Welcome to the show “Build It Up”. Here, artificial intelligence represents encryption technology, technology represents humanity, and East meets West. I am Bill Qian, co-founder of Cypher Capital. Today, we are honored to invite Yat Siu, co-founder and executive chairman of Animoca Brands, to share his entrepreneurial journey from Web0 to Web3, as well as his insights on the future of Blockchain, gaming, and digital assets.
Yat Siu’s career began in Vienna, where he started his tech journey at Atari, and in the 1990s he founded his first internet company in Hong Kong. Today, the Animoca Brands he leads has become a giant in the Web3 gaming and NFT space with a market value of $5 billion, investing in over 400 blockchain projects and profoundly influencing the future of decentralized gaming and the open metaverse.
From Web0 to Web3: Yat Siu’s digital journey
Bill Qian: Thank you for participating in our program! Our audience is very interested in your transition from Web1 to Web2 and then to Web3. You started your entrepreneurial journey in the Web1 era; could you share the story behind this journey?
Yat Siu: Thank you for inviting me! In fact, my transformation can be traced back to the Web0 era, which is before the internet emerged. I was born in the 70s and grew up in Austria, where the technological environment was far less advanced than today. My first online experience was through CompuServe, an early bulletin board system (BBS), connected via telephone lines and acoustic couplers, similar to today’s Reddit but with no concept of the internet at all. That was in the early 80s, around 1982 or 1983.
My father was a businessman, and he bought a computer for accounting, but no one in the office knew how to use it, so he brought the computer home. It was a Texas Instruments TI-99/4A, and I played a game called ‘Parsec’ on it, which led me to start teaching myself programming. Later, I upgraded to a Commodore C64, which was my first introduction to the ‘online’ world—although it was just connected to a centralized database, and each connection had to be paid by the minute.
In that era, I started writing MIDI music software for Atari, as Atari had a MIDI port. I released this software as shareware, and if users liked my work, they would show support by mailing checks. At that time, there was no Paypal, and payments relied entirely on paper checks. I couldn’t even cash dollar checks in Austria, but this community interaction made me feel recognized.
Bill Qian: It’s truly impressive that you got involved with computers and the internet at such an early age!
Yat Siu: Yes, I am very lucky. My parents are music scholars, and we were not wealthy, but that computer changed everything. I built my own community on CompuServe and met a lot of people who did not care about my age (I was still a child at the time) or where I came from. This “borderless” community made me feel very special, especially in a place like Austria where there are very few Asians.
In the 1980s Europe, as a person of Chinese descent, I felt some stereotypes, such as people thinking that Chinese people could only run restaurants. But online, I could showcase my abilities without being defined by appearance or background. This gave me the opportunity to enter the tech industry, ultimately landing a job at Atari and being sent to the United States to study computer science. You could say that my entire career stemmed from early digital experiences.
The commonalities between Web0 and Web3 communities
Bill Qian: You mentioned the early online communities, so what similarities or differences do these early communities have compared to the Web3 communities?
Yat Siu: I think there are many similarities between the two, but there are also some differences. First of all, technological advancement is the biggest difference. Today’s people are digital natives, while I am a “digital immigrant” who gradually adapted from the analog world to the digital world. My children and the younger generation were born into a time when smartphones and the internet were already an indispensable part of daily life. In the 1980s, personal computers were rare, and IBM even believed that no one would use a computer at home.
But from the perspective of the community, the essence of the communities in Web0, Web1, Web2, and Web3 is essentially the same. Humans are social animals; we crave connection, friendship, and recognition. This need has not changed in the last 1000 years; it is just the expression that differs due to technology. The Web3 community especially emphasizes decentralization and trust. For example, through Blockchain, you can directly verify a person’s digital asset or behavior without the need for traditional intermediaries. This trust mechanism reminds me of the early CompuServe community, where people built trust through code and works instead of relying on external labels.
Bill Qian: You mentioned trust and authenticity, which are very important in Web3. How can technology help us better understand human nature?
Yat Siu: Some people believe that technology makes us less human because we are always staring at screens. But I think technology allows us to express our humanity more. For example, repetitive labor in factories is not the essence of being human, and AI and automation can free us to focus on creativity, emotions, and relationships.
I had an interesting discovery on LinkedIn: If I let AI write a perfect post, the engagement rate is very low; but if I write it myself, even if it’s not perfect, combined with AI checking the data, the engagement rate is much higher. This is because of authenticity. People want real connections, not perfect machine outputs. Web3’s NFTs and Blockchain technology amplify this authenticity further, as they make digital assets and identities verifiable and trustworthy.
The Past and Future of the Gaming Industry
Bill Qian: You have a deep accumulation in the gaming industry, from Atari to the current Web3 games. How do you view the current state of the gaming industry, especially the development of GameFi?
Yat Siu: Gaming has always been a social experience, even early single-player games. For example, in the 1980s, Atari and Nintendo consoles were social tools in living rooms, with family and friends gathered around to play. Today, there are 3.4 billion people worldwide who regularly play games, making gaming one of the largest online communities.
GameFi is currently very successful, with between 60 million and 70 million daily active players. Projects like Axie Infinity and The Sandbox have maintained billions of dollars in market capitalization, despite market volatility. In the Web2 gaming world, a $1 billion market cap is already very successful, but in Web3, people tend to compare the highest point (for example, Axie Infinity once reached a market cap of $25 billion), which is unrealistic.
The challenges in the gaming industry are manifold. First, the macro environment affects growth. During the pandemic, both the gaming and blockchain industries grew explosively, but after the pandemic, the gaming industry as a whole flattened out, and even Web2 games saw layoffs and sales declines. Secondly, demographic changes are also the cause. Developed countries have declining birth rates and fewer young gamers, while regions with younger populations like Africa and the Middle East are becoming growth points for the gaming market.
More importantly, the pricing mechanism in the gaming industry has not kept up with inflation. Over the past 10 to 15 years, game prices have hardly changed, while development costs and user acquisition costs have risen significantly. Distribution platforms (such as Steam, Apple, Google) charge a 30% cut, and additional advertising costs make profits for game developers very slim.
Bill Qian: What are your expectations for the gaming industry this year?
Yat Siu: I’m very bullish on the gaming industry this year for two reasons. First of all, Nintendo Switch 2 will launch a new console for the first time in 8 years, which will spur consumers to buy new games, with each console user buying an average of 10 to 12 games. Secondly, the release of GTA 6 will be a milestone in the gaming culture. Players may buy a new console in order to play GTA 6, and GTA 6 is likely to break pricing conventions and push the price of the game up to $70-$90. This pricing breakthrough will bring revenue growth to the industry as a whole, attracting more investment into Web2 and Web3 gaming.
Web3 games are still a subset of the encryption field, with 80-90% being encryption users and only 10% being traditional players. However, as the quality of games improves (such as AAA titles like “Godzilla: Off the Grid”), Web3 games are attracting more traditional players. Blockchain grants players ownership of digital assets and the ability to trade, which is the unique advantage of Web3 games.
NFT and Meme Coins: Complementary Rather than Competitive
Bill Qian: The NFT market seems to be overshadowed by the brilliance of Meme coins. What is your view on the relationship between the two?
Yat Siu: NFTs and Meme coins are complementary, not competitive. Meme coins are more financial, and price fluctuations are closely related to market sentiment and narratives. NFTs, on the other hand, are more culturally attributed, representing a unique identity and community status. For example, holding 1 million or 2 million Doge coins won’t make you stand out in the community, but owning a CryptoPunk or Bored Ape Yacht Club NFT is like owning a Picasso or a Rolex watch, representing social, cultural, and symbolic capital.
In the past 30 days, NFT sales reached 600-700 million USD, which is quite significant among illiquid assets. The original intention of NFTs was not high-frequency trading, but rather cultural investment. Meme coins can quickly attract users, but to build a long-term community, cultural identity must be created through NFTs. For example, many NFT projects launch meme coins, and vice versa; the two promote each other within the same network, enhancing the network effect together.
I personally hold CryptoPunks and Bored Apes, as they are not only investments but also cultural symbols of this era. In the Web3 community, showcasing your NFTs is akin to displaying your art collection in the real world; it can evoke resonance and connection, something that Meme coins cannot fully replace.
Animoca Brands’ strategic layout
Bill Qian: Animoca Brands is not only a gaming company but also involved in investment, incubation, and even market making. Could you share your strategy in market making?
Yat Siu: Our market-making business developed unexpectedly. In 2022, after the collapses of FTX and Luna, we needed to reduce costs. At that time, we found that the fees for external market makers were high, and some market makers only focused on selling tokens, lacking long-term support for projects. So we decided to form an internal team that would not only provide liquidity for our own projects but also support our portfolio companies.
According to our recent financial report, Animoca Brands achieved $314 million in revenue in 2023, of which $165 million came from digital asset consulting services, including token design, issuance, and market making. This is not only a source of revenue but also a way for us to establish better relationships with token holders. Traditional token sales may create an adversarial relationship between project parties and users, whereas through market making, we can take advantage of market inefficiencies for arbitrage, generating cash flow without selling tokens, while also hedging to protect assets.
This financial capability is crucial for Web3 companies. In traditional enterprises, the finance department is usually only responsible for accounting and auditing, but in Web3, the finance department must become a revenue center, just like the financial department of a bank. Through our internal market-making team, we not only provide liquidity for our own projects but also help portfolio companies bridge the gaps in financial expertise.
Although market making is not our core business, it allows us to cooperate equally with professional market makers such as Wintermute, Amber, and GSR, understand market dynamics, and avoid becoming victims of a “black box.” This capability also enables us to publish research reports, such as our Polymarket report and exchange listing report, which have attracted media attention from outlets like Bloomberg. This not only supports our own projects but also creates value for the entire Web3 ecosystem.
Bill Qian: Thank you very much for sharing these profound insights! From Web0 to Web3, you have not only witnessed the technological revolution but also driven the future of the Blockchain and gaming industry through Animoca Brands.
Yat Siu: Thank you! This is a great conversation. Web3 is an ever-evolving field, and we must remain agile and innovative. I hope we can continue the discussion next time!
Bill Qian: Today’s program ends here. Thank you for watching “Build It Up”. Next week, we will bring another exciting guest. Please subscribe to our show so you don’t miss out on more wonderful content! I am Bill Qian, see you next time!
