Deepbook and Sui Ecosystem, TAM of GameFi, Lack of First Mover Advantage | Analyst Round Table

Transcript

consumers are telling you that they like these like mainstate titles that have been around forever um the studios that are putting them out it's like Sony uh you know Nintendo um or take 2 and Rockstar uh epic games so if a game isn't coming out of one of these Studios and it's not related to one of these titles like from a monetization perspective or from a tam perspective which is what gaming folks are often talking about in the crypto space like you don't have that Tam that's not your Tam it's red Dead's Tam it's Grand Theft Auto's Tam it's take two's Tam nothing said on zerox Research is a recommendation to buy or sell Securities or tokens this podcast is for

informational purposes only and any views expressed by anyone on the show are solely our opinions not Financial advice pachio Ryan and our guests May hold positions in the companies's funds or projects discussed what's up guys welcome back to another episode of zerox research today I'm joined by Ryan Connor and Danny from blockworks research to talk about all that is happening in and across crypto uh what's up guys welcome back how you doing warning bullish bullish very good um not as not as big of a week as last week before we get started on talking about S I wanted to say that they've had

some issues with um infrastructure Partners selling so if you are listening to this podcast and you're going to be interested in SOI I would highly recommend looking into that and like when unlocks are happening just in case so nobody comes back in next weekend and says oh bako told me about Su and then they dumped it on my head um but more relevantly I've been in we talked about it we said oh what's even happening on suie um deep book recently launched I don't know how familiar you guys are with it um me and Danny had the chance to talk to adini who's the co-founder of sui um the other day and this is something that he talked about a lot as well it's a club for the entire ecosystem so similar to what serum was on salana and

basically order books and Dex is on so we can connect to it it's pretty cool um on AOS they have something similar called eonia um it's up 7x over the past week past two weeks it has 30 million tvl which doesn't really matter that much but more I think like here let me pull up some numbers over here I um this kind of was a bit I found this interesting so it it's still not up there we go okay now we can see it very good so um it is currently a 200 mil market cap 800 mil FTV did 166 mil in volume over the past month or could did 7.1 Bill

Trad y did 1.7 Bill camot did two bill um so it's doing much less volume than all of these so I'm guess my question here is like it obviously has some form of valuation premium do you think this is coming from it being the official SOI based order book for liquidity or do you think it's coming from people pricing in SOI growth um tvl volumes Etc will improve over the past few months and that's what people are betting on and saying look everyone's going to plug into deep book so we do not have to we don't have to worry about the pricing right now volume's going to come what do you think yeah I think there's I have a few thoughts one I

don't know how sophisticated the thinking is in regards to the trading of this token yet um they had a fairly large airdrop right um it would be great if we had some data on you know net buying and selling of perhaps you know what those air drops looked like as a relative uh amount of the circulating Supply today I think that would maybe tell a little bit deeper of a story um perhaps participants who have earned that are you know using it as a proxy for theu ecosystem right and so if they're you know expecting you know s has been doing really well um obviously you know the for someone who's a participant in the ecosystem today like the upside on the

sweet token at five plus billion is far different than something at you know 200 million market cap today so maybe they're just using this as like a beta disu um kind of like I think you mentioned um and maybe they got the air drop so it was Zero cost basis for them and and you know they can sell a little bit or you know they can just hold hold whatever they've got or add to that um and play it from here I do think you're right though like the valuations today maybe don't make sense but um maybe just based on the recent traction um people are pricing in a little bit more growth but even still it does look relatively like overpriced when you look out across these comps it it seems quite a bit high but maybe we're just in for a period of

consolidation here going forward I was just going to say I think a part of it also comes from the fact that there isn't really much to buy on SOI apart from um and D you kind of mentioned this as well so I'm just repeating your point but there isn't that much to buy on SOI apart from sui um as well as some meme coins so that's the one thing that I should have brought up when I first mentioned it as well yeah I think that the problem also like everyone's looking for like high beta exposure to get to this ecosystem that seems to be kind of separating itself from like when you look in the blockchain landscape there's like five chains that are doing stuff and then the rest are not doing stuff relative um and

then likeu seems to be maybe separating itself from the pack so people want that high beta exposure um I think that the problem is that these deck tokens historically really disappoint um they don't have like like a very like sustainable like value capture Mo like unlike you know a per de where you have to lock in capital and you know it can't move so quickly it's just like really competitive at the Dex level um especially at this early speculative stage so you know no sure things I mean I look at the I look at the names that you have here in front of us Orca Trader Joe Camelot like you know hyper competitive market so um not clear to me

the the other was is it aftermath onu like I think that that's interesting I'm increasingly interested in like cross- selling opportunities in defi because it does it just makes sense at the end of the day like you look at you know how do banks make money they cross sell I'm not saying it's a perfect comp but like you want to do everything in like one UI so having a lot of services um or a lot of complimentary services and being able to cross sell them is like I think super important it the model really hasn't worked in a meaningful way in defi I think given this airdrop Dynamic so um but I do expect it to work event eventually and you know aftermath is one name in that space that um you know

maybe since this ecosystem is kind of starting from the ground up they have the ability to pull that off um but we'll see it it's way too early to tell so could be a zero I have no clue yeah yeah I think the other the other Factor I'll add is that like for airdrop tokens it's still very early I mean we're a week into this token I think um obviously I think the market regime has a lot to do with performance of of brand new tokens like this um you know if you enter into up Lon mode like in the beginning of this year for example um you know the market can stay irrational longer than you can stay solvent on a short so um that is something to consider but um I I think even if you

look at like jup from salana I mean it had a period of of quite Insanity early in this year going up to like nearly $2 a coin I mean that was like a 20 billion fdv at that point in time nearly um the metrics today for jup look quite a bit better but yeah I mean I think just the market environment is it's it's becoming a little bit hotter again it's a brand new token one week um it's had no time to like really distribute off of this this air drop Supply potential so um I mean we'll see what happens I I think the longer term picture here is really going to depend on continued ecosystem growth foru and if it really is like the kind of liquidity hub for all apps going forward then um the economics could

start to make sense if if it continues to grow as a as a larger ecosystem yeah I um Ryan I like that you touched up on aftermath because that's something that I wanted to talk about but you kind of gave it all the way um by talking that you like cross selling that's yeah so they're trying to be a One-Stop shop um l swaps aggregator of aggregators I think like exactly what Jupiter was doing um for what it's worth they've published a few pieces on me on sui so I I assume that they're doing some stuff on that side as well maybe something to do with the LSD um going like the Geo model potentially uh no way to get exposure as

it is with all good projects um except for using it and they had they launched these these egg nfts three four months ago I don't know if you guys have ever seen them but up to like 80 suie a piece it's I I don't think they're going to do anything with them just wanted to bring that up that it's that's the only thing that they la Hey guys for today's snippet I am once again joined by Miguel to talk about Ai and privacy thanks for joining us Miguel thank you bacho great to be here um so why is privacy important um especially in the context of decentralized AI yeah in in the context of decentralized AI it is important because

it in it enables uh three important things um it enables to enrich the data sets with private information that not even the largest players in in AI have access to right now so most of the llms have been trained with uh primarily public data um but there's a lot of potential in private data that sits in companies like most of the the data on the planet sits in encrypted form and is owned by someone and I'm not only talking about personal data but imagine like I don't know data that players in a vertical like agriculture may have that is really um sensitive or is the asset of one company and they keep it to themselves so unlocking value of this of this data because you're you're making

it private you're not revealing it to the to the nodes training the model it's something very valuable then the the model weights themselves are also um subject to you know they can be protected with privacy and that is again very important and interesting because now if I specialize on training uh models I don't have to give you the weights if you're going to run inference on my model um so again something very interesting and finally the the third and probably most important point is the fact that you're protecting user inputs and prompts because the company running inference on on your prompts are not going to see them uh your prompts will remain private so those three are kind

of main reasons why privacy is important in decentralized Ai and I also believe that it's it's not just a feature it can potentially um create a healthier ecosystem because right now everything is is centralized it's like an oligopoly it's like a monopoly of a few you really powerful companies if I have a startup and I want to step into that market I would have to cover the whole chain of value from data Gathering to to training to inference those are very different problems very expensive and I would have to invest millions of dollars to to make that happen that's why the the Monopoly exists um but if you're able to apply or or or apply privacy to to those key

elements like U data sets model weights and user inputs then you're actually decouple decoupling them um and so now you can think about companies just specializing on one element like this agriculture company I was talking about so maybe that's all I do I create this interesting data set about AR agriculture data and I provide it in a privacy perving way to other companies doing training or I specialize in training or I specialize in um you know running very efficient um inference so this specialization leads to diversification which leads to better tech and and more Innovation so I think privacy in in the context of decentralized AI is actually

transformational because it can change the whole industry and make it healthier that makes sense and one thing you brought up was these private and I guess like secret data sets um the agricultural companies the example that you gave how obviously like ballpark how much of data are we missing out on right now because it's encrypted and private property that we can't access it kind of give you like a percentage but uh but the vast majority of data on the planet sits in encrypted form and is owned by companies because as you know there's many companies that make their business model revolve around that very specific asset data so companies have been Gathering and Gathering data across the

last decades and they're sitting on those honeypots so to speak um so there's a lot of untapped value there's a lot of um information that they don't want to make public because it's core of their business or they can not make it public because they it would violate some regulations that are applicable to to their vertical like for example data protection violations or Bank secrecy regulations uh there's there's tons of examples like that so I think in in essence we're sitting on top of like the the bottom of the iceberg and what we're seeing now what we've trained our llm models on is actually the tip of it yeah and how does nilon enable um uniquely privacy and

AI um it's throughout this concept of the orchestration layer the idea here is that there's not going to be a a single privacy enhancing technology that actually solves for every different problem for example if you want verifiability then you'll probably go for ZK ml right you will want to run zero knowledge proofs which Ena you to prove statements on on your data or on processes applied to your data in this case you want to be proving that you run uh a certain model on on your on your inputs and not a different model model so you you make a verifiable proof that anyone can check and make sure that

actually you did run that model and not something else but in this case zkp is not providing privacy to to the equation because you actually have to have access to the model weights and to the inputs that's typically a combination that you don't find so then you have another uh types of of technology which is um t or NPC which both solve for the same functional problem which is how can you then compute uh for example run inference on a Model without um you know without sharing either the weights or the inputs or the prompts um both as I said are functionally equivalent trusted execution environments it's a hardware solution uh to that problem and then you

have like software Solutions which are typically regarded as MPC or multiparty computation both are functionally equivalent but they're not the same in terms of security assumption so tees require more trust in the parties running the hardware because um as you know there's there's been like um vulnerabilities found in the past and there's attacks like side um chain uh attacks where you can gain some information that's fine for some use cases again I'm not saying that T's are are not useful but in other cases where you want a higher security uh level you may want to be using MPC and even be inside of NPC there's different takes on on that you can build NPC using um something called linear secret

sharing which has very high degree of security because it's uh typically is information theoretic security which is the best type of security you get in cryptography but you can also build MPC using FH fully homomorphic encryption which is very interesting as well because it doesn't require any pre-processing and it has some special characteristics that make makes it appealing and then you can also build it from something called Garbo circuits which is a third main way of of building NPC and again between you know among these three there's no clear winner um they have different performance um um you know um characteristics like for example Performance is measured in terms

of the number of rounds that your protocol requires the bandwidth that it requires and the compute um or CPU or GPU that it requires lsss the worst thing about it is that it requires a large number of rounds garble circuits it requires a lot of pan width and FH the worst thing is that it requires a lot of computation so it really depends on your use case are you going to be compute constrainted or are you going to be bandwidth constraint or are you going to be constrainted in terms of communication because you have many nodes sitting um geographically apart um therefore the solution is not clear who who's the winner there's no winner um so we're rather building this ecosystem where you can combine the different Pets

the different privacy enhancing Technologies and build a tailor made solution for your specific problem that hits the Sweet Spot between performance and security and to do that you need this orchestration layer which is a layer that is able to connect or or um Interlink the different the different Technologies perfect that makes a lot of sense last thing I wanted to talk about in terms of sui was that they have had more of a I think like often times we talk about sui versus and one thing that's become clearer and clearer to me is thatu very clearly um or I guess like very explicitly has said we want to focus on um gaming and

consumers versus apos is very like much focused on real world assets I don't know which one is better I assume um like if it was me I would want to go for institutions I think they're easier to deal with and to please um as opposed to like pleasing users and Retail um but yeah s they had that they have that gaming device I don't know how useful that's going to be but apart from that they're very explicitly trying to go for gaming through ZK login which is um allows you to third party logging with like web two apps and you have social recovery it's actually pretty cool um I had the chance to talk to the again with Danny and he was very firm on the fact that low value transactions matter so payments matter I don't know

if I agree with that um but I guess you want that at for for what he wants which is like a large consumer gaming base it makes sense um on the other side like I said apas is very much rwa focused on the finance launch on abos uh Franklin Templeton added their money market fund on apas and then also I think numo and webn released something to on board brev Howard Hamilton Lane's senior credit opportunities fund and black Rock's money market fund um on OS so two very clearly like different I think approaches at this point um which one will win uh Danny what's the right

answer um I think there are points to be made on both sides here if you want to leave that slide up um the on the gaming side and even on the low value transaction side I I I see positives and and negatives um on this one particular like I if I think of very successful you know mobile gaming applications for example think of your Clash of Clans Etc um while the like you know cheap inapp transactions like you know spend a dollar to get some gems to interact with

the game um while that could be meaning full on like a high scale basis right if you can convince millions of users to do that that's millions in Revenue um the models that these games like the way that these games end up making money is never through that model it's always a small subset of whales that push a ton of volume themselves um I mean we see this on on large chains today if you look at salana if you look at onchain volumes it's there's lots of accounts trading very very little in volume but then there are a few large L large wallets doing you know significant multiples greater volume and they're driving a large percentage of the overall total volume picture um that

being said I think you you need both is what I want to say here in that you know for Clash of Clans to become really successful and you know you you get these large whales that want to invest their their money and their time into the game um I think it's to an extent necessitated by how and how pervasive the game becomes if you don't have millions of people playing it you know you're not going to get this large class of whales that want to come in and dump all their money into the game um so to an extent it's meaningful but it may not be directly meaningful in your actual Revenue picture um I think that's really the point to take away from it um on the on the apos like rwa side of things I just hate the term real world assets I

think it's really stupid um if these are meaningful products like let's just call them what they are you know for if we're bringing t- bills on chain if we're if we're giving people access to like um fixed income markets if we're giving access to um you know bond yields Etc like I think there's probably a more meaningful and constructive way to talk about the these things other than saying like our real world assets the the future um of onchain economies because it it just really like abstracts away the like real discussion in my opinion I guess I meant like is very clearly focused on more institutional money coming on their chain and I agree that it's probably a mix of the two I um for

what it's worth I don't think that the gaming Focus will work out for sui not because I don't think gaming is important but more so because I think every chain is going for the for gaming like the Tam is Big um and it's like tangentially related to crypto and very like digital user based that everybody's like oh we need to get the game Gamers on um Su said they're doing it for platron which is an OS so they want to onboard using their OS and their um Hardware device I don't know how I don't know how that's going to work when we have presumably like Avalanche throwing money at some of these gaming Studios um arbitrum

throwing money at gaming Studios for GCB um Solana which is like obviously a very hot um name that I imagine like gaming Studios who want low transaction and like uh a user base that's very active when who are constantly on the blockchain they want to go to Solana which is like obviously dominating narratives and attention um so I don't know like that's the only reason that I would say the gaming Focus might not work out for soie on the other hand I think it's you you probably want to go for it um like it's it's like the final like it's like the white whale I think you definitely want to go for it it's like

as far as low transaction low value transactions go gaming is like the highest low value transaction because it also goes into like nfts and maybe they'll go use some D5 protocols I doubt it but what do you think Ryan yeah I think that um there are Pros to the gaming which to to to going after the gaming Market which is just like the adjacency of that user base to crypto we've talked about that a lot I think that there are a lot of Cons with specifically targeting the gaming Market that are pretty underappreciated um first just in the

case of sui sui specifically um like Mobile gaming is like the dominant form factor or platform today um it's actually the the only like platform or form factor where um that's experienced growth since like 2015 2016 I'm just eyeballing a chart from Matthew ball here um consoles are sideways to down right like it's actually like additional friction to try to introduce a mobile console to someone today um it's quite odd like I I understand switch was successful but like the market there seems like pretty limited um es relative

to gaming which you already have like a huge installed base of the mobile device right so you should go for the mobile device I think that that's pretty obvious it's the lowest hanging fruit um and it's also the highest monetizing and highest growing today so that seems I don't know the focus on like the standal console seems like an error um I think the point on low on you know gaming transactions being low value transaction is correct uh I think simple payments um look they don't they don't create Mev and they don't create priority fees so you're left with an super minimal base fee and like you could kind of like imagine a world like

I'm just saying that this is a risks to this is a risk to base layer value rule for payments um you can imagine a world where payments are totally somewhere else than the L1 like simple payments because the L1 is increasingly being used by sophisticated actors to trade assets against one another and they're going to box out your you know your simple you know $ Five Doll payment for you know a hot dog at the ball game to your friend so um prioritization there like I understand that there are like potential knock on effects there but as far as like near-term revenue for a base layer the prioritization there I think is suboptimal um the other I think underappreciated thing about

gaming um is that consumers are increasingly telling you now look I'm not I'm not in the weeds as much as you guys on gaming um there's obviously like Niche games are popular they they last for some time um but as far as like we're constantly talking about the Tam of gaming right it's like $200 Billion Dollar Plus um I would argue that a lot of that Tam is not accessible to crypto um if because gamers are telling you that they favor um that they favor um large Studios and um like call them like Lindy titles so I guess another way to

say it is that concentration and gaming is increasing in both a um from both a title perspective and from a studio perspective so when you look at the shooter category the top three shooter games generate rate 70% of the genre's revenue and 90 94% of that genre's revenue is generated by games that are older than two years old so incumbents right um from a game sales perspective from Two and this is this is data from Matthew ball um from from 2009 to 2002 the bestselling games in the United

States um came basically from only three um categories or three varieties which was Call of Duty they won the top spot 12 times uh Grand Theft Autos or rockstars Grand Theft Auto won it once in that 15-year period and then um and then um Rockstar's Red Dead Redemption one uh one time in that in a 15-year period but appeared on like this top 10 list like six times and even when you add like the free to play games to this category fortnite is just like the only one and it's like been in there five of the last 10 years so like consumers are telling you that they like these like mainstate

titles that have been around forever um the studios that are putting them out it's like Sony uh you know Nintendo um or take 2 and Rockstar uh epic games so if a game isn't coming out of one of these Studios and it's not related to one of these titles like from a monetization perspective or from a tam perspective which is what gaming folks are often talking about in the crypto space like you don't have that Tam that's not your Tam it's red Dead's Tam it's Grand Theft Auto's Tam it's take 2's Tam so um I think those are underappreciated by risks um from the gaming folks and when you see these like Mega funds on arbitrum targeting the

gaming sector or when you seeu kind of like going all in like I don't know I question um I question that strategy I think I have I gener like I'm not gonna say I agree with you because you're just talking pure statistics so like even if I disagree with the statistics it doesn't work because they're numbers but I'm gonna say I wrote about this um I think for the first gaming report that we did at blockworks and it's I don't really see um crypto games um that's why like I've never I don't really see them competing with these tripa a games um specifically I don't see the point of having web 2.5 games is what like I referred to them back then um now I try

and call them hybrid onchain games um I think it makes way more sense for crypto to go for the fully onchain gaming crowd where it's like very much um you're appealing to a very Niche um crowd I don't know if you guys have ever played Paradox games like Paradox interactive like Europe universales um Crusader Kings Victor Victoria 3 Victoria 2 um these types of games that have a smaller like how how would I Define it for example um what's that the Wukong game that game uh you get 70 hours out of it and it goes very very viral and a lot of people play that game um and they make a lot of money off those sales Paradox

interactive games let's say like Europe of universal 4 you play that game 5,000 hours 6,000 hours like you play it was launched in 2013 and people still play it today not that many people play it because it's a very Niche game that appeals to a small subset that is very into the mods of the game like getting into the really nitty-gritty bits of the game and I think crypto appeals to that side um I think like the current subset of crypto users that are that probably like in the vend diagram with Paradox interactive players I think it's probably quite large and I think that could be a way for crypto gaming to work out for them to actually find some form of PM I do agree

that it doesn't make a lot of sense like even with Off the Grid when did Apex come out Danny do you know I can't remember but it's like relatively new and it's it's newer than well it's definitely newer than like Call of Duty um and it's newer than fortnite as well 2019 yeah so that's like and it's top threee right now like it beat pubg so there are incumbents that come in and take these spots but it makes sense to be doubtful that a crypto game would be able to do that um but like I said I think it makes more sense to do Niche games that like appeal to um really intense people because I feel like crypto has a lot of that as opposed

to um like large demographic games like FIFA Madden Call of Duty Etc right yeah my point was specifically on the the estimate of Tam uh maybe I wasn't clear on that like the Tam is is when you adjust for that what you're talking about like these more Niche opportunities if if a fund's trying to sell you an allocation or LP interest and they're telling you our Tam is 200 billion it's not it's you have to Discount that by 99% or something like um I I think what I I think you're right I think that you see it today in the market like I know that this is like a not everyone agrees with this framing but like I do think that pump fun is a

game like fantasy top is obviously a game I think friend Tech um was a game um I think we're constantly playing games with these coins right um so and it's very like retail oriented so I think I think gaming has probably been more successful than people think in crypto if you want to expand your definition there um so then when I think of like what like what's the opportunity in a in market cap terms for a game I look at take two the studio $27 billion valuation uh 5.4 billion in Topline revenues over the past 12 months last 12 months um that seems pretty unlikely but if you're going to like take the studio

route to like gaming riches in crypto like it's a lot of like small games like fantasy. toop right you're constantly pushing out different mobile mobile games at a high Cadence um I think that that's how you compete there um very very broadly from a high level um and then on like what is each game token worth on a market cap basis like I don't know if you if you got a token you wrote it from 50 million to a billion like I don't know it's hard to think it's going to go much higher giving given this like take two um kind of comp um and not an expert um I don't are there any individual games I don't think we can count Roblox but are there any individual games that have like trafi market caps so we can look at for

comps as far as those individual games go like some of the the largest and best examples are going to be owned by the biggest Publishers in studios today so they're they're playing into you know what I mean like if you're going to pick out World of Warcraft we're talking about blizzard um if you're going to talk about Call of Duty you're talking about blizzard Activision Blizzard um you know you pick a lot of the these top titles that might you know achieve some Mass valuation on their own and it's you know it's because they're already they are already owned by the larger Studio that was able to spend maybe the tens or hundreds of millions to to kind of put that together in the first place and and build it and Market it um or they've the game has existed for a decade they've been building and

marketing it for a decade um and has that established user base I think both of you are correct I think that the mobile focus is certainly an interesting like Avenue um from the monetization aspect as well as just like we're seeing with telegram like with these mini apps that there is some kind of pipeline um from like small in-game um monetization and and you know transactions to like simple onchain um actions or activities um quick like you know tap tap to do a transaction to get like a boost for an hour like there's some models here that

can be explored um and we're seeing some like relative like excitement and and usage of them at least um to get things going on the other side of things I think you're right Ryan like the The Tam is not like if we look at Off the Grid and then we compare it to Shooters like that is a very very contested category if you're competing with Call of Duty and you're competing with Apex Legends and like all of these top shooters today these are from the biggest studios in the world they're spending hundreds of millions to launch these new games I mean Call of Duty drops a new game basically every year they spend hundreds of millions to build and Market it and they I mean they get their money back but that's who you're competing against if you're going to drop you know a shooter into their category um and so

you better be ready to spend and market and um kind of iterate on the development there and it has to be top Notch right like if you're going to launch a 2021 style crypto game in in an attempt to compete like you are dead in the water um if your if your graphics and like the gameplay experience are awful um I think another opportunity lies that hasn't been mentioned is like the indie game Market um just a quick stat here um apparently according to Global Indie Games market report Indie Games have generated nearly 4 billion in gross revenue on Steam um this year which is 48% of all full game revenue on the platform this year so nearly half of all um full game Revenue which is game sales not not in-game microtransactions or

like shop in-game shop transactions but just game sales on Steam um half essentially coming from Indie games this year um I I think there's an opportunity there and the I think the problem or the issue that it r or sort of alludes to is that there might be value in like a game token or you know a particular game that happens to to you know build some traction it's interesting it's like a new take on something um but then the value acrs to like that particular game it's not going to ACR to the blockchain right we've looked at the the economics of like how much transactions cost and what that feeds back to like a sui or a salano or an avalanche and it's not meaningful so even with you know millions of transactions like that that

revenue is not going to be very meaningful but if you have a game that can you know an any game that can pop up and pull in 50 million in Revenue obviously that game is Meaningful yeah the interesting thing about this shooter category and these like these like um I know for lack of a better term metaverses or just like these um like like these I don't know you're you're playing in a world right with like other people um they actually like have Network effects which is pretty overused term in crypto um but but they actually have Network effects like the more people are using the thing the more useful it becomes and there's like this structural technology Advantage too where like I think when fortnite started like you could have Max six people

playing at a time now it's hundreds um as these like bandwidth constraints like become a thing of the past um well like you still need to run like pretty comp complex infra in a data center um there's a reason that these games are capped at like 150 or so um that's a that's a problem for crypto gaming right like we want to do things fully on chain but hey guess what you need some AWS scale infra to really make this thing work uh in with you know how competitors scale these things up um so if there's there's Network effects there's um that they have to contend with and there are meaningful technology constraints I think yeah crypto gaming crypto gaming

and for us still very very um nent I don't think we've had really anything that's been particularly impressive to the point that we can run any of these games I think it's definitely getting better though especially the fully Unchained stuff um in improving ever so slowly but ever so slightly What's um I one more Point here I I do think there's some interesting like kind of continued development there magic block is maybe a good example on salana um but as far as like maybe the question for crypto gaming going forward is if the tech really like enables something more interesting for games and for gamers you know if if off the grids Marketplace is

actually really interesting to Gamers um owning their assets and whatnot the diffult problem is that then you know blizzard Activision Call of Duty you know they can drop their their next iteration with a gaming Marketplace and you know if you were all on on Off the Grid um maybe may maybe Call of Duty cannibalizes that whole opportunity anyway because they already have all of the gaming market share it's it's hard to say how that necessarily plays out I feel like they like Activision wouldn't be able to compete on that it's just like the same reason why after good has to take like has to return whatever Revenue it has like through some like it has to take these um it has to basically make less money than it could if it was

an Activision just because it wants to compete with Call of Duty um or like whatever like Apex fortnite but activation doesn't have to do that Call of Duty doesn't have to do that would just rather keep all of the money so I don't like I don't see how off the grit taking let's say 3% market share out of the entire um Battle Royale genre would make Activision say oh hey guys like we need a we need to make all of our like assets tradeable I just don't see it like I feel like all of these typically game like game as far as I understand developers like taking risks um or like they want to take some form of risk but

Executives don't like to take risk which makes sense because they have to provide shareholder Val like they have to go back to the shareholders and say hey guys like and I don't know if they're going to be able to say hey guys like we lost 3% market share to Off the Grid so we have to like you know how we had a system where every year we would just like redo all of the points and the money that we have in the game so that we made an extra God knows how much money the moment that a new game launched we're actually going to get rid of that because somebody took 3% of our Market I don't I don't you know what I mean like I don't see if they would ever be able to justify that I don't see it like I imagine they would always be really

really slow so I definitely think there's an opportunity but um like you guys said I don't think it's a$ billion dollar opportunity um I think that's fair but I I do think there's a Tipping Point as well right like 3% might not be it but if one of these games captures you know if you get a new fortnite but it's a blockchain game like that that will cause developers to act and I think the the the thought process here is you know their margins are X today and they they make a ton of money and revenue and and so for them to be like well we can compete with them if we just give away like x minus y and then we still make you know we're still a behemoth we're still making a ton of money we just have to give away why and we can like

recapture this market share back from this new incumbent I think is is the thought process that's fair all right let's let's move on um Ryan last thing is I know something that you want to talk about which is first mover advantage in crypto um do you want to run over it or do you want me to give a small back run and then you can give a Ryan take yeah please go for it and I'll give a Ryan take um the so this is's tweet here let me me put it up so and it it's basically him saying um crypto doesn't really have a first mover Advantage there's no real modes um Unis

swap was not the first amm coinbase and binance weren't the first exchanges tedar wasn't the first stable coin y y y um and I agree with this I don't really see I think like I know one thing is definitely hyper liquid is the one like I think often times um the first mover gets lazy because they assume that this three-year-old technology is now they have pmf and they're going to be able to do really good I think hyper liquid is the clearest example that has been for me like dydx got lazy hyper liquid swop in uh into an sector that has historically been very mercenary um took

like gave out a good incentive program a good points program and just took all of their volume or at least a lot of their volume yeah so um yeah I guess I think we all agree here um it's really hard to have first mover advantage in uh a market like crypto like thinking in web 2 there seems to be some tendency for like first mover advantage to work out um like Netflix uh eBay uh Amazon and e-commerce like these guys had first mover Advantage um and in short I think it's because like there are Moes they're like very Observer

observable strong Moes in a lot of like like either physical or web 2 businesses um and when you have a Moote Plus network effects like they just compound and it's really hard to compete I think that it's pretty underappreciated that there are very very few Moes in crypto and that a lot of things can very easily get competed away um some obvious Moes to me um and there there are very few but given the open source uh nature and um you know um um the the highspeed nature of the capital in the space like yeah crypto shouldn't have Moes uh but last mover

Advantage is a real thing in crypto seeing what an incumbent did um watching them get comfortable as you said Bach and then just doing something a little bit better something like actually historically is like very very obvious um saving you know Partners costs or having more favorable fee structure is like or you know slightly better incentive structure is like um a really good source um of incremental Edge in in a space with a few modes so like pith over chain link right like chain link made the very obvious mistake of focusing on security over speed um and having you know meaningful uh frictions

for integration High fees and then um pushing prices to um it's you know the apps that used it rather than letting those apps Pull those prices when they need it um pith saw that and like hey this is very obvious like let's go to market with this kind of new model and then by some measures like pith is massively outperforming in terms of market share um like you said b b hyper hyper liquid over dydx becoming more general purpose uh Salon over ethereum is a great one um where you know the incumbent just got way too comfortable and the road map is way too long and it offered Salon in with a higher execution speed both like from a product

perspective and From onchain perspective um jto over marinade is another one I remember when marinade was 100% in the market um and then jeto offered a very like in hindsight obvious thing which is just like okay we'll do some Mev and then we'll like it's just like a better product um I don't know durable Moes that I can identify um and maybe there are more but like offchain Partnerships I think this one's really underappreciated it's not it's not it is it is and it isn't underappreciated um people notice like yeah telegram has you know an offchain relationship sorry ton has an offchain relationship in telegram coinbase has an offchain relationship in coinbase or

sorry base has an offchain relationship in coinbase um I think strong Community though I've discounted this one for a long time is another potential moat in this space where as you get bigger as people get more enthusiastic like you get this like Community locked in and then another underappreciated one which um I think will get increasing attention over the next 12 months is just physical Hardware um helium has a massive advantage over competitors that it already has a ton of Hardware out in the world providing Services um Hive mappers the same like they have a lot of their cars that use high mapper have two G dash cams dash cams in them like you can't compete with H maper by making people put you know two more dash cams

in that card it's it's incrementally more challenging so um the these kind of like durable Moes um I think you need them to to have a first mover Advantage if it exists at all I think I agree with all of them except for off train Partnerships um except for the one that you mentioned telegram T makes sense I just think like what the moment that you said that I was like oh polygon offchain Partnerships have just been like like not that official at all just fake um but I don't think that's what you meant anyway so I'm not gonna yeah it's obviously by Case by case basis I think um a distribution partnership where you have like the telegram instance where

like there will there is a button for international telegram users and it says wallet and it's a ton wallet like that's pretty powerful um same thing with the coinbase base thing um May maybe there's an maybe there's another um layer to this which is like native Partnerships versus non-native Partnerships like like Starbucks didn't reach out to polygon or at least I mean I don't know but I highly doubt star star Starbucks reach shots polygon is probably the other way around um so like the quality of the partnership partnership obviously matters and the incentives yeah I um I think I largely agree but I also think that like maybe

just to add on the first mover point is that you know the I think the first mover Advantage is like a little bit maybe overstated in many cases as well I just think there are you can think back to so many examples even in web 2 of like tech companies where something is attempted in 1991 it massively fails and then 10 15 20 years later like the tech or the um you know larger industry as a whole like and and consumers are more willing or interested or that that advancement makes more sense um the idea is basically retry with new branding and and is massive success um you know timing is key I guess is what I want to say so you know you could have tried to

launch you know pump fun in in 2014 but maybe it would not have worked at that time just due to the industry's like large focus on uh maybe proof of work related blockchains at the time but today we're in a much different uh Market layout than we were at that time I think you know just timing of like Innovations and and your go to market and what the product is and how it serves consumers is is another big factor that um I think kind of gets overlooked when we just talk about like first mover advantage in a vacum are you lever long right now is the market jumping is that what's going on no I'm not lever you put on a you put on a lever long position when you saw the coins going up you bought in late and now they're dumping on you this morning

and now you're getting liquidated he bought AI coins too late and now he's I leg did buy AI coins too late I got dumped on like like heavy um holy I didn't even know we were having a pullback wow me and Danny are sitting pretty in spot memes yeah you know what they say just zoom out the entire space is a thousand Xing that's what I'm saying here let me actually give our viewers never see this but I think it would be fun if they did guys this is um zoom out whole Space 1,000x this is not Financial advice by the way all right um yeah anything you guys are

dying to tell people before we head off before we wrap it up that's all she wrote thank you so much for listening to the Pod um Danny Ryan thank you so much for coming on [Music]