Security Tokens, Blockchain Gaming, and LeBron: Crypto Invest Summit Takeaways
We should probably start off with a quick disclaimer. No, LeBron James is not issuing a security token, nor is he heavily involved in the emerging world of blockchain gaming (at least as far we know). He did, however, sink a deep three-point shot to send the Lakers-Spurs game into overtime last Monday night in LA, so we’ll chalk it up to “he was with us in spirit.”
While the kid from Akron was seeking his first win as a Laker, just around the corner the real party was well underway as hundreds of crypto enthusiasts gathered for the Crypto Invest Summit’s kickoff event. The next two days were jammed with high-profile interviews, project pitches, and engaged panel debates on the very future of this nascent market.
After taking the week to digest it all, here are some of our biggest takeaways and thoughts from the event.
The Big Guns
When Steve Wozniak speaks at a crypto conference, he automatically bats leadoff in your recap. I mean, come on, the guy was the mastermind behind the first Apple computer. Alright, you get it. Moving on.
Steve graced the stage with his off the cuff rundown of the early days at what is now the world’s most valuable company, citing similarities between the current excitement around blockchain technology and the early days of the Internet. This comparison isn’t new for many, but nonetheless felt reassuring coming from such an iconic figure. A recap of his commentary is worth the quick read.
Tim Draper, a renowned venture capitalist and avid crypto supporter, came out guns blazing, calling fiat money “political money” and expressing disdain for currencies that remain vulnerable to government manipulation. Naturally, this led to him questioning the growing trend of fiat-backed cryptocurrenices, often referred to as “stablecoins”, since they are, by definition, tethered to political money.
Our Take: While we largely agree that governments left unchecked are highly susceptible to harmful monetary practices, we do not believe bitcoin (or any other cryptocurrency) will entirely displace fiat currencies anytime in the near future. Just as all cryptoassets are not created equal, we must be hesitant to paint all governments with a single brush.
Dan Morehead, the CEO of Pantera Capital, also made a few head-turning comments during his fireside chat/interview (does fireside still apply if there was no fire? Sorry. Moving on again). Despite growing concerns the U.S. is falling behind, he believes the country is making decent progress from a regulatory standpoint, citing the emergence of futures trading and recent CFTC rulings. It’s also notable ~70% of the investments Pantera has made are based in the United States. He also stated it may take another 9–12 months for the SEC to decide exactly what it classifies as a security, but that’s because crypto, at least in its current form, doesn’t fit into an existing regulatory framework very well.
Our Take: Among the important points Dan made, one that really stuck out to us was his comment addressing the giant elephant in the room: there simply aren’t enough people holding crypto for mass consumer use today.
There’s no doubt many teams are in the process of building some incredible products and services in support of the Web 3.0 movement. But in the wise words of Creed Bratton, if you build the best product but no one uses it, then what’s this all been about? That is why blockchain gaming has commanded much of our attention recently, but we’ll get to that shortly.
Other prominent speakers, such as Wikipedia Co-Founder Larry Sanger and Boost VC Co-Founder Adam Draper, also made headlines with their thoughts on the future state of the crypto market. You can read more on their interviews here.
ICO’s Are So 2017
One of the biggest takeaways from the event was the resounding optimism for security token offerings, or STO’s. Unlike an initial coin offering (ICO), security tokens are actually backed by real assets. Real estate, private companies, and even VC funds have become commonly cited use cases for tokenization.
The Security Token track at the event was stacked with a variety of opinions on everything from the types of assets being tokenized to the legal requirements issuers will face if they decide to pursue an STO (h/t to the CryptoOracle team for hosting a number of these engaging sessions). The infrastructure to support security tokens is still in its infancy, but the conversations we had with teams spearheading these initiatives reaffirmed our belief that this trend really does have legs.
Our Take: The benefits of tokenized securities are well-documented. Unlocking the “liquidity premium” for traditionally illiquid assets. Broadening a security’s potential investor base. Fractional ownership. Allowing companies to dial-in the appropriate level of liquidity. The list goes on.
While we are very optimistic on this rapidly growing segment, it’s important to also understand the downsides of 24/7 liquidity. We’ll save most of thoughts on this subject for a separate post, but a primary disadvantage we foresee is the emphasis on short-term results at the cost of long-term investment. We also believe a token can do much more than represent ownership in a company or security, and are excited to continue exploring new types of engagement models that have started to evolve. Stay tuned!
Blockchain Has Gaming In Its Crosshairs
Two of the best sessions in our opinion were focused on blockchain gaming and the rise of eSports. Each boasted a diverse panel with backgrounds in traditional and blockchain-based gaming, which made for lively discussions centered around where blockchain technology can be implemented to improve both the user and developer experience.
Chris Gonsalves from ConsenSys moderated a panel appropriately titled “The Future of Blockchain Gaming”, which focused on, you guessed it, the outlook for blockchain-based games. One of the panelists, Lucid Sight CEO Randy Saaf, made an interesting comparison between non-fungible tokens (NFT’s as they’re known in most circles) and the privileges that come with leasing versus buying a car. Albeit not a perfect analogy, it helps explain one of the key advantages blockchain gaming advocates consistently emphasize: true ownership of your in-game assets. Seeing as how Lucid Sight is the team behind MLB Crypto Baseball, we’ll use it as a quick example to illustrate this point.
MLB Crypto Baseball allows you to buy and trade digital players that can be used to earn rewards based on performance, accomplishments, or team events (the Boston Red Sox World Series trophy is going for 86 payments of 1 ETH at the time of this writing in case there’s any willing and able buyers out there). Unlike many of the games in this space, this one is actually live and playable. Randy talked about the LA Dodgers bobblehead giveaway in late September, which gave fans the opportunity to claim a free player using physically distributed ETH cards. Those who did claim a bobblehead own that figure outright and are free to use or trade them if they so desire. The development team has also disclosed their plan to release new games, which users will be able to play by simply transferring over their baseball figures. When it comes to greater user adoption, free crypto bobbleheads is, at the very least, a step in the right direction.
Here comes that word again. Adoption. Naturally, this came up in the conversation as one of the biggest hurdles to the success of blockchain gaming. Cristian Gonzalez, the CEO of MEGO, discussed some of the challenges to on-boarding new users, stating many gamers are “blinded” by what they are accustomed to. GAS cost transparency and current game quality are other challenges this industry faces because, at the end of the day, many gamers may not care about crypto or blockchain. They just want better games.
A controversial question is when will developers pivot to start building decentralized games? James Mayo, the president of 8 Circuit Studios, believes it will be when successful gaming models begin to take form. We foresee smaller, independent game developers leading the next wave of innovation for blockchain-based games as they experiment with new fee structures and revenue models.
Our Take: I will be the first to admit I am not the world’s biggest gamer (luckily my colleagues pick-up my slack in this area) but the use case for distributed ledger technology makes sense in an industry where central authorities (game publishers) hold power and control over their loyal customers (gamers). A number of teams are working on solutions to this issue (i.e. Enjin’s digital metaverse) but time will tell if the old adage “if you build it, they will come” proves to be true.
Currently, the vast majority of users are people familiar with crypto who also enjoy playing video games. This makes up a small portion of the population, so in order for this industry to really take off it’s going to need to attract the much larger, “non-crypto” crowd. Most gamers may not care whether a game runs on Ethereum or EOS, as long as it runs smoothly and securely. Again, most gamers just want better games. Effective marketing strategies will also be key in a game or platform’s early success, especially for on-boarding traditional gamers.
The other panel, titled “Gaming, eSports & Entertainment on the Blockchain”, seemed a bit more skeptical on this topic, but nonetheless agreed opportunities for disruption do exist. John Kosner, President of Kosner Media and ex-ESPN executive, highlighted the challenges of marketing to young consumers today who have less interest in traditional sports than prior generations. The conundrum today is teams “don’t know who their fans are.” We are in an exciting time where the idea of what it means to be a fan is being redefined as new ways of interacting with athletes and teams begin to surface.
William Quigley, the CEO of OPSkins, elaborated on the harsh reality that there’s not much money in eSports, at least in its current state. Twitch users can monetize their channels, but some of the large value drivers for traditional sports (i.e. merchandise) still don’t exist in eSports today. He also weighed in on the adoption debate, noting a number of frictions (MetaMask set up, GAS fees, etc.) still inhibiting potential users.
Our Take: The rise of eSports is certainly contributing to the falling interest in traditional sports, in part because user engagement in the former is unlike anything we’ve ever seen in professional sports. The world’s top gamers can make 6- or 7-figures a year streaming live gameplay, not to mention the hundreds of thousands of followers and subscribers who follow them with cult-like loyalty.
Decentralized gaming, powered by transferable assets users actually own, will allow players at all levels to monetize their time and experience more readily. People may be more inclined to spend money on platforms like OPSkins if they know their character is truly their own and won’t be lost when a game is decommissioned. This will provide greater incentives for user adoption, resulting in a more satisfying experience for gamers.
That’s a Wrap
This only covers the tip of the iceberg, but it’s safe to say we’ve never been more excited to be involved in this space. I’m sure we’ll look back a year from now and laugh at how much has changed. We are well aware nothing is certain, but we’re willing to bet our livelihoods that this is just the beginning.
