokenomics because of accessibility. The key thing, and sometimes people in this space often forget to say, what blockchain does and what tokenization does, it democratizes access to financial instruments that were simply not there before, and it also creates assets out of things that had value but that couldn't be assetizable before, couldn't be of our capital value, right, like intellectual property, right? So I'll give you some examples. With Open Campus, we have teachers who basically would create their educational content as a capital asset through the form of an NFT, right? And I think most people think of NFTs like Bored Apes and Mocaverse and Pudgy Penguins or land and Sandbox, and that's one representation. Those are cultural status goods and that's absolutely relevant, but people don't talk enough about how NFTs could actually be containers of IP value. And what happens when someone has something that might only make 10 or $20 a year and that turns into a capital asset, someone could pay a 100 or $200 for it because he's happy to get their 20% yield on that one, right? And that was the foundation of property. I mean-

>> It's happening.

Yat Siu

>> It's happening. And then because of that, a bank can come in and finance it or a third party investor can say, "Hey, I'll finance that and get some return," and all that kind of stuff. So those entire economies develop because of that, right? And so that's kind of where we think the future will go. So what are we focused on? Well, we're focused on the things where we think there's gaps. So for instance, with Mocaverse, which is focused on digital ID, which is really, we think of it as our reputation stack, but the reason we're focused on that is because we take everything from the lens of an economy, so how do we build a better functioning economy while in the real world it's based on trust? The fact that you can go to a local baker and buy a bread and he gives you the bread and then takes your money as opposed to the other way around, both of you need to have trust, right? I mean, we take it for granted, but it's actually fundamentally very much trust-driven. I'm giving you money. How do I know you're not going to run away with it? You're giving me bread. How do you know I'm just going to run out with the bread and not-

>> Exactly. Yeah....

Yat Siu

>> sort of do business with you, right? There's a framework of trust, and it's proven statistically as well, and I guess sort of economists as well, that any society that has a high level of interpersonal trust has the highest GDPs, right? And in countries that have very low trust, there's no GDP, there's no economy because I can't trust doing business with you, right? And so that's really missing in Web3 to make it that next level.

>> This trust network is really critical.

Yat Siu

>> Yes, exactly, right? And so in Web2, trust networks are built by the platforms in the form of these ratings. Your Uber driver, your Amazon seller or buyer ratings, you've got three or four or five stars out of five and therefore I know I can trust you, but it's a very imperfect mechanism.

>> Yeah, and it's a black box.

Yat Siu

>> And you can game it and all that kind of stuff, right?

>> It's a total black box and it's not owned.

Yat Siu

>> And also it's not transferable. It's not interoperable. My seller rating on Amazon has zero meaning in Facebook, has zero meaning on Instagram, has zero meaning on Uber. There's no connection whatsoever. And just quickly on that, on blockchain with a decentralized ID that we're doing on Mocaverse, that type of reputation layer is not only owned by you and you get the benefits for that in the form of data rights, it's transferable and it's usable by others. So other platforms can leverage the reputation that you've built, and this is really important because when I want to do business with you, and I don't know who you are because you're anonymous or you're privacy-preserving, but I need to know your reputation, and that actually I think gets solved with blockchain because with zero-knowledge proof, we can do this in a way where you preserve your privacy but still enable that trust.

>> That is a huge thing. And I totally agree with you 100%. The reputation is earned, not bought.

Yat Siu

>> Correct. It's earned. And also what's interesting is once you have reputation, you will do everything to keep it, which is very different, by the way, when you talk about purely money. If someone makes money in one area, they'll just extract and make money somewhere else if there's no consequences. But if your reputation is at stake, then you will be careful. And that's the foundation of really .

>> And that's a good equilibrium, right? That puts people on check. That's the bread example.

Yat Siu

>> Correct. Exactly.

>> Hey, you're a customer coming in. You pay all the time and I know where you live.

Yat Siu

>> Yes. Exactly, exactly.

>> That's a face-to-face paradigm. But that goes to digital too because it's first party.

Yat Siu

>> It is. But also because we can't quantify reputation in a pure dollar sense, in a numerical sense, it's been hard for people to think of it as value. But think about it. What is your reputation? It's everything, right? It's the reason why people don't want to leave a country, for instance, after being there for 30 years, even if the country might be going to shit, because it means they have to start from scratch. Well, what's the fear? The fear is everything I've built, which is what? It's not your assets. It's your reputation, it's your network. It's the people you have and you have to start all over again, and so many people in the world prefer to stay maybe in worse places because that historical reputation has been so invested in that moving to a new country and starting from scratch -

>> And switching costs.

Yat Siu

>> Switching costs are tremendous.

>> Switching costs.

Yat Siu

>> It's the most expensive, switching costs.

>> Yeah, that's a great point. It's interesting. We're looking at saving democracy because we've been approached because news and information is happening in the US and we're open source, so we're looking to expand that so tokens would be a great value there. We've got video. There's also local news, so news is changing. All of these structures, the old structures are being torn down. You mentioned a few of them, digital.

Yat Siu

>> That's right, yes.

>> And so I want to get your thoughts on this because I keep coming back to this. I'm in my 50s. Open source was never around in college.

Yat Siu

>> That makes two of us.

>> So I lived in proprietary software world, which meant we would steal software, share it with our friends, try not to get caught. If a company was started and went out of business, that software was lost with it, goes into bankruptcy, all these mechanisms. Media is proprietary, right? So these platforms are proprietary because they control everything.

Yat Siu

>> Yes.

>> So there's a proprietary open kind of dialogue going on where it's like open is good, proprietary is bad. That's my thesis. So give me your perspective on this because it's not direct translation, but all the benefits of open networks and open concepts where tokens are now empowering new dynamics.

Yat Siu

>> I think the way that maybe the, let's call it summarized version of what you're describing is centralized versus decentralized. So proprietary versus open is really centralized versus decentralized. And what is the power of decentralization? It's checks and balances, it's common ownership, it's distribution of power, influence, and it's longevity. So a lot of people would say, "Oh my goodness, but if I sort of decentralize it and distribute it across, am I not actually weakening it?" But actually you're strengthening it funnily enough, because what happens is that the network is more commonly owned, which means more people have a vested stake in it. So if only one person is interested in success -

>> And by the way, you said portable reputation too.

Yat Siu

>> Correct.

>> So it's interoperability.

Yat Siu

>> It's interoperability, right? So the more people have that have a vested stake in it, the more they want to make sure it survives. And if only one person or one entity cares about the survival, then it's all dependent on that person or entity. And if it goes away, to your point, then everything goes away with it. So really to make something last, it has to go to common ownership. It must. I mean, if you think of it from this construct of nations and countries, the fact that citizens feel they have a common ownership in their country is why it lasts.

>> And it's interesting too, and we have to wrap up and I know you got a busy schedule, we appreciate you coming in on theCUBE pod here, is you can let capitalism thrive in that environment because transparency is there.

Yat Siu

>> Yes.

>> So you-

Yat Siu

>> It's in market. Yes.

>> You got enough market structure just to get the behavior going, but let it go. A marketplace is an open forum of transactions.

Yat Siu

>> Correct. Yeah. And it opens up, I think, a better form of capitalism because more people can participate. Again, it's the democratization and the access of that. Over time, we've created much more harder frameworks for people to participate financially, and blockchain basically opens it up.

>> Well, we're at Wall Street here. They're making big trades. You heard when the trades go, it gets loud. They yell at each other. I love it. That's like Trading Places to me. Love the commentary. Yeah. Thank you so much for coming on.

Yat Siu

>> Thank you for having me.

>> Really appreciate you.

Yat Siu

>> Thank you.

>> Really love the work you've done. Again, you've laid down some serious work there, foundation of body of work and the investments. Got great work to continue to do. We appreciate what you do. Thank you.

Yat Siu

>> Thank you.

>> All right, I'm John Furrier here with theCUBE. NYSE, it's our Wall Street studio. NYSE Wired and theCUBE bringing you all the action. Thanks for watching.