Yat Siu has a completely different vision for the metaverse to almost everyone else. And at the helm of an investment portfolio worth $5 billion, his perspective is as important as it is empowering.
An early advocate for the ‘open metaverse’, Yat has a unique vision for what the word ‘metaverse’ really means. Built on blockchain infrastructure, he envisions a future where digital property rights underpin an explosion of prosperity in digital economies, just as physical property rights inspired rapid growth in the real world. It is a future where the internet looks similar to today, but where users control their own data. No headsets or avatars required.
Yat got his start at Atari before becoming an internet entrepreneur in the 1990s, ultimately selling his company to IBM and establishing Animoca Brands in 2014, where he has built a investment portfolio of over 450 blockchain companies worth over $5 billion.
Vienna-born and based in Hong Kong, his vision for the metaverse revolves around digital property rights. He doesn’t emphasise meeting your friends in virtual reality like Mark Zuckerberg’s Meta does, nor does he emphasise immersive experiences in a headset like Apple’s Vision Pro. Instead, he envisions an internet where anyone can own their own assets, in the same way we own things in the real world, and from that, a vast and prosperous digital economy can emerge that works for everyone.
We speak about how his vision of the metaverse is different, and why it’s going to win.
Read on for the full transcript.
Leo Nasskau, Culture3: Hi Yat, thank you so much for coming onto the Culture3 podcast. I wanted to start off with a big picture question. The metaverse, and everything in the immersive internet, is something you've been focused on for many years. Why does the metaverse inspire you and motivate you so much? Why does it really matter?
Yat Siu, Animoca Brands: For me, the journey of the metaverse really began when I went online as a kid. I grew up in Austria, and clearly, I was part of an (ethnic) minority back then, but I was able to find my footing, build a community, and build a career amongst a group of people who didn't care where you were from, how old you were, what you looked like, or what your background was. You were merely judged by what you could do in this online environment – I was able to code software very well and people appreciated that.
For me, that was the immediate attraction to, let's call it, a ‘digital identity’. I see the last 30-40 years really as the training wheels for what we describe as a true metaversal experience today; one in which we can own a piece of it. Today, when we go online, we have a digital identity, but we actually don't own anything and, in that sense, it's really mostly entertainment. It’s enjoyment and exploration of oneself, but we don't get to monetise it. We don't get to have value in it because it doesn't belong to us.
That's where we've now landed with web3. Consider all of the digital experiences that have become such a critical part of who you are. Now you can actually own it and have intellectual rights over it — which is, in the classic sense, a human right. Our right to property, life, and liberty are things that we consider sacrosanct in the physical sense, but in the virtual sense we just willingly gave it all up. As a result of that, we have become dependent on platforms that own everything about us, including all the data that we generate.
The power structures of the metaverse – what actually fuels it – is data. If it wasn’t for data, we wouldn't have Facebook, we wouldn't have ChatGPT, we wouldn't have self-driving cars, we wouldn't have half of, if not all, the innovations that we see today. We're the creators of this data, we are the ones giving it value, but how much of that data do we own? It turns out we own nothing. We define web3 and the metaverse as so intertwined because the only mechanism we can see, in which we can own the rights and have a stake, is through the power of blockchain and web3.
Leo: We are at a time, in mid-2023, where the debates around different concepts of ‘the metaverse’ are not settled. What you were just saying focused on digital identity ownership and data, but you were also couching it in something that began in the early days of the internet. These are trends that you want to bring forward to the modern day and expand.
What makes your definition of the metaverse different from other people? What are the real aspects of it that make it ‘the metaverse’?
Yat: One of the big surprises that I have found was that people identified the metaverse with Facebook. So, when Facebook's metaverse failed, or hasn't done well, then somehow the metaverse itself has failed. That to me was surprising, because it just told me how much I was still in my own little web3 bubble.
In web3, things like NFT sales or the token values that form the economy of the open metaverse are very substantial. Billions of dollars have been transacted and the majority of that value went into the hands of creators and owners of these assets — substantially higher than what web2 platforms were paying out to their creators.
But if you're not in that web3 world, you don't see it at all. We have to go out and keep explaining what the metaverse is truly about: we can have a stake, we can own a piece of it.
For most people, the metaverse is VR and maybe some AR. Apple's headset announcement is a very cool gadget and device, but it continues to reinforce this idea that the next level of our virtual existence is just deeper immersion. This is where I fundamentally disagree.
Not to say that deeper immersion isn't great, but the most valuable and most important kind of immersion is not what we see and experience through our eyes, it's what we think and dream in our head. What happens in our imagination, what happens in our belief systems, what happens in concepts of ownership, is far more valuable to us and far more meaningful than just simply how we experience it.
When we go to Disneyland, we have wonderful experiences through our eyes and our senses, but we don't walk away with a deep sense that this changed our world, that this helped create an opportunity for us, because we don't have ownership, we don't have a stake in its success, and we can't build on top of it.
“It turns out we own nothing.”
— Yat Siu, founder and Chair, Animoca Brands
When you have actual ownership of something, you can construct network effects on top of it. So, what makes the metaverse so special? I’ve found that when we start explaining to people that the true meaning of the open metaverse is that actually you get to really own this, that you have provenance over that, something that you've created, that this identity that you’ve formed really belongs to you, that's when it starts to click for most people.
A lot of the objections to the web3 space are often around token prices and feeling that it's speculative. But when it comes to ownership, generally everyone agrees that they should have a stake in the digital things that they own. They often don't understand that decentralisation enables that ownership. I think it's very similar to the physical world.
For instance, when you buy a house and you get a certificate that says you now own this house, we take for granted how it functions. We assume it works because the lawyer said so – but the legal systems, the judiciary, the democratic framework, the fact that these are elected officials, all of that is actually what makes it function. And if that government no longer exists, then all your property rights disappear with it as well. So, property rights in the physical world are arguably even more frail than in the digital world with blockchain.
Leo: I think that's a really important outline of the debate over the metaverse. For companies like Meta and Fortnite, it's very easy to see what they're doing in terms of creating the metaverse: you can look at users, you can look at value spent. How do you track your version of the open metaverse? What are the core features that make it distinctive?
Yat: The core feature is that you can track everything on a blockchain. This what's beautiful: you can see what the transactions are, who owns it, what the volume is. All data that is in this transparent framework. That's how we can measure the millions of people that are making an income on it in places like Venezuela or the Philippines. These people, before blockchain, never even had access to a banking system.
Last year, the whole decentralised finance infrastructure – which is basically the public banking infrastructure of what we've described as the open metaverse – was over $100 billion. Despite all of the crypto crashes, it's still a respectable $75 billion today.
Then you have these decentralised autonomous organisations (DAOs). There's over $12 billion in value sitting in decentralised structures where the community gets to decide where the money is deployed through community governance. DAOs are representing, in a digital world, a new way of running an organisation. We think it will be the new, and perhaps better, way that we can run corporations.
“People often don't understand that decentralisation enables digital ownership.”
— Yat Siu, founder and Chair, Animoca Brands
Digital property rights isn't simply a technical evolution of more immersion, better goggles, and faster computing; it's a fundamental change in terms of how we look at our rights online. In the same way that the American Constitution was born, or when the French Revolution happened, and when the rights of man were written down, this, to me, is at the same kind of level of importance.
We don't have a Magna Carta of digital rights. Our digital rights exist entirely based on a clickthrough agreement from Facebook. Now there's a revolt that's taking place, and that revolt has happened to be on blockchain. It started with a financial construct then evolved, with that same technological framework, to just about everything digital – our data, our virtual timelines, and our assets online.
Twenty years ago, our digital life was an ‘add-on’, but today our digital existence is our life. And that is not because we spend countless hours on TikTok and Instagram; it’s that our livelihood depends on being online. Whether you're a social media influencer or whether you want to conduct business, if you are removed from the internet, you become a lesser human. You have less ability to transact, you can't make friends, maybe you can't even find a romantic partner. You can't do anything if you're not online.
Leo: What are the most compelling examples of people, groups of people, or organisations making most of this ability to own their own data?
Yat: I'll give two examples but there are countless more. But I'll give you two examples that are within the Animoca world, where I work and invest. In gaming, in places like the Philippines, Venezuela, or Indonesia, they are people who have been able to earn value in the game and sell that to other players, but also to participate and create enjoyment for themselves.
This is interesting because a lot of people in the West say, ‘if I start to play a game to earn, doesn't it just become work?’ This shows just how much people don't understand the way the gaming industry actually works. What actually happens in the $200 billion gaming industry is that only a small number of people pay for the games, and the people who play for free are actually the ones who provide the entertainment and enjoyment for the people who pay – which drives all that revenue. Imagine you go to Fortnite and the map is empty; you won't pay any money because there's nobody to play with.
So, what does Fortnite do? What does Epic Games do? Well, make an entertaining game so that people will come in, and so that the person who's willing to pay now has something to shoot at. Eventually he has enjoyment, and he pays money for the skins and for status. So, the free players are effectively ‘ducks’ in the game, they are the target practice for the people who pay. One perspective is to say ‘I'm having fun being target practice because I'm good at this game’. The other way to look at it, which is how we look at it, is that you are free labour to the game: if you are not playing the game, then the game doesn't make revenue.
“The people who play games for free are the ones who provide the entertainment.”
— Yat Siu, founder and Chair, Animoca Brands
Now, you can see what value there is, and that value can be translated to people through the blockchain. That's the point about data transparency and data as a real commodity that you can now measure – because Facebook and Instagram make tons of money on our data, but we don't know what that's worth.
Imagine if you went onto Facebook and, at the end of the day, it showed that you just made a thousand dollars for the company. Your relationship to Facebook would completely change. You would probably demand your fair share, and if Facebook says, ‘I won't give you a fair share’, guess what happens? Some other competing network might come to you and say ‘I'll pay you 50% if you join my network’. This is what happens when you have transparent frameworks.
So, that's one example where the entire financial and transactional ecosystem of the gaming world becomes open and transparent, allowing people to create products, services, experiences and better pricing for everyone. You could choose to play a game for free because you're having fun, or you could choose to play to make money – which should be an option for you because every game has that financial transactional layer.
Leo: I find it interesting that these play-to-earn games have picked up steam in developing countries, where incomes are lower compared to Hong Kong, where you’re based, or Europe. Your example seems to say that, just by being there, they're creating value. Do you think play-to-earn is a phenomenon of poorer countries where that value is being channelled back to the West?
Yat: No, I don't think so. I think one very important factor for us to explain is that play-to-earn is just one thing you can do, it's just one network effect you can have with property rights. If you think of the rise of the play-to-earn game Axe Infinity, it wasn't Axie Infinity that promoted itself in the Philippines, it was an organisation called Yield Guild Games that decided to use their Axies – in-game pets – and rent them out to players. Ownership gave them the ability to create an Uber-like service on top of a game, and to create a new business framework that helped grow an ecosystem of guilds on top of Axie Infinity.
Now here's the thing; just because the first generation of a game may appear to be more valuable for people in the developing world, it doesn't mean that this game format is only appealing in developing countries. Even in very developed countries, people will be more than willing to do something if money is involved. We can see this with skins trading – the only reason why skins trading in games like Counter Strike has been suppressed is because of the developer, Valve. If it was a truly open and free market, you would see much more volume and many more transactions take place.
Leo: I think that actually ties into the example you gave about data on Facebook. It might be the case that my data on Facebook is worth a thousand dollars – I think some examples I've seen suggest it’s closer to two or three dollars, per person – but the idea you are alluding to is that, when you have digital property rights and actual ownership of the data created, then that data becomes more valuable because we're more invested in it.
If we have ownership over what we are creating, then we might invest more in them than we currently do. So, the value of these digital assets could potentially be increased and become something we invest more time in.
Yat: Let me give you one other example of what happens when you turn content into an asset – which is the real power of NFTs. In this platform called Tiny Tap, a teacher has the ability to make his learning content into an NFT and into an asset. In the past, in the sort of traditional legal framework, it's very difficult to do that because it's just too expensive. You can really only create property rights frameworks for things that are worth tens of thousands of dollars.
“Property rights transformed the physical world, the same will happen in the digital world.”
— Yat Siu, Chair, Animoca Brands
With NFTs, you can create property rights for something that's worth just a few dollars. So, here's a teacher who now has an NFT that encapsulates within it all the property rights and intellectual rights, which is worth maybe $100 a year to that teacher – it's a nice side income that they make on Tiny Tap. But now a publisher, an investor, or an individual, can say ‘I'd like to have 20% yield, and they can go buy this asset for $500, enjoy a 20% yield on it, and promote and grow the asset. The teacher now gets his value forward, and gets $500 instead of $100.
That essentially creates a reinvestment into that ecosystem. In the same way that capital appreciation of things like real estate or art have led to wealth accumulation and reinvestment into society, we can now see this happen in the digital world with things like teachers and education. We sold our first set of NFTs for teachers through Tiny Tap late last year, and they were making close to a year and a half’s worth of their salary through their first sale. This is a life-changing event for them; they started hiring friends to help build up new companies to create new content, and new business ideas.
Whether it's a musician, a photographer, an artist, anyone that creates content can now turn that into an ownable digital asset. That’s the other opportunity that we see. In the same way that property rights completely transformed the physical world hundreds of years ago, the same will happen with the digital world.
Leo: I think that's a particularly compelling example. It talks about the metaverse as not too dissimilar to what we're doing on the internet today, but with the activities expanded through ownership. It can be on internet forums, it can be on desktops, on browsers, it could maybe be in headsets, it could be anywhere.
Is this where the metaverse is going to come from? Is it just going to scale up? Or are there going to be different journeys to this broader vision?
Yat: One of the amazing things about having actual property rights on your own assets is that you're empowering entire communities to promote and grow the ecosystem themselves. We can't possibly imagine how that growth will happen because it's no longer based on a single entity – the entire community has a million different ideas, and some of them will stick.
When you think about how Web3 started to blossom with gaming, everyone was thinking about NFTs as ownership. Very few people thought about tokens and almost nobody thought that decentralised finance was going to have this big impact in creating the web3 NFT gaming boom. But because they're all within the same network, they all start to benefit each other as they do in the real economies.
So, network effects in the metaverse can compound on top of each other because they're permissionless: you have a great idea, and I can say, ‘that's cool, let me build something on top of that’. I don't have to ask permission from someone, I just innovate on top of what someone else has built. The blossoming of these network effects are essentially limitless in their construction.
“Network effects in the metaverse compound on top of each other.”
— Yat Siu, Chair, Animoca Brands
I think there will be many surprising offshoots in where web3 will grow – but they will come from within, from people in web3 that are innovating in the space. Also, when one part of the web3 economy grows, whether it's gaming, education, art, it benefits the entire network because value is being created, more activities are being created, and that brings in more users as a result.
Leo: Does this make the metaverse inevitable?
Yat: Yes, it makes it inevitable. There’s just such a better value paradigm for everyone in an open metaverse. We can see this by looking at Facebook, which is pouring billions of dollars into creating a closed metaverse and has had a really difficult time succeeding. By comparison, when you look at the web3 metaverse, it’s much smaller in the number of users but has economic substance in the size of small nations like Cyprus and Iceland. So, in comparison, it's doing really, really well.
I think it's these metrics that people don't understand or see, particularly in the US where web3 and crypto are viewed as intertwined and the narrative is so negative. In the rest of the world, it's absolutely revolutionary what's happening. The example I gave of last year, when NFTs sold $24 billion in value – more than 90% of that value went to users, owners, and creators. In comparison, Spotify, which has hundreds of millions of users, only paid out $7 billion in that same year.
Leo: Earlier you spoke about Disneyland, and you spoke about how people love going to Disneyland, but that they don't actually own part of it – and so the experience is somehow less fulfilling. I thought to myself, as you spoke, that some people actually really do have life changing experiences at Disneyland.
The vision we are talking about is that the metaverse will keep on growing and, eventually, it will start changing minds and it will just show people that it’s better being on, for example, a web3 social media platform rather than Facebook. How does the metaverse actually go about changing minds and convincing people who have amazing experiences at Disney or playing Fortnite that they should be moving over to something in web3?
Yat: I think it's already changing very much in Asia. When you look at the web3 policies in Hong Kong, Japan, or even China, in comparison to the US you can see that these parts of the world are looking at things very differently and are ready to adopt this technology.
When it comes to mass onboarding, historically we’ve always thought of gaming as a big way to bring people in because gamers already have this intrinsic assumption that they should own their digital assets. However, it turns out that just onboarding them to web3 wasn't enough – we had to make them financially more literate.
We don't teach it in schools, and culturally we don't often talk about money. A huge number of people might have a bank account, but they actually don't know anything about investing or about value. This is another reason why web3 is so important now: capital has clearly outperformed the value of labour in the last thirty years. Being a labourer is no longer a means in which you can actually make a reasonable income.
“Capital has clearly outperformed labour in the last thirty years.”
— Yat Siu, Chair, Animoca Brands
Instead, you have to start investing, you need to own assets. One of the unfortunate things in the early gig economy, when people were pushing companies like Airbnb and Uber, was that we spread this little lie that the next generation doesn't want to own anything – that they just want to rent and travel around the world. All these people missed opportunities to put their money into something that would potentially have value.
That comes from a lack of financial literacy. So, what we found is that to bring a person fully into the meaning of web3 you have to also make them more financially literate. You have to train them to understand what value is, and that's not to say that you want every person to become an investor, they just have to be aware.
This is exciting for gaming because we can educate people about finance through play. In a fun, storytelling way, you can teach people new skills and teach them about financial literacy. I think this is a key method of onboarding because once you’re in it, then you totally understand its value. It’s no different than how we onboarded people from feudal societies into democratic capitalist ones.
Leo: I think, big picture, what you're talking about is that people need to understand financial literacy in order to fully understand what the metaverse can offer them, and it's cultural mediums like gaming that can carry them into this new era of connection.
To what extent is Animoca Brands investing in bringing this metaverse about? How much are you focusing on that last cultural mile, versus the tech, to spread those values around the world?
Yat: Absolutely everything. Tech is a part of it, because you can't really separate technology from culture. So, we focus heavily on NFTs and that's really been our main thesis. We invest in layer one and layer two technologies to enable that because we always had the thesis that culture is going to be the mass on-border into web3. That is the main medium in which we understand and appreciate web3 because that is how we appreciate societies.
“Yes, the metaverse is inevitable.”
— Yat Siu, Chair, Animoca Brands
We always draw the parallel that the open metaverse is like the birth of a new nation. It's a new country, or new countries, for that matter, and what drives the value in those ecosystems is our sense of culture and identity, not just money. With Bitcoin as a store of value, we would then describe NFTs as a store of culture, in this case digital culture.
That digital culture isn’t just what we create, it’s also what it means to you – in the same way that we appreciate a wedding ring, in which you end up creating a connection that is entirely invisible to the rest of the world. That wedding ring is lore, it’s a legend, it’s a story. You can’t lose it without suffering, it’s not like ‘oh well, just buy another ring.’ That's what culture really is. Look at how culture touches us in the real world: everything we purchase, certainly in the developed world, is all about culture.
We are deeply cultural creatures. Where you choose to live is cultural, the clothes I'm choosing to purchase are cultural – they speak to our cultural identity because of their associations and preferences of our particular identities. Think about how much we spend, billions of dollars, on digital goods that are entirely cosmetic. These are all things that have no utility in itself, instead they speak more to your status. That's what we've been very heavily focused on.
Leo: I'm interested in the bigger historical picture of Animoca Brands as a gaming and investing organisation. What's the story of the company, and how it got to today? You mentioned The Sandbox, any other companies that you're excited by in the portfolio?
Yat: We're excited about everything in the portfolio, it's a bit like trying to pick your favourite children! However, I will talk about a few things that, as a concept, I'm so excited about – but before that, let me talk about why Animoca invests in the way that it does.
We think of it as building new economies. In other words, what's important to us is not important in the classic VC sense because we invest out of our balance sheet, we don't have a fund. So we're not looking for returns solely based on 10x, 20x, 100x. That's nice, and obviously we hope to achieve that too, but we're more interested in whether that business creates economic activity within the web3 ecosystem. Because we have such a heavy footprint in web3, we can essentially invest in any business that helps grow the network effects or give more value to NFTs.
“We’re deeply cultural creatures.”
— Yat Siu, Chair, Animoca Brands
So, marketplaces, DeFi platforms – these may not be typical things that a pure NFT company would look at, but for us it's interesting because they help grow the ecosystem. Even if the company itself may not create the biggest return in terms of equity or return from financing, if it creates tens of millions of dollars in economic activity within the open metaverse, then we will have already won because success in the far corners of web3 will have a ripple effect around the world.
We describe this as a shared network effect, which is something that you can only do in web3. In a traditional web2 game you can’t do that – if Fortnite was the most successful game on earth, who cares except Fortnite? Everyone else is just competing and Fortnite will do whatever they can to erect higher walls so that nobody else can come in and grab any of that network effect.
In web3 it's the opposite. If an NFT collection becomes really big and people start making money on it, or people start creating network effects, web3 allows people to partake in those effects. One of our portfolio companies is Yuga Labs, the creators of the Bored Ape Yacht Club, and Board Apes is an NFT collection that has probably one of the deepest network effects out there. People are willingly building new products on top of their ownership of these bored apes, because they know they're tapping into a really big audience.
Leo: Wonderful. I think that is the perfect time and vision to end on. This has given me, and I hope everyone listening, a really clear idea of how you're thinking about the metaverse and, critically, what can be so inspiring about it. Thank you so much for coming on.
Yat: Thank you. It's been a pleasure.
“Our right to property, life, and liberty are sacrosanct in the physical sense, but in the virtual sense we gave it all up.”
— Yat Siu, founder and Chair, Animoca Brands
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