$5B Valuation Metaverse Investor Yat Siu Shares His Web3 Strategies

In early March of 2022 at UC Berkely, I had the pleasure to have Yat Siu, the chairman of Animoca Brands as a guest speaker, in the class I run on Entrepreneurship in Blockchain/decentralized applications.?

With over 150 startup investments working on different aspects of Web3, Animoca Brands is revolutionizing the way we interact with the internet.?

In this article, I want to reflect upon the core aspects of Yat’s presentation, his mission to contribute to the web3 space, and how entrepreneurs can leverage the lessons learned to create the next big thing—or should I say some of the first, decentralized - big things!

Before I begin, let me quickly go over the journey of Animoca Brands and why they’re one of the most, if not the most, important Investment firms in the Web3 space. In their own words, “Animoca Brands is focused on bringing digital property rights to video gamers and the Metaverse through the use of blockchain and non-fungible tokens (NFTs), which provide true digital ownership, play-to-earn capabilities, and digital asset interoperability.”?

Animoca concluded its funding round in January 2022 with a little over $350 million raised at a valuation of $5 billion. The company’s investment portfolio is stunning, to say the least. They have invested in companies like Sandbox, Axie Infinity, Upland, Dapper, Polygon, Flow, at a very early age, and they have just started.

Yat Siu founded the company in 2014 with the idea of digital property rights and how it can help the user be free from the constraints of Web2’s perpetual renting policy.

The True Value of Digital Property Rights and How NFTs Are Changing the Scenario

Like many emerging technologies, NFT has its fair share of cheerleaders. But what many people miss is the vision, the actual transformation created in the long run and not just add to the “innovation chaos”. For example, the word NFT means different things to different people, some might take it as a way to make some quick money, a way to boost the creator economy, or a tech to introduce property rights to the digital realm.?

All of these are true and possible but what matters is how you choose to look at it. For Yat, it was about empowering users to secure property rights and letting people actually own where they invest their time.?

For a Facebook user instead, the amount of data getting saved on Facebook's database is completely owned and managed by Meta, a centralized corporation. Even though the data is collected from the user, the user has no claim over it. The same applies to video games, before NFTs, anything achieved on a game is the property of the game, the gamer only gets bragging rights.?

Think of this in a broader sense, in a country where property rights are weak and government regimes are unstable, it’s not difficult to guess that there’s little opportunity for thriving. Less democracy means less opportunity for a capitalistic economic framework. And it’s not an assumption, take a look at the chart below:

It’s the case for every centralized service and product, it upholds the idea of perpetual renting and not owning. In Yat’s words “when people get offered between renting and owning, everyone will come to web3.” And here comes web3, a community-based technology that can’t be governed through a centralized framework. Every contributing community member owns their data and has the right to sell or rent their property. Given its decentralized and open-source network, it also provides composability to creators.?

Composability means creating something on top of an already established protocol or platform without getting into copyright issues. For example, many blockchains like Binance, Polygon, Fantom use EVM (Ethereum Virtual Machine). In simple terms, EVM is like the copy of Ethereum’s core protocol that anyone can use to build their own blockchains and L2 applications.?

In a centralized framework, it isn’t possible to use Instagram or Amazon to create new and modified social media or ecom platforms. This basically means you’re reinventing the wheel, again and again, it stifles creativity.

The Social Aspect of Web3

To think of Web3 as a mere technology is a little imprecise. With every major technological change (or evolution), there has been a major societal change. Starting from the industrial revolution to the invention of the computer, to the first wave of the internet, society has adapted to the change.?

Web3 is bringing this change on a much bigger scale. When the internet first came into existence it liberated knowledge and information from closed doors. Knowledge became this universal asset free for all. Web2 modified this by offering tailored services that solve particular problems and opening new doors previously unknown to mankind like social media, Ecom, streaming, etc. With Web3 that target is to change the way, people perceive the internet. It’ll no longer be a place for ‘users’ but for ‘owners’.

Try to project this idea to your real world. You buy expensive wines, watches, designer dresses, luxury cars to present yourself in a way that validates your self-image from a societal perspective. It’s your social identifier.?

In the digital realm, social identifiers were mostly restricted to a closed community recognized by a few people. For instance, in a video game, you achieve a certain title or buy a certain instrument that presents you as a pro. Outside the space of that video game, it has no value, no one really cares about your “Legend” status.

But Web3 changes this. If you own an NFT like a Bored Ape or a CryptoPunk, your social status is recognized regardless of the platform. In the near future, video games (mostly decentralized) will allow players to take their achievements with them as NFTs and sell or show off on any other platform. You can exchange these assets you own with something of equal relative value. If your asset is scarce, you can exploit the scarcity and get a massive pay-off—just like the real world.? Yat used the example of Bored Ape, the biggest NFT series, and how having it as a profile picture on Twitter acts as a social validator.

This also poses real opportunities for earning money and ideally making a living off of your digital existence. Play-to-earn games like Axie Infinity have become a source of income for countries like the Philippines. There are many such games and other similar gamified platforms, where people are earning in exchange for their time, data, service, without any centralized authority hijacking their data or income source.

The Metaverse with capital ‘M’

The metaverse is where this whole thing leads to. There is this floating idea that the metaverse is a separate thing detached from web3. That isn’t the case. While centralized metaverse(s) (Roblox, Fortnite) is possible, it isn’t ideal. Digital identity, social identifiers, ownership of digital assets, all roads lead to a web3 metaverse (Sandbox, Decentraland, Upland). I have discussed centralized metaverses like Microsoft and Meta previously and have pointed out their pros and cons several times, and there is no hesitation to say a centralized metaverse isn’t the ideal environment to think of while referring to the metaverse.

The vision of metaverse is to have a place where humans harness technology to a level where we cross the breaking point and utilize technology on a far greater scale. As Yat says, “metaverse is a natural extension of the physical world.” At this level, we augment reality to create an enriched reality breaking the barrier of physical constraints.

In the metaversal existence, NFTs will be as common as the receipt you get from McDonald’s when you buy a double cheeseburger.?

The Age of Creativity

This idea of a metaverse brings a new set of rules and perspectives. What happens to the conventional way of life? Because with Web2, it was almost a digital reflection of how things were done in the past, only the scalability issue was solved. But it wasn’t quite a revolutionary change, at best we changed the in-person meeting to a video call. Instead of sitting face-to-face, you sit in front of a computer that tries to create the sense of a presence.?

But what if we could attend a meeting asynchronously, without having to meet everyone at the same time? This is one example of a perspective change that web3 will bring. And this won’t be limited to tech only. It’ll influence our life choices, parenthood, tutoring.?

While explaining this idea, Yat mentioned how we were not allowed to use calculators in school. Because a calculator could empower a weak student with the advantage of complex computation. This is a primitive style of teaching. Average computational work doesn’t require any specific talent and is getting replaced by AI, what isn’t replaceable is creativity.

A study shows that 98% of 5-year-old kids are creative while only 2% of adults possess the gift of creativity. So it’s not that creativity is rare but it decays with time and web3 will encourage creative efforts more than computational efforts. The things that make us human, like creativity, empathy, compassion will be useful in the future, the rest will be done by robots.

And I don’t think any drastic measures are required to change the way of our learning, I think it will be something very gradual. As we move forward, society in itself realizes the importance. A 100 years ago, free-thinking wasn’t encouraged en masse, because the need of the hour was physical labor to build an industrial society.

But with Web3, the societal shift will start towards creativity as it’s pointless to fight against the machine.

Conclusion

Do not interpret Web3 and the Metaverse as being another technology wave, or look away because of shiny objects called NFTs or tokens that seem surreal. For the first time in human history, humankind is capable of owning their time, instead of renting it out to whatever we are investing it into, … sports, health, work, family, learning, shopping, traveling.?

A line of reasoning that sounds abstract at first. But if one pauses and reflects future-back on a what-if scenario, it might start to make sense. Web3 is shifting the power to people and transforming each and everyone to be a value-added creator of the phygital, the syndication between the physical and the digital world. It is the democratization of value creation, and with that not a linear innovation, but what we will experience is a transformative behavioral paradigm leading to a Tsunami of new opportunities.