🎙 102 - The Emergent Metaverse | Sam Englebardt & Richard Kim

build um a jungle gym not a tight rope and i think the moment we get um emotionally closer to like that jungle gym where we're like we just hang out with our friends and that that kind of social space is just as real as like the things we were doing if we were all hanging out having beers right now like i believe in that world because i think it can teach us something about ourselves that we don't get to capture every day given our physical limitations and that's the type of stuff that gets me excited

welcome to bankless where we explore the frontier of internet money and internet finance this is how to get started how to get better how to front run the opportunity this is ryan sean adams i'm here with david hoffman and we're here to help you become more bankless guys we have a fantastic episode for you coming up on the metaverse we cover a number of things that i think you're going to want to take away from this episode number one what is the metaverse an actual definition second why today's metaverse is nothing like the metaverse in its final form

third why the play to earn skeptics soft currency versus hard currency and gaming economies number four how the metaverse isn't predetermined it's emergent the metaverse actually builds itself number five what's wrong today with crypto gaming and how it can be fixed number six this big idea i think the essential idea of the podcast is we are embarking humanity's embarking on a multi-decade exodus to the real world we unpack all of this in the episode today david uh what were some of your thoughts

i think my biggest enjoyment in this podcast is the fact that richard and sam seem to have a conclusion for what the metaverse is and it's hard to argue with that conclusion it's very very um easy to hop on board with with it and the some of their very like easy to define versions of the metaverse or some things you'll hear in this podcast such as when you're talking about some version of the metaverse and whoever you're talking to is like wait wait which one which reality are you talking about are you talking about the digital one or the

real one like that's how we know kind of when the metaverse comes and then working backwards from there what does that mean because if we're going to mix up the digital world in the physical world a lot of things need to happen where for example meaning and purpose and some sort of emergence needs to be in the metaverse on the digital side of things and so what does that mean and what does that create and what teams and what games create meaning and purpose in the metaverse in a way that's emblematic of the world that we currently live in and the other big takeaway i had is that

there's a stark difference between some of these play to earn games these early metaverse startups and that we are seeing today in 2021 and 2022 versus what logically needs to happen in order to have this uh more holistic version of the metaverse built out um so my takeaways ryan are what we're building today in crypto is probably going to be very very different than what we're going to be building in five to ten years and uh it's really the five to ten year plan that really i think excites me and what excites people

about whatever the hell this metaphors thing is yeah same here and what i like about uh you know sam and richard is they they were here before all of the metaverse mania that that we've seen right and so like they were here in 2018 investing in the space um trying to figure out their thesis uh you know laying it down uh there are so many projects that have spun up in the last six months that are just like jumping on the narrative we thought without a lot of like long-term substance and i think both both richard and sam sort of bring this long-term perspective to the space that's needed

once you get past all of the mania of like you know digital real estate and you know two billion dollar uh funds pouring money into the space what are we actually left with and the the thing to me that that we're left with is if you're if you're in this space if you're listening this episode if you're exploring the metaverse today you are so early and you also can't go wrong because this is all about humanity's exodus it's it's migration from the analog world into this digital world and so

no one can predict it and if they could predict it it wouldn't be the metaverse right because the metaverse is fundamentally uh emergent so you know that that's the fun part of this is this is another episode where we're all trying to figure out figure it out together we get to pick the brains of uh sam and richard who are experienced venture capitalists in the space investors in the space and are gamers themselves very plugged into the media side of things the content creation side of things and so it's overall a really fun conversation that i know you guys will enjoy as always make

sure you like this podcast if you're listening to it on youtube subscribe in your local podcast feed and also review it on apple itunes need those itunes reviews to boost us to the top of the charts and we will get started with the episode in just a minute but before we do we want to thank the sponsors who made this episode possible polygon is ethereum's largest and most vibrant scaling solution to date with millions of monthly users and all of the biggest defy apps the polygon ecosystem has turned into a blossoming metropolis

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your idea is you can apply it for a unique grant at uniswap grants.org and help steer uniswap in the direction that you think it should go thank you uniswap for sponsoring bankless bankless nation we are super excited about our next guest we're here with sam engelbart and richard kim of galaxy interactive we're talking about their thesis for the metaverse big topic today to unwind sam is the co-founder and partner at galaxy digital he's also the founding general partner galaxy interactive where he now works he's a

media and tech investor and content producer who's helped create a broad range of traditional and digital businesses and a ton of different films and television shows over the past decade definitely a lot of experience in the interactive space and richard is a general partner at galaxy interactive as well and a managing director at galaxy digital he joined galaxy digital as their chief operating officer in may 2018 before going full time into galaxy interactive in december guys welcome the show you ready to talk

we are ready glad to be here thanks for having us all right you know we're we're super excited to dig into this we've done a we've touched on a few different um i guess topics related to the to the metaverse but i feel like this is sort of a metaverse episode actually before we call this a metaverse episode let me ask you guys about this term metaverse whether you like it or not because i know we're going to talk a lot about like just gaming in general and how that's going to evolve maybe that's the terminology you prefer but what do

you think of this term metaverse is 2022 going to be the year of the metaverse thoughts on this i mean i guess i would start by saying whether we like it or not and regardless of what we think of it it's here to stay is that zuckerberg's fault it's not his fault things were trending in that direction but he's he's certainly solidified it for us we we were just talking earlier today and the reality is um whatever happens um metaverse uh the idea of the metaverse meta the

company and all the buzz around this concept uh we we can be certain that at a minimum uh at earnings time every quarter we're going to be hearing yeah most of the of the big companies certainly one enormous company and a lot of others following their their lead talking about metaverse so it's here i think uh i think ultimately that's a good thing um but in terms of of the word and and what we think about it and to what extent uh our strategy uh is a metaverse strategy you know we

end up in this conversation a lot as you can imagine over the last couple of years and i feel like and including i've heard you guys on on your show as well um you know there's this this need i think initially to define metaverse and figure out first and foremost are we even talking about the same thing and i think when you dig into it at all what you realize is uh is very few people are talking about the same thing and it's the you know the ability uh for one person to hear the word metaverse and imagine ready player one and the oasis and the

things that have been made popular in the literature over the last couple decades most recently but you know even going back historically to ancient greece if you think about some of the ideas of philosophically that the concepts of immersive worlds have been explored um there's that version of it and then there's on the other end everything that might mean to some people nothing more complicated than you know a mobile game and and buying digital objects in a game so we need to define the term and and that's the first task and uh and then we

can figure out whether we're in it or or soon to be it's one reason we generally don't like to use the term metaverse because we don't want to spend 15 minutes talking about definitions when we could be talking about what actually matters which is that you know this is a world where our digital identities have become just as real as our physical ones and so if you think about the practical ramifications of that um they're quite wide-ranging right and really challenge a lot of the foundations of value that traditional kind of markets people have understood

right and started with fortnight cosmetics and you know now with crypto it's it's it's about earning a livelihood for you know doing the things you otherwise would have just consumed as entertainment it's now a whole investable asset class right so that's what's interesting to us yeah if you're if what we're talking about is where do you spend your time your money meet your friends build your your life have your status create your identity uh you know i think we realized even a few years ago it was true and it's even more true today that people are already spending

the majority of their conscious time inside of digital spaces through through their devices and if you include ideas around the second and third screen and the way that we're we're all looking at you know our phones and our consoles and and our uh pcs and everything else uh we're spending more considerably more than 100 of our conscious time at this point in digital worlds and so if that's what we mean maybe we're already there so if we were to play a game where we weren't allowed to use the term metaverse but we still needed a word to or a phrase to talk about what we're

going to talk about what would be second best what would what else what other word is relevant to this conversation i think the concept of um digital identity and value is is really what it boils down to i mean ben thompson had what i think is the best take i mean he's in this bucket of we're already in the metaverse it's a world where particularly in a post-covered world uh a lot of the most important relationships and time and energy we spend are in interactions with people we've actually never even met physically right and i think it's useful to think um not

just how digital worlds um are the equivalent of physical ones but the types of interactions that are only possible in purely digital realms you know especially in this world where you can zoom in with hyper specificity to people who share the same interests and values that you do form a community around that just like you guys have done with bank list now right and and really have that be a long-term sustainable metagame i think that's the most fascinating part and then when you unpack the implications of

of a lot of that it's about this intersection of markets content tech that all come together in really interesting ways to enable things that weren't possible before i think a lot of this podcast is going to be about games but do you high level do you see games as kind of the gateway to the metaverse is this how we're going to experience the metaverse primarily because i know there's a big emphasis in your investment your fun your thesis on gaming is that is that going to be the the the metaverse for for people i i mean i think gaming is an enormously

important part of this conversation and it is you know the tip of the spear for where so many of the behaviors that they're going to matter in in the metaverse conversation and just in people's lives generally going forward um the generations younger than me and i think forever going forward are learning um their behavior and and are building their lives inside of games primarily and so you know if what we think the metaverse is or a big part of what the metaverse is uh it is immersive digital worlds then what better place

than than the game worlds that are already built and that are being built where people are spending their time and you know i think the the thing richard and i realized is the for us and we do have such a heavy focus on gaming in our business but not because we just want to be or believe the opportunity is in games but what we've recognized is um two massive growth trends that are converging right and so it's it's immersive digital worlds led by games uh with um a real um sea change in finance and and and

fintech and trading technologies and markets and all of the ways that people are monetizing their experiences and their time and so for us games matter but it's also really the intersection of games and markets with all this new technology and um yeah i think if you start talking about things like digital objects and and the other stuff that we explore especially as you unpack the web 3 piece of all this um it's it's really like no better place than games where people have been comfortable for a very long time with the idea that digital objects have value

and they're they've already been uh making markets inside of those worlds and building economies many of which have grown to be enormous uh you know in size at this point uh and and for a lot of people they've been spending a lot of time uh in those worlds i think the types of games that are gonna be do well in this kind of metaverse world and by that i mean you know fully open economy because you know there just look on the app store look at the top charts uh today take random mobile game x and put a token on it is that gonna work i think

in 99.99 of cases the answer is no right so it's not as simple as taking an existing popular game and slapping a token on it i think the things that are going to do really well are those that are specifically designed to work well from a long-term sustainable economic standpoint with fully open economies right and and so i think the most lasting part of gaming and game design is going to be um in in a lot of the early experimentation we

saw around open world economies um it's it's quite interesting to me you know when i talk to a lot of the pioneers in that space they're the ones who are actually the most skeptical um blockchain and and play to earn not because they don't believe in the potential of earning value for your time but they just know how complicated it is you know short-term speculative fervor aside to build a lasting and sustainable kind of token economy that's fully open um so i think learning a lot of the the learnings from the last two decades and

applying that to play to earn game design is going to be a really interesting space wait can we dig into that for one second because you hit on something that i think is interesting so you're saying like the early pioneers of digital worlds who created digital economies before there was a thing called web 3 and before there was a blockchain that had been invented they are the most skeptical of the sustainability of this this web three thing can you talk about some of their concerns like why are they why are they

so skeptical i i think uh i i think a few points come up pretty regularly one is this general theme that what we should be optimizing for with this new primitive is um not scarcity but abundance um you know so many of the initial play to earn um kind of game loops are some form of buy an nft use that as access uh and then build breed all these things that that kind of flow from this exclusive club to start off with

right um when there's a whole sample space of design out there of um you should really be using tokens as an incentive to encourage user generated content and and work not to exclude your community in the form of like a thousand or ten thousand avatar project but actually um give people tokens for their time right and then over over that course of earning you produce such a such a sustainable volume of user generated content that that's like the insular

economic loop that keeps the thing going um i think there's a lot of things that flow from that like we could have a whole discussion about land right like in in things like ultima online if you talk to you know one of our portfolio companies ralph koster about the learnings of land and ultima you know i i think they're almost universally skeptical that land is a good idea and you see so many of these early plato urn projects focusing on land um as a heuristic so i think we're going to go through this process where a lot of

the lessons over the last 20 years get relearned uh in the crypto space it's hard to tell um to date because so much of the beta in the space has been so strong you you say metaverse or plato earn on anything and you see companies raising 50 million dollars when you know literally six to 12 months ago the same company was on our list of potential write-offs right a couple of cases like that um and and so i think over time it's going to take a few years to play out um we're going

to start to see some of these things reveal themselves that's so fascinating to me i think we could do a future bankless podcast just on that subject of what like you know the the og game designers who created some of these economies like the eve on lines of the world ward of world crafts and you have diablos and all of these what they think of this whole crypto economy and you're saying that they're like actually anti-land which is just blowing my mind fasting to me because like my my model for the metaverse is is kind of like it's just like real life only digital

and we have this scarce thing called land in real life and so why not make that digital but it strikes me that that might be um skeuomorphic right that might be sort of like oh you're just importing the old world into this into this new paradigm rather than seeing what the what the the new technology can actually bring about um but just can you help me there richard why why anti-digital like i i i'd really encourage people to look at um asmongold's recent rant post square unix

launching their um nft strategy uh because i think and and try to watch that not with a you're wrong about this or that but just listen like a refrain from trying to explain why he's misguided or whatever just listen and i think what you hear when you listen to that um husband gold for those who don't know is a pretty pretty well-known twitch streamer who's played he's probably the number one world of warcraft twitch streamer right um so he was talking about uh you know how a lot of nft and blockchain

gaming is it's essentially micro transaction squared right there's a lot of ptsd from decades long excessive monetization that really takes the gamer out of the heart of the immersive experience they wanted right i i'm personally obsessed playing breath of the wild right now which is not a new game but the reason i love it is there's no micro transactions and it's completely transporting and yet it hits all of the themes that are in vogue in multiplayer social gaming today like open open world crafting you know all

these things in the context of a narrative structure that's quite inspiring and like mythologically grounded right and and so you know when when i when i see uh kind of videos like that my mind immediately goes to that the next wave of play to earn gaming that's going to be really successful are the games that give players value for their time without ever asking them to buy anything right they're going to be airdropped value for playing the game and well and that feels like playing a game i mean without over complicating it

i think it's like it doesn't it doesn't take a deep study to figure out very quickly that if you go on and play a blockchain game um a lot of the skills and a lot of the experience and the things that you're being asked to do and the the things that will determine your success you may if you're a gamer that's been playing world of warcraft or other games or a first person shooter or any of the things that like have defined you as a gamer and in the areas in which you've built your skills you're you're being asked to do and to learn entirely new things um and to understand things

that may not be in your vocabulary or in your skill set at all like how many of these traditional gamers that have been playing games for for decades now um come to a to a blockchain game understanding yield curves and understanding how to how to be a traitor and understanding all of those things that really determine sex success in a lot of blockchain games and so like i think it's not surprising at all that people come to those games and actually want to um want to play a great game and and want to continue to do the things that they have learned how to do in their

experience as gamers yeah i mean i'll tell you my mental model for how i think the next wave of real games is going to work is you know you have this um concept in gaming today of like soft currencies and hard currencies right soft currencies are the things that you earn um playing the game uh that allow you to do various things in game right it's like an earn it's a it's the equivalent of slp in axiland right um and then you have a hard currency which today is is like the equivalent of gems that

allow you things like super cosmetics and other things but you have to pay money for you can't earn right um so what is the equivalent of that in play to earn space well soft currencies are interesting because they're these things that help game designers balance supply and demand and the objective of a soft currency should not be to have this thing go up like you sometimes see um axi analyses where it's like uh slp is inflating like crazy and the price is going down and it's a disaster i i personally don't view it that way like i

don't think slp was ever meant to go up it was it was meant to be this plug to like bridge supply and demand and if you think about like an rpg or any kind of game mechanic it's a very useful thing for a game designer to have a fungible soft currency now where if i want to shortcut playing a thousand hours in the game i can do that by buying the equivalent of slp in this game and it's fine right that market exists like there's many progression-based in-app purchases and mobile is a very big thing um and and it'll be great i think the really exciting thing

is you air you you airdrop soft currency to players for their time but then have this opt-in hard currency uh the equivalent of axs to go back to axi that can redistribute the economic rewards uh through kind of shares of transaction fees or otherwise back to players and that if i'm a if i'm a gamer and i don't ever want to do another micro transaction again like a truly free-to-play system where i'm earning value for my time and don't have to opt into that hard currency but i can

true believer and i want equity-like upside in the growth of the ecosystem i think that's really interesting right so um i looked at the top 50 blockchain gaming projects recently i forgot who published it and like frankly it was a chore even looking through that because i just knew what the core loop of all these things is going to be it's either like some clone of axi it's like some buy my avatar and i'll promise to create some game that may or may not be delivered it's like all these things they're like three blockchain games today uh and and we're much more excited about

the opposite which is like real game designers who are um uh who are thinking about how can we incorporate fungible fungibility into our token and economic model in ways that give players value for their time and and and game designers are they're going to build a game or have a shot that people are going to be playing 10 and 20 years into the future this is so interesting like the the idea that you're saying richard is kind of like this uh this idea of like there's some people who have more money than time and some people have more time than money right there's this separation between a

hard currency and a soft currency between almost like labor and capital that you're getting in but like you you have to have the balance right it's like it's the thanos thing all things in perfect balance like you can't have too much capital invading you can't have you know too much labor without capital but i i also wonder if there's uh some sort of uh you know try crypto loves its trilemma some sort of you know trilemma here that might might prevent this world from from coming true because once we have that thing that you said was important earlier called an open economy then everything just

suddenly gets priced right like everything has a market like do you think there are ways around that you know people are gonna speculate on uh slp and that like that's why slp in the axi game it was supposed to be soft currency but that's why it's it's gone up and if you want to have an open economy then it has to plug into d5 it has to be part of this whole speculative game and then like you kind of get what you what you what we have right now what are your thoughts on that is there some sort of impossibility yeah trilemma that

we're hitting up against i think there is like um you know i think there's a fundamental tension between reputation-based currencies that you can only earn by doing things and they connote real status because of the proof-of-work that goes into earning them versus something you can just buy and say i have the same status now i've said that in the past and i've had mobile game designers come up to me like you're wrong you know here's why you're wrong because like you know we sell this thing as iap and it caused just as much status as someone who's earned it but you know i think particularly in a

crypto world where you can really tell who's put in the proof of work versus just bought something i think it's going to really detract from the long-term value accretion that goes into virtual goods that you can only earn right or find randomly so yeah i do i do think there is a tension and we see we there's a lot of tensions in any kind of currency whose value is driven by engagement right like um i i think we we can even talk about social tokens as an example right like you

often hear this social token paradox of there's a tension between the need to expand your your token community versus exclusivity right and how do you balance those two things i think it's the same for any any any kind of virtual good or token that plays on in the status realm um and and i don't know how that tension kind of sustains itself in the long term one of the things i really enjoyed about learning about galaxy interactive is you

guys call yourself a thesis driven investors and you know bank list we like to call ourselves a thesis driven media company so we have some alignment there and i think another thing that we align on is just overall long-term thinking rather than just you know cloning axing and you know re-skinning it with some new loop you guys are really thinking deeply about what it means to actually have a successful metaverse successful virtual worlds and there's some things on in your guys's literature that really stood out to me that i want to unpack with you guys the first one is on your website you

guys say that you believe in the power of digital playgrounds to foster a healthy sense of community place and purpose a means of enablement not merely escape and i really like that last line enablement not merely escape how will in your guys minds how will the metaverse enable people and uh is it a good thing that we are also depriving people's uh a way to escape when so many uh sectors of the gaming industry is like kind of optimizing for escapism

yeah i mean i i think we should both comment on because i think we have different different ideas and angles but i mean i think of when i think about enablement so much of this is first imagining and understanding these worlds as being proactive places that people people are building right and so if you're building your identity and you're building the content that you find inside of it and you're able to uh you're able to design a life for yourself i mean obviously to the extent you're earning you're living inside of these worlds that's that's one very important part of this conversation but

likewise just the ability to really and in this way predates metaverse right i mean just user generated content in the first place and when you imagine persistent virtual worlds that people are building whether they go all the way to the to the extreme version of metaverse that some people are imagining um these we've already gone in the direction of people being able to realize the vision for themselves and their lives inside of these worlds and that's very very different if you think about the history of gaming right and and i mean gaming