Post FTX, Do Blockchain Games Stand a Chance?

ruins the fund. Others are cautiously optimistic and experimenting with things like in game n f t s. A smaller number and a relatively vocal minority are absolutely committed to making blockchain based games happen. Among those who were committed in vocal well fd X and some bankman freed. Earlier this year, ft X announced plans to start its own gaming unit, a platform that would help games companies launch their own tokens, dabble in n f t s, use

their infrastructure. F t X had also worked with a handful of gaming startups to expand their gaming footprint in other areas, but in the aftermath of the ft X meltdown, many wondered what the future of those small companies might look like. To make sense of the impact the ft X meltdown has had on the gaming industry, we have Bloomberg Report Hannah Miller, so we know that within Sam Bankman Freed's empire there was the synthesis on gaming, both through ft X Ventures and through this ft X gaming

operation they were developing. Yea, yeah, Hatt, welcome back to the show. Thank you for having me remind our listeners what you're up to. Yeah. So, I am based in San Francisco. I'm on the Crypto and Tech teams, and I cover crypto startups and venture capital, what's going on with crypto startups and venture capital in general. But today

we're going to talk specifically about the crypto gaming ecosystem. Now, partly because I love video games and I have the ability to do this, We've had a lot of conversations about about crypto and gaming on the show. We've heard from our colleague Emily Nicole, We've heard from our colleagues cecil A Donastasio, and one of the things that you know they've been clear on is it's not the case that there is a universal agreement or disagreement on the

relationship between crypto and games. What have you observed in your reporting. Well, this is a really fun space to write about. I too love video games, so it's been really interesting talking to founders over the past few months about their blockchain games, and I think I've seen some really big changes in terms of how people are looking at blockchain gaming. I feel like when crypto was hot, people were like, oh, yeah, this game is all about n f t S, it's all about blockchain. You know,

we're we're ridding the wave here. But now it feels like people want blockchain and fade into the background. You know, they still want to use this technology, but they don't want it to be in your face. So they've gone from this is all about crypto to our favorite phrase, the underlying technology. Who were some of the people, particularly in the venture space, who had been promoting the idea of blockchain gaming and crypto, whether from an underlying technology

perspective or otherwise. Well, one of the first names that comes to mind is Sam bankmn freed Um. Yeah, we've all heard about his role in the spectacular collapse of f t X, but what some people might not realize is that he was super into gaming. He was actually playing League of Legends during calls with major investors like Sequoia, and they thought this was super cool at the time, But in hindsight, I think it kind of shows, you know, his flippancy towards this space and you know the work

that he was doing, and raises a red flag. He was also playing Storybook roll during some recent Twitter spaces, neither of which are blockchain based. I would note, Yeah, he loves story book brawls so much that FTX acquired them. Now, So ft X, it sounds to me like ft X was thinking about gaming in a couple of different ways. They were promoting blockchain gaming. They had a hundred million dollar fund with light Speed to support the Solana gaming ecosystem,

and they straight up both games. Why other than SPF's own interest here, Yeah, I think a lot of people see gaming as an important front here within blockchain This is a way too easily on board regular consumers. It's a fun way to get people involved with things like n FT and crypto tokens. But it's been really interesting to balance that with the backlash that blockchain gaming has

faced among regular gamers and regular gaming companies. So yes, there was a lot of passion um in promoting these blockchain gaming projects, but at the same time founders and investors had to contend with regular gamers just kind of shaking their fists in the air and saying we don't want them, we don't want blockchain in our backyard. Now, let's be clear, gamers do not only shake their fists in the air. This was just like a vocal opinion

as that I'm just describing myself. But you know, I remember so after the story Book Rowl acquisition, they got review bombed, right, like a lot of angry gamers were like, this game sucks. Nothing had changed other than the owners. So we're talking about a passionate community. Now what are some of the objections of this vocal segments of gamers to the existence of crypto and games specifically. Yeah, I think the big question is why do we need crypto

in gaming and is there really a point here? And a lot of people have looked examples like ACTI Infinity and they're like, well, this is just defy wrapped in crappy graphics, Like this isn't fun, This is just a way for people to make money. This is just a way for people to profit. It's not actually something that's improving my experience in gameplay. One of the more interesting hires that f t X made prior to everything was

a person named Amy Wou. Tell me more about Amy Wu. Yeah, Amy Wou, big name and venture capital like super hot,

rising star. You know, she had been at light Speed before going over to really help oversee ft X Ventures, and any founder I've spoken to who's worked with her has just said how smart she is, that she knows how to ask tough questions, she knows what numbers to ask for, and that she's also you know, someone who invests in you will keep that relationship going look out for you, you know, even after you know she's moved places like you know, I spoke to people who she

invested in them through light Speed, but it was still like a good contact for them. When she was at FTX Ventures and a big part of her portfolio at light Speed and then later at FTX was gaming correct. Yeah, she she was a huge force there in terms of um, you know, investing in gaming startups. And we also know within ft X there were it was a separate division that was working on gaming, you know, stuff to do

with gaming infrastructure. It was still in a pretty nascent stage, and a lot of the founders I spoke to or like, yeah, we found it interesting, but it didn't seem like they were ready to start working with us, or like, we already have all of infrastructure in place, so we didn't need, you know, that technical support they're offering. So we know that within Sam bankman Fried's empire there was the emphasis on gaming, both through ft X ventures and through this

ft X gaming operation they were developing. Not to mention that Alameda Research, the Trip crypto trading firm he helped found before f t X, they were also extremely active gaming investors. So you've got all of these different, explicitly and implicitly interconnected bits of the f t X empire. Now they're all in bankruptcy. What does this mean for the founders they invested in? What does it mean for

the founders for the games they acquired? Yeah, so it was interesting talking to founders about this, you know, especially those who had received equity investments from either Alameda or f t X. So with the bankruptcy proceedings, it seems like though that you know, those shares of equity will be up for grabs so these companies and projects could still could soon have new owners just to recap an

equisy investment. Is in exchange for boatloads of money from either Alameda or f t X or fd X Ventures, they offered shares in their companies back to these folks. Yeah. Yeah, And so it was interesting talking to the founders because some of them they're like, I have no idea what's going to happen. You know, I think, yeah, like these shares are going to go up, you know, with with

everything else that's you know, involved in this bankruptcy. But it's very interesting to think that, yeah, they could have new owners who scoop up these shares on the cheap, which is a lot of uncertainty for the companies involved. For sure, are the game's going to survive? Yeah, everyone I spoke to is super confident, and yes, they see this as a setback for the whole industry. And some

of them have had to make serious changes. Um. Just even before the collapse of ft X, they were doing layoffs, tightening budgets. Um. You know, some founders at all costs are saying, you know, I don't want to cut salaries, I don't want to let people go I'm working on every option to make sure that doesn't happen. I'm trying to raise funding from my investors. Up next, more from Bloomberg REPORTSA Hannah Mila on what the collapse of FTX

has meant for the crypto gaming industry. We'll be right back. I want to switch slightly to talk about game stuff. An incredible rally in game Stop to day ignoring all valuations, all fundamental game Stop of course for the last three days into today, up more than eighty percent. As those message coordinators was hero of the meme stock revolution, decided to become involved in crypto in different ways. We're talking about getting into n f t s. They had a deal with f t X where they would sell f

t X gift cards. Yeah, no, they had to. Is this deal with f t x UM, like you said to you know, sell the gift cards as this partnership, and it seems unclear what is going to happen here with that. I've reached out to game Stop, have not gotten not heard back from them, But it is interesting that, I mean, this was a big, high profile partnership the

game Stop and f t marketplace. Like other marketplaces, UM has seen sales decline, and whether the ft X name will taint them moving forward is a big, big possibility. In a similar vein to their partnerships with I would describe that as like a traditional gaming retailer. F t X sponsored an E sports company called t s M. I think it was one of their larger deals, was

like more than two million dollars in gaming rights. So I have had a theory, which I think of a spouse on this podcast, that there isn't a lot of room between like gaming and crypto, not because those things should necessarily be related, but because they tend to appeal to similar kinds of people in the sort of the

grand scheme of East Sports, game Stop, etcetera. Do you think that some of this was like just f t X marketing being like, we want to get in front of people who might want to trade on our platform in addition to them all being die hard gamers themselves. Yeah, I mean the the E sports deal that was a really big team or is a really big team, So to to get on board with them, I think was

a huge play. And again just part of ft X is giant push to get to infiltrate mainstream consciousness and with yes, I do think this comes from a personal passion and personal interest from Sam Bankman Freed. But there also is a lot of hype about blockchain gaming within this space. Even during this crypto winter, you know, we've seen resilience among crypto venture capital investing in blockchain gaming. You know, there are these these n FT deals still happening.

You know, there are still gaming companies that use blockchain who are scoring big valuations and raising funds, so and even speaking to investors, you know, they see blockchain gaming is a way for the space to survive and even regain whatever legitimacy it had before ft X is collapse. One area that sometimes gets conflated with blockchain gaming is

the metaverse. If as you may have to do in your stories or to your relatives, Like if you were to explain the difference between these two and on who they're trying to appeal to, what would you say? Yeah, it's a it's always a tough thing to explain, but yeah,

the metaverse. I I always describe it as a more immersive version of the Internet, you know, like maybe it'll use virtual reality, augmented reality, where you can see the digital world that you're in around you, and I always mentioned the movie Ready Player one or the book to you know, I think that's like people's idealized version of the metaverse in some ways dark stuff in some ways, yes,

very bleak in different ways. I think people would see like what the the end, the end vision of that metaverse as being the ideal, not not what it is the majority of the book and movie. But with that, crypto advocates have kind of stepped in this space by arguing that that world should run on blockchain, that there should you know, the currencies, the assets that you use in the game should be based on blockchain because it allows gamers to actually hold and own, um these things

that they're using in these virtual worlds. And a big person who has invested in those kinds of games in the metaverse and who stands to benefit potentially from the decline of FTX and sound backmen freed is Yatsu and Anamoca tell our listeners just a little bit about the Anamoca empire. Amoka is huge, you know, it's it's based

in Asia. Yatsu has just been an incredible force within the industry in terms of helping to develop blockchain games, invest in blockchain games, so Anamoca uh is an investor in Accine Infinity or in sky Mavis, the developer Vaccine Infinity, and it also owns the Sandbox, which is the super popular Well they wanted to be right beca see I remember you writing that we had like five daily active users. Yeah, well there was this report that they had that and

I spoke to Yatsu about it and wrote an article. Um, and you know, he explained that there are other ways to measure engagement in the Sandbox versus you know, blockchain transactions and buying stuff in you know, the marketplace. And you know, he even said something like, you know, in virtual worlds, you'll be able to have metrics like gross domestic product, and NAT will show you know what engagement

looks like and your jobs created. Even so, it's it's been very interesting to kind of see how people form their conceptions of what success means in blockchain gaming. I think what on Amoka has done, what Yatsu has done, is really help lift up some of the biggest names

in blockchain gaming currently. And with actin Infinity, you know that obviously broke a lot of barriers, but I think it's they see it as sort of like the first step maybe not necessarily the future, right, because as you put it so memorably at the beginning, it was like, is this DeFi just wrapped in crappy geffics. The idea is to play that game. You were essentially like minting tokens and engaging in micro transactions and trying to get

a return on those micro transactions. Whereas something like Storybook Brawl Is actually fun had no crypto elements at the time of its acquisition, but could foreseeably support things like you mentioned where you have in game n f t s or others. So it seems like there's a spectrum of ways to think about what blockchain and games could look like. Definitely, Yeah, we're still figuring out what exactly,

uh this space could look like. And you know, when I talked to blockchain gaming enthusiasts, they say, Okay, there are developers coming over, There are big name companies that are sort of softening their stance and getting interested in you know, n f t s and blockchain. So we'll

see what happens. But I do think what's happened with f t X, and considering f t X as presence in the blockchain gaming space, there have been setbacks and that might delay, you know, mainstream acceptance of crypto games. If any of our listeners are big fans of crypto games, send us an email at Crypto at Bloomberg dot net and tell me and Hannah what we should be playing. Hannah, thank you for being on the show. Thank you for having me. You can find more of Hannah Miller's reporting

on the Bloomberg Terminal and on Bloomberg dot com. And if you do have a recommendation for your favorite block Dame game, make sure to email us at Crypto at Bloomberg dot net. This is Bloomberg Crypto at Daily podcast from Bloomberg and I Heart Radio. For more shows from I Heart Radio, visit the I Heart Radio app, Apple Podcasts, or wherever you get your podcasts. Send us your comments, questions or suggestions for the show to Crypto at Bloomberg

dot net. The supervising producer of Bloomberg Crypto is Vicky very Galina. Our senior producer is Janet Babin. Our producers are Mohammed Farouk and Sharon Barriro. Our associate producers are Ty Butler and Moses on Them. Desta wonder At is our engineer original music by Leo Sidron. I'm Stacy Maria Shmael. We'll be back tomorrow.