Exclusive Interview with Yuga Labs We are more like Tencent of Web3, constantly changing the rules of NFT games

Exclusive Interview with Yuga Labs We are the Tencent of Web3, constantly changing NFT game rules.

During the Token2049 conference, BlockBeats reporter had a conversation with Daniel Alegre, CEO of Yuga Labs, to delve into topics such as the narrative of NFTs, how to view OpenSea’s optional royalties, and Yuga Labs’ ecosystem layout.

Interviewer: Jack

Organizers: Luccy, Joyce

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In the past few months, the trading volume, new issuance volume, and prices of blue-chip NFTs have all been declining in the NFT market, with BAYC falling below 24 ETH multiple times. When people in the crypto circle talk about NFTs, Yuga Labs is definitely a topic that cannot be ignored.

As a leading NFT player, Yuga Labs’ incubated NFT brand firmly occupies the blue-chip rankings. Over the past year, although Yuga Labs has launched Dookey Dash and the Bitcoin NFT series TwelveFold, these new narrative gameplay styles only attracted players’ short-lived attention and liquidity. The sentiment of “NFT’s darkest moment” and “NFT is dead” is still far from over.

During the Token2049 conference in Singapore, BlockBeats reporter interviewed Daniel Alegre, CEO of Yuga Labs, to delve into topics such as the narrative of NFTs and Yuga Labs’ ecosystem layout.

Has the narrative of NFTs really come to an end?

Prior to joining Yuga Labs, Daniel Alegre worked in the music industry, while his family was involved in broadcasting. After that, Daniel Alegre moved to Google, where he worked for 16 years, responsible for opening and operating Google in China in 2005, and established many businesses in the Asia-Pacific region. Afterward, Daniel Alegre joined Blizzard in March 2020 as President and Chief Operating Officer, during which he participated in the development of well-known game brands such as Call of Duty, World of Warcraft, Diablo, Overwatch, and Candy Crush.

On April 1st this year, Daniel Alegre posted on his personal social media that March 31st was his last day at Activision Blizzard, and he would officially start as CEO of Yuga Labs the next day. He expressed great excitement about the next phase of work, which sparked community discussions.

BlockBeats: Regarding the current situation of NFTs, do you think the narrative of NFTs has already come to an end?

Daniel Alegre: No, definitely not. It’s a misconception that the valuation of the NFT space is based on the valuation of PFPs. Just a few weeks ago, some BAYC were sold for over a million dollars. It’s like asking Jeff Bezos about e-commerce in 1998, whether it has come to an end. He answered, “No, definitely not,” even though everyone thought Amazon would fail at that time.

But if you see the evolution of NFTs and the real value and functionality of NFTs, you will understand that NFTs are a clear value proposition. Its value is so high that holders of bored apes are now using it not only as a PFP but also for community branding.

Therefore, for Made by Apes, we have over 900 holders who are using their PFPs to create independent businesses, but in reality, they are leveraging the entire community branding. What they are doing is building various businesses, from selling alcohol and water to clothing, digital cards, burgers, and more. The entrepreneurial spirit demonstrated by our NFT holders is very unique, as they are creating a whole new ecosystem similar to what Amazon has established in e-commerce.

How Yuga Labs, the ruler of NFTs, built its NFT brand

Established in 2021, Yuga Labs, as an NFT and cryptocurrency marketing and development company, launched its first product, Bored Ape Yacht Club (BAYC), in April 2021, creating one of the most influential projects in NFT history. Not only BAYC, but Yuga Labs’ notable NFT projects also include Mutant Ape Yacht Club (MAYC), Bored Ape Kennel Club (BAKC), Cool Cats, World of Women, and more. The acquisition of CryptoPunks and Meebits IPs sent the entire crypto community into a frenzy.

In March of last year, the parent company of bored apes, Yuga Labs, completed a $450 million financing round at a valuation of $4 billion, led by a16z, with participation from Animoca Brands, Thrive Capital, FTX, MoonLianGuaiy, and others. From a humble beginning to a $4 billion valuation, with stars from the sports, entertainment, and VC industries, acquiring well-known IPs and launching Ape Coin, Yuga Labs has truly become the ruler of NFTs.

BlockBeats: We have indeed seen some people printing their monkey NFTs on water bottles or different types of beverages. But if the price of NFTs drops, people are less willing to associate them with brands. What is your view on this issue?

Daniel Alegre: I have a different opinion on this. Just a few days ago, I saw a robot at the airport in San Francisco making coffee. My son said to me, “Look, there’s a BAYC.” Then I noticed that someone had their BAYC displayed on the screen. So it’s not that people are unwilling to leverage their PFPs.

The trading volume of BAYC shows that 92% to 93% of holders are unwilling to sell their BAYC. Therefore, the actual circulating trading volume of $ape is relatively low. People hold $ape because they see the value, the value in community and community connections, and the personal value of identifying with a brand built by the community. On top of that, you can see a complete ecosystem emerging, with many developing businesses.

BlockBeats: Has Blur disrupted the atmosphere or overall integrity of NFTs? After all, only Blur can extend their brand or reputation through permission, while projects like Azuki or Pudgy Penguins have performed slightly better, but they haven’t really benefited from BAYC.

Daniel Alegre: Yes, we focus on one thing, which is telling a good story, building a good community, and everything else stems from that. Especially in BAYC, the model we adopt is disrupting traditional concepts of intellectual property. In a normal media company environment, you create intellectual property and then license it in very specific ways. For example, you can use Mickey Mouse’s image to make sweatshirts and profit from it, but you wouldn’t use Mickey Mouse to build a restaurant. Here, we actually let the community help build the brand, they own the brand and can truly drive it forward, and we just need to support them. In addition, we have also built some experiences based on Web3 or not based on Web3 for the community. What we do with Made by Apes is to support the business of the entire ecosystem, and they are also creating offline businesses.

We hope they succeed. It’s all about community and connection. The reason we established Otherside is because community members told us they wanted a place where community members could connect, and on top of that, we provide a unique experience.

BlockBeats: So fundamentally, you disagree with practices like CC0 and other NFTs that don’t obtain permission for creation, commercialization, and other uses. How should we make use of them?

Daniel Alegre: What surprises me is the level of entrepreneurial spirit in the community. I know the community will be very strong, users will connect with each other and be dedicated to the community. What I didn’t expect is that many people are taking what they have collectively built in the community and turning it into something else very interesting. Moreover, the reason I came to the Asia-Pacific region is because I know there are many community holders here. In the early days, it was just a company that had been established for two years and we were more focused on our business in the United States. But when I became CEO, the first thing I said was that the next ApeFest (an annual community event) should not be held in the United States, but in the Asia-Pacific region. I think this was the right decision because the community in this region is very close-knit, and it also provides us an opportunity to expand the community.

BlockBeats: Building a brand in Web3 is indeed very difficult, especially in extending influence to Web2. In the Chinese community, many friends are also building NFT brands, but many people have left because they couldn’t successfully build a brand and a strong community through NFTs, eventually returning to the Web2 industry because Web3 didn’t bring them enough income to survive. What are your thoughts on this? How did you survive and build a brand?

Daniel Alegre: I think the mistake these companies made is that they saw the NFT industry as a revenue opportunity, considering how to profit from it. If you approach it from this perspective, you may release an NFT, but there is too much noise in the market. You may think it doesn’t matter, one makes a little money, the other makes a lot of money, but what’s next?

Yuga Labs, on the other hand, was built from the beginning with the idea of being a continuous interaction and community building platform. That’s why it’s called Bored Ape Yacht Club (BAYC). When the community feels that they are not only being listened to and connected with, but also that the experience will continue to evolve, they will remain passionate and help build the brand. Of course, this is not an easy thing to do. As a company, we should focus entirely on storytelling and building connections. If you do it well, you can establish long-term relationships. But we don’t look at this issue from the perspective of the NFTs of now or 12 months ago. We see it as a long-term commitment, and we hope to continue to maintain and build this passion and connection in the years to come.

Yuga Labs is more like Tencent of Web3

BlockBeats: Some people say that a major achievement of Yuga Labs is that many celebrities stand with this brand, but others say it is a carefully planned strategy by the team, such as giving monkey NFTs to these celebrities as a clever marketing strategy. What was the thinking process behind this strategy?

Daniel Alegre: In fact, our association with celebrity endorsements or having celebrities own monkey NFTs, or promoting anyone to buy monkey NFTs, is irrelevant. They bought them spontaneously, they identify with this art, they like its uniqueness, and this art resonates with many people. I think that’s what makes it special.

Ultimately, it all depends on whether you have a good story and excellent artwork. This kind of art is innovative and can truly resonate with people from all over the world, whether it’s the Asia-Pacific region, the United States, the Middle East, or Europe. From top celebrities to unknown individuals, they all find a sense of identity in it.

Speaking of ApeFest, we will be holding ApeFest in Hong Kong in early November. What sets this ApeFest apart is that we have added an extra day of activities, inviting creators, community members, and potential new members to experience the significance of joining BAYC. We care not only about the development of the community, but also about enhancing the connections between community members. I think it is important as a leader in this field to show people the value of joining such a successful brand, so that more people can experience the fun of Web3.

BlockBeats: Another very important question for us, where do you think Yuga Labs’ main source of income will come from in the future?

Daniel Alegre: Frankly speaking, I think this is unpredictable. What I can see now includes the newly minted coins, secondary royalties, in-app purchasing experiences we are building in Dookey Dash and Heavy Metal Forge, as well as revenue sharing agreements with third-party partners like Gucci. There are likely also new sources of revenue that I can’t even imagine.

BlockBeats: If you were to compare Yuga Labs to a Web 2 company, which one do you think is most similar to Yuga Labs? Which one is closest?

Daniel Alegre: That’s a good question. We can feel that Tencent has a strong presence in gaming, social connections, content, and other aspects. We have some similarities to Tencent’s development in certain areas, but there is a big difference in terms of belonging and community awareness. However, this is my understanding of Tencent from five to ten years ago, so I don’t know the actual situation of Tencent now. However, in the digital field, I haven’t found any other companies that can compare to this level of community and connection. It is a way of building a community brand and connection that even the most loyal fans of Elvis Presley, Britney Spears, and BTS do not have. The closest example I can see is the level of connection that fans of major artists have, but they will go further to embrace it and want to establish and strengthen this connection for the benefit of others and themselves.

What is the future ecological pattern? Where will Yuga Labs go?

And starting from this year, Yuga Labs’ layout seems to have changed. On January 12th, Yuga Labs officially announced the launch of the new game “Dookey Dash” on January 18th, and will launch the game participation ticket “BAYC Sewer LianGuaiss” for Mint on the day before the game opens. This is the third stage of the prequel to the new storyline within the BAYC ecosystem and the preparatory stage for the launch of the first interactive game in this storyline.

Similar to Temple Run, Dookey Dash is an “endless running” game. There is no end to the game and the difficulty increases as the distance increases. The game will be a web-based game that can be played on both PC and mobile devices, but you must own “BAYC Sewer LianGuaiss”.

On June 21st, the BAYC Yacht Club official Twitter released a promotional video about the new game “HV-MTL Forge”. “HV-MTL Forge” is a space-building game based on Yuga Labs’ latest mecha NFT series HV-MTL. Players who own HV-MTL can access and participate in the game, build or customize their own unique space within the game, and upgrade their HV-MTL to a new form through the game.

Seven days later, the game “HV-MTL Forge” was officially launched. On the eve of the launch, Yuga Labs co-founder Garge.eth posted a long article on his personal Twitter account, discussing some thoughts and ideas about the game, the earlier “Dookey Dash”, and Yuga Labs’ game development plans. Two years after the release of BAYC, Yuga Labs had the idea of making a game, although it didn’t come to fruition, the idea has always existed and the thinking about the game has not stopped.

Following the “HV-MTL Forge”, the public beta testing of Legends of the Mara (LotM), a game under Yuga Labs, will start in September, providing new NFTs and a broader metaverse experience for Otherdeed virtual land NFT holders. “Legends of the Mara” is a “collectible-based 2D strategy game”, while “Otherside” itself is a large-scale 3D game. LotM will also reveal more information about Kodas, which are small bipedal creatures that exist on 10% of the initial 100,000 Otherdeed lands.

Building Culture and Community on the Blockchain

BlockBeats: There is also a question that many NFT entrepreneurs often raise, viewing Yuga Labs as a spiritual mentor in building Web3 brands. But now they see that Yuga Labs is also moving towards the gaming field. Therefore, they need to make a choice between building brands for NFT projects or games. How did you make this choice? Why did you turn to the gaming field?

Daniel Alegre: I want to say to the friends who asked the question that Yuga Labs is not a game company. Our mission is to build culture on the blockchain, which means telling stories, showcasing art, providing experiences, and building communities.

The reason why we provide gaming experiences for the community is twofold: first, many of our holders have a strong interest in gaming. They understand Web 3 and its value, so we created games that connect them together, and they enjoy these games. Dookie Dash is a game we designed for Heavy Metal Forge, and it will enter its final season tomorrow (I believe it’s tomorrow). This game actually brings the community together, and it’s also an opportunity for us, just like ApeFest I mentioned earlier. It’s an opportunity for us to show people who are not familiar with Web3 what they can experience in terms of games, shopping, videos, etc.

We start with games now because it’s the easiest way to explore what Web3 can do, showing gamers Web3 and making them understand: through Web 3, I can have digital ownership, trade assets in games, and use my characters across different games. These were problems that existed in previous games, and I personally experienced them at Activision Blizzard. The closed model used in games means that as a player, you invest money but never get any returns, or the fruits of your hard work cannot be exchanged with others. This is a unique problem in the gaming field, and Web 3 will bring unique evolution in this aspect.

BlockBeats: Although BAYC is a brand with high community recognition, community members can already start connecting and interacting with each other even without games. And as the number of other IPs owned by Yuga Labs grows, the community is expanding. Another way to expand the community, like Azuki, is achieved through the trading of low-priced NFT IPs. I noticed these two obvious differences, such as in the narratives of BAYC and GameFi, where users can utilize or monetize their game tools or devices. What is your perspective on this situation?

Daniel Alegre: I don’t know if you are a member of a rural club, but if you look at the membership system of rural clubs, you will understand our view on community development. When you join this rural club, you can interact with other members. You will meet them in the main building, drink, and engage in social activities. Then some people will say, “I actually like playing golf, do you want to play together?” Okay, let’s play golf together. And then you start to build your own social circle and truly participate in golf. That’s what we are doing. BlockBeats: Why don’t you consider cooperating with other games? Daniel Alegre: That’s exactly what we are doing. We have created and launched our own games, and now we have started discussing cooperation with third-party game developers to create unique experiences for our community. This is something we will definitely do. That’s also why we spend so much time in the Asia-Pacific region, where many of the best games and game companies in the world are located.

BlockBeats: So, at least in the short to medium term, is Eugalyptus focused on building a platform for games?

Daniel Alegre: Although we provide gaming experiences, our absolute focus is still on storytelling, engagement, and community. Whether it’s NFT minting, gaming experiences, or partner experiences, such as partnerships with brands like Gucci that allow you to truly experience a Gucci-like experience, these are the things we are building. Our current focus is not just on games, but on considering multiple aspects.

BlockBeats: So, what will the future ecosystem of Yuga labs look like, with NFTs possibly including IP, games, and other series?

Daniel Alegre: It depends on which series you are talking about. Obviously, we have CryptoPunks, orbits, and BAYC. As for BAYC, I think our evolutionary vision is to establish digital connections on the other end, and the evolution on the other end is that you will continue to have new experiences, and no one knows what it will become in three years. But we are actually providing support for the community to enable their third-party partners to participate in the construction together. It could be gaming, shopping, augmented reality (AR), or virtual reality (VR). We hope to enable the ecosystem to build itself rather than building it ourselves. At the same time, ensuring community connectivity and a continuous storyline are factors that keep our communities connected. So it’s more like a digital evolution of our platform, incorporating strong community elements.

Is “declaring war” on OpenSea taking the PFP NFT market in the wrong direction?

On August 18th, OpenSea announced the implementation of optional royalties starting from August 31st, and all previously issued NFT series will enforce optional royalties after February 29th, 2024.

OpenSea’s move has left many people confused, as they previously filtered out zero-royalty markets like Blur and made NFT project owners choose from their options. Now, they are shifting towards optional royalties and indirectly embracing zero-royalty markets. Previously, OpenSea seemed to be on the side of creators, rooted in the cultural track, providing support for new projects (such as LaunchLianGuaid) and forming differentiated competition outside of transactions with Blur. However, OpenSea has received accusations from Yuga Labs and has started to stop supporting OpenSea’s Seaport protocol.

This matter has also attracted the attention of many community members. How will things develop? Will OpenSea make changes? Or will Yuga Labs, like projects such as Pudgy Penguins, have their own NFT marketplace or settle using $APE?

BlockBeats: I know you have expressed many opinions on the issue of the maximum NFT trading tax on OpenSea. Do you think the entire PFP NFT market is heading in the wrong direction?

Daniel Alegre: Not only you, but I am also very concerned about the entire ecosystem of NFTs. The importance of secondary royalties is to create an economic business model for creators to incentivize them to create on Web 3. The more they are incentivized to invest in this field and create unique opportunities, the more everyone benefits from it. Whether it is consumers who have the opportunity to access these works, or ecosystems built around creators or creator economies, or companies like Yuga Labs, they can help promote connections between communities. So, I am very disappointed with the direction OpenSea has taken, and I have expressed my views publicly on Twitter: We are committed to finding ways to reward creators for their hard work.

BlockBeats: How do you think about FutureHub and are you considering building your own NFT marketplace?

Daniel Alegre: The first thing we need to do is ensure that we can establish partnerships with markets that support secondary royalties and support their development, it’s that simple. As for whether we are considering building our own NFT marketplace, we are committed to finding the right solution, ideally with the help of others in this field, to develop and build. The core issue is still about caring for creators and protecting their livelihoods, and we will do everything we can to achieve that.

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