The a16z Podcast: Building a Digital Nation in Web3 with Play-to-Earn Gaming
Jeffrey Zirlin of Sky Mavis and Gabby Dizon of YGG, with Arianna Simpson and Zoran Basich of a16z, discuss how play-to-earn games are onboarding non crypto-natives to Web3.
The a16z Podcast discusses trends in technology and culture with industry experts, business leaders, and other fascinating thinkers from around the world, to consider how these innovations will positively impact the lives of many in the future.
The podcast is hosted by Zoran Basich, Editorial Partner at Andreessen Horowitz (a16z), who previously held editorial positions at Dow Jones and the San Francisco Examiner. A16z is a leading Silicon Valley venture capital firm that led investment rounds in Yield Guild Games, as well as the creators of Axie Infinity, Sky Mavis, to further the development of the broader play-to-earn ecosystem.
In this episode, Zoran interviews Gabby Dizon, co-founder of YGG, and Jeffrey “Jiho” Zirlin, co-founder of Sky Mavis, along with Arianna Simpson, General Partner at Andreessen Horowitz.
The group covers Axie Infinity and the sustainability of the game, as well as the play-to-earn model that is serving as a method to onboard non crypto-native people to Web3. They also discuss the Axie Infinity player base, which has evolved into a “nation” of its own with its vibrant community and complex game economy.
The following is an excerpt from the discussion. Listen to the full podcast here.
Zoran (09:41): When you speak about the community, what is it that keeps people feeling as though they’re part of a community? There is some bigger, evangelizing feeling here than just, “Yeah, I’m gonna make a few bucks,” right?
Jiho (09:50): Sure. I think it boils down to this shared economic alignment, but also cultural alignment. This community has been around since before NFTs were popular and, you know, what everyone in the world was interested in. So, this exploration, I think that’s part of the DNA of the community. And as new entrants come in, they learn about this, and they actually have some of the ideals transferred into them as they join. So, I think that’s been really important. And the community is amazing at educating and onboarding, for example, eighty percent of our users are coming from referrals.
Arianna (10:26): I think it just demonstrates the enthusiasm that people have for what’s happening, both in the physical space — by the way, the meetups have incredible attendance, people are really organizing themselves on the ground — but also, of course, in the digital realm. So in Axie Infinity itself, in the Discord, in the Substacks, etcetera. So, there’s just a stickiness that comes from people feeling like this community is theirs, and they are benefiting from being members of it rather than having someone extract value from them.
Zoran (11:00): But it seems like there’s kind of a paradox here, right? Because one of the things about legacy systems, whether it's financial systems or gaming, is that they’re very sticky. It’s hard to move your account from one bank to another, or you can’t move your in-game goods from one game to another. And crypto has kind of changed that, and it’s made it much more portable. Isn’t it easy for some other game to pop up that is just as appealing and the characters are just as cute, and your community might migrate over there?
Jiho (11:25): What we’ve built is not just the gaming community. It is, in many ways, a nation where people have shared cultural values. There are overlaps and entertainment, there’s even this lingo or jargon similar to any language. We have this very deep economy. So, I think it is much harder with this type of network to uproot a community and transplant them into a new universe where they don’t have a stake in it. We’re seeing people in the real world from Axie Infinity communities, where all the people in your town or your city play Axie Infinity. And it has network effects, right? The more people that own Axie Infinity tokens, the more people that own Axies, the more people that own land within the universe, the deeper entrenched these economic and social relationships get with each other.
Gabby (12:09): Yeah. One of the hallmarks of the shift between Web2 to Web3 is that the communities are opt-in, and they’re incentive-aligned by shared economic ownership, by the kind of traits that lead people to share the same affiliation, the same tribe around maybe certain assets or certain game universes. People stay here because they choose to be here, and they help build the culture of a tribe. There’s a shared economic incentive, there’s a cultural incentive. But if people want to quit that network and leave and join another network, no one is preventing them from doing so.
Zoran (12:43): So speaking of user choices and user behavior, how is that changing? YGG is funding players, bringing them into the game, helping them get started, you’ve got a close-up view of this. Is there a pattern of behavior, or different modes of participation that are evolving?
Gabby (12:58): We see ourselves as a necessary layer to bring people from the real world into the Metaverse, especially for those that can’t afford it. But once they’re there and have an income, we actually encourage them to turn people from gamers to investors.
So, the first few cycles of people are earning money via SLP. They sell it for fiat, put food on the table, pay their bills. What we see is that when they are a few cycles in, and they have some excess income, many of them, for the first time in their lives, the behavioral patterns actually change. People have more of an investor mindset. And now they think about, “Do I buy Axies for myself and graduate from this program so that the next person can benefit from the Axies that I was using? Do I buy Axies for my family members so that they can start earning money too? Do I buy my first piece of land in Axie Infinity and become a virtual landowner?” And so on and so forth.
Zoran (16:06): And so the other challenge is onboarding, in terms of the steps required to start playing the game. You have to download multiple wallets, and you have to, obviously, pay some money. And on the one hand, that shows how appealing the game is for people, that they are willing to take these steps. But on the other hand, you want it to become easier.
Jiho (16:22): It is still difficult to get started with Axie Infinity. So, a lot of our development roadmap is aimed at reducing these barriers, specifically, for example, right now, if you are interested in Axie Infinity and you want to play, you then have to figure out which Axies you actually want to buy. This might involve doing a lot of research on the internet, maybe watching YouTube tutorials. And you’re basically buying characters for a game that you’ve never played before.
We will be releasing an upgraded battle system. And one of the features of that will be a demo/tutorial where everyone will be able to download Axie Infinity, get a free team of starter Axies, learn about the game, figure out if they actually love the gameplay, and love the community before they have to make any economic decisions. So, we think that that’s going to be a really important stage between awareness and activation.
There are also payment on-ramp and off-ramp frictions that we can work with partners on to also improve that onboarding experience.
Gabby (17:23): And, you know, that’s where the community steps in. And what I love about it is that you’re replacing the middlemen such as Facebook and Google with community-based structures that onboard people into games like Axie Infinity, teach them how to play the game, how to earn money, how to use crypto. And for me, it’s like Web2 reduced people into statistics that it’s just about daily active users, but with Web3, with this community-based acquisition growth returning them back into individuals again, individuals who are like creating content, learning how to play, people who are earning money, and we see all of these stories of people whose lives were profoundly changed by earning money. And I think that’s really significant.
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