YugaLabs CEO: Our biggest risk is deviating from our mission, not regulation

YugaLabs CEO: Our main risk is mission drift, not regulation.

Yuga Labs CEO Daniel Alegre attended an offline event hosted by the Overpriced APEC podcast in Austin to share their views and development plans.

Host Carly Reilly: Based on the number of people in this room, I know there are many others who are very interested in this conversation. It feels really important, even though you’ve only just started your formal work, to be announced as the new CEO. But it’s really inspiring and uplifting because you come from what may be one of the largest game companies in the world, have worked as a C-level executive, and are now coming to our Web3 world to manage Yoga Labs.

Today you have a major announcement, which I believe is about hiring Mike Sievers as the new Uganda Labs CTO. Mike recently served as EVP at Epic Games and was previously CTO at Riot.

Moreover, he has a very impressive gaming background. I want to ask you a question, to start our conversation, to express your vision for Yuga. What did you tell Mike and how did you persuade him to leave his superior position in a Web2 gaming company and join Yuga, which is a challenging Web 3 world? What did you tell him?

Daniel: I initially tried to recruit Mike Sievers as the chief technology officer (CTO) of Blizzard Entertainment, but after Microsoft’s deal was announced about three weeks after we opened the Fract branch, I decided to suspend the CTO role at Fract. But I always remembered Mike’s talent. So when I came to Yuga Labs, I immediately called Mike and said, “Do you remember our previous conversation? There is a great company, Activision Blizzard, but there is a better company called Yuga Labs.” I introduced Mike to Yuga Labs’ vision and where I want the company to go, and I promised him that he would meet some amazing people, including someone with extremely innovative thinking, cultural adaptability, and a deep understanding of Web 3. You will see Mike make amazing achievements in inheriting the great will of Yuga Labs’ founders.

Host Carly Reilly: Do you need to sell him on Web 3? Or is he already interested in it?

Daniel: Sometimes you encounter situations like this, and I’m sure many of you have experienced them. When I talked to him, he candidly admitted that he hadn’t really thought about this issue and, to be honest, he didn’t know much about Web 3. But as I started to explain my reasons, it also answered the question you might be asking next, which is why do this.

Host Carly Reilly: Okay, please continue. You can now speak freely and efficiently answer the questions.

Daniel: Obviously, I came to Web3 for a reason. Blizzard Entertainment does have some of the world’s most iconic games, such as World of Warcraft, Call of Duty, Overwatch, Diablo, and so on. While I was working there, two things happened that were obvious, but I didn’t realize how important they were until I sat in the company’s chairman position. One of them is that no matter how good your game is, it won’t be successful without the endorsement of influential figures. Therefore, even if you make excellent brand promotion, TV commercials, or any display advertising online, if famous influencers don’t endorse your game, it won’t progress.

Now, if you look at what Ryan Reynolds is doing with Mint Mobile, you will find that influencers are moving away from just being game spokespeople or talking about games. They actually want to be involved in the entire ecosystem of what’s happening in the game. So they know they don’t want to say that Diablo is great, they don’t want to say that other games are great, give me money. They say, how can I be part of the entire ecosystem? This is very clear to me and it is a signal. We need to fundamentally rethink how games interact between influencers and players. Game players spend a lot of time and money in games, hoping to use them to make progress and achieve success in the game.

Now, if you don’t like the next version of the game, or you’ve reached your limit, you feel frustrated and want to start over in another game. So, when I was in Miami and met Greg and Wylie, the co-founders of Yuga Labs. We started chatting and they mentioned this problem, which we can solve for you through Yuga Labs, and where we want to take Yuga Labs. Frankly, this was a match made in heaven because they were thinking about how to focus on content and content creation as well as community building.

Then, gaming is not just about the game itself, but about the entire entertainment industry and the relationships that connect people through entertainment, placing creators and communities at the core. This is what games should truly focus on. This is the path you need to take.

Host Carly Reilly: I don’t want to delve too deeply into this, but how did you first connect with Wylie and Greg? Did they reach out to you or were you interested in Web3 and looking for partners?

Daniel: It was an excellent recruiter who told me, “Hey, you should meet these two guys.” We were originally supposed to meet in New York for dinner, but it didn’t work out. Later, I was visiting my parents in Mexico and they told me, “Hey, we’re in Miami. Do you want to fly over and meet them?” So I did, and obviously that was good recruiting.

Host Carly Reilly: I think that’s very attractive and shows your belief in this as the future. I find an interesting thing. Road block raised $4 billion in valuation in 2020, and many people may know that Yuga Labs also raised $4 billion in valuation, both led by A16z. When Roadblocks got that valuation in 2020, they had 115 million monthly active users. So what is your vision for Yuga Labs to get 115 million monthly active users?

Daniel: This may underestimate the direction I want to go in.

That’s just hype. The reality is that there is a clear tension between where we are now and where we need to go, right? We have a very intimate community, including the Board Ape community, CryptoPunks community, MeeBits community, etc., which is a relatively small and very tightly knit community. We want to make sure we continue to maintain the cohesion of this community and continue to provide value to them.

At the same time, I’m not focused on the issue of $4 billion or $40 billion valuation. What I really care about is providing excellent and unique experiences and ways of connecting for the community. If this leads to 150 million, 200 million, or 300 million independent users, that’s great. But that’s not really what’s driving all of this. The driving force is very clear to me, and I think everyone here can understand it: it’s a seismic shift that is about to take place in many areas, such as media, tourism, finance, etc. For me, the key is to continue to be a company known for creativity, connection, and community.

However, at the same time, because we have such a huge lead, a lot of people want us not only to continue to innovate, but to bring more people into the world of Web3. And this, obviously, is a path to that. It reminds me of the internet in 1994 and 1995. Some of you may remember what it was like to connect to the internet. You would have to attach a modem to your computer and then call up your telco. The telco would say we don’t have anybody who knows anything about the internet. So he’d show up in about two weeks and then connect you for half an hour, but then it wouldn’t work afterwards.

Then along came a company called America Online. They would send you a CD. What did you do with the CD? You put it in your computer? It was a miracle that people without computer science degrees could actually get connected to the internet. That’s the opportunity, right? How do we provide a great experience? Obviously, we want to take as many potential Web3 users as possible into our platform by utilizing the technologies that Web3 brings. That’s what I want to do with the Other Side. A lot of people have been asking me, Daniel, you’re from Activision Blizzard, you just hired an Acto from Riot and Epic, your Chief Gaming Officer comes from Scopely. Are you now a gaming company? We’re not a gaming company. We’re a content company, we’re a community company, but we’re using games as a way into Web3, because there is a very strong similarity between the gaming experience and the online gaming experience.

What you can do in Web3 is not as daunting as it used to be to connect to the internet. By the way, I don’t want to compare us to AOL because AOL failed four years later. But the principle is the same. That’s why Spencer Tucker is here, our Chief Gaming Officer, and the experience that he’s developing is going to allow consumers and gamers to really experience the fun of Web3 without feeling like it’s commercialized like a Web2 company. I have to say, this is what we can do. That’s why we’re using gaming as a way into Web3, because the experience and technology in this area can help more people understand Web3. There is a very strong similarity to the online gaming experience, but the potential of Web3 is greater. We hope to surprise and engage people through these experiences.

Host Carly Reilly: So you’re not a gaming company, which is interesting, but your current focus and emphasis is on gaming. That’s your tool to get people in. For example, you did Duke Dash. But what I find more interesting is that you have casual games like Duty to actually and Legends of Mara. I’m curious how casual games fit into Yuga. When you think about Other Side, do you think of it as a 3A game in and of itself, and these casual games like Duke Dash might be a testing ground for functionality or a way to keep the audience engaged while you’re developing the 3A game? Or do you see Other Side as a platform and many casual games will exist on it?

Daniel: Do you want a very precise and quick answer?

Host Carly Reilly: Let me ask you this, what do you think is the best metaphor for Other Side?

Daniel: If you look at what Facebook is doing with their metaverse, it would make a lot more sense. First of all, the idea that the metaverse is new is a misconception. In fact, the metaverse has existed for a long time. You can look at World of Warcraft or Warcraft, those are metaverses. These experiences are like metaphors, they’re the direction they’re headed, and they’re what they’re encountering on Facebook. Essentially, what they’re doing is building these features and tools and people will like it. And what we’re doing on Other Side is very different. First of all, we’re building these features, some of which are actually casual games. You can imagine that eventually, Other Side’s games and gamification will surpass casual games and become more immersive. We’ll be partnering with third parties to build applications on this platform. But we’re seeding for a very passionate community that has a reason to come together. This is a very different approach than what other companies are taking, so this is why we brought PollDers to Other Side, they’ve gone through the first and second journey of gaming experience. What Spencer and his team are building the gaming experience for is to unite the community and make them aware of other aspects.

Now you’re on Other Side, you can connect. These are the other things you can do, you can experience it, just like how Web 2.0 players experience Web 3.0. This is what NFT holders can experience on the platform gamification content. This is the first stage. We’ll reach a point where Other Side is no longer in this current decentralized state, right?

There’s a 7-8 month gap between the first and second journeys, around April. Yes, it’s a very long gap. We’ll reach a persistent state of Other Side where it’ll have some great gaming experiences, but we’ll also have other community elements. What’s the final state of Other Side? First of all, we basically believe in interoperability, we don’t necessarily want to become a platform, but we want to become an innovative platform. Hopefully, there will be other platforms that need to work with us and enter the market together. This is not a zero-sum game. We can benefit from a lot of users. Fundamentally, starting from Web 3, the interoperability of Web 3 will actually be a huge differentiation factor and market driver.

We are currently trying to figure out the mechanism. What does it mean to have ownership? What special value will you get? If you participate in the experience from the outside but are not necessarily a property holder or NFT holder, what impact will it have on the profit point? This is what excites me. When I announced that I joined Yoga in December last year, Spencer and his team introduced me to how they plan to operate “Dooky Dash”.

Then I said, okay, let me think about this mechanism. So you will limit the number of users, they can only play for three weeks. This is incredible in the game, right? Who would say that only these people can play, and you can only play for a limited time. I have to rethink my understanding of the entire game process and see how it all works. Another thing that really makes me nervous is that you have an AAA-level company with more than 100 people. From owning a Board Ape to obtaining a token, to receiving a token and starting the game, the mechanism of the whole process is very complicated, and there are issues of cheating. Finally, you must ensure that you have the correct statistical data and that the server is operating normally, and so on. Are you sure you can do it? By then, I realized that I am a person in a big company, right? Because Activision may have thousands of people working on this problem for months.

But you have a passionate team, they say, anyway, we will have an excellent experience. Their only problem is that they were delayed for three days, and Spencer was four days. Other than that, everything is seamless and the economic benefits are very good. But this is not the reason why I am really excited. What really excites me is that this is a team that knows how to have fun and they did it. That’s great.

Host Carly Reilly: This may be a stupid question, but you describe it very clearly. You said that only a limited number of people can play this game for three weeks. Why would it be successful? It looks weird.

Daniel: I think the first issue is that people have a fear and concern about Web 3 and NFT games. Traditional Web 2.0 companies have tarnished the concept of NFTs. They say, “Yes, we believe in NFTs. So you can now buy limited edition swords in the game. We will make money from you.” But players see through this. They say, “Okay, so you’ve already asked me to pay a $70 premium game fee, plus digital goods, plus you want to sell me a sword. This is not fun.” However, if you think about game production from the perspective of Web 3, you need to fundamentally rethink the concept of game production. Spencer mentioned this several times today. He said that when you think from the perspective of Web 3, you can get ideas that really need to subvert game production. This is the concept of Dookie Dash. This is the first experiment that shows NFT holders an experience from the beginning of the game. Eventually, you can imagine that it will enter other fields that have ownership and identity at the core, and what the experience will be like.

When people experience this game, they can easily understand its mechanics, but of course, winning the game is very difficult. Yes, I won’t tell you how bad I performed, but I did perform very poorly. I think people understand that this is not just about making money, but an experience. People participate just to participate.

Host Carly Reilly: So you said people realize that this is not just about making money, but I’m actually curious, do you think Duke Dash’s success expresses some of the basic features of Web 3? To what extent does it express some of the basic features of Yuga, that your stuff is very valuable? Players win more Yuga items and can sell them for a lot of money, is this an issue about money?

Daniel: Duke Dash’s players are token holders. I think we can divide them into three categories. The first category are those who love games and are willing to spend time playing this game. The second category are those who believe there is an opportunity here and want to see what it will bring them. They let professional players represent them in the competition. The third category may be those professional players.

There are also some people who basically say, “I’m not a gamer. I don’t quite understand it, but I want to get value from my tokens.” So they actually sell their tokens. The impact that results is that it has brought us revenue, but it has also attracted many new community members to join our platform, which is costless marketing and has generated a huge amount of engagement, attracting some professional players, such as Fortnite players who win the game, to join our platform and experiment.

So we see many different reasons why they like it. One is that I can make money from it. If I sell my tokens, I can let others play and then I can reap the benefits it brings. Second, I can really play it, enjoy it, and have fun. We actually cover these three different components. And from the perspectives of engagement, conversion rate of payment rate, and average revenue per user, in some cases, we have achieved 100 to 200 times higher revenue than ordinary games that last several months.

Host Carly Reilly: I have more questions, but I’m also keeping an eye on the time, and I need to delve deeper into the conversation. So I will trust your words. We will have further discussions to explore sustainability issues. I want to talk about risk issues. I mentioned earlier that since then, that is, after the $4 billion valuation, things have changed. The secondary royalty suddenly faced a major crisis, and the trend no longer exists, and the regulatory headwinds are quite large. Because Yuga is very prominent, you are definitely in the center of the storm. In addition, the market’s trading volume and active users are at historic lows. What do you think is the biggest risk for Yuga? Or in other words, if the worst-case scenario happens, the vision is not realized, Yuga is not successful, what will this story be?

Daniel: 这是一个很好的问题。老实说,在我看来,最大的风险是我们偏离了我们的使命。当然,也有监管风险,我们并没有积极主动地与美国和其他国家的监管机构进行接触。

我认为国际上的情况非常不同。我已经开始与监管机构和参议员接触,以实际上为Yuga Labs背书。我知道我们一直都是在幕后,人们并不一定知道我在这个行业中有很好的声誉。我愿意与监管机构一起为这家公司站出来。


主持人Carly Reilly: 你现在对这些监管机构说了什么?或者如果你可以对监管机构说些什么,你会说些什么?你现在向他们传达了什么信息?

Daniel: 有两个主要的问题。一是告诉我们规则,告诉我们你想让我们进行项目的地区在哪里。另一个问题是在SVB事件之后,许多公司面临着非常合理的风险。你会看到一些公司在加密领域中有相当一部分的资金放在SVB银行里。这样怎么办?现在我们该怎么办?我们应该把我们的钱放在哪里?一些大型银行表示,存在监管风险,因此无法托管你的资金。因此,伦敦、香港和迪拜等地纷纷争相吸引资金。两周前,我在晚宴上对一位非常有影响力的参议员说,如果我们不小心,将会发生什么。不要考虑像Coinbase这样的公司正在寻求迁往其他国家并将员工派往其他地方这样的灾难性情况。从短期来看,出于非常合理的原因,你可能会看到资金流向伦敦或迪拜。这对美国来说是一个损失,但从行业的角度来看,想想这意味着什么。这意味着监管机构将会说,你看,我告诉过你们,他们正在隐藏他们的资金并将其发送到迪拜。但这根本不是原因,和这无关。我们是合法的参与者,我们想按规则玩。

主持人Carly Reilly: 我想谈谈你们拥有的其他知识产权。当我们谈到Duke Dash和你们所推出的一切时,我们主要谈论了Board Apes,但很明显你们拥有最大的知识产权收藏,从CryptoPunks到Bored Ape Yacht Club到10,000个数字拍卖品。你们如何对这些不同的知识产权进行优先排序?

Previously I mentioned Derek Edwards, who has different end users. I am an old user of MeeBits. So, I would say that in some ways it feels like it has the most mainstream appeal because it can be said to be the most family-friendly. How do you balance the needs of these different intellectual property and how do you prioritize them?

Daniel: This is related to your previous question. The biggest risk for us as a company is not being true to our mission and community. I’m lucky enough to have seen the MeeBits community in New York. I’ve seen the CryptoPunks community here, and I’ve seen the Board Ape community here. Some of them overlap, but many are very, very different. Their expectations of CryptoPunks, MeeBits, and Board Apes are very different. I treat each community as independent, I call them franchises, not commercial franchises, but actual content franchises, giving them the freedom to decide what content is necessary for the business, what is necessary for their connection to the community, and to build their vision.

At the same time, I also know that the other side is a unified platform, and it is necessary when we try to find stories for each community. But at its core, the community will tell you what is necessary. Each franchise or each different business unit will decide for itself what is necessary.

Host Carly Reilly: Related to this, you said earlier that you’re not a gaming company, a content company, or a storytelling company, or even both.

Daniel: We’re doing content and community.

Host Carly Reilly: Content and community. Do you have plans for this now? Because it may involve these franchises for TV shows, online animated series, or movies. I’ve interviewed many big companies in this field, and one thing that impressed me is that in Web 3, it seems that they want to occupy all areas at once. How do you think about this?

Daniel: I won’t deny it, but I won’t confirm it either, not because I have anything to hide. We are a young company and relatively small in size. In my first three weeks here, I reviewed each franchise one by one and integrated them. They are critical to each franchise, including 10KTF Crypto, Punks, Me Bits, Board Ape, and other aspects. Our company has more than 100 employees, and 12 key plans that we need to execute, and this is already our limit.

Daniel: When you have such an iconic brand, the community’s expectations are very high, so I’m definitely concerned about that. But I see a lot of support and expectations from the community in the responses I’ve received on Twitter, which is very heartening. Our founder has always been committed to the values that Yoga represents. As I said, we have come to a consensus on what we really want to build, to stay true to Yoga’s values and to continue moving forward in the future. I think we will continue to do the right thing for the community, stay closely connected, and listen to feedback, as we value the community’s feedback very much. We just need to continue to bring surprises to people and launch truly great products. Host Carly Reilly: This is the last question, what is Koda? Daniel: For Koda, code is something you must have.

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