Why altcoins will be bigger than Bitcoin, with Yat Siu, Co-founder of Animoca Brands

0:00 [on-hold music] Welcome to another episode of 51 Insights, today with Yat Siu, co-founder and executive chairman of Animoca Brands. Yat Siu, welcome to the show. It's great to have you here. Thank you for having me.

0:17 It's a great pleasure to be here. Yeah.

0:19 Today, we're gonna unpack everything about Web3 and all the interesting things that you're doing with Animoca Brands and property rights and different views on capitalism and stablecoin.

0:30 The first question I have for you, uh, Yat Siu, is you grew up crossing Checkpoint Charlie as a kid.

0:36 You literally walked between two worlds, East and West Berlin, and you've said that this experience shaped how you think about property rights.

0:45 Can you take me back to what it felt like as a kid to see those two systems side by side, and how that shaped your view about property rights? Yeah.

0:55 So I mean, I guess just for context, uh, my, my mom was a musician, and she was working basically in, at the Komische Oper, which is on the eastern side of Berlin, and so sometimes...

1:06 And, and this is the other thing, I was quite young. I think I would've been maybe anywhere from 12 or 13 or 14.

1:10 It was, you know, it was kind of funny 'cause, you know, like back then, I guess it was not unusual for kids to travel by themselves.

1:17 You know, it's, the world was different at the time, but either way, you know, basically you take the train, and then you go to, to, to sort of, you know, um, and then on, on the western side of Berlin,

1:27 um, it was kinda like everything was normal, although it was isolated by itself in a way, right? You can either fly in or do other stuff.

1:34 But then for, um, you know, to visit my mom, uh, I would, you know, I would basically cross the border, uh, because she was working on that side.

1:42 And, and by the way, this experience wasn't just in, in east and west, uh, western side of Berlin.

1:46 It was also, you know, I grew up in Vienna, and we would also basically literally go to what used to be Czechoslovakia, as in Prague, right, um, and Hungary, and you cross over, and it was literally two different worlds, right?

1:58 It was, you know, it's, um, you know, the, the most striking image was, you know, you go to the supermarket, and there's cans of food literally one meter apart because there was true scarcity in those environments.

2:10 And, you know, when, when, when friends of my mom, when they were on tour, you know, they would basically be able to travel with her, and then they would actually go to Zurich and, you know, Paris and so on for the show.

2:21 But the reason they were allowed out is also because essentially, typically, you know, the other half, whether it's the husband or wife or parents, were basically held hostage back in, in, in, in the eastern side or Berlin or in Leipzig or wherever it was in the eastern side, right?

2:35 So they literally held hostage to make sure you come back, right?

2:38 And so there were many things around sort of the construction of appreciating the freedoms that I had and the difference of what I knew, what I wanted to have and didn't want to have.

2:47 And of course, ultimately, I, I didn't fully appreciate this when I was a child 'cause I didn't have the capacity to understand, you know, that this was around capitalism and property rights.

2:55 I just knew that this was not what I wanted and, you know, we wanted freedom. And back then also, the world was quite black and white.

3:03 You know, this was when, you know, when, when you had Reagan, right, and then you had, um, kind of later on Gorbachev, right, who basically with Glasnost and Perestroika opened it all up, right?

3:12 Like that was, it was that era. But at that time, Russia was the bad guy, so to speak, or USSR as, as it, as it, as it was called, right? And so it was a very clear divide, so ideological as well.

3:22 It was like USSR was bad, you know, the West is good. Like, you know, like very, very simple, right?

3:28 Of course, today we know the world is a lot more nuanced than that, but these had very clear lines of, of, I guess, um, sort of, um, sort of, uh, um, sort of, uh, views of the world.

3:38 Um, and, and definitely, you know, uh, capitalism and the Western construction of dem- uh, democracy was much more superior to what we saw essentially in, in the Soviet Union, and of course, the satellite stage, which included basically, um, sort of, uh, Eastern, Eastern Germany.

3:54 Um, but maybe I'll close with one other thing, which of course is the nuance, which is, you know, people who have never been to China and are criticizing China because of the fact that it is a communist system, so to speak.

4:04 China is nothing like communism that you would think of, right?

4:08 But those people who don't know, they would compare the communism of, I guess, what they may have seen in Cuba or seen in, you know, basically, um, uh, formerly Eastern Europe or Russia or USSR at the time, right?

4:20 And so they, they compare it against that, when in fact China is perhaps, at least on the economic level, perhaps, you know, more capitalist than most countries in the world, right? So they've kind of blended it.

4:30 It's a bit different. Um, so you can't compare it this way, right? So just because you call it communist doesn't mean it's communism in, in that way, right?

4:37 I think we see a lot of sort of, I guess, what they say sort of, you know, double speak, where you say something, but it doesn't quite mean that or is a little bit different, right?

4:44 And so what comes to mind really when I went to the East, East, Eastern Europe and particularly, um, East, East Berlin was it was very much like 1984.

4:51 And it was kind of funny 'cause I actually went and crossed the border in the '80s, right?

4:56 Uh, so it was just around that time, um, around sort of, you know, this whole idea of sort of, you know, I guess what it's like to be in a tyrannical, despotic environment, which was really what communism was like at the time.

5:07 Mm-hmm. So you've seen communism, you've seen socialism and raw capitalism. All of those experience have shaped your philosophical worldview today. Mm-hmm. How did that influence what you do with Animoca Brands? Yeah.

5:24 So the thesis that we've basically started building up, and again, this is just a collection of my own experiences over time and then, uh, the work that I've had,

5:32 is that I think capitalism remains the superior system broadly, but when left unchecked, has a lot of problems, right?

5:39 And, you know, the idea and why today, for instance, and I think it's topical, things like communism and to an extent socialism, um, has become more popular is because most people in the world are not participating in the capitalist system.

5:54 Meaning that if you're basically a child and you're basically growing up as a, as a youth, the idea that you can own property to be introduced into the capital world as in owning property of some form, whether it's real estate or whether it's something else, right, is almost impossible to think of, right?

6:10 If you think about my parents' generation or certainly a generation sort of, you know, or maybe my generation, maybe just a bit more senior, let's call it 10 years or so, right, you know, you had two-...

6:20 broadly inclusive, uh, sort of ways to grow into a capitalist environment. One was real estate, right?

6:26 We could all buy real estate, we could have a home, and over time, the home compounds in value, and I'm part of the capitalist system. I'm a landowner now, right? I have property, and I participate in the growth.

6:35 And the second one was compound earnings, right? If you remember, and actually a lot of financial planners will still tell you, "Compound, compound. Yes, take your savings, put it back in," and that kind of stuff.

6:46 Well, if you do the math today and you compound it, given QE, given everything else, there is no way you can afford anything.

6:52 In fact, compounding might actually even give you negative returns given the, the way that money is being inflated, for instance, right?

6:58 Because, of course, in the '70s and even '80s to an extent, right, um, you know, there was-- even though the gold standard was obviously long gone at that point, there was an implicit promise that money was still supposed to be a store of value, not just a me-medium of exchange, right?

7:16 But of course, that store of value has eviscerated itself, especially basically post the financial crisises that we've had.

7:22 And now governments have become very addicted to basically printing money so, so basically to deal, deal with their, with their debt, right?

7:30 And I think, I think this is the, this is the challenge that we have right now basically in the world, where in reality, are we really living in a capitalist world?

7:37 Well, we live in a capitalist environment in terms of property rights and we have commerce, but the way that, uh, governments are essentially using the money system is they're basically, uh, abusing it by basically constantly printing it.

7:48 And so that's why we have the birth of things like, you know, whether it's Bitcoin or people buying more gold, right?

7:53 These assets have gone up in value because those who understand what's going on need basically more safe havens.

7:59 Or like assets, for instance, like real estate has been going up in, in large part because it's been in sort of so much active printing and dilution of the, of, of money, right?

8:06 It's not just necessarily that the real estate has increased in value, it's the fact that the dollar or the currency you have has devalued, and therefore your assets have simply essentially sort of adjusted to that level of, uh, devaluation, right?

8:19 So you needed to understand that hedge. But the shaping of the thinking came from this idea that how do we find a way in which all of us can participate in capitalism?

8:28 Uh, because capitalism is still the far superior system, right?

8:31 I mean, as, as, as, as we've seen, you know, with entrepreneurship, with growth, with, with, you know, basically sort of human development and with innovation, that's only really possible in capitalism.

8:40 And it has to be in a way that all of us can participate in capitalism, which means somehow we all need to own a stake.

8:46 An important thing about capitalism is not that-- I think a lot of people conflate this idea of sort of, uh, participation and equal opportunity with equality, which is not the same thing, right?

8:57 So, so having sort of equity and equality are not the same thing, right? So having the ability to participate doesn't mean I get the same thing, right?

9:05 Capitalism functions on the fact that we all don't have the same thing, but we can compete for it, and we can have a way of participating as long as we have access to the opportunity, right?

9:16 Which is the problem with equality, which is more socialist and definitely more communist in thinking. We should all get the same thing 'cause we're all kind of the same, right?

9:22 And that's actually the system that doesn't work, right?

9:25 But if we have more people that are involved in the capitalist system, which we have seen, if you look at places like Singapore, for instance, or, or Hong Kong, or places where land ownership is very high, right?

9:34 You know, for instance, or participation in those economies. You have generally more happier societies. You have generally more participated, uh, societies. You have higher growth in middle class, for instance, right?

9:45 Versus the places that don't have that, right?

9:47 And you can definitely see the countries that have no property rights, as in no capitalism, extreme case being North Korea, for instance, that actually have poverty, low GDP.

9:55 And those countries that have, you know, higher participation and more property rights tend to have basically not just, uh, sort of better GDPs, but also, uh, basically more freedoms because of the fact that there's a respect for your property, which is defended in whatever constitution you're in, which means that, of course, you have the ability to trade and, and you have the ability to sort of, you know, do business in a, in a certain way because it's the freedom of your assets that are yours, that are sovereignly or yours, so to speak, right?

10:21 So definitely capitalism is better. But, but capitalism has become very monopolistic. We used to have this thing in government called antitrust, right?

10:30 But antitrust has failed basically society for the most part, and now the corporations are so large that antitrust can't even touch them for the most part.

10:37 And so you have these monolithic super giant organizations, you know, whether it's the mostly tech companies who basically, you know, basically control everything in a way, right?

10:45 Especially because the most valuable asset today is essentially our data and the network effects that are derived from it.

10:50 Right, so how do we create a way in which we can basically claim some of that, right, and own some of our data? And that we think is basically why blockchain is so important, right?

10:59 And the philosophical thinking here is, you know, how do we create a framework where we can all own a stake in what we're building in? Well, that's tokenization.

11:06 Because whether it's fractional ownership or whether it's broad participation, you can imagine how s- you-- a billion people can own a stake in a network, but you can't have a billion shareholders.

11:15 That's the other thing. There's a limitation in the current world. If I have a, you know-- sure, I, you know, I could own some stock, but you can't have, you know, hundreds of millions of shareholders in one company.

11:24 It doesn't work. The, the governments, the systems don't break down, and also there's no, no way to easily participate.

11:30 You know, you need to have a stockbroking account, you need to be qualified, you know, all that kind of stuff. With a token, you basically need an internet connection. That's it, right? And you can participate, right?

11:38 And we see this in blockchain. How many people own a token in the world, right, um, you know, through a wallet? It's super easy.

11:45 Whether you're in Africa, you don't even have a bank account, you can now participate essentially with having, in this case, digital property, which makes you a capitalist, right?

11:53 So, so, so the thinking is, you know, we need to have more broad participation in this new network asset, and that's basically through what we call stakeholder capitalism.

12:00 And the powerful thing is that the more people participate in stakeholder capitalism, the more valuable the entire network becomes, right?

12:08 Which is different from creating a monopolistic sort of zero-sum environment where only a small elite exclusive club may have access, which frankly creates a very inequitable society which we see today, which historically has always led to very poor outcomes.

12:22 Uh, you know, typically revolutions and war, which of course we all try to avoid. That's super interesting, and just a, a little anecdote to property prices. Financial Times published a big piece last week about this.

12:35 While property prices around the world, particularly in, in hotspots like London and New York and, and the big cities, have skyrocketed, so whereas in the US you had below 2X a yearly average wage to buy a property 20 to 30 years ago, today it's- Correct...

12:53 more than 5X the- Yes... yearly average wage. Yat Su, you've also written extensively about John Locke's theory on labor and property. Hmm.

13:03 Can you unpack that a little bit, and how does that fit into what you just described about property rights? Great. Yeah, g- going straight into sort of philosophical thinking. I love it.

13:12 So first, the base concept, you know, one of the things that draws so much attention, and again, just to be clear, you know, John Locke was writing in the context of his time, right?

13:23 Which of course was, you know, hundreds of years ago, so the world was different. And we're talking about a world where there was still slavery.

13:29 We're talking about a world where basically the environments were slightly different, and John Locke himself wasn't of nobility in and of itself, right?

13:36 He, he-- So, so, but, but he, he understood that we all had a sort of intrinsic right in, in, uh, in, in the work of what we did, the labor at the time, because it was labor that you would own.

13:47 So the idea is I get to pluck the apple and, you know, by plucking the apple, it is by right mine because it was my labor, my effort that basically received this, right? And so that's your property, right?

13:58 And so, you know, you could, you could sell it, and you could eat it, and you could do whatever you want with it, right?

14:03 And of course, ownership of the land basically gave you the right to keep plucking that apple, as it were, right? So that's the element of, of that property right, right?

14:11 Um, and there was that idea sort of basically caught fire, right, and became the constitution of, you know, um, and, and basically the, the base thinking of people like Adam Smith and so on, you know, Wealth of Nations, and this whole idea of, you know, really, really they call him the father of capitalism, but it came from this idea that, well, to be capitalist, you must first own your property.

14:31 So he's really the godfather of it, even if some of his ideas aren't really as relevant today. It's, it's important to understand the context of it.

14:38 But what I found fascinating, you know, uh, you know, when, when I wrote something about this, you know, the, the labor of our hands has changed today, and it is no longer the labor of our hands that is as valuable because we've now developed in a technological age where we have AI and tools and so on, right?

14:54 So we're not laborers anymore. Um, we're actually thinkers, creators. Uh, we have ideas. You know, the fastest growing asset class in this last century was intellectual property, right? You have patents and ideas.

15:07 That's worth $80 trillion today, right? I mean, think about it, $80 trillion. That's roughly three and a half to four times the value of gold, right? And these were all things that came from our mind.

15:17 So the true labor of today, the value of that labor, is intellectual property. It's a labor of our mind. It's a labor of our ideas.

15:25 And these forms of labor today, however, and this is where we think about blockchain and the work of Animoca Brands, is no longer belongs-- actually doesn't belong to us, even though we thought about these ideas.

15:36 It actually belongs to the platform. I mean, just think about OpenAI. You ask OpenAI a question, ChatGPT. It gives you an answer. Who gave them the ideas for this answer? All of us, right?

15:46 However, do we get paid for that? Not at all, right? In university or in high school, that would be called plagiarism, and you would get a big fat zero for the grade. But somehow, if it's AI, it's okay, [chuckles] right?

15:59 And it's very different from search, by the way, right? Because for search, you-- it's the information. You come with your own ideas based on the material you're searching.

16:06 That's not-- Uh, there was never a claim that I took someone else's idea and made it my own. But with AI, they are doing this. But there's this more insidious version of this, and that's basically social media.

16:16 When I'm sharing photos on Instagram, when I'm basically, you know, creating a social graph and building network effects, am I building network effects that are mine? No.

16:26 You know, those likes and those follows are not mine. They belong to the platform, and they're actually the ones who own you now because if Instagram went to you and you had a million followers and said, "You know what?

16:37 We need you to do something else, otherwise we'll delete your account," likelihood you will do what Instagram asks you to do because you want to keep your million followers, because actually they were never yours to begin with, right?

16:48 So in other words, who's working for who? We've basically become essentially, essentially the, the slaves and the serfs of, of the platforms.

16:55 And when you think about what's happening to our youth, that's even more apparent.

16:59 I mean, they're literally sort of become essentially slaves to the platforms and working for them for free, which is why they've become the f- sort of the, uh, the fastest growing and biggest companies in the world because of the fact that they own, you know, basically our digital time, which is valuable and is often sold in the form of advertising, which is almost a trillion dollars a year, right?

17:18 So this is huge numbers we're talking about here that we, we-- that ought to be by right some of ours because it comes from our time and from our ideas, right?

17:25 And so that's kind of part of that thinking where, you know, when we talk about property rights, it's something that touches us deeply.

17:32 The idea caught fire back in the day, even though it was a relatively novel concept, because everyone's like, "Yeah, I should own this. That is mine," right?

17:40 Um, and it's interesting when you think about philosophy like this because it didn't take a lot of persuading for people to debate it, right? It was like, "Property, that should be ours," right?

17:50 Um, and it's similar to our own freedoms as well. Like, you know, should I be, you know, between it being a choice between a, a slave or a free man? Most people will say, "I'd rather be a free man."

18:00 It doesn't take sort of some intellectual debating around what you intrinsically want to be as a human. You want to be free, right? So, so these are things that are inalienable, I think.

18:09 You know, um, somehow we as humans are naturally attracted to this idea that we should have freedom. But to have freedom, we need to have property rights, because property rights essentially is the basis of that, right?

18:20 I think there's, uh, a lot of people sort of, you know, con- sort of connected to. Mm-hmm. So I have actually two interesting points on that.

18:27 The first one is that cynics would probably say that even though blockchain and crypto was seen as that liberating technology, retail investors are still being played. VCs extract tons of values.

18:43 There are chains that are being launched, tokens that are being launched that go nowhere, people scamming. So that's one cynical view.

18:51 The other view is that idea of deplatforming, also an idea that was heavily pushed by Chris Dixon a couple of years ago, that big platforms like Spotify would be decentralized thanks to blockchain technology.

19:07 All of this hasn't really materialized yet. What is your view on that, and what are you doing at Animoca Brands to counter this?

19:16 So very quickly, let me start with the second one first, and I'll come to the first, first question shortly. First, you know, as they say, no king willingly gives up their kingdom.

19:24 [laughs] So, so if you think about basically the big platforms like Spotify, they're the kings of music. They control the fate of creators. They have all the power. Why are they motivated to change that?

19:38 There's no musician in the world that makes money on Spotify, and it works for Spotify, right? So I mean, it's a great deal for them. It's a great gig for them.

19:46 It's a terrible one for creators, so there's no reason for them to change.

19:49 And that is a story of basically creative destruction and innovation anyway, whether this is, you know, things like Tesla or whether this is things like Uber or Airbnb or even Google or any company back in the day.

20:01 They challenged the status quo with a new paradigm, and it was the new paradigm that took over, and then the competition or the incumbents either had to adapt or die. And that's exactly the same thing here.

20:12 So we don't believe that a Spotify or Facebook or whatever is going to change their business model because it works quite well.

20:19 It's going to be a new company, whether it's someone like us or someone else, that basically will emerge, that will disrupt the space substantially so, and then you have to basically adapt or die, right?

20:29 And we see this already, by the way, today. I mean, just think about Bitcoin. I mean, it sounds simple enough, but today Bitcoin is a major disruptor in the financial ecosystem.

20:39 DeFi is a major component that is now used in significant ways. Yes, of course, it's a small number, but look at stablecoins as well.

20:47 Like, you know, in a relative size of the global economy, you know, $180 to $200 billion of stablecoin isn't a lot, but just imagine where it has come from, right?

20:55 In a short period of time, somewhere over the last five to seven years, stablecoins has now become a powerful force. It's basically, what, sixth or seventh largest buyer of T-bills in the world, right?

21:06 And it wasn't JPMorgan, it wasn't, you know, Bank of America, it wasn't Citibank that said, "Yeah, let's do a stablecoin. Let's do that."

21:13 It was a Tether or a Circle or another company that basically innovated and made that change, and now there's no going back, right?

21:20 So from that vantage point, innovation typically always happens at the edge, right, or at the fringe, as they like to say, and then they grow and emerge, and either they get gobbled up, um, or they basically become large forces and basically force the industry to change.

21:33 So I think there's no, no different here, right? So the change and, you know, what we do is we enable other companies.

21:39 We don't just invest, but we advise and we support them and grow to basically create challengers, um, basically in, in, in the space. And people might say, for instance, you know, we're known for originally for gaming.

21:49 You know, today, you know, blockchain gaming is still a $15 to $20 billion industry, which was a $0 industry before.

21:55 And I would argue that it is still much easier for an indie game developer to launch a game that basically has Web3 and sort of, you know, tokenization components than try to make a game and, and compete on Apple and Facebook and Steam, 'cause basically you have no chance at all, right?

22:11 Um, so, so, so I think there's, there's many examples of that.

22:13 In, in time, of course, you know, when you think about things like digital identity, when you think what we're doing with, you know, student loans on chain, when you think about basically all of the new things that are happening in DeFi, that stuff is, you know, that we're funding and supporting, that's all disrupting these incredible spaces or, you know, our, our own, um, you know, joint venture that we have with Standard Chartered and Hong Kong Telecom, uh, Anchor Point here in Hong Kong.

22:36 These are all things that are challenging the status quo as well, whether we help incubate them or whether we basically fund them, right? So I think that's, that's a big part of that.

22:43 And remember, you know, in the '90s internet, it was kind of like that as well, right? A lot of crazy ideas that ultimately, you know, Amazon used to just sell books, okay? Right, you know?

22:54 Uh, Google was only doing search, right?

22:56 I mean, these were companies that had started in a certain way and now have become the giants that they have because they've of-of-expanded and, and, and figured out basically sort of n-new markets to, to, to conquer, and the same is, is true for us.

23:07 Now, in terms of the cynical view about sort of, you know, basically sort of, um, scams and basically tokens that don't do anything and all that kind of stuff. First of all,

23:16 you'll always have scams when you have, uh, basically commercial applications that emerge.

23:21 I mean, for those, even when the start of the internet, which wasn't even transferring money, you had all of those, you know, you know, sort of Nigerian princes and 401(k) scams and stuff like that, right?

23:30 People used to send an email and say, "Hey, I'm this prince, and I've got this money. Please give me your details so I can send to you." Like, nobody falls for that today, right? Or maybe almost nobody.

23:38 However, back then, this was very popular, right? A lot of people used to fall for this because they didn't understand the medium, right?

23:44 So the, the challenging thing is that unfortunately, you will always have scams, and so it's a matter of education and knowledge to know that you're not gonna fall for that type of stuff, and that just comes with literacy in the space.

23:56 So financial literacy is something that a lot of people don't have today, um, in comparison to before, that equivalent was digital literacy.

24:03 Like, a lot of people didn't have digital literacy and didn't understand this medium. As they become more digital literate, they basically won't fall for these type of problems, right?

24:11 Uh, and then of course, we have other things like antivirus and all those things that basically sort of protect us, which of course, you know, we're in the early days of basically the whole crypto blockchain development where these tools are emerging but aren't as mature as well, right?

24:22 So this is the challenge with all frontier tech, right? And even frontier environments. I mean, for all the people who were discovering, you know, the American West- Hundreds of years ago, right?

24:31 There was a lot of risks and dangers and problems there as well until it basically matured, right? So you are basically venturing into new environments and new spaces, which does come with risks.

24:40 I think that has to be, that has to be said. So it's-- You have to be aware, and you have to be conscious around, uh, around that, right? Um, I think the other point, though, is around

24:50 basically when you think about sort of, um, um, this idea that, you know, only a small number of people may have benefited. That's not true.

24:57 It is true that, of course, some people have become incredibly more wealthy than others.

25:02 But the participatory wealth that's been created in crypto, broadly speaking, anyone who's gotten into crypto over the last, let's call it five to 10 years, would've made much more substantial money than they had before, right?

25:14 And, and that to me is the key point, right? Capitalism isn't about everyone making the same amount of money, but it is basically that we all get to grow with it, right?

25:23 So when you remember in the '80s and '90s, for the most part, when the economy was growing broadly in places like Europe and, and America, for instance, right?

25:32 Yeah, there were some billionaires, and there were some millionaires, and there were some middle-class people, but it was a very harmonious environment broadly because everyone got to participate in growth in one form or the other, right?

25:42 And you had scams, and then you had regulation come in, and regulation basically had to control this type of stuff, um, which basically is getting better and better, right?

25:49 Today, we have regulatory frameworks because now-- This is the thing I think a lot of people misunderstand is they think, you know, um, regulation, regulation might be a sort of, you know, a hindrance or, and so on.

25:59 But actually what regulation does is it legitimizes a space and puts it in a form of law that you can now protect and defend.

26:06 If you didn't have regulation and someone just launches a token, you're like, "Okay, what does it mean?" Like, who protects you? Like, is there a framework? You don't know.

26:12 You don't have anything to go with, and that's why it's kind of truly Wild West.

26:16 But if you now have a law around this or a system around it that essentially has, you know, uh, you know, a, a, a, a sort of a legal framework, then you have a certain kind of safety and protection around that, right?

26:27 So regulation, regulation is broadly speaking, in that sense, uh, a good thing because the key is that there's a consequence for doing something the wrong way.

26:34 And I think in America, a lot of people are gonna be looking for the market structure bill, i.e. the Clarity Act, to get an idea of what it means to launch these tokens with a framing.

26:42 'Cause we have to bear in mind that right now everyone's launching tokens for the most part, you know, in their sort of best guess as to what they think would be right, right? Um, you know, with advice and so on.

26:52 And I think many of them have the right and best intentions, but honestly speaking, there's been no framework for it, right?

26:58 Because it wasn't something that was debated and discussed, and so we're in that phase right now, right?

27:03 Um, and you know, you saw Chair Atkins make comments around basically sort of crypto with innovation, uh, sort of a kind of an innovation exemption. That's very interesting.

27:11 However, when you launch something with an innovation exemption, uh, or, or then maybe they should know that it's a very innovative and potentially high-risk type of, uh, sort of asset, so people know.

27:21 It's like buyer beware. It's like when people go smoking, you know? It's like, okay, you go smoking, but, you know, it might damage your lungs. Okay, fine.

27:28 [chuckles] You know, like, like, like those are the type of things we probably need to do in the industry so people are aware.

27:33 And then if you still wanna take that chance or because you're interested or curious, um, then, you know, you've been told. Disclosure is basically, I think, the, the main thing, right?

27:41 Um, so these are all things that are maturing and developing. Um, and, uh, and I g- as one more point, you know, a lot of people are critical about meme coins. We should remember why me- a lot of meme coins launched.

27:51 They launched because you had a very hostile regulatory regime that essentially said that if you launch a token that had any kind of utility, then actually you're really basically a security according to the previous SEC chair, right?

28:03 Uh, which is of course very different today. So what do you do? You launch a meme coin because you say, "It's a joke. You shouldn't take it seriously. You know, don't buy it.

28:10 You know, like, like seriously, don't, don't do anything. Like, I'm just warning you. I'm warning you." And then people still buy it, [chuckles] right?

28:16 Because, um, but, but it-- I think it ended up creating a disservice to our industry because it made people launch meme coins, uh, and thinking that meme coins is the way to launch a token, which is only proper for a certain type of tokens, not for everything.

28:30 But they did it because they wanted to protect themselves from a regulatory perspective when in fact they were planning for utility and they were planning for value capture, which they couldn't really talk about publicly.

28:42 Yeah, and meme coins is a great topic. I wrote a lot about meme coins a couple of months back, and my view was meme coins are very interesting, even though they might seem scammy.

28:50 But it's a very interesting concept at heart because it allows people to capture cultural value. Uh, I, I mean, it's not just-- It's also not just cultural.

28:59 I mean, cultural value is one part, but also it allows you to be a member of a particular network from that particular community or culture. So it's capturing a portion of that network effect, as it were.

29:12 And I think this is one of the things that is, you know, whether it's momentary or long-term is a different question.

29:18 But the thing is, by owning a meme coin or a token of any kind, you're actually owning a piece of the network effect and the implied value of that network effect, right?

29:27 Because for instance, if you own Ethereum, it's not that Ethereum pays you great yield.

29:32 I mean, at 2% [chuckles] or whatever you staking yield you get, that's a pretty high P/E ratio if you were to sort of really just calculate it as a pure yield-generating asset.

29:41 But actually, the real value of owning Ethereum is by owning Ethereum, you get rights to participate in the network. It's not the amount of gas of that's value, that, that's value generative.

29:52 It's the fact that I can now use the token to do stuff on the network and build stuff on it and target communities and grow my customers or trade on DeFi platforms.

30:02 It's essentially my membership pass essentially to the entire Ethereum ecosystem, which has a network effect value above and beyond the sort of implied revenue value that comes from it, right?

30:12 And network effects have always had value. It's just they've never really had a way in which that value could be enumerated, and essentially tokenization does that quite well. Mm-hmm.

30:21 Yat Siu, for listeners not familiar with Animoca Brands, can you explain what Animoca Brands is today?

30:30 Well, I mean, I think in simplest terms, you know, Animoca Brands is probably from our perspective, you know, especially because we have our go public plans announced, um, like, um, like a month or so ago.

30:41 You know, we think of ourselves as probably, uh, the best sort of, I guess, amplified and, uh, levered bet on altcoins. And, uh, and that's because we have over 600 portfolio companies.

30:52 Most of them are launching a token and have not yet launched one, for instance.

30:55 And we believe that altcoins, by the way, I don't know if it's controversial for your audience, but we believe that altcoins collectively will be significantly larger than Bitcoin, right?

31:04 And so-- But, but, uh, if you're a public company, you know, maybe you buy a MicroStrategy, maybe you go and, uh, you know, maybe you buy a Bitcoin ETF, maybe you have your Ethereum and Solana.

31:13 But then how do I know which of the millions and millions of other tokens out there I should invest and participate in?

31:19 You could do it yourself, or you can give it to someone like ourselves who basically, um, not as a fund, but on the balance sheet continually invests and grows essentially, um, sort of its participation in what we think will be the fastest sort of growth market

31:34 in, in, in, um, in the tokenization space, which is, you know, altcoins. Uh, and maybe just quickly to sort of, you know, um, uh, sort of elaborate on that.

31:42 The reason we believe altcoins will ultimately collectively be larger than Bitcoin, uh, is because we think of Bitcoin like gold. It's digital gold. It's the ultimate reserve asset and store of value.

31:53 Gold today is $27 trillion. The stock market is $128 trillion. At the private markets is something like $250 trillion.

32:01 Altcoins, to us, represents both the public stock market and the private markets, big and small, right? You don't have to have a billion-dollar token. You could have a million-dollar token. That's okay, too, right?

32:10 Like an SME. Because what the tokens represent in the altcoin space is essentially the utility and the access and the growth potential.

32:19 It's like, you know, whether it's Google or Facebook or NVIDIA or these companies, they will never be bigger than gold, but they're driving customers into the economy.

32:27 They're the ones who basically creating participation. They're the tools that we're using. What tools are we using in crypto?

32:32 It's altcoins, whether it's for gas, whether it's for access to DeFi platforms, whether it's for governance, whether it's for using for games. We're not using Bitcoin for that. We're using altcoins for that.

32:41 That doesn't mean that altcoins are going to be as valuable than Bitcoin, but collectively as a space, it will be. And so we think of that essentially as having to have an index of that.

32:50 And if we are correct, altcoins today is half the value of Bitcoin, right? It's like roughly one trillion to roughly two trillion, give or take. Markets are pretty, you know, [chuckles] markets are pretty choppy, right?

33:01 Uh, but if we are correct, then actually ultimately altcoins will be larger collectively than Bitcoin.

33:09 And if Bitcoin was to turn into, which we all believe, into a $10 trillion asset over time, then there's either two ways to go for altcoins.

33:16 It either has the same ratio, which means it's five trillion, or it, because of the higher growth and higher utility, collectively is going to be maybe 20 or 30 trillion, right?

33:25 And that basically, you know, how do you participate as an investor and as a public vehicle in the future?

33:29 Animoca Brands basically positions itself as that, as essentially the sort of, you know, um, ultimate access point for the altcoin economy, as it were. How big is your portfolio today in US dollar terms?

33:42 It's about $1.4 billion. Yeah. Okay. Um, and we're not a fund. Um, and we make-- So last year, our revenues was around $300 million, uh, with close to $100 million EBITDA, so we make operating income as well.

33:55 And I think the, the thing to think about us is that because of the operating income that we make, we can also continue to reinvest in the space and grow.

34:02 And the thinking goes like this, right, which is, you know, we're so early in this space.

34:06 If you're a fund, you have a five or seven or 10-year cycle, then you have to cash out and, and you have to liquidate and give a distribution, right? That's the terms of the service, right?

34:15 But, uh, imagine if you were invested in the Amazon and Google and Apple and Facebook back in the 2000s, okay? And, you know, because it's 10 years, you are forced to sell.

34:26 That would've been anywhere to, from two thou-2011 to 2015. You would've basically sold your most valuable positions.

34:34 Um, and 10 years later, right, those assets didn't just double, but they literally quadrupled, quintupled, in some cases went up 10, 20X from, from that perspective, right?

34:43 But the problem is, is that as a fund, there are two problems with being a fund. One, um, not only do you have the fund cycle, um, only a small number of people can participate.

34:53 If you're a high-net-worth individual, if you're a qualified investor, if you have at least a million dollars, then you can invest in a fund. Whereas if you're a public vehicle, everyone can invest in you, right?

35:03 And that's the whole ethos of crypto. You want broad participation, right?

35:07 And so, uh, we, we believe that, again, that's kind of h-how we think we're positioned as a company where you can basically invest in the future of crypto through basically buying a stock, um, outside of Bitcoin, which of course, go ahead and buy MicroStrategy if that's what you do for Bitcoin.

35:20 Uh, but we wanna be every-- we wanna be that for all the growth tokens. Mm-hmm. Uh, Yat Siu, just help us understand also a bit where you're coming from, because Animoca Brands has been very early in the space.

35:33 You were big in NFTs. I know that you were big in, uh, Web3 gaming. You, uh, are looking to launch a stablecoin. You are in Web3 identity, blockchain IDs.

35:47 Uh, w-what is it that you do with Animoca Brands, and how does that play into that thesis of being kind of an altcoin leverage bet? Yeah.

35:56 So first of all, we're generally speaking, you know, we both invest and incubate projects that basically ultimately have some kind of utility token attached to it. Even NFTs are tokens, right?

36:07 At the end of the day, they just happen to be non-fungible tokens, right? And we believe that the whole world is gonna tokenize.

36:13 More, there will be more tokenized assets, and so you have to be, have, have some kind of way in which you can participate in that.

36:17 In fact, our view is that if you don't tokenize as a business, in the future, you will die as a business.

36:22 Very similar to, you know, if you're not discoverable on Google, you will die as a business, or if you're not on LinkedIn or if you're not on Facebook or if you're not on Instagram, right?

36:30 Like, whatever it is, your competitor that is on those platforms or is using that technology is going to out-compete you, right?

36:36 So it's very important that everyone basically ultimately aims to try to tokenize In some form or fashion, and these are gonna be the growth assets of the future. Just quickly talking about things like NFTs, right?

36:45 NFTs is still a $300 to $400 million monthly sales business. But people need to remember that five years ago it was a $0 business. It didn't exist. It just doesn't have the same hype, that is true.

36:56 But it is a fundamentally large enough business that can sustain companies and is an economy that is reasonably sized, right, in comparison to the other stuff.

37:03 But of course, the, the tokens, um, systems where we're investing in new areas, we're looking at gaps of the market where what's needed. Like, why do we do digital identity?

37:13 Because we found that, you know, as we're growing the space, we had a struggle with basically, um, authenticity, 'cause a lot of people in our industry often conflate anonymity with privacy.

37:25 They seem to think it's the same thing, which it's not. You can have privacy, but you don't really need to be completely anonymous, 'cause being completely anonymous actually makes it possible for these scams.

37:34 But if you want privacy, but you want to preserve your reputation and basically your authentic presence, as it were, as an individual, then actually you care about privacy more than you care about anonymity, right?

37:46 And so that means you need a way in which you can measure your digital reputation, and that's what a digital ID is all about. So I don't need to know your name, but I do need to know whether you're a good person, right?

37:55 But if you're truly anonymous, I have no idea who you are. Imagine if you go to a store, um, you know, and every time you're buying something from a new person or from a new identity, 'cause we're all anonymous, right?

38:05 You can't build a relationship. You can't build trust. It doesn't work this way. Imagine going to the office every time and every person you talk to is a new person every single day, right?

38:13 Because we're all anonymous, right? That's not how you build society. That's not how you could build trust, right? Um, but I don't need to know your full life details in order to trust you, right?

38:22 And that's why sort of things like digital identity are important, and nobody was building that, so we decided to incubate that, and basically that became basically Moca ID and Moca Chain, right?

38:31 Because we felt that that was necessary. So that's one approach.

38:33 But then, you know, and we did this for gaming as well, because in 2018 and 2019, nobody was making blockchain games, and we thought gaming would be a great way to onboard users.

38:42 And right now, that thesis turned out true in terms of on-chain usage. The number one on-chain usage is games. Sure, the tokens haven't performed as well, relatively speaking.

38:51 However, if you talk about on-chain traffic, which was what our driver is, that, that proved to be true. But in 2018, 2019, we had to build the games because nobody was making games.

39:01 But now so many companies are making games, so it's easier for us to invest and support them than rather build everything from scratch, right?

39:08 So what it really means is that as a business, we have to constantly evolve and adapt because our space is changing in hyperspeed, right? I mean, you know, from crypto cycles aren't like even annual.

39:19 They're probably more like quarterly [laughs] right at this point, right? And so we have to keep adapting and changing. And, you know, just think about all the big companies that we know today.

39:28 They started off doing one thing, and they may still do that. Like we still do NFTs and we still have The Sandbox and so on, but we do so many other things as well. And like think about Amazon.

39:38 I mean, 20 years ago, Amazon Web Services, really? Right. You know, data centers, really? Nobody would have thought.

39:44 And then today it's, it's what Amazon is probably in many cases better known for than the actual e-commerce website and for the most part of the fact that it used to sell books, right? It was a bookseller, right?

39:55 And this is true for every other business. Look at Microsoft. Microsoft started selling us like, you know, an operating system and a word processor, right? That was the history of, of, of Microsoft.

40:05 And today it's like everything else, right? Or it's Google or it's Salesforce or whatever company you wanna say, right? You evolve. And I think for Animoca Brands it's the same thing, right?

40:14 And, you know, you know, if you had asked us five years ago that we would be engaged in a stablecoin joint venture or that we would do- be doing RWAs or that we were supporting basically digital asset treasury companies to go public on sort of public markets like Nasdaq or New York Stock Exchange, we'd be like, "What?

40:28 What are you talking about?" Like, that would not be imaginable five years ago, and here we are doing this, right? Um, you know, we have to-- And this is, I think, true for any entrepreneurship journey, right?

40:37 You have to adapt to the markets, and I think anyone in crypto will tell you this is one market where you have to adapt super, super fast, right? Yeah, absolutely.

40:46 Yat Siu, what are you most excited about for Animoca Brands over the next one or two years?

40:52 Well, I mean, I think for Animoca Brands, obviously we announced our sort of go public plans with the merger with Currencygroup, which is a strategic fintech player that, uh, actually fits nicely with our business as well.

41:02 They service something like 13 million customers in places like Philippines and Indonesia and Malaysia, right? So it's a great use case for crypto, for instance, right?

41:11 And, um, and it's, it's going on in Nasdaq, so that's a big part of our focus plan, right? To be essentially a publicly listed company where you can basically participate in the growth of Animoca.

41:20 So we're excited about that. Obviously, you know, our emphasis on RWAs we think is a big one.

41:25 We, you know, have written last year about our thesis that basically the crypto world is becoming much more institutional, and so that's just another step, not just going public, but being engaged in sort of businesses that, uh, basically appeal and are necessary for institutions.

41:39 The CLARITY Act is a big one because we believe it will pass, as most people do, next year, uh, maybe Q1, Q2, not sure. Um, you know, certainly before the midterms is what a lot of people are saying.

41:52 And if that happens, then there will be clarity as to what is a utility/

41:57 uh, sort of, you know, or commodity-like token, uh, token under the CFTC versus what is a security token under the SEC, and how do you define possibly even things like NFTs or so on.

42:07 I mean, Chair Atkins has already indicated sort of his opinion on it, but it's not law yet, right? And once it becomes law, it allows larger companies, big and small actually, to basically start tokenizing, right?

42:19 And so we're gonna see an explosion of really interesting utility tokens emerge in space. And you're seeing this already today.

42:25 Projects are now talking already much more openly about the kind of value accrual the token can generate or why it's important from a utility standpoint, which they were not allowed to do so before, right?

42:35 So I think we'll get more disclosures and more information around that.

42:38 And of course, Animoca, as the altcoin index Obviously, you know, l- we like that because we want people to own tokens for its utility and its use case.

42:47 And the more people that use tokens, then the markets will also become less volatile, 'cause that's the other thing.

42:52 Most of the tokens, frankly, are held for speculative purposes, and that's because 80% of token owners are in crypt centralized exchanges who really can only do one thing. They can trade, right?

43:03 And so that means by definition, most tokens are basically used in a speculative manner, not because that was the intention, but because the ratio of owners own them in centralized exchanges rather than essentially on-chain, right?

43:15 But that's slowly changing, right? We're now look- seeing projects that are only launching on-chain, or we're seeing on-chain communities become larger than the centralized communities by design, for instance.

43:24 And you see basically very different type of balancing of when, you know, um, token values, and as a consequence also token utility because it's designed around that, right?

43:32 So we're really excited about the evolution of that. And, you know, it's gonna constantly evolve.

43:36 We're- we definitely haven't hit any kind of sort of mature space on this, but, uh, that's, that's what we're excited about and that's what is sort of helping drive, you know, in terms of, um, sort of growth and potential, you know, as, as we, as we believe altcoins are going to be really significant.

43:50 Yat Siu, we're almost at the end of the show.

43:52 Uh, my last question is, if you had to paint that vision that you described at the beginning of the show about property rights and blockchain playing into all of this, and given where we're at right now in the market and in terms of progress in technology, where do you see this going over the next five to 10 years?

44:10 [chuckles] So ultimately, if our thesis is right and everything tokenizes, then the world...

44:18 But the big change is obviously everyone will have digital property, but really what will happen is that we will all become much more financially literate.

44:27 And the change of our industries and our human behavior and interaction is going to radically evolve and change because we all know more about money, not only because we've become more capitalist, but because we have an understanding of it.

44:41 So I think I read some statistics where the global stock index, obviously that includes people like, like in Africa and whatever, but the number of people who actually own property, um, or equity, uh, is less than 10% worldwide.

44:53 Obviously, places like in New York or London or, or, or, or Zurich, whatever, will be higher, much higher, like maybe 60, 70%. But in most places it's, it's less than 10%, right?

45:02 Which is kinda crazy if you think about it, right? So we say we live in a capitalist world, but most people aren't capitalists 'cause they don't own anything, right?

45:09 Um, but that's also because they don't know anything about money. And, you know, you're, you're, you, you said you're, you're from Switzerland, right? So you're in Europe.

45:15 Switzerland's already better than most of Europe. I grew up in Austria, and I can't talk about money to many of my friends in Austria. It's just not something you do, right?

45:23 Um, and, and, and most people don't think about investing in the stock market, right?

45:28 And most people don't think about the value of investing long term because that's not how they're wired, because they don't understand it, right?

45:34 And capitalists are kind of bad people because they make money and it sounds a little bit shady and... 'Cause they don't understand it. It's not that it's actually shady. It's the fact that it's alien to them, right?

45:44 And so, so in a world where everything is tokenized, everything becomes effectively a capital asset. That's the way in which we introduce the world of money to them, and then you learn about it.

45:55 And we've seen a similar story with digital literacy. I remember in, uh, in the late '90s, I had to print my emails, the, uh, my, the emails for my boss because he was not digital literate, right?

46:07 Of course, it's ridiculous today that people would be printing stuff for this, but back then it was normal because most people were not digital literate, right?

46:15 And they didn't-- And, but of course, those are all the people who didn't understand the internet and they couldn't comprehend it. Why would I go online? What is a hypertext? I would rather read a magazine, right?

46:24 All that stuff. We're seeing the same kind of similar sort of adjacent arguments happening in crypto. If you're not in that space, then you're not gonna understand it that way.

46:32 And I'll give you a real sort of, you know, close it off with a real-life example. A few years ago, we tokenized a Stradivarius. And, um, my mom is a musician, but she has no interest in, in, in buying Bitcoin.

46:44 [chuckles] It's just like, what? It's like just, just won't, right? Just, just doesn't matter to her, right? Or she's not interested in buying stocks and bonds.

46:51 She couldn't care about Tesla shares, but she would be interested in buying a tokenized Stradivarius, not because it's a token, but because she appreciates the value of a Stradivarius.

47:01 And so a whole world of people who would appreciate this, who might not know about money, suddenly learn about the value of things because it comes from something that they're passionate or interested in.

47:10 And we saw this with, you know, Web3 and blockchain gaming as well.

47:13 People loved playing games, and then they learned about money, like in the Philippines, and suddenly they became investors or learned about financial systems. And just think about our children.

47:21 How do they learn about money by trading Pokémon cards? Pokémon cards were not designed to teach you about money. But now there's a market for it, and me owning a Pokémon card, suddenly I can trade it and there's value.

47:31 Why is it valuable? What makes a Charizard more valuable than something else, or a Bulbasaur or whatever that is, right? There's some lingo that comes from it. Is it scarce? Is it rare? Is it the color? Is it the age?

47:41 Like, all these things come together and you learn about it because it comes from a point of passion, right? And that to me is the real power of tokenization, right?

47:49 You can basically financify this thing that people are critical of. Oh, everything's over-financified. But no, when you financify something, it's the tool in which you learn about money.

47:59 And when you make the world more financially literate, that's how I think we make the world a better place. Mm-hmm. That's a great ending, Yat Siu. Thanks so much for coming on the show. It was great to have you here.

48:09 I feel like we could have continued for many more hours, and we've just scratched the surface. Yat Siu, where can people learn more about you, about Animoca Brands?

48:18 Yeah, I'm, I mean, mostly active on Twitter, uh, or X I guess as it's called now.

48:22 Um, handle is ysiu, but you can go to animocabrands.com website or to my Medium blog at Yat Siu, although I don't write as much as I used to.

48:29 And of course, I do post a lot of educational content on my Instagram, which is also ysiu. Mm-hmm. That's great.

48:36 Yat Siu, I wish you all the best and best of success also with your NASDAQ listing coming up, and talk soon. Thank you so much for having me. You obviously liked this video enough that you got to the end.

48:48 Listen, do me a favor. Hit that like and subscribe button because I think you'll like it.

48:54 And if you want even more, with more I mean incredible alpha, research, and digital asset market updates, subscribe to our newsletter on 51, that's the number 51, insights.xyz and get the most actionable insights on digital assets.

49:11 See you next time.