Welcome to Epicenter, the show which talks about the technologies, projects and people driving decentralization and the blockchain revolution. I'm Sebastian Inquitia and today I'm joined by Robbie Ferguson. He's cofounder at Immutable, Mutable as a platform for building Web three games. And we're going to talk about Web 3 gaming today. We're going to talk about the gaming market.
We're going to discuss also Immutable their whole developer platform and some of their some of their products and understanding where Web 3 gaming is going generally. So Robbie, thanks for joining me today. Thanks for having me. Is that pleasure to be here? So yeah, tell me a bit about your background and like, how you. Came to want to focus on Web 3 gaming. Yeah, of course. So I've been building technology startups for the last decade as
a software engineer. Originally self-taught and most days I built with my brother and my cofounder James. In fact, we actually started out by building a League of Legends betting application where you could automatically wager on your own matches. So I think we had, you know, we were massive grainers growing up I think with this thesis pretty
early on that. Games were incredibly important, that the assets inside these games could be valuable, and that there was something that was being locked away from gangs, you know? Back then we didn't know the technical architecture of that, but I remember even playing Runescape on a shared account I had with my brother, and one day I decided to take his account of the wilderness. I think he had full dragon, and I scowled my Lost Doors items.
And I felt so bad that I went online and I spent all my pocket money and I bought in game gold so that I could buy as I was back. And the next day the account was banned for real world trading. Six months later, Drug X rolled out first party support for real world trading as long as the issuance was centralized and controlled through them. And so I think it was pretty obvious the, you know, the
impunity with which people. Regarded these economies and made changes to them even though they were incredibly important to people's lives and and to some extent their their financial livelihoods. Even in web two economies where
it was limited to a database. In fact you make arguments that the first ever sort of you know real world trading of digital assets was probably World of Warcraft and indeed you know Counterstrike go through this essentially Steam locked database today did $32 billion in volume over the last few years. So I I think it's obvious that
there's a problem. And also that there's a need, there's a demand that all in the real world over, these assets being traded or wanting to be traded and they're really not being a good solution or infrastructure for it. So we we, we started building more tech companies. We got into the crypto space in 2014 with Bitcoin. We basically just got exposure financially. I thought it was kind of interesting. I wasn't super obsessed, but when Ethereum came out, I became
a, you know, a believer. I remember using ether roll and just becoming obsessed with this idea that someone could take what, you know, a gambling company spends billions of dollars or the government does, ensuring that the payouts on slot machines are compliant. That they have the probabilities rated between what their payout ratios are 88 to 93 cents here in Australia, and they literally heuristically test this.
They have to air out the machines and then someone build this little app called ether Roll. It did all of that. Into underlines the code. And then it did something that the companies and the government could never do. It took the revenue streams from this institution of this enterprise and it gave it to every single person who used the protocol through tokens. And I was just obsessed with this idea of decentralizing and
making companies cooperatives. I thought it was the way that capitalist incentives could finally solve some of the inherent problems in society. I was sold by this idea of a decentralized Uber where all the riders could throw in the network. Now turns out that did happen.
It just happened with on chain financial products because the friction was much lower and you already have native product market fit with these 100,000 defy freighters slash AirDrop farmers slash early users of Web 3 today. That's kind of your core and whales who are who are moving money around and we we basically started building trading bots for a few years. On top of Ploni X initially and and then on decentralized exchanges. But we always wanted to build something.
And so at the start of 2017, my brother and I wrote a white paper called the Distributed Autonomous Bank or DAP, which was effectively compound. And we hadn't solved all of the collateralization problems of lending protocols. I I don't think they're solved today even, but we are about to launch it when. 5I CO's went to 50, went to 200 and we just got very cold feet about the space from a Reg and compliance
perspective. We thought a bunch of people were going to jail and we wanted to build something that would be long term feasible and that we would be happy to grow incredibly large without having the SEC knock on that all at when it gets to a sufficient scale. And So what? We scrapped that, but serendipitously at the same time, the first of NFT's came out in this idea of a crypto punk and.
We we saw these and we said this will be how gamers are in game items and actually the way we we started was we built the first ever multiplayer game on any blockchain. It was fully on chain Logic came out in December of 2017. It was called Etherbots and you could basically battle robots and and win real. NFT's by by having your your machines win. They were composable of four a RC72 ones you had a fully on chain perk tree.
You can play a game today and it will cost you hundreds of dollars, but it can never go down.
And so I think we learned pretty early on, you know watch you go on chain versus watch it off and that really formed the thesis of how we started to build immutable which was build first party content much in the same way that Steam or Valve started out with Counter Strike go. And then we're able to leverage that knowledge and that sort of beachhead from the content perspective into building a platform that everyone could use
and that really sold core needs. And so you know immutable today we're nearly 300 people around the world, much more if you include the the contracting on, on game development. We have hundreds of games building on us and we we had more than a billion dollars invested in games building on us just last year and we significantly increased our
market share. Since then, with this Polygon partnership, and we've raised, you know, hundreds of millions from everyone from Temersec to to $0.10 versus investment in the space. And our whole mission is how do we deliver on this promise to to web through gamers and to gamers worldwide on true digital asset ownership.
You said something in the beginning which you know kind of struck me as interesting is that you you said that you were you I think it was League of Legends that you you had bought this gold and and then ended up buying some assets to sort of make make good on your on having lost your brother's assets and that that account was banned for real world trading.
What why do gaming platforms and game publishers prohibit or you'll want to prohibit or keep or in the case of of this game having then allowed real world trading. Why do they want to keep that sort of centralized within within their platform? So I think before now it the technology hasn't existed. I think it's impossible to do with databases. The availability of being able to change something means that companies will and that means you can't form third party trusted ecosystem.
Even if the current CEO wants to make a trusted third party ecosystem, you know people can't trust the incentives and financials enough to actually build real enterprises. You saw this with Upskits, which is their $300 million third party marketplace, the CS Go skins. That basically went belly up when Valve implemented Tradelocks, and they limited skins from being created more
frequently than once a week. And so I think there's actually just this technological impossibility and political impossibility with everything that doesn't rely on open, trustless, immutable architecture such as Nft's. But isn't that a design issue though? I mean, so there may be the technology issue, but there's
also like the design aspect. So whether you're building on the centralized database or you're building in a blockchain, the designers of say the smart contract or the, and maybe this is getting a little bit in the weeds here sort of early on, but the design essentially is in the hands of the developer or the
issue of that game. And so couldn't you build a similar sort of design in the game where you have like an admin key, and that admin key gets to decide who is able to trade or what the trading mechanisms might be? You can. So I I think the technology is only one half the picture. And the answer to that in web three is I mean if you work really hard, you can make things properly trustless and in general they're, they're much
more trustless. For instance, if if someone doesn't change, they don't like, you know, people can kind of you know fork those assets or we'll find out some other ways to bring value to them. But in general, what we're relying on is incentive alignment, which means that the publishers have an incentive to grow the value of that ecosystem and grow the value of those assets.
Because they now have access to things like royalties and secondary market fees rather than having to rely on this old model of I sell stuff I deprecate that and and make them more useless by releasing more powerful stuff that people want to buy every year and and so I I think it's it's a fair point and it's it's certainly not you sort of overnight solved unless they're doing fully on chain clusters games which you know I certainly love this cycle I think we're seeing some
interesting experiments but it's web 2.5 games that are going to go made straight first. But the second question in the probably much more important one is just economics and incentives. I think this model hasn't existed before. I think it's difficult for games companies to see how they can, you know for a long time actually succeed off growing the value of these economies. And you have to remember as well, like in game items being the biggest portion of spend is also a reasonably new
phenomenon. Free to play gaming only came out in the late 2000 and 10s and that's when you had in game items as even something that was really important. As a vast majority of monetization, the majority of monetization is now in game items and we're we're sort of seeing this pressure towards well how do we actually create better economic standards and better property rights.
The game is because of this. But 20 years ago this was completely irrelevant because these, you know, these sort of economies were increasingly small and didn't have that much relevance to to players. So I think the answer now is it's a bit of both. It's. How can we prove out to developers this is a better and more aligned business model while at the same time you just have innovative dilemma. People are going to be
disrupted. The goal we're going for is we want gamers to demand property rights. They play a game and they get given something in a database that should be not good enough. And that's the point of which it's no longer sort of market to have a game that runs on a database rather than on open property systems. Yeah, interesting. We can get a little bit more into this a little bit later, but I just want to pull and throw a little bit. You know, what is it that people
like me take a snap back here? Like what is it that people understand the least about game development? You know, this is whole, there's this whole kind of narrative around web three games and how web three games are inherently better than the the traditional model. But like game development is a really, I mean it's a huge industry. It's like a $200 billion
industry. Games and game development is expensive and like, there's all these, there's all these considerations around like licensing and publishers and distribution. And I mean, it's a very complex industry. What is it that people understand the least about it that bears understanding if they're going to be building a Web three-game or if they want to go sort of in this direction? I think the first thing is probably timelines and how they get produced.
The reason that D5 ball runs correlated so quickly with D5 innovation is Andrei Croneer can put together a test smart contract and call it a productions one contract in a week, right? Like it, You can build D5 applications very, very quickly. They're all open source, they're highly composable, people can fork and and sort of remix things. Building the gate is not at all like that. It's like building a movie. You have a budget of roughly minimum $5 million for anything
reasonable. Unless you're looking at truly indeed, it's. All the way up into the hundreds of millions of dollars and for sort of you know Bethesda quality games and and even them you will not be able to produce a Bethesda game unless you have the capabilities and processes of Bethesda. There are very few studios with sort of that internal capability and and risk tolerance and and the time it takes is a lot longer.
And then you combine that with the power law of gaming, which is that gaming, particularly free to play games, conform to a power law, which means that the biggest game will have more revenue or more players or more volume.
And #2 and and the end and the second biggest game will have more than #3 and and so on to the end And what that means actually is when you look at why we haven't had a hit or the one hit we've had was was sort of axe which was sort of medium sustainability obviously had a had a sharp drop off is there simply hasn't been enough shots on goal and one hit is going to dwarf everything else combined. You see this already in in Web 2, Counterstrike Go doing $32 billion in volume.
Over the last three years or in revenues you you see that same topology Axeden is is roughly what 5 or 6 billion and everything else is lower than that combined. And I I think we're we're going to see that but the failure rates are going to be incredibly high to start with 90 to 95%. And so the reason we have such a broad platform players, we know there are going to be so many shots on goal and all that matters is they have sufficient funding to be one of those hits.
And then we just have to make everyone as successful as possible and sort of focus on those top 100, top 200 opportunities and one of the biggest challenges then I mean you said there's like 100 games on Immutable and we've seen other games like AXI and there's a whole like sandbox ecosystem.
What have we learned so far about web Three games that we've identified as like the biggest challenges to like hitting those shots on goal and like really demonstrating that this new sort of infrastructure and this new paradigm of gaming is inherently better and making some positions here that you know than than traditional games. I think there's probably 5 big problems blocking successful games being ready now and
available. And we think about this problem a lot and our goal is immutable, is to be the one stop shop that we could solve everything for a mainstream developer. If they want to build something, I'll go through and I'll say where I think the like the market is at today.
So I think the five problems are security and choice of technical architecture to user experience for onboarding mainstream players 3. Developer Experience for mainstream developers to build a successful blockchain game without having to touch things like Salivity 4th.
Having a sustainable and easily built economy and five the game design itself and and the the actual game production quality kind of getting live and and that's the one we have the least control over that takes time it takes game studios being built and we've had a lot of that investment so that's kind of you know in progress and and we're seeing stuff start to go live and and we'll start to pick up the pace increasingly over the
next 12 months as the rest of the boy I think we've actually made massive progress so. So the first one, security, I think this is basically now solved and this was always something we would never have to compromise on. It's the reason we didn't go down the path of side chains. Even then that was the most faded sort of VC thesis for how you should build a valuable company with building an E
killer or an E alternative. And we always wanted to build on the thing that already had liquidity and had the best security and we wanted to do so inheriting that security, which is why we're basically you know the first ZK roll up for NF T's why we why we chose this architecture from day one. The second is user experience, and this was in a really bad
place by the way, security. If you make the wrong choice here, you know your platform is dead and you lose all brand sort of security and trust with your customers. So this is a nonviolable condition that companies have to be incredibly careful about and and it doesn't just extend it to inherit blockchain security, it's also the quality of your wallets, are they self custodial, etc etc. So I think that's really important decision.
Second is user experience. This is probably honestly the. The more it's basic, but also the most important. If you ask a mainstream gamer, I I you know, I even think friend tech is a perfect example of this. He was able to go viral within crypto and no further.
Because as soon as you have that viral coefficient which might have been just above one with within web three, you cut it down to like .1. As soon as you require anyone to go through Web 3 on boarding, if you're required to learn what a wallet is to bridge, you lose a huge amount of your uses. 90 to 95% of your uses. And so we need a way of making this like downloading a game in the App Store and pay. And I think we've come a very long way here.
We have Fiat on ramps and off ramps entering maturity. We have things like immutable passport where you can literally sign up to a wallet that's self custodial in another 5 seconds, sign on with Apple, sign with Google, sign with e-mail. And that's kind of our view for the long term is this has to be completely invisible to the end user while still maintaining self custody is the default. Otherwise, again, we're just
building a glorified database. Number three, I think developer experience is really interesting and has been overlooked by the vast majority of platforms and blockchains. A lot of people have invested in better frameworks for writing smart contracts, EVM compatibility. They are important but they really service a hardcore use case of DFI builders and people building. Right now what our belief is is 95% of developers will just want to build using APIs like Stripe and I think without that
usability. It's incredibly hard for this thing to take off. I mean even you have like Co finance advanced builders using early version of Vypar and then having a reentrancy back that was not even really auditable and so it's terrifying to build stuff using open smart contracts. You have brand new security concepts that do not exist in web.
Two things like reentrancy which are literally not sort of concepts that you're encountering conventional programming and then on top of everything you have immutability and financial contracts that that inherently deal with money. Which I think it's just terrifying. And as somebody who was originally a web two engineer and obviously had to learn celebrity and and build on chain
products, the 4th is economies. And this one is really interesting because I think that had actually had a sustainable economy went through, gaming would already be mainstream. Because what you have in every shift in gaming is, and there's been three major shifts in gaming over the last couple of decades. You have the free to play shift, the social shift, and the mobile shift. And then within that you have different game designs emerging based on each form of distribution.
But with each form of distribution, basically you have early hypothesis, a few people taking bets and as soon as someone has a mainstream success, there are 1000 copycats. That becomes the new default form of distribution, huge in forms of investment and it basically becomes a commodity. How to build a successful game design for that game distribution or genre. You saw this with FarmVille. You know FarmVille spawned the
social game genre. You had Mafia Wars also greater by Zynga skin into 15 different games that were literally the Mafia Wars code under the hood. They just had, you know, it's skin for teenage girls with like a beauty salon, lots of different other modes. And that's actually what we need in Web Three. It actually had a sustainable economy. I'm not throwing shade on actually here, I'm just saying the reality of it was it was a bet that became extremely viral and failed.
But if that was sustainable, suddenly we'd have all the copycats like Stephen seeing sustained success. And I I think that's what we need. It's why we build immutable studios is that we have to force ourselves to think through first from first principles. How do we design an economy to be sustainable and and work with things like you know the natural growth curves or or or churn at
different games. That's incredibly important and that needs to be just super simple games should not have to go and have to hire like 5PHD economists to succeed in web three. It has to be like, oh cool, I'm building a gatcha game. Here's like the open source template for building a gatcha game. I might add some tweaks and make it hit like engine impact, but really I'm innovating on cool gameplay loops and retention, not like some really intractable stuff around economies.
And then five. Actually, I didn't even touch on this, but like liquidity, fragmentation is also a huge problem. I realize I'm talking a lot, but obviously there's something I'm passionate about now. These are these are great points. So liquidity fragmentation is is like the the hidden demon of the blockchain today. It's the reason behind the fact we even have these killers is because everyone says and the fantastic article Chain Link Guard Chain Rotation thesis, you
know you have a bull run. The theory hits congestion. Congestion creates the narrative fodder for someone to create an each competitor saying it doesn't scale. They raise cash because they need to bootstrap liquidity from scratch. But that alternative blockchain and then they able to seed, defy and create sort of artificial metrics on that new blockchain in order to seed some interest. And we've seen that happen time and time again with every single
bull bear run cycle. The difference with the next cycle is we now have L twos and L threes that can scale Etherium, the most secure and most liquid block train in the world. And our vision is, well, how do we just remove fragmentation whatsoever?
How do we make it so no matter what L2 or L3 you're using, no matter what wallet you're using, no matter what marketplace you're trading on, no matter what game you're trading in, you can trade completely, atomically, completely seamlessly with any other trade in the world. And I I think that's incredibly important because everything I just said, marketplaces, roll ups, wallets and user funds, they're each fragmented to whatever particular product
using that particular time. And and so we're having no network value credit from everyone depositing. And like this is what Apple does. Everyone thinks it's really easy to pay for things in the App Store is. But at one point you actually had to sign up and give them your credit card details, you had to KYC or to register your username.
That's why you can double click with your face and you have to do that for a million different times for a million different like liquidity motors onboarding platforms in web three when we just need everyone to come onto a single source and and start to be able to use their funds everywhere. I think that's kind of the the really important underlying network that every bit of value has to be approving to I'm So those are the five things we think about.
I think the majority of these are either solved will be sold in the next six months. I'm so we're finally the point where gains are actually capable of succeeding purely based on the infrastructure that they're using. So all these all these points like these five challenges you cited when you were going through them, to me they just seem like the same challenges. They're they're crypto
challenges. They're not just get crypto gaming challenges, They're the the challenges for any crypto adoption, whether that's social networks, whether that's Defy, whether that's whatever application you want to build on crypto. And I think. Some of these are getting solved, right? Onboarding is getting solved, security is getting solved, liquidity fragmentation. I think we're in the early stages of solving that with trust, minimized bridging and
stuff like that. I really think that that's gonna be one of the big leaps ahead in the next cycle, the next four to five years developer experience. We're doing quite a lot of work
here. I think on on a couple of things, which is our global order book which basically aggregates and propagates liquidity to every marketplace that integrates with our wallet which is self custodial but doesn't lock your liquidity per game, which is what the majority of other sort of you know easy sign on wallets do as well. Yeah, I want to talk about the wallet a little bit too.
Passport. But so I read on, I read on one of your blog articles that it says that immutable so that you guys sort of expect that 40% of the $200 billion gaming industry will shift to what, three in 2 to 2 1/2 years That I read that and I was like that is a very bold claim. Do you think that in two to two to five years all of these problems will be solved and there will be enough incentive for? 40% of the gaming market essentially to drop what they're doing and and move to web three.
I personally think this, this claim is is a little bit optimistic. Yeah, I don't actually, I don't necessarily agree with that claim set. I think the timelines are a bit aggressive on that, but it could be referring to points of the market being sort of the the minimum bar of the amount which are in game items. And you know our conviction is certainly that's going to shift. I I I think it would take a decade to shift for for the
whole thing. But I think we'll start to see it's snowball as soon as you have like. I think the key inflection point is there's probably 2 coming up right, The first hit that says sustainable. And then second is this ability to go to cost like customers in web two and say here's a much more effective model for running your games and something we're not just choosing out of people interested in building web Three games. It's become something you can pitch to everyone and it's like
pitching them. Hey, you should also launch your game on consoles, not just PC, because this is now a thing that makes you way more money and is a way more successful way of doing games. You guys were just at Games Con in Cologne. So for those who don't know, like Games Con is like the it's like the Dev Con of games, right? It's this massive conference that's. Happens in cloning every year.
Actually I was surprised to find out that it's more like a BDC conference than the B2B conference, which I find it interesting, but but basically it's like, you know the the biggest games conference in the world, all the game developers are there, all the big publishing houses that they hold, the entire industry is there. I'd like to get a sense from you like cuz I asked a friend who was there. Like we're just down the street
from from from Ubisoft here. Like, I have a couple of friends who who work there and so I was asking your friend like, hey, like. You know, were there a lot of with three games there and his sense was that there weren't that many or like he didn't get a feel that a sense that that it was, it was a big part of like the the narrative at the
conference this year. So I'm curious if if you like, echo that sentiment and what is the general approach that incumbents like Uvsoft, like 2K, like EA, like these big game publishers, you know, how do they look at Web Three? Are they adopting it? Do you know?
I I guess my question is like is it similar to the way sort of finance looks at Defy, like they're a little bit reluctant to adopt it, They think it's a little bit scammy or or are they like wholeheartedly sort of like throwing a lot of resources than this so that they can really sort of like be at the forefront
of this tech. There's certainly a big difference I think in the promotional activities around web three games just in terms of how much of A splash they're looking to make versus last year. There was so much hype last year. People were trying to launch a lot of tokens and do a lot of speculative up and primary sales, which meant a lot of noise. I think people are now more focused on building games that have realized, so can they profitably grow and can they have sustainable economies?
I vastly prefer that. I think this is a very healthy shift in the industry. The game developers we have applying to us today are a very different profile of composition
than a year ago. A year ago was mostly D5 devs or people who have been able to raise cash who were trying to build a a game on top of it and some of them will succeed but most of them don't have the experience and build like unless you've shipped a game to you know 10 million people we're not that interested in in sort of or or we rate our confidence of you succeeding a lot lower I think is you know just inherit back the game it's a very specialist job is is sort of shipping
successful games. The majority of people building today are now people who have successfully built things before who are incorporating web three in their economies and we must prefer that and I think their their goal of sort of how do they drum up as much fanfare prelodge as possible is less the data point. We see service you know the last four months which we call a cycle we've on boarded more games than any other cycle in the middle history more than are
you know the peak run etcetera. And obviously part of this is the increase in market share. But we are still seeing a very healthy flow of sort of credible web to developers in terms of how we think about the market and sort of incumbents approaching. And I think there's two things. What is there? You know some of the names you mentioned already building a web. Three, they've already launched projects.
I think the West will have a sort of by build partner analysis approach, which is how do they hedge the risk in the future of of knowing how to build successfully in Web 3 without throwing all their eggs in the basket, right. Because it doesn't make sense that the beneficiaries of the current model, they are the incumbents who are able to sell $100 billion of digital assets without ever having to back the value of those assets as a liability in the future without
having any ongoing obligations. So of course it's a model that they're a fan of and these are risk minimizing enterprises. But that being said, out of the top 20 Western developers, you could think in the world, A-Team would have fulltime large teams staff to look at Web three, whether it's now, whether it's longer term because that Zynga announced Sugartown and obviously some of these with with Asian roots. But I think that kind of leads into how we see the large
studios in age. Approach this and you literally have in Korea next on one of the largest gaming studios in the world, putting the flagship IP Maple Story in the blockchain. You have Fumio Kishadar, the Japanese Prime Minister saying web three is the new form of capitalism and identifying Nft's and Web 3 gaming as one of five core areas of national interest. You have MUFG Mitsubishi Group investing in Web 3 gaming.
So we we see really interesting leading metrics from Asia and this makes sense because Japan and Korea have always been to the vanguard of shifts in distribution rather than reacting to it. They were the ones who ushered in the free to play new game design genres. They're the ones who helped to usher in a lot of social gaming.
And I think they see themselves as, hey, if we can, you know, if we can win on this and this will be a huge boon and and this is the really important experimentation for the players benefits. The final note I'll just say on all of this said is like, I really believe Web Three, you know, Web Two's margin is Web Three's opportunity and that's the case in gaming. So the people who will be most motivated are not number one, it's #2, it's the underdog.
And in gaming there's many of these and they're reasonable sizes, but we think it's going to be just going the lights on back here. We think it's going to be companies who want to compete with the biggest incumbents the world by leveraging the growth strategies of web three.
And we've just seen in my opinion the most interesting real world of example of this of token driven user acquisition ever play out, which is with World Coin where they were able to effectively like bootstrap from nothing a giant token and then leverage the paper FDV to incentivize 20 million people to scan their readiness. Like say what you will about whether you think this is Systopian or utopian.
It's an incredibly effective way to essentially do a vampire attack in real life and then have massive incentives while giving people ownership of the underlying network. Cool. Well, let's this is really interesting and I'd love to spend more time kind of like asking talking about the market and where you think this is going. But I do want to talk about the tech a little bit and talking about it immutable as a as a
developer platform. You guys are doing some really interesting things there and have just announced the ZK EVM on Polygon. It just happens. We got Sandeep on. Last week or two weeks ago to talk about the polygons work in ZK. So yeah, what is immutable as a product? Like who is this product for? And like you know talk about the different aspects of this product and how they're how they're useful for people who want to get into it through
gaming. You know either Nude Web 3 developers that are looking to to build a game or existing gaming developers that want to shift to the Web 3 economies for sure. So Immutable is we describe it as the one stop shop for web free games. If they want to build anything, we can service it. Everything from having an incredibly easy wallet to on board their customers, to having the entire blockchain design done for them to be able to use any marketplace instantly via
our global order book. So if you list an asset for sale on immutable, it lists on every marketplace that interacts immutable, which means you're vastly increasing your volume. And it's a much better platform for marketplaces because they have much more volume that they can take these on.
We have things like enforceable royalties and mints so that you can easily run a primary sale or you can easily take ongoing clips of assets no matter where they trade, if that's a really important part of your business model, like it is for Digi Didacu or some of these bigger games moving in from Web two. And all of this kind of comes back to, we're trying to operate at the most important layer of the stack where we can help unify what would otherwise be 6 different technical choices.
And this is a really important reason behind why we did this Polygon partnership. You know, at the end of last year, Polygon was by far our biggest competitor for gaming. We we both had roughly 40% market share. We were both competing pretty viciously in market. And you know, grand pricing was going up astronomically for top deals. We had this vision of saying, well, actually, there's no reason for us to have to
compete. We could have it so that players can use the immutable platform and under the hood they could be using the immutable ZKVM which leverages polygons ZKVM technology and and by far they are the best developers of this in in the world right now they're the closest to production if Italica said this a couple of months ago and and by combining the two we just simplified the developer choice
hugely. I I think that's why our our win rate has essentially doubled over the last six months since launching this partnership and why we've been able to have such
you know success in the market. And the reason I like that is it means game these games spend less time wasting around what technical infrastructure they use and more time building quality games And then the final really important part to immutable and I think probably what resonates with these game developers the most is we are gamers and we build games.
I think the reason why even though we started out with far less funding than any major blockchain in market, you know, and and we pretty much until early last year didn't have any war chest that was akin to these. And obviously we now have a pretty sizable war chest. The reason we are able to compete in and gain this market share is you know the salon is the world. The the, you know, EOS is whoever was relevant back then.
They cared about everything. They cared about winning Defy PF P's, collectibles, gaming, RW, A's. All we cared about was winning gaming and helping to usher in you know real property rights for the 3.1 billion gamers around the world. We had built several games internally where we're now publishing three more. And I think that radical focus meant that we built a product that was fundamentally designed for this use case, but that we also understood things on the economic side.
If they were struggling with the App Store, we were struggling with the App Store because we were also at the coalface building things with them. And I think that's been really essential to the sort of DNA of our product and product teams today as well. Let's talk about the underlying platform here, So. I learned that there is basically like 2 roll ups, right? There's immutable X that's built on Starkware and you guys just launched this ZK AVM on Polygon. Why did you shift to Polygon?
What was the impetus to do that and what will? Is the idea for immutable X to be phased out? Or you know are there still sort of like some types of customers that along use immutable X, both are continuing to run, we maintain and upgrade both of them continuously. And I think you know stock X is an exceptional technology as well and ultimately we needed to solve a couple of things and we needed to solve an EVM compatible offering.
So before then the only ZK technology when we wanted to go with CK security reasons was an app specific roll up which meant you couldn't just use Solidity or copy paste your contracts. For me that one and that was the choice that we had to make. I'm very happy with that choice. But now we have the first ZKEV M's coming on market and it's essential for us to have this
product offering. Ultimately we still think 90% of developers will build using API's, but the people building now and a lot of the hardcore more advanced game development companies, D5 companies want to build with their own smart contracts which means EVM compatibility makes this a lot
easier for them. But the second thing was more pragmatic, which was sort of by by partnering with Polygon with their CKVM technology, we were able to provide this joint offering to game developers which was this end game tech stack and also this end game commercial stack where they could find it much easier rather than having to choose between Polygon or Immutable, they could simply have a unified solution.
And I think that's, you know, pretty much everyone who's originally deciding between the two has come to us and said it's so much easier now. Like we find this much better, we get support from both, we're able to be much more successful in market. So I think partially a, you know, a product decision. I think that that ZKVM
technology is exceptional. They obviously had what I think is one of the most successful examples of M and A and the Web 3 history buying 3Z K teams two years ago and for roughly a billion dollars all up and and those teams have now turned into the kind of CK technologies by using today but also on the commercial side. It just makes a ton of sense. How is this going to improve the developer experience?
And I guess you know for for let's say like a traditional game developer who wants to incorporate web 3 aspects into the game, you know, they might choose something like immutable. What's the learning curve for that developer to have to, you know, learn to build EVM? Smart contracts? All the concepts? That introduces security, reentrancy, all these things, right? That takes people years to learn.
How does that fair for traditional web gaming developers that are entering the immutable ecosystem? The cool thing is that you can use smart contracts if you want to, but you don't have to and in fact you can sign up and create a web free game while never writing a smart contract. You can use APIs for minting and for trading. You can basically use our template contracts and and soon be sort of almost entirely automated for deployment of collections and manage them via APIs.
With much more to share here with Immutable hub where eventually you can manage all of this through a GUI and I I think that is incredibly important. So our vision has always been make this as dead simple as possible for developers. We have a very high NPS on on that, but we're sort of working continuously to to make that develop to make that easier.
And I think as soon as we hit this inflection point from this being a really interesting sort of heavily funded niche of game design to being a horizontal because this is not a vertical right web through gaming is not going to be a category. Web 3 is going to be the way you own assets and multiply games and at that point this has to be like building incredibly easily on Unity SDK or in Unreal or with Stripe like APIs. And so a lot of what we also do is our ecosystem integrations.
We have integrations coming out-of-the-box from day one, the ZKD and Main net for Unity and for Unreal where you can basically leverage our SDK from day one. Interesting and so talk about a bit about the SDK and what's possible to do with the SDK like you know. So you're building a game, Would you want to start using the NSDK early on or is it possible to take like an existing game and sort of like strap on the SDK in order to incorporate web three
mechanics? Yeah. So look, the majority of the stuff right now is initiating things like transfers, trades, mints, even things like forging. So you take say 5 assets, you destroy them and you mint something that it's required input output and that's like upgrading say. You know, 5 common legals or rarely 5 common gods and chain cards.
And we we've even launched things like pushing where you can basically have this done automatically under the hood up to a certain value threshold, which is how we think about the centralization. And so users can always set kind of almost the the parameters to how much they're happy for the game to sign on their behalf. And then they can kind of say, well, I, I want to, you know, specifically approve or sign things about a certain value threshold, which to me makes a
ton of sense. And it's the right balance between the two as long as they're always the ones in control and the technology is architectured to be self custodial. So the vision is you'll be able to initiate all of this incredibly easily through like Sdks we expose, through pretty much every version of Unreal of Unity and obviously trying to work with the app stores as well. What's it like working with the
app stores? Cuz I realize it's probably well, one of the big challenges of for the for the Web 3 gaming space is some of the barriers of having the work, particularly I think with Apple or having Apple sort of approve certain types of of applications. Is that getting better do you think? Or are we still sort of the same place we were a couple years ago? So the trend is toward. More open permissions for app stores, for digital assets and lower fees. We will see exactly how that plays out.
I don't have a crystal ball, but you know she's some really interesting things. One you have a lot of increasing economic pressure. There are more alternatives able to download things. You have the EU forcing side loading within the EU, which say you know a really big deal of apps. So you should be able to download apps through to any App Store, not just the the one provided on the device. You have Google basically allowing NFTS inside of their apps, which I think was a pretty
landmark announcement. I mean that provided just a ton of of sort of compliance, clarity to a lot of people building and now a lot of people are building their sort of Android first on boarding you have Epic Store which is very pro web, three as well. You have you know 40, I think 20
web three games live on there. Godson chain went live in there in the last few months, which is a massive source of distribution so. I I think this is really interesting sort of pressure mounting on the biggest incumbents as to how they can actually clarify permissions and
fees. Ultimately you can use say the iOS store today if you you do two things one is off platform NFT's not used or usable the utility inside the game and the 2nd is you pay clips on these assets and and you know you just kind of pay that the Apple tax it's very tricky obviously with secondary markets went to to sort of add a tax onto it so. I'm pretty bullish on where this is going to get to over the next
few years. I think there's already sufficient clarity for people to launch mobile first games where suddenly focusing on it. At this point, I think they may be the first ones to mainstream success. But that is kind of the the billion or trillion dollar question is how will App Store rules interact with this open ecosystem. So I'd like to also talk about about passport, which is your, I guess like non custodial sign in
or identity solution. Yeah, what is passport and what's what technology is it leveraging MPC? Yeah, How does that work? It does. So Passport is our easy onboard wallet that is completely self custodial and is your universal wallet for every single game or marketplace or wallet you interact with. And this is our vision if there's Full Passport, the only
easy onboarding wallets you had. Used a single state MPC system where in order to both maintain security but also have easy user experience, they basically generated a new wallet per user per game. They could give that game escalated privileges for transactions because it was localized to that games ecosystem, but it meant that for security reasons you can't expand that to your general funds. And this is obviously terrible
if a user plays 10 games. You have 10 different wallets and there is no unified liquidity or network value being created. If I'm onboarding into web three, I can't use that cash to go buy assets from, you know, another game like in Counterstrike Go. I can't trade with someone in legal budgets particularly easily. And so our vision with Passport was to solve that problem while not compromising on self custody and while not compromising on user experience.
And the way we solve this is with the multi Seq architecture system. It leverages 2 Mvcs, one is in Immutables custody and we actually act as basically a guardian. So we basically will refuse to sign transactions that don't comply with. The either the economic missions that you've set or a general set of sort of heuristics we use to to analyze bad behavior.
And of course the other one is the the user's self custody which is held in cloud storage in in their legal self custody by our MPC and and the multi cigar architecture and they can kind of opt out of this. Early points means you can default to self custody while still letting them sign up in under 5 seconds. We've just run a B tests. This converts 250% better than you know, your default wallet, and we're looking to increase this drastically.
And then that's already huge. So you're already spending less than 1/3 in user acquisition costs if you use passport versus a traditional wallet today for one body. So you say it's fully self custody.
I mean, I understand that. I mean, I'd say it's more of a hybrid custody because immutable does have like another piece of that Shard. So technically immutable could if it wanted to with whole or sensor transactions, or I mean, I guess probably not because you can't see the actual transaction, you can just see the signature request, right? Precisely. And they can always remove us unilaterally. So there's no ability for us to say, censor transactions if we really wanted to.
OK, the user can remove you from the MPC. So it's an opt out system, right. OK. And are there because I mean we're dealing with like users that are fairly, you know, not like necessarily super technical. Are there ways for the user to recover their? Like are the recovery mechanisms? Say the user loses access to to their. Is it like a like an e-mail login or like? How does it work on the user side? Yeah, so we we use Oauth at the moment.
So you can log in with Apple, you can log in with Google, you can log in with your e-mail exactly, and it's registered to your address, OK. And so the and. So the user then sort of like backs up their Shard in any number of you know cloud providers. It's encrypted like with the password I guess. Yes, ultimately that's automatically set like saved in the MPC database associated with your e-mail. If you can access your e-mail, you can access that and that
wallet. But our vision here is really where. So you can be able to like zero to 100 or $200.00 of value if you want to store large chunks of value. We think that's the point. You say, well, hey, here's the options available to you. Here are the risks associated with each. I think that's kind of the way it needs to be done, Okay And are there options? I mean can you use this?
Also decide like I don't want to use passport like I have a Ledger, I have some other custody solution I might use like an MPC wallet or like a custody solution so you can log in with that as well. Yeah, absolutely. We support everything out-of-the-box. Passport is just the offering that we have. I think the nice thing with passport is because. It integrates in a vertically integrated manner with our control of say like the ZK technology and the order book
and the wallet. We can do things like say you know shared sequencing or crosswalk liquidity in really seamless ways that other platforms can't because they only have one layer in the stack. And so our vision is no matter what asset you're trading on any marketplace, on any game, on any roll up using any wallet, you could do so atomically and seamlessly. With no loss in security or sort of custody with anyone else. And this is this vision of this sort of universal liquidity for
digital value. Yeah, talk a little bit more about you. We talked about this before the show, the enforceable royalties. What's that about? Yeah. So this is obviously pretty topical and you have the marketplace wars over the last couple of years first? As you had the blurs and the the XDY choose, the world basically say hey we're not going to respect royalties and suddenly soak up a huge chunk of pro
trading volume. Then you have oversea car with some solutions and and sort of you know contracts people use to to make sure that they can only be traded these collections on royalty respecting marketplaces and and smart contracts. I think this is all indicative of the fact that this really has to be sold in the product layer. Just to kind of understand the
problem here. The problem is that when you have assets that are tied to royalty, so like I I, I create like some some suite of assets I I put those out on say open sea unless that contract has royalties built into it at the contract level you're sort of trusting the the the platform to extract and deliver the royalties that and and that's so the issue where if you take those assets somewhere else if you like just you know send them to someone those royalties are
not being perceived by the the some of the creator. Precisely. So basically, it's really hard to enforce royalties with traditional NFT smart contracts and NFC marketplaces. There have been various sense of solving this, but ultimately it appears as though the game theory, particularly on a theory in layer one, is to converge toward a zero or no royalties world. Because that's the world in which you have to be in order to have any meaningful market share as a marketplace.
All these pro traders who join the vast majority of all today, our approach has kind of been from day one make this enforceable at the protocol level which we can we can do due to sort of a couple of things we designed on immutable exits because we have a single sequencer, we can kind of enforce these royalties from day one with immutable C, KBM. It's going to be more of a decentralized solution where?
We're we're actually sort of engineering the ways that smart contracts respect royalties and people can cannot do and but I think both the principles are we firmly believe that enforceable royalties have to be available protocol wide in one of the marketplaces to be able to fairly compete and gain their market share and gain developers to be rewarded. And the the thesis is quite simple, which is you know, if you have a counterstrike go or mad at the gathering.
Mad at the gathering has an estimated secondary market cap of. 10 to $20 billion of cards. But every year they've got to make new, more impressive cards than everything else in existence, making them less than I got to sell my old Magic cards. Yeah, like that. They, they're tremendously valuable, right. But MTD, the company has no way of tapping into that, the value of what they've created. That's why they have to basically dump on everyone else every year by creating this new,
more powerful stuff. And so suddenly we can have a business model that doesn't rely on that. That's like, hey, magic just gets 5% of every trade. Magic's only incentive would be. Increase volume, which might mean make new cars that make the game better and grow the player base. It might mean throwing more tournaments, might mean creating an E sports league, whatever they can do to increase the the value to players of that
economy. And so you have complete incentive alignment even though it can be an incredibly profitable system. So that that's why I've been so passionate about it is it actually enables a much better more incentive aligned business model that we must protect in order to you know essentially not have adverse selection or
this kind of you know. Tragedy where we we do a short term benefit to players by giving them cheap trades and there's no incentive for game developers to build or to build based on this much Better Business model. So why is it that this is not enforceable at the smart contract level? I mean couldn't we just build like a better year year C 721 kind of contract or that would enforce royalties? Is that possible?
It is, but it's just very hard to enforce if the collections themselves aren't originally a sort of. And written to be to be opt into those smart contracts. And so a lot of the volumes say in NF T's has been the legacy collections which weren't incorporated into this.
So I think that's partly what what has given this decision with Open C But be that the the kind of more simple solution is if it's relying on individual say marketplaces or individual collections to make this decision, it's just going to be an incredibly fraught debate. The answer just has to be sort of protocol wide. This is an available standard that that can be enforced. OK.
So you guys enforce this by having a sequencer include the the sort of the royalty or like extract the royalty when when building the block? Precisely so. That's on a mutable X, on stock X at absentee rollout. But we can do that on a mutable ZKDM. We're going to have a slightly different approach. I think we'll be we'll be sharing more details. OK, cool. So I want to talk a little bit
about the token. So this, this IMX token which is actually like yeah trading today and you know I checked there's like $13 million of trading volume somewhere around that. And you know actually I found the token price like you know over time has stayed I guess like pretty consistent except for you know 11 peak where I guess probably during the during the bull market but hasn't hasn't lost a lot of its value compared to I guess like when it was initially launched.
So I guess that's it's a good thing. I guess how much do you think of that volume is speculators and how much is tied to actual platform activity? I guess maybe a prequer source to that question is what's the token use? What's the utility of the token? Yeah. Look, so the token's utility is basically immutable, operates very differently to most of the blockchains in terms of our business model, rather than
having say, sort of this. L1 chain thesis and around value occurring to the token, the chains and we will obviously IMAX is going to be the call gas currency of the beautiful C KBM. I think we're now you know capture a lot of that narrative which is really interesting. But our philosophy has always been we think a much better and much more aligned business model is to make the most liquid value add platform possible for web two games and take 2% of every trade.
And in this way we can build something that has completely aligned incentives developers. When they make money or when users trades, we're making money and every single time those assets are traded 20% of the fees must be paid for an IMAX. And so I'm actually actually has sort of you know clear fundamental utility which I think is you know people can sort of look at that and sort of you know build their utility models around and rather than. Sort of alternatives in in
market. So that's that's our utility that's been the clear goal since day one is to really have this integral into the protocol and and how we add value to every single thread. And then yeah, the, the volume, you know how much of the volume you think is or do you have a sense of is that something you're tracking somehow? I mean like how much of that is tied to actual activity on the platform and how much of it is speculative? Well, the vast majority would be people.
Trading based on what they sort of perceive the utility to be. I wouldn't necessarily call that speculative, but I can up to the reader's interpretation. I think the most important thing is this thing has a clear right kind of that we've set in stone since day one. And our vision is to construct really just some of the most sensible tokenomics in the world. So the few things that really excite me about. The token, and obviously immutable, you know doesn't generate this.
This is run by the Digital World Foundation but is 1. Every single person who trades unimmutable can own part of the protocol. And that's because every single time the trade you're owning IMAX tokens. And the vision of this is really cool because you have 3.1 billion gamers. If this takes off, everyone can own a part of this open ecosystem of what the future of digital property ownership is going to be. And that's that's probably my my favorite thing.
And the second thing you know you talked about how the the price has been quite stable. Obviously you're not here to comment on prices but the the circulating supply is much higher than most alternatives. It's it's, it's sort of used a lot more and we've been able to maintain that ranking or improve that ranking from 150 to 50 over the last year in circulating supply even despite everything I'm locking.
I think that's because it's sort of the you know the the utility in the long term alignment we have from holders today. And then the final thing I'd say. Is that obviously the vast majority of I MX allocated to ecosystem grants. The vast majority of these grants, all of which are issued by the foundation, are almost completely under written. So we don't just give them out
to games in exchange for grants. The games actually have to deliver volume to the protocol in order to earn those grants. And right now, in order for roughly 180 million of tokens which have been allocated over $12 billion in protocol volume has to be achieved in order of them to even be given out. So in terms of ecosystem allocations we run, you know, the recommendations here are incredibly efficient in terms of how they're structured for grants versus returns.
And game developers love it because they know that ultimately you know that there's no supply just going out there, no value being bought. Everyone has to contribute to the ecosystem in order to sort of end up owning part of the protocol, which I think is really important. Very cool. Yeah, I mean maybe the wrap up here, what is the, yeah, what's the road map and what should people be looking into when it comes to immutable? How can people follow the protocol also in the project?
And yeah, any any final thoughts? Yeah, look, test that just went live 2 weeks ago. We have pretty much every game on the platform signed up to Passport. We've just done our biggest quarter of onboarding games ever.
In the company's history off the back of this Polygon announcement, basically you know increase the album rate by 75% and we've got over four years of runway way over the long term with the face of a year to get that hit before and we're here to change digital ownership for good and and the thing I'd say is look coming up we have main net in quarter four we've got God's Unchained going mobile end of this year, Gold of Guardians,
Shad Bound, Infinite Victory all immutable titles being published this year. And we've got a ton of our biggest games on the platform. On the rise, yeah, across the ages #1 in in France strategy game and in Australia you have Illuvium going out of that open beta imminently. Probably one of the most hyped games in in Web 3 right now. I'm we're really just excited by the continued raise of the caliber of quality of games right now.
And you know, as I said, you can't play the magic wand on the timelines, but. It's pretty clear that a single hit is going to pull gasoline on everything and catalyze what has already been a very heavily invested in categories. So personally, we're actually thrilled with the pace and progress of things. I think it's just continued to build to despair and help people get to these hits faster, more profitably and more sustainably. Great.
Robbie, thanks for coming on and telling us all about Immutable and also I've learned a ton about about web through gaming. So this has been great. Thank you. Thanks for having me. Pleasure. Thank you for joining us on this week's episode. We release new episodes every week. You can find and subscribe to the show on iTunes, Spotify, YouTube, SoundCloud, or wherever you're listening to podcasts. And if you have a Google Home or Alexa device, you can tell it.
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them. So thanks so much and we look forward to being back next week. I want I want I want I want I want I want I want, I want.