Immutable Live Reveal: Scaling NFTs to a Billion Players with L2/L3

Thankless Nation, welcome to another State of the Nation episode. We're doing a deep dive today on scaling NFTs with our friends at Immutable. And this is a particularly important

uh topic in the whole scaling NFT strategy. David, can you give us a preview of who we're talking to and what we're talking about today?

Yeah, we've had uh Robbie Ferguson from Immutable on the show a number of times before, but he has brought his CTO, Alex Connolly, to bring to along with him because we are going and doing a deep dive into some of the technical aspects that is going to create a revolution in both layer two technology, as well as NFT technology, as well as gaming technology. But we you and I, Ryan, are gonna do our best to make this simple and make this digestible for the rest of the world because what they have going on here, I think, is going to solve a lot of people's concerns about the future of Ethereum scaling. As we all know, the gas fees on Ethereum suck, I guess. Uh, and then we are all trying to move on to the layers uh to the same layer two, uh, and so that we can have all these composabilities. But the issue is with we can't just have one single layer two, we're going to have many, many layer twos. And so, how do we restore composability while also having cheap fees? And so, this is the conversation that we're going to be having today with the immutable co-founders. Uh, and just to really kick things off with context uh con uh context, last September, Vitalik Buterin wrote a research post on the ETH Research Forums titled Cross Rollup NFT Wrapper in Migration Ideas, which is a proposal for how to make NFTs cross-rollup friendly, allowing NFTs to move across the entire layer two ecosystem. And today, what Immutable is announcing is uh their solution towards solving the cross rollup composability issues. So, what does this mean? This means we are going to have many, many games with many, many chains, with many, many assets, and all of those things are going to be completely abstracted away. Uh and so users are not going to need to be DeFi DGens to be able to play their DeFi game. Game developers are not going to be able, not going to have to be smart contract developers to build a game. And we're going to talk about all the different layers of complexity that exist to make this magic happen, while on the surface level, it doesn't feel complex at all, Ryan.

Yeah, this is super cool. This is a way to have your cake and eat it too, right? We get all of the scalability of of layer twos with without losing composability. And what that just means is we have the ability to like atomically move liquidity from one place to another, be able to trade with you know one asset on one chain to the other. It's all interwoven, it's all composable. We get these to preserve these money Legos. Um, David, speaking of having your cake and eating it too.

Welcome Bankless Nation into this fantastic show where we're going to discover how exactly Immutable is scaling out NFTs and game fi to a billion people. In the bottom left corner we have Robbie Ferguson who you've seen him on Bankless before. We've had him on a number of times. Robbie, welcome back.

Thanks, David. Good to be here.

And in the bottom right corner, first time on Banklist, we got Alex Connolly, the CTO of Immutable, also co-founder. Alex, welcome to the show, man.

Thank you very much. Super excited to be here.

So we have a lot of stuff to get uh to get through, a lot of material to get through, but I want to start with this very, very high-level question. Uh, we're coming off of the absolute mania of 2021, going into 2022. Uh, gamefi has definitely embedded itself into the minds of more or less everyone these days. Um, but I'm still yet to be playing a game. Uh I haven't found a Web3 game that's quite for me. Robbie, what would you say is really holding the world of GameFi back right now?

I think there's two answers. The first is we don't have a platform which is easy for mainstream gamers to use at the scale at which these games will operate, which is 100 million players or more per day in the largest cases. And the second reason is that

great games take time to build.

And often the lagging time on these is at least a couple of years. And so although we've seen a huge influx of innovative DeFi, of profile picture projects, which look attractive and can be built in a month.

It's really, really hard to build long-term games. There are very few which will be releasing up to this point, but we're going to start to see over the next 12 months more and more of these games come out and the average standard of game rise dramatically.

Alex, what would you add to that?

I think there's a

big trade-off here between the games where they are sort of gamified economies, right? So that's where you're basically having a DeFi like construct, but with a game UI where it sort of feels a little bit like a game,

and a game where it's fundamentally built to be a fun game that you can play.

And then you're sort of soft onboarded into crypto.

At the moment, most of the games that have been built are the first one, right? So those economic games. And those are great.

But for most players, they just aren't very fun. And so the reason that you're not playing them so far.

Is that we haven't actually been able to build the type of games that you would play,

even if you didn't yet know about NFTs and crypto, we think it's really necessary to have that soft onboarding so that people can use this technology for the first time without having to spend $2,000 on virtual sneakers.

And I think when we all uh hear the word GameFi or Web3 game or asset powered game, we more or less think of the games that we all played in our childhood: World of Warcraft, Diablo, StarCraft. But when we find items in these Web3 games, uh, just like we did in our old games, they're actually items. They are actually assets. Uh but other than that, the blockchain element, and at least this is how I interpret uh gaming in my mind, Web3 gaming, where the blockchain elements just aren't present in the game. I don't have to be signing MetaMask transactions, I don't have to be worried about gas fees, uh, and everything just happens instantaneously. And so they look and feel like the games of my childhood, but they are also with real world assets. Robbie, uh same question, but back to you. Like, why haven't we found this yet? What are the ingredients that we need to really get to this point of gaming?

So I think we need a few things. The first is, as we'll talk about in today's episode, the scale and user experience that enables

billions of players to eventually play these games, which is the total market of sort of gamers in the world.

But the second is I think we need

Really robust gaming playbooks so that

games in the Web 2 era can come into Web3 and actually be able to build things successfully without being economic experts. Because when we look at every previous paradigm of success for gaming, whether it was mobile gaming as pioneered by Supercell, whether it was so uh social gaming as pioneered by Zynga, or whether it was even free to play gaming, which had massive backlash from uh gamers and games industry folks alike when it first came out,

the

Commonality between each of these industries is they only truly took off

when a winner developed content in the space and then turned that content into playbooks for everyone to use. You know, they they reskinned uh Farmville and Mafia Wards into 10 different skins of games and created the playbooks that any publisher could create, you know, social graph uh incentivized marketing for Facebook. Um, for Supercell, it was developing the playbooks that people could just build, you know, mobile games and gotcha games at scale. We need that moment for Web3.

We need it to be,

hey, here's how you take an MMORPG and develop it into a play and earn economy, which empowers creators and players inside that game. We need, hey, here's how you develop a MOBA, an RPG at scale with exceptional user experience. And those are the playbooks that Immutable is investing in.

And so the uh uh this is a line that I have later in the show, but I'm gonna pull it, pull it up here where the future of GameFi or Web3 gaming or asset-powered games is not that game developers become smart contract developers too. It's that the smart contract developers build the scaffolding to allow the game developers to continue to be game developers, yet also just pull in assets. Uh and I think that I think it's a great transition to uh what at a high level what you guys are announcing here today. So uh as we are going through the whole rest of this show, unpacking all the details, Robbie, can you just explain what Immutable is uh releasing here today?

So Immutable is releasing the first cross rollup liquidity solution, which will allow

Games to have their own dedicated L2 or L3 instance, which means that now World of Warcraft can come on board and their 100 million players can have a dedicated 10,000 TPS or multiple instances of it. While we fundamentally solved the reason that multiple roll-ups would suck today, which is siloed liquidity and siloed orders. Assets can't be easily traded between them and the orders can't connect anywhere. So

with Immutables Open Order Book, we solved a fundamental liquidity problem with NFTs today, which is that assets traded on one marketplace or venue cannot be matched against assets traded anywhere else, which is really going to be a fundamental thing that would prevent gaming liquidity from taking off.

With this announcement today, our cross-roll-up liquidity platform, we're basically supercharging those highways. So now not only can you trade from any marketplace, rareable, GameStop, OpenSea, but each of those can have the TPS required to support the next billion players on Ethereum.

Hey Robbie, so quick question for you. I think uh some people are still, you know, you you're almost talking about a a problem ahead, maybe a problem that the many of the game uh publishers and developers, and certainly you guys see right now, which is like, hey, uh we don't have kind of the the composability, we don't have the ability to move from kind of one roll up chain to another.

A lot of people are still stuck on the first problem when they think about crypto games, which is like the ETH gas fees are too damn high and like transaction speed are too low. Could you give some other context for actually what main problem immutable is solving, and then also fit that into kind of the the next horizon of of problem set, which is like you know, making sure that we have liquidity and composability. We can trade assets from one layer two to another. But like the question of why do why layer twos in the first place, and will this actually fix you know gas fees on Ethereum? What what would you say to that?

Right now, if you trade an asset on Ethereum layer one, it'll cost you anywhere between 20 to hundreds of dollars in gas fees, depending on how congested the network is. And the problem with this is if you're creating an economy where you want to create tens of millions of NFTs per day.

and have players trade these NFTs as part of a real economy,

it doesn't make sense. Why would you pay $50 in gas fee on an item that costs, you know, a dollar or $2 to trade?

And so what we're fundamentally doing is bringing a scaling solution where the consumer and business facing gas cost is zero.

In order to, if you want to mint 100 million NFTs on immutable today, it costs you literally zero dollars in gas fees. And the reason we're so passionate about that part of our tech architecture, you know, which no other sort of sidechain or scaling solution has, is because what's most important is an economy can be generated where you don't know the value of which these NFTs will trade. You know,

it's just tokenizing stuff like you can own these assets in real life. And the reason that's so important is now players can onboard without having any ETH in their wallets and start to earn and trade instantly. But also games can just create real economies where they don't have to worry about, you know.

Paying millions of dollars in minting costs to create a true economy in the first place. And they can just monetize through a player incentive aligned manner as they take these secondary fees.

And so this is of course bringing and collapsing the cost of uh being a game inside the Web3 space down to zero. But Alex, I wanna throw this next qua question to you. Uh why can't we all just do that on uh like a the Starknet or one single ZK roll-up? Why why do we have to have many chains?

Great question.

What this comes down to for us, and I think this speaks to Immutable's positioning in the space as well. Just as you asked before, uh, you know, what why are we looking so far into the future to next year and beyond?

That's partly because we speak to these game studios every day.

We speak to all the major game developers in the world. We speak to all the major indie studios, to the Bid Market studios, to AAA studios,

and we get to hear what they're thinking about building and what they would need to make that happen.

And the truth is that what they're looking for often is a little bit different, and they want to make slightly different trade offs.

Some of them absolutely must have their own dedicated rollout because they need hyperscale.

Some of them need different guarantees around privacy

or around data availability.

Or they want to have different sequencer structures to enable better resiliency.

Or for some rollups, people are comfortable paying a low gas fee for each transaction.

Some roll ups, people are saying, okay, well, we have to find some way to subsidize these costs to make them zero.