Game theory: What’s holding back an explosion of play-to-earn?
Despite its rising popularity, GameFi has lessons to learn from Web 2.0 and elsewhere before it can gain a comparable user base, says Ethlas chief Wui Ngiap Foo.
Ask any gamer what’s not to like about playing to earn. After all, what could be better than getting paid to do something you love? So why are only a fraction of the world’s 2.5 billion gamers taking up the opportunity?
The irony of play-to-earn, or GameFi, whose users can earn crypto rewards by playing video games, is that it’s never sat particularly well with the gamer community, despite its growing popularity, and Web 3.0 gaming adoption remains far below what GameFi metaverse Ethlas Chief Executive Wui Ngiap Foo believes it could be.
Wui, a former head of technology at ride-hailing platform turned Southeast Asian super-app Grab, one of Southeast Asia’s leading super apps, says much of the Web 3.0 gaming industry would benefit from a change in the way it looks at the space.
“I think that earning, as a concept for gamers, for the digital economy, is a good one. It’s a powerful one, but it cannot be the be all and end all,” he told Forkast in a video interview in Singapore. “Games have to be primarily fun. Then you earn when you flip that, then what you’re attracting is you are attracting speculators. And they are not gamers by nature.”
Wui also says that the business model is another obstacle to bringing more gamers into the Web 3.0 space. From Axie Infinity to StepN, many Web 3.0 games require players to purchase non-fungible tokens (NFTs) before they can play and earn, a model that has drawn unfavorable comparisons with Ponzi schemes.
“The problem with the current generation of GameFi is that they are trying to do what games in Web 2.0 have learned, which is they try to make you spend before you play … If you want to earn, you’ve got to pay money first,” he said. “(But the) transition from pay-to-play to free-to-play was what really unlocked the gaming market to the size it is today. There’s, like, 2-and-a-half billion gamers today. And it’s because most people actually don’t want to pay upfront fees.”
Wui also believes that the gaming space has much greater potential than is currently being realized for integration with crypto and the broader economy. Some game developers, such as Square Enix, have realized this, and are merging GameFi into their products and services, but some of their moves have prompted a backlash among gaming communities.
To attract gamers into the world of crypto, Wui says developers must look at the games themselves before adding such financial elements, and that the two components will work best together with increased scope for integration.
“Most … games are standalone games. The economy is contained. When you earn something in-game, it’s not liquid, it’s not cash. It’s just tokens, like virtual things. And DeFi (decentralized finance), or crypto, when it meets games, it suddenly unlocks this capability,” Wui said. “And that’s why I think that the future of gaming is actually really, really bright, and that the concept of blockchain meets games, meets finance — when you mash that together, it could be the start of a new digital economy.”
Watch Wui’s full interview with Forkast Editor-in-Chief Angie Lau to learn more about Ethlas’s experiences in the GameFi space, its outlook, how GameFi could bring the next 1 billion users into crypto, and how GameFi innovation has diversified away from Silicon Valley.
The fun factor: “If there’s no money to be earned, people will not play the current breed of games on GameFi … They have not cracked fun. And in my mind, fun is four things. Fun is achieving. You are able to achieve complex puzzles, get badges. It is socializing. People have fun engaging and building communities. It’s killing … PvP (player versus player), feeling that you’re better than somebody else, and that I think a lot of the Web 3.0 games do (that) quite well. And the last bit is exploring … Games have to be primarily fun. Then you earn when you flip that, then what you’re attracting is you are attracting speculators. And they are not gamers by nature.”
Betting on browsers: “Our main population on Ethlas is Brazil, followed by India, followed by the Philippines. And they all share these sort of mass-market, emerging economy and huge potential kind of demographics. And so the first thing we did for Ethlas is we say we’re not going to launch an app, which would shock many people. We are 100% browser based, true technology, and just familiarity with the chromium stack. We say if you’re going to get a billion people, they don’t want to download something. They kind of want to be able to play, they want to immerse. And maybe eventually they want an app, but not in their first entry point.”
The best things in life are free: “The second thing we did was we said, every good thing that has happened to humanity has to have some free element. If you want mass market, you have to render a service or value-add, but not charge for it. And so we set ourselves up to be free to play. And this was back in December, where every game was going, ‘I’ll sell you an NFT before you can enter my ecosystem.’”
Innovation everywhere: “I actually think that Web 3.0, for the first time, is not Valley-centric. There were many waves of technology disruption where it was always like, ‘Come to where the action is.’ But if you look at Web 3.0, where is the action? It’s in Lisbon, Portugal. It’s in Dubai. It’s in Singapore. And some of it is in India and China. And I think that the decentralization nature of Web 3.0 actually really spills over into the real world. People are just going, ‘We can build companies anywhere.’ And they do.”
Asian equation: “There’s far more talent in the region than there was when I started Grab seven years ago. There are far more startups that are starting — and more importantly, people are recognizing that. In the past, if you had a very brilliant Singaporean data scientist, or a very brilliant Vietnamese engineer, they would just go to the Valley. But now they’re going, ‘Hey, you know what? I like my region. My family’s here, and maybe I want to do a startup here or join a startup here.’ And I think all of that coalesces into this perfect moment of going, ‘This is going to be like the Silicon Valley of the 80s, but for Southeast Asia and Asia.’”
Angie Lau: Did you know that one in three people in the world are gamers, and the gaming industry is set to hit US$200 billion in revenue by 2024. And yet only a fraction of these gamers are in Web 3.0 gaming. So where are they, and when are they coming? Welcome to Word on the Block, the series that takes a deeper dive into blockchain and all the emerging technologies that shape our world at the intersection of business, politics and economy. It’s what we cover right here on Forkast. I’m Editor-in-Chief Angie Lau.
Well, today we’re in conversation with Wui Ngiap Foo. He’s CEO and co-founder of the gaming venture Ethlas, which just got its start a few months ago. Welcome to the show. So where is everybody, and when are they coming?
Wui Ngiap Foo: (Acknowledges)
Wui Ngiap Foo, it’s great to see you. It’s a really interesting time to sit down with you. You’re a former head of technology for a decacorn, as they say in the biz — for Grab here in Singapore. And now you’re doing something very different.
Wui: A little bit.
Lau: A little different, still in technology, but certainly in the future. Tell us what you’re doing.
Wui: Thank you, Angie, for the introductions. What we’re doing is we’re trying to build layer-zero for games in the future. And I say ‘future’ because games have existed for decades. And there are many, many very popular and very great studios. The difference, though, is they have never been able to crack two things.
The first is how do you marry the financial aspects into the economy? Most of the games are standalone games. The economy is contained. When you earn something in-game, it’s not liquid, it’s not cash. It’s just tokens, like virtual things. And DeFi, or crypto, when it meets games, it suddenly unlocks this capability. And I’ll talk a little bit more about it as we go through the interview.
The second thing is interoperability. And this is something that I’m particularly passionate about. So, as a gamer, let’s say you invest four years of your life in a game — let’s call it Clash of Clans — and you get really good at it. And one day you decide, ‘Hey, look, I kind of like to play Candy Crush these days.’ What happens is you lose everything. You start from scratch. And that’s because assets are not interoperable. And this is one of the biggest, biggest peeves of any gamers out there. Just go, what if levels, experience, items, rare things that I own in one game be …
Wui: Exactly. And that’s why I think that the future of gaming is actually really, really bright, and that the concept of blockchain meets games meets finance — when you mash that together, it could be the start of a new digital economy.
Lau: We call this space GameFi. And it’s getting to be a very crowded space. What makes you different? What’s the thesis that differentiates what you’re doing at Ethlas versus kind of the decimated environment that we see in Axie Infinity and others?
Wui: So, it’s two things in my mind. If you draw yourself an X and Y axis, the first one is whether you’re building a single-title game or you’re building a platform. A single-title game would be an Axie Infinity. A platform would be something closer to a Roblox or a Steam. And we’re closer to the platform angle, and a lot of that builds on the marketplace, builds on the experience that myself and my co-founders have had through the years. We came from large consumer techs. We know how to build platforms. We know how to build marketplaces. So that’s one.
The second axis is: Is it free-to-play or is it pay-to-play? It sounds trivial, but I want to bring us back to the history of games. All of you remember how games, or even just movies, started. There was always a paywall at the start. You want to watch a movie. You want to watch ‘Matrix,’ go rent it out from Blockbuster. Or if you want to play a game, they’ll say ‘Go buy the CDs.’
I remember when I was young, you wanted to play a game called StarCraft, which was the hottest game. There would be like, ‘No, nobody can play unless you go pay 40 bucks to buy the CDs.’
And then gamers discovered this very simple yet powerful tool. They said, ‘What if games were free?’ But eventually, if they like what they see, if they’re having fun, you give them in-game purchases. You tell your loyal supporters that if they like what they’re playing, if they want to support the developers, if they want to sell and get cute skins and digital goods, go pay inside the game. But we will not block you having your first experience at the get-go.
So, this transition from pay-to-play to free-to-play was what really unlocked the gaming market to the size it is today. There’s, like, 2-and-a-half billion gamers today. And it’s because most people actually don’t want to pay upfront fees. They just go, ‘Let me experience what you’re talking about. Let me have fun. Then let’s talk about the money.’ And people do like that concept. The problem with the current generation of GameFi is that they are trying to do what games in Web 2.0 have learned, which is they try to make you spend before you play. So if you think about titles like Star Atlas or Axie, Infinity or Pegaxy, what is the first prerequisite?
Lau: You have to buy — pay to play.
Wui: Correct. You have to buy something. And, of course, they would say, ‘Oh, this is because the economics have to make sense.’ If you want to earn, you’ve got to pay money first.
Lau: But inherently, that has been the criticism of projects like Axie Infinity, this kind of allegation of a Ponzi scheme structure where you have to pay in before the other players who have been there originally get the earnout. That structure is changing — obviously it has to — but that’s the criticism of this type of game.
Wui: It is. Also, you create this walled garden where you don’t attract the masses. So if you took every single GameFi out there and you summed up its users, it’s about 40 million people. Not a small amount, but not great. But if you think about how many gamers there are in the Web 2.0 world, the real world, it’s 2-and-a-half billion.
So, it’s always something that I’d like to talk to my team, to our strategists about. I call this the ‘mystery of the missing gamers.’ Where are the other 2.4 billion people?
Lau: The migration is not happening. But one of the big things that we’re also observing is that it’s almost like the OGs and the Web 2.0 space, they want to preserve their status there. They don’t want to get into NFTs (non-fungible tokens). In fact, they’ve pushed back against a lot of these gaming companies that have said, ‘Let’s do an NFT, let’s launch this, let’s launch that.’ And the backlash from their own gamers was phenomenal.
Wui: Indeed. And I would say this: At the end of the day, consumer companies follow what their consumers want. At some point, if enough people who play World of Warcraft tell Blizzard they want an NFT version, Blizzard will give them an NFT version.
The reason why there’s so much backlash is because consumers don’t want to play Axie. The problem is (that) if you took the money away from GameFi today, would people still play it? And I think that’s the uncomfortable elephant in the room.
Lau: What is the answer, in your view?
Wui: That is no. If there’s no money to be earned, people will not play the current breed of games on GameFi. And it’s no criticism to them. A lot of my peers are my good friends. I actually deeply respect what they’ve built.
Lau: So, what you’re saying is the value proposition is the money, not necessarily the fun in the game.
Wui: It is not the fun. They have not cracked fun. And in my mind, fun is four things. Fun is achieving. You are able to achieve complex puzzles, get badges. It is socializing. People have fun engaging and building communities. It’s killing … PvP (player versus player), feeling that you’re better than somebody else, and that I think a lot of the Web 3.0 games do (that) quite well. And the last bit is exploring.
In most cases, games in the GameFi space have not cracked this code. Games in the Web 2.0 space have. Think about Legends of Zelda: Breath of the Wild. It’s an immersive, open space. You can talk to people, you can trade, there’s an intricate economy. People go there because they’re having fun, not because they’re paid to play. And so I think that earning, as a concept for gamers, for the digital economy, is a good one. It’s a powerful one, but it cannot be the be all and end all. I know a guy who’s on level 28,000 on Candy Crush. I don’t know how many years he spent on it.
Lau: I didn’t even know there was a level 28,000.
Wui: There was. And let’s just say that the reason he’s spending all that time is not because Candy Crush is paying him US$0.20 a day. So I think that we have to go back to basics for games. Games have to be primarily fun. Then you earn when you flip that, then what you’re attracting is you are attracting speculators. And they are not gamers by nature.
Lau: Wui Ngiap Foo, CEO and co-founder of gaming, Web 3.0 — what do you want to call it — Ethlas. And why did you call it Ethlas, actually?
Wui: Great question. My co-founder, who is also my brother, named it, actually. So, Ethlas is actually two words. Ethereum, because we’re built on the Ethereum protocol — actually a derivative of the Ethereum protocol, but still EVM (Ethereum Virtual Machine) compatible — and ‘atlas,’ meaning ‘of a space, a world.’ We just wanted to build a world of worlds. So that’s kind of where the name derived from.
Lau: A world of worlds. And what does your mother think that both of you are neither doctors or lawyers, and both of you are in gaming? I mean, I’m teasing you a little bit, but it’s that Asian parents’ expectation.
Wui: My mom did call my sister up when she heard that I was quitting my job. And she’s like, ‘I don’t know what he’s doing, but are you sure?’
Lau: She didn’t call you?
Wui: She did call. I’ve always sort of followed my heart. Funny story: When I was in college, there was this point where I almost quit college. I was quite obsessed with this game called Dota 2. It’s a 5v5 (five player versus five player), and I and my crew were actually really good at it. And we always go, ‘What if we went pro? The world’s our oyster.’ And so we actually talked ourselves into almost quitting school. We were like, ‘You know what? We’re going to join this like Singapore qualification for the global tournaments. We’re going to kill it, and we’re just going to quit our school because like, who wants to go to school, right? The future is in gaming.’ And let’s just say that I went to that tournament, and we got our ass handed to us. Multiple times, in fact. There were just people with just better instincts, better reaction times, younger, more dedicated. And we came back very dejected. We were just like, ‘Oh, man.’ And so we continue our studies. And here I am in a technology role. But all things considered, probably it was a better outcome for me than the alternative.
So that’s kind of a little story about myself, but I’ve always sort of wanted to build something and do great things. And for me, what drives me is creating an impact. Creating a lasting legacy. The same reason I joined Google, the same reason I joined Grab.
And so when I thought about what I wanted to do next, there were two things. Number one, I spent seven years at Grab. It was a great run, a great chapter, the company IPO’d. And I felt like I needed to go back to my roots. And some of my roots was — even pre grad — I always told myself I’m going to build a startup one day. Wasn’t sure what, but I’m going to do something. The second is a little bit more personal. A good friend of mine who worked with me at Grab for many years, he passed away from cancer, and it really sort of hit me just how mortal we all are. And I just go, ‘I’m not getting any younger. It’s been a good run. If you’re going to do anything, you should do it now or you should do it soon.’ And, incidentally, GameFi at that time really blew up. And we didn’t actually go in wanting to do games.
Here’s the funny story. Initially, Ethlas was actually supposed to be a DeFi platform. We were actually going to do loans, like loans for underprivileged students, and we had a pool set up. We had all the yield farming mechanics set up. And we realized that it wasn’t, number one, sustainable, unit economics. And number two, we weren’t really feeling it. And so what happened was, in our free time, while we were jamming about how could we make that idea better, my brother actually created a little game on a website, and it was just for us to sort of just take a break every time we were working hard on something. And suddenly we realized that people were playing that game, that we didn’t know who they were. It was just a public website. People found it. And one day the game crashed because it was never our bread and butter. And people pinned us and they were like, ‘Hey, look, is the game coming back up?’ And this was like hyper-casual games. In fact, if you go to Ethlas, that game still exists. It’s a game called 2048. It’s a little game where you just get the blocks to merge together. And at that point, my brother was just like, ‘Wait a minute.’
Lau: Something’s happening.
Wui: Exactly. If there are people pinging you about a product that is pre-launch, and there’s demand for it, maybe there’s something. And as we dug into it, we realized that there was this whole GameFi thing going on. Not exactly what we were trying to build, because we took a very big bet on things like platforms, on things like hyper-casual games, on things like the next billion users. But if you squint loosely in the same category of going, take games, take blockchain and mash it up. And so for us, we were convinced that there was this one single and simple mission statement we wanted to achieve, which is we wanted to use games to onboard the next billion users in crypto. And that’s because we just felt that there were just so few legitimate gamers on crypto.
And more importantly, there were just a few people, full stop. Just to quote a stat, all of blockchain combined has 340 million people. And that’s less than 1% of the global human population. And, as somebody who has scaled apps to hundreds of millions or billions of people, I understood why it’s important for disruptive technologies to have mass-market adoption, because technology ringfenced or siloed to only a small amount of people, it’s not disruptive. Think about the internet, think about electricity, think about railroads. They only became valuable when the mass market could consume them in bite-sized ways.
Lau: What’s interesting is the transfer of knowledge that you have in the Southeast Asia market. What people actually want is that they want to get on their phone or online, how do you transfer the knowledge that you’ve had as former head of technology at Grab to what you’re doing today?
Wui: Great question. So, there are some key lessons, or key big bets, we’re taking in how we’re structuring assets that is very deviant from how GameFi thinks about things today.
So, for example, our main population on Ethlas is Brazil, followed by India, followed by the Philippines. And they all share these sort of mass-market, emerging economy and huge potential kind of demographics. And so the first thing we did for Ethlas is we say we’re not going to launch an app, which would shock many people. We are 100% browser based, true technology, and just familiarity with the chromium stack. We say if you’re going to get a billion people, they don’t want to download something. They kind of want to be able to play, they want to immerse. And maybe eventually they want an app, but not in their first entry point. So that’s the first thing.
The second thing we did was we said, every good thing that has happened to humanity has to have some free element. If you want mass market, you have to render a service or value-add, but not charge for it. And so we set ourselves up to be free to play. And this was back in December, where every game was going, ‘I’ll sell you an NFT before you can enter my ecosystem.’
And the third thing that we learned, from just experiences in Grab, is how do you think about things that you and I may not care about, but the average mass-market consumer may. So, for example, not everyone has an iPhone. If you’re in Brazil and you’re catering to the mass market, Android phones are the dominant phone. Performance is a thing. Storage space is a thing. And so how we optimize our app, how we think about latencies, even what kind of games. Instead of building a triple-A title where you make someone sit in front of a desktop and grind for four hours, we said we’re going to augment your human experience. We’re going to fill up the moments in between.
So, imagine if you’re a delivery driver waiting for an order. You’d maybe be browsing TikTok. Now you can just play Ethlas and maybe earn a dollar or two. Let’s say you’re a student waiting for your bus. Fill up the moments in between. Let’s say you’re a housewife. Just go, ‘Hey, look, I could be playing Candy Crush or I could be playing a version of Candy Crush where it’s fun, it’s social. But it exposes me to crypto and tokens, and I learned a little bit about that.’ And that’s kind of our value prop.
We deeply understand the fact that people don’t want to change their lives 180 (degrees) before they embrace a piece of technology. They want it to blend into their lives. They see the value of it. Then they say, ‘Ok, give me more of that. What more do I need to do? Do I need to create a wallet? Do I need to figure out how to go to an exchange to change the tokens?’ But don’t front-load. And so a lot of the thesis and the mental models that we put into Ethlas are fundamentally driven by this idea that we understand what a billion people would like.
Lau: So, for those who are watching right now, we’re in Singapore. What’s so different from Southeast Asia and understanding the market that’s going to potentially set this region apart, especially for startups who understand this space versus maybe Europe or the U.S.?
Wui: I think it’s the fact that we’re just close to a lot of high-potential markets. If you look at a stat that I like to quote a lot, if you look at the top 10 countries with MetaMask adoption, Southeast Asia is four of the top 10. And it’s mind blowing, because you’d think, like, it would be America and Canada and France. But it’s not. It’s, like, Vietnam and the Philippines and Indonesia. And it’s just because when societies are growing and they are self-forming their path to what it means to be a prosperous community, they’re just more receptive towards adopting new technologies.
And so a lot of what we do in the region is just inherently scalable outside. Give you an example. We targeted the Filipino community because we knew the Filipino community, they’re also very big in the GameFi scene. And we say, let’s build communities for them. Let’s build games that they like, and all. And this was sort of three months back. And all of a sudden, we realized that people in Brazil were playing our games, even though they don’t speak English. And they were just going, ‘It’s not that I can understand exactly what is happening,’ but the lowest common denominator that you’ve built into the games — ease of use, just intuition, the kind of games that appeal to Filipino communities — that’s just transferable to the mass market in Brazil. And so we built up a huge part of this community, even though I have no idea how to speak Portuguese. But we are super-proud of our Brazilian community. But it was that organic. And so we were just, like, when you build great products, you don’t even have to speak the language. Everybody’s speaking the same language of ease of use, of crypto.
Lau: It’s the Tower of Babel moment for GameFi.
Wui: It is a little bit of that.
Lau: It’s the universal language that transcends language. All right, institutionals are coming into this space. There’s some big-time investors who believe in Ethlas, but they’re also making a bet on this region and here in Asia. Why do you think that is?
Wui: I think there’s a couple of reasons. Number one is the tech scene. The technology scene in Southeast Asia, I feel, is really frothy. There’s far more talent in the region than there was when I started Grab seven years ago. There are far more startups that are starting — and more importantly, people are recognizing that. In the past, if you had a very brilliant Singaporean data scientist, or a very brilliant Vietnamese engineer, they would just go to the Valley. But now they’re going, ‘Hey, you know what? I like my region. My family’s here, and maybe I want to do a startup here or join a startup here.’ And I think all of that coalesces into this perfect moment of going, ‘This is going to be like the Silicon Valley of the 80s, but for Southeast Asia and Asia.’ And I think Beijing got that moment with the rise of the BATs (tech giants Baidu, Alibaba and Tencent). And obviously, the Valley has just been well known for startups. But I think innovation is hitting, and capital is hitting, and talent is hitting, and that’s what’s happening.
Lau: What are you hearing from your investors and Sequoia’s? Who else is circling this space that you’ve been tapped with capital? And what are they exploring?
Wui: So, our lead investors include Sequoia, include Dragonfly Capital and Makers Fund. They’re very trusted partners. We’re very blessed to have them on our cap table. On top of that, there are actually quite a lot of players who are interested in the space. We’re speaking to everything from sovereign funds to Web 3.0 VCs to gaming funds to even … certain — I cannot disclose — government-linked companies who go, ‘Hey, look, we like how you guys take an active role in promoting Singapore as an HQ. We like you taking an active role of saying you don’t have to go to the Valley to build a respectable startup. What can we do to help? Is it capital? Is it strategic collabs? Is it partnership?’.
And so I actually think that Web 3.0, for the first time, is not Valley-centric. There were many waves of technology disruption where it was always like, ‘Come to where the action is.’ But if you look at Web 3.0, where is the action? It’s in Lisbon, Portugal. It’s in Dubai. It’s in Singapore. And some of it is in India and China. And I think that the decentralization nature of Web 3.0 actually really spills over into the real world. People are just going, ‘We can build companies anywhere.’ And they do. And I think that that’s pretty cool.
Lau: Not only is it pretty cool, it really represents the next phase of growth. There is, as you’ve said, this brilliant moment that coalesces so many things. You have emerging markets, you have emerging, developing nations that are seeing technology as a leapfrog moment, and then, on the other end of it, you have a lot of capital looking for growth. And if you’re going to achieve a billion people … find those missing gamers from 2-and-a-half billion to 40 million. There’s a lot of upside here. And it’s this moment.
Thank you so much for sharing your story. I think your mother can be proud of you both, even if you’re not a doctor or a lawyer.
Wui: Thank you. She has a lot of concentration risks in the family right now. But, as (they) say, we’re all going to make it.
Lau: We’re all going to make it. And thanks for making it. And thank you, everyone, for making it to this latest episode of Word on the Block. I’m Angie Lau, Editor-in-Chief of Forkast. Until the next time.