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Yield Guild Games

The Delphi Podcast — Yield Guild: The Job Board of the Metaverse

In this episode of The Delphi Podcast, Delphi Digital co-founders Piers Kicks, Anil Lulla and Yan Liberman, chat with Yield Guild Games co-founder, Gabby Dizon, to get an understanding of the guild’s mission, their plans to uplift communities around the world through play-to-earn gaming, and their vision to make the Metaverse accessible to anyone who wishes to enter.

As the lead investor in Yield Guild’s $1.325mil seed raise announced in March this year, Delphi Digital was an early backer — and the first VC investor — to get behind Gabby and his co-founders, Beryl Li and Owl of Moistness.

Delphi also helped create the mini documentary, Play-to-Earn: NFT Gaming in the Philippines, which showcased the income earning potential of blockchain games and their impact on rural communities amid the COVID-19 pandemic.

In the podcast, Gabby and Anil discuss the backstory to how Delphi and Yield Guild first got connected. They also talk about Yield Guild’s plans to transition to a decentralized autonomous organization (DAO), their journey toward community-led governance, and the upcoming launch of the YGG token.

Watch the podcast recording on YouTube, listen via Spotify, or read the transcript below.

Yield Guild: The Job Board of the Metaverse — Metaverse Musings Ep 30

Piers: Hey guys, welcome back to another episode. Today I’m delighted to introduce you to the two co-founders of Delphi Digital— we’ve got Yan Liberman and Anil Lulla with us. And we’ve got Gabby Dizon, who is the founder of Yield Guild, one of the earlier investments we made out of Delphi Ventures, and certainly one of the ones that we’re most excited about here. It’s already having some pretty exciting real-world impact in a way that not many other projects are. So yeah, thanks for joining us, guys.

Gabby: Hey, happy to finally be here.

Anil: So yeah, I guess it’s been months in the making. Yeah. Damn.

Gabby: That’s right.

Piers: Excited to get into it. Gabby, to set the stage for us and kick it off, what is Yield Guild? Give us a high level summary.

Gabby (0:48): Sure. Yield Guild Games, or YGG, is a play-to-earn gaming guild. What that means is we invest into NFTs (non-fungible tokens) of different games and virtual worlds that have a play-to-earn component. That means you’re earning some kind of token rewards for the games that you’re playing. These token rewards are usually cryptocurrency based — you can exchange them for ETH, and eventually, for fiat.

So what we do is that we invest in games such as Axie Infinity, where we came from and have the largest operations in, but also different games like The Sandbox, Formula 1 Delta Time, Illuvium, ZED RUN, and a few others. We basically hand over the governance and the control of these games, and the assets that we buy, to our community, and let them earn an income with it. This is pretty much what we do.

Anil (1:49): Yeah. I think Gabby, it’d be helpful to, you know, before we even dive into your background, to explain exactly who the audience is and exactly who your users are. I think it’s important for everyone to understand that it’s not just the crypto people who are just trading and farming things on DeFi protocols. It’s a whole new user base that you’re bringing on into crypto.

Gabby (2:17): Yeah, so DeFi has a reputation of basically just the same pool of users that are earning yield across different protocols.

What’s pretty special about what we’re doing is that over 90% of our guild members are actually new to crypto. And this is because we offer them the experience of something they learn how to do, which is play a game, and they don’t have to buy the assets. We invest in the assets, the guild owns the assets, and we basically lend these out to our players.

So all these players, what they start with is that “I can play a game and earn money.” And if you can open it to that kind of demographic, there’s actually a lot more people that can just pick up a game like Axie Infinity, start playing, and then they learn blockchain as they go along. This is pretty important, because we’ve seen that if you start with the crypto side, it’s a lot harder to onboard people. But if you start with, “Hey, want to play a game and earn some money in the process?” you actually really widen your target demographic.

Actually, most of the players that we have are from emerging markets. Pretty much regular people who have good game experience, but are not really tech-savvy or especially crypto-savvy. So the countries that we are mainly operating in are the Philippines, Indonesia, India, Venezuela, and Brazil. The money that these players are earning from these games is pretty significant compared to how much they can earn in their respective countries.

Anil (3:50): Yeah, I think that’s the most important. I see your guild in so many different ways, and I think we’re gonna get through all those throughout this podcast. But I really do see, in one way, how Yield Guild does this next generation type university, where instead of paying a huge fee, textbooks, cars, and everything like that — you’re actually getting paid, and you also have a job. And I think that’s such a fascinating aspect.

I think throughout the podcast, Piers, Yan, and I, will express how excited we are about your guild and why we’ve been so heavily involved in what you guys are working on. But I think it’s best to take a step back and give everyone some context, a little bit of your background, your story, and then, we can slowly go into how Yield Guild came about?

Gabby (4:37): So my background is really as a game developer. Here in the Philippines, I was part of the team that made the first game back in 2003. In 2014, I started a mobile game studio called Altitude Games. We were making games for iOS and Android phones.

In 2017, we heard about Ethereum, and the concept of smart contracts. We heard about Bitcoin before, but the use cases were around remittance and fintech, which I really wasn’t so interested in. It was when we heard about the concept of programmable money, and smart contracts, that I got really interested. And so we started researching this at the game studio to see how we could kind of integrate this into our games. While we were doing this research, CryptoKitties came out. This was around November 2017, and it popularized the term non-fungible token. It brought down the Ethereum network, and it showed that you can put unique tokens on the blockchain.

So this is really a very kind of “aha!” moment for us being game developers. Now that we realized that you can put game items on the blockchain, which is kind of sovereign — the player owns them, and is no longer directly tied to the game, and you can kind of take it with you wherever you go — that was really an eye opening moment. And I’ve been kind of pushing the boundaries for NFTs ever since. So in 2018, we started developing a blockchain game where I released one called Battle Racers. In the last year, I was heavily researching different protocols related to NFTs and DeFi.

I think, most importantly, for this narrative, I started playing Axie Infinity in late 2018. I met one of the founders, Jiho, at one of the conferences and I invited him here in Manila to talk about blockchain games and he left me three Axies. And basically, the rest is history.

Anil (6:40): Yeah, I think, we have to pause here, and just pay homage to how incredible Axie Infinity is, and what an important piece it actually plays here. Obviously, here in Delphi especially, Yan, and Paul from our team, played a really big role in designing the AXS (Axie Infinity Shards) governance token. But maybe Yan can give some context. I think very similar to Gabby, we fell down the Axie rabbit hole, and from 2017–2018, we saw something growing there. Maybe, Yan, you can dive into that real quick?

Yan (7:12): Yeah, absolutely. It was actually when we first started our consulting gig, where we were asked to look into the gaming space. This was in late 2018, where there was basically nothing except Axie Infinity. So we can confidently say that nothing else that we looked at is still around at the time, or at the current time. Axie Infinity was by far the game that we thought had the most promise, it was live, we actually enjoyed playing it. So we contacted the team and as part of the natural due diligence process to learn as much as we can about the game, we continued to follow it.

Thankfully, they reached out in late 2019, to help them design the token. That was a really fun experience, because we played the game way back when, and the idea of a token at the time was still something we imagined that we were going to bring eventually.But it kind of helped us wrap our minds around the whole idea of play-to-earn, what it can mean, and then how sustainable the model is. As all the in-game flows are basically accrued to the token, rather than all the in-game spending in a normal game accruing to the equity of a company.

And really, that’s where all the value sits. Here, you have a situation where as more users join, as more money is spent in the game, it all gets added back to the community pocket, which is effectively used to incentivize additional adoption and reward token holders and kind of allows for a lot of unique mechanisms to engage with the user base.

That was something we designed in late 2019, and I think we had the opportunity to lead the round in 2020 through our venture arm. But yeah, it’s been really insane to watch, especially as of late, their numbers have been nuts. I know you guys have a really large role to play in that. So we’d love for you guys to expand on that.

Gabby (9:12): Yeah, so we’ve been very active in Axie Infinity ever since we started Yield Guild. We were doing what is called a “scholarship program” in the game where we are breeding Axies and lending them out to players that are coming in. That is definitely the leading cause of the explosive growth that Axie has been doing lately.

So just some quick numbers, we have around 2,000 Axie scholars in Yield Guild, we have around 18,000 guild members overall, and these scholars have farmed over 18 million SLP (Smooth Love Potion) which is over $2 million USD. The most amazing thing about that, is that 90% of that has gone back to our players; so 70% goes to the player, 20% goes to the community manager that’s handling them, and 10% goes back to the guild.

So of the over $2 million generated, most of that flows back to our players.

Anil (10:11): Yeah, that’s incredible. I don’t think people really understand the scale of those numbers, especially when you’re talking about the people that those numbers are going too, right? If those revenues were going to, you know, crypto whales, they might be like, “Okay, this is a drop in the bucket” etcetera. But when it’s going to people in places like the Philippines, Venezuela, even small villages in India, and everything like this — it’s just so massive.

It’d be great to go into some of these stories, because you’ve introduced us to so many people whose lives Axie Infinity and Yield Guild has positively impacted to the point where in these conversations, they’re telling us that they go to sleep and wake up every morning praying that Axie Infinity and Yield Guild are there tomorrow. That is such a heartwarming story. I don’t know which stories you want to pick, but I’m sure you have a couple to go through.

Gabby (11:06): Yeah, it’s just crazy how many stories really just come out of our community. For example, Cabanatuan City in Northern Philippines is where the earliest epicenter of Axie Infinity came out from late last year, because of the early lockdown. And we have a lot of players there of all ages.

There is a grandma and grandpa tending their store, and when there’s no one in their store, they’re just playing the game, then they’re able to use that to buy medicines. We checked up on them recently, and through their SLP earnings, they were actually able to financially assist their daughter who had migrated to Canada for a better life. So it’s kind of a crazy story where it’s a reverse situation where the parents who are retired and kind of grinding Axie Infinity are helping their daughter who has moved to a better life.

There are people who have bought food for the table, milk for their kids, a car, or even two houses at the extreme end. It’s amazing how much a lot of these people have gotten from SLP. And the best kind of feedback cycle are people helping the scholarship program. They’re able to earn some money, and they actually started helping some of the other people in their vicinity.

So they may start their own small scholarship program, or they may be investing in Axies for their family members to play, or they may be paying for some of the immediate needs of their family. There is a super strong culture of pay-it-forward which is actually a very strong positive network effect of people helping people get out of poverty, and into upward mobility in life.

Anil (13:23): Yeah, I think that’s such a big role about it too. When Yan, our team at Delphi, and I — we were looking at this, even talking to investors like Mark Cuban about Axie Infinity and Yield Guild, there is almost like a big responsibility and duty where you want to make sure that this game is sustainable, and this model is sustainable for the long term. So, you know, understanding that aspect of it is key.

I think, obviously the most vital and important part about that is the community, right? You saw this with DeFi protocols where even the strongest DeFi protocols, their community isn’t as sticky as maybe you would have hoped. It comes in waves. But in a game like Axie, and these other crypto games that Piers has been diving a lot into, these communities just become a little bit like cults, but they’re way stickier than these other DeFi communities or these other communities that might move based on where the yield is.

You can’t really fork or you can’t do a Uniswap to Sushiswap in Axie, right? You can fork the game, but you can’t fork the community. It’s pretty incredible to see that. What is it about crypto games, and Piers, feel free to jump in here as well. All these games that you know, even with something like Illuvium that we’re seeing right now, the community has already become so strong in this game and it isn’t even out yet right? What is it that makes that happen?

We’ve discussed this so much with the team, but I’d love to have an open conversation here about it.

Piers (15:07): Yeah, Gabby I don’t know whether you want to jump in on that one. We’d love to get some color around, the types of things you guys are looking for within these up and coming games and virtual economies.

Obviously, it’s still pretty early days across the board. I think we can probably discuss some of the merits of this technology in gaming at length, which we’ll get onto. But yeah, we’d love to know, how you guys are thinking about what those target virtual economies are and, what that selection process looks like for you.

Gabby (15:37): We do look at a lot of different games to see which ones that we would like to invest in. The primary one is that there has to be some sort of play-to-earn loop. That means there is some kind of reward from playing the game. So for example, our community loves NBA Topshot, but we would not invest in it as a guild because there is no yield component about it, we’re not really set up as a guild to buy and sell or trade NFTs.

We want to buy NFTs, and if we can hold them forever, our community just earns yield from it forever. We did this first with Axie Infinity, then we did this with League of Kingdoms. Most recently, we’ve invested in Zed Run, Splinterlands, and a few other games in between. When we buy this, we pair this with a community lead. Basically, someone from our community is very passionate about the game, and they take control. We want to hand off the day-to-day operations playing the game and governance over to our community.

One of the concepts we have is that we were creating a DAO of DAOs. So there’s a DAO for each game containing the assets and the yield that is in each game. So each game will have its own wallet, and there is a token minted against it. So in our case, the token is YGG-LOK for League of Kingdoms, and then the players get to buy in the subDAO token, which is basically our cost of acquiring the land. So instead of buying lands themselves, they are part-owners of the YGG-LOK estate, and then we hand over governance to our players. So they are pretty much free to run the game as they see fit.

So far, one governance proposal that was passed is that the community wanted to turn the yield, which was DAI, to c-DAI or Compound DAI, so it would still be earning yield while it was in the wallet. I think the community is just starting to figure out what it means to have a blockchain style of governance in games, such as League of Kingdoms, and it’s an experiment that we’re really interested in pushing to the limit in all of the games that we’re working with.

Pierce (18:01): Super interesting. I’d also love it if you could give some color. Obviously, you come from a more traditional game development background, and you’ve been in the industry a long time having built a number of mobile games. Can you comment at all on this shift towards these open virtual economies whereby people are able to participate in the economics of the value that they’re helping create? And if you can give some color on the high level shift towards some of these larger game publishers and whatnot?

Gabby (18:32): The most important concept is that these games with NFTs are driven by player-owned economies. We’ve had some instances of these in games before blockchain. So I guess most notably, EVE Online, which has been around for almost two decades now. But it’s always been either impossible, or kind of a gray market to cash out resources that you’ve had in-game into real money.

So with these player owned economies, it’s really your player base that owns a chunk of your economy. And you, as the game developer, you’re acting as the kind of facilitator of your own economy. So it’s like your own little country, with its own little economy, and you’re creating the game experience that will allow this economy to grow. And yeah, we’ve seen this, more successfully with Axie Infinity so far. But I’m expecting other games will be able to build very interesting economies that people will be able to invest in as well.

Yan (19:39): Yeah, I think that’s really important where the game is proactively making this feasible. Thinking back, I’ve been a gamer for my entire life. So the first kind of instance, where I noticed that this element existed, but the game itself made it prohibitive.

It was Diablo and Diablo 2 where in order to monetize the runes or any kind of assets that you you pick up, you have to to transfer gold to JSP and use a third party site to store your wealth, then other players would have to do it through there as well. It created a lot of friction and made it really difficult.

For Blizzard, it kind of makes sense, where they don’t want to make it easy to store wealth across seasons — they’d rather have you restart, and then commit all the time and kind of play there. Whereas right now what you’re seeing with these kinds of games, even with the play-to-earn model in general, is the way it’s sustainable in a handful of ways.

On one side, before the Axie token even launched, the way that it existed was that you have on one hand, a transaction where you have users that play the game to farm SLP, and that item is minted when you farm it, and then it’s destroyed when you consume it. And so, for certain players who need to breed and all the future actions that will involve it, it takes a while to farm. And so from their perspective, it’s a lot easier to buy some of it when you need it on an ad hoc basis to perform potentially more profitable actions, or it’s just easier for you to go down that route rather than farming.

And on the other hand, you have the users that can play the game and farm this resource and the rate at which the yield that they get by farming and selling this asset is really considerable relative to the wages they’re able to earn. So you kind of have this geo wage arb where both users are happy because on one hand, it would take too much time for one user to farm it. And on the other end, it’s actually very lucrative for users to spend their time farming it. And then you’re able to actually facilitate that rather than normally make that a friction as you’ve seen in previous games.

Anil (22:06): Yeah, I think that’s really well said. That’s how play-to-earn works. We did a really good job in the Play-To-Earn documentary, which by the way we’ll put in the show notes. If anyone is listening and hasn’t seen that, it’s on YouTube. Gabby, the Axie Infinity team, Yield Guild, Delphi Digital, and Emfarsis did such a great job on showing exactly the impact of that. And I think we should have a video of you explaining just what you said, in combination with that video, because I think that’s the full story right there.

I think one of my favorite parts about this is going back to what I said earlier, this being, kind of a university where people are getting paid. So the job aspect of this is so powerful where the future of work is right in front of us.

Obviously, you hear people talking about how everyone’s going to have their own jobs and not be working for companies, etc. It’s amazing when he says something like that, and people think like, “Oh wow that’s gonna be crazy at the end of this decade” — I kind of laugh and think this is happening right now with Yield Guild, you know, protocols like this.

So Gabby, I’m such a big fan of the Yield Guild team. Maybe talk about how that team came into shape, but also how your team is not going to be this centralized. Your team isn’t going to grow to like 50 to 100 people over the next six months. It’s actually going to just be a community-driven effort, right?

Gabby (23:41): So at Yield Guild, there’s three of us as co-founders. One of my co-founders, he’s an anonymous developer called Owl of Moistness. So when I came into Axie, late 2018, he was already there, he was like a community dev. He actually makes amazing Discord bots, and smart contracts. Last year, during this time, we were actually learning how to yield farm for the first time. So this last year, we were actually farming the YFI DAI-Balancer pool if you remember those days. We were learning yield farming from scratch in different protocols, not getting much sleep. Owl posted two double mystics on nftfy.org/ for collateral and I lent him 20 ETH and he was yield farming on that.

At the same time, Beryl’s a friend of mine from the crypto space who has a deep experience in fintech. She was actually in the founding team of Coins.ph, which is the number one crypto wallet for a long time in the Philippines. We were yield farming separately. What happened was that Axie started exploding in Cabanatuan City in the Philippines because of the lockdown. I thought that it was time to create an organized guild out of this and start it.

Beryl Li, Gabby Dizon, and the pseudonymous Owl of Moistness, co-founders of Yield Guild Games.

The funny thing was, during DeFi summer last year, there was so much going on, I started becoming an NFT insurance agent for Yearn. If you remember those times, that was how I met the Delphi Digital team. So Anil actually DMed me out of nowhere on Twitter, and he’s like, “Hey, I really love what you guys are doing. Way to go showing what NFTs can do.”

Anil didn’t know that I already had a pitch for a play-to-earn guild in my back pocket. So I asked for a call and I targeted Delphi Digital specifically because of two things: one, I knew that they designed the AXS token, and second, in DeFi, I always heard about, “Oh, why don’t the Delphi Digital team design the the YFI token or this other token or this other token.” I was like, “Yeah, holy shit — I need to talk to these guys.” So yeah, I got in touch with Anil, met Pierce, met Yan and the rest of the team. Colm as well, and yeah, that’s how we really got started.

For the other part of what you said, how are we thinking of growing the team? So the funny thing is, we’re a team of maybe 12 now, but I see the team has basically 18,000, which is the strength of our entire community. Each of our game leads are from the community, all of our scholarship managers that are handling thousands of scholars are actually community members. What’s special about it is that these guys are all empowered, and are able to earn, even though they are not basically salaried members of the team.

For example, each Community Manager, they are earning 20% of the SLP that the scholars generate. And on top of that, once we launch the YGG token, we’ve actually set aside 45% of the supply to give out to the community over a long period of time to make sure that our interests are aligned, and that our community as much as possible are the owners of the protocol — not just the whales and investors who have a lot of money.

Anil (27:22): That’s a bit of an alpha leak. I couldn’t be more excited.

I remember our first call, obviously the passion came off. And you know, Delphi Digital and our team, we’ve been really involved in the Axie community. But we’re busy running a research consulting ventures division. So we aren’t on the ground floor like you and Owl. Getting your perspectives about that community was just so fascinating and I’ve told you time and time again, Gabby, I’ll say publicly on this podcast — If I wasn’t working on Delphi Digital, Yield Guild would be the one place I would dedicate all my time and energy where it’s right.

I think the most fascinating part about it is you have an outlet for any type of person, right? So it’s a university for people who do want to start learning and make money, and not waste their time or energy going to university where they’re majoring in something that they don’t even know if they’re going to get real-life knowledge. As you’re learning, you get revenues for that.

But at the same time, I think you guys have such a unique opportunity where you have an outlet for people who are, maybe, giga brains in the space, and maybe, they don’t need to earn income from playing game or anything, but they want to do something where they’re having an impact, and actually help move the space forward.

It’d be great to hear, you obviously can accept basically anyone who wanna work at Yield Guild, because it’s such a vast operation. But what type of people are you looking to join? Because I think that that would be great to let people hear on the spot as well.

Gabby (28:57): We have such an, I would say, a diverse range of activities as a kind of social guild that is a DAO, that is part investments, that comes attached with a large community. So for example, one of the roles that we are hiring now is an esports program manager. This is especially after our last round, which was invested in and led by BITKRAFT which is basically the OG esports people in the world, right? We’ve been getting a lot of guidance from them on how to build an esports program. This is important for us because we think that NFT gaming esports will be really huge someday. We want to be at the ground floor of how it’s important for us.

It’s like a branding exercise. For example, if I’m a scholar from the Philippines or Brazil, coming in, there may eventually be many different guilds that they may want to join. We want to have a world-class NFT esports winning team, and for the scholar to say something like, “Hey, I may be a scholar now, but I want to be world champion someday.” We want to be able to build that path where I come in as a player with skill and no money and end up eventually being a champion. So that’s one example of what we’re building.

Another is basically early-stage investing in games, and that comes with a very different skill. It comes with evaluating these games that are coming out, looking at tokenomics, looking at how value will accrue to the game’s economy, and if there is a token involved. So that is a very different skill level.

There’s a bunch of operational roles that we have, not only within the core team, but also in each of the games themselves. Each game is a little bit different, which requires different skills. For Axie, you need a little bit of that Hearthstone card being the strategy where you kind of know which meta you’re playing, which cards you’re going to be using, and kind of being good at timing that.

In different games, you will also need different skills. Zed Run, for example, we have one manager who is breeding horses, studying the traits, and then figuring out how to raise those profitably for the guild. Different people are drawn to different parts of the operation and we kind of try to look within the community to see which ones are super passionate about it. We give them the leeway to run away with their skills and interest in the guild.

Anil (31:55): Exactly. I think, as you were saying all that I was smiling, because Yield Guild mirrors Delphi Digital in a lot of different ways. Where at Delphi Digital, our main product is this pool of intellectual capital — finding the best talent, we can have all these different use cases where we can siphon them off into research, consulting, ventures, etcetera. So, when we interview at Delphi, we always say, “What’s your dream role?” Like, everyday when you wake up, what would it feel like work to you that you can excel at, then we can kind of craft that or roll out for you here.

I think Yield Guild’s in an even better positioning because it’s all like, you go to the gamers and say, “What’s your dream role in the gaming space?” This can actually be your job now, and you can siphon them off into all these different ways. Even on management, right? The esports angle is, I think, one that people don’t even realize your guild is gonna tap into and probably dominate quicker than anyone else can even get up and running. Yeah, I think the Yield Guild flywheel is probably one of my favorite aspects of what got us really excited as well.

Yan you, you want to maybe dive in what, you know, all these different ways to look at what YGG really is here?

Yan (33:12): Yeah, absolutely. So going into kind of one of them, obviously, you know, you’ve built up this massive user base across a lot of different areas. I think what’s especially unique with gaming crypto is that we’re tapping into a completely different user base. As games launch, and they come online, part of how they gain momentum and enter the general economies for a lot of these games is you use the token initially, to bootstrap players in the early days and really incentivize adoption. So you kind of escalate velocity with the games and that’s part of what they build into the model, so it’s a core necessity for the game itself.

Here you have Yield Guild sitting with a massive amount of users that are playing crypto games. Some of them are playing because it’s fun, some of them are playing to make a living and there’s that combination that makes it really beneficial for both users. And now with each additional game that comes into the space, it’s beyond their best interest to partner with your guild in some way to plug into the community, to integrate, to learn.

As you guys deal with more and more games, you start to see what works, and what doesn’t. And so they’re gonna want to tap in and integrate with you guys in every single way. There’s a massive user base to plug into, and they can learn from what you guys have seen in a game. They’re able to kind of understand what works and realistically what doesn’t, and I think it also helps the users themselves because the members of Yield Guild can have a choice. Do I want to play this game? Is it more profitable to play this game? Am I better at a certain game? So everyone gets to optimize for their ideal situation.

I think it becomes a really healthy way for new games to join the space, and it also just makes it really possible for new games to join the space, where before they had to individually deal with finding community and finding players. Now, the probability of success for all these games gets incrementally higher as Yield Guild grows.

Piers (35:16): That’s one of the aspects that I love the most, providing these structured engagement opportunities for this still nascent space. I mean, obviously, all of us who are in it, and see what’s coming and have that degree of conviction. But for many, there’s still a long way to go on that front. So that’s one of the really exciting aspects for sure. And as Yan was alluding to the kind of pedigree of sophisticated users that understand this stuff, the concentration of them in your guild at this point is almost a little unfair.

I wonder overtime, how you think about rival guilds that do similar things emerging, because that’s a world that I look forward to where you’re operating across multiple virtual economies, and you’re the dominant force and you have all the best players and all the best resources and you’re generating a lot of yield. But I look forward to the day it becomes competitive. So I wonder, Gabby, whether you can comment on that at all.

Gabby (36:08): So we think of ourselves as a meta guild. I think it is healthy for guilds to have competition in games — you definitely do not want an IOI situation wherein it’s basically just one group dominating everything. That said, the way to think of Yield Guild is not one monolithic guild but actually a series of very powerful cells that is empowered by the community, the greater community of Yield Guild, the infrastructure that we have, the incentivization around our token, and the culture that we have, around the guild itself.

I don’t think people really understand — outside of the Delphi team and our investors — about the size, scale, and impact that we are really going for at Yield Guild. We don’t want just to be a game community that is present in different NFT games around the world. What we see with our impact is that if we are able to onboard millions of millions of gamers around the world, we are going to be a competitor to Uber, Lyft, Grab or Tokopedia. So it’s not just the game communities; instead of driving taxis, they will be driving Axies. Basically, they’ll be farming in virtual land, and we’ll be competing with the work that people are having in their real lives.

When people realize they can log on to a game and actually make two to three times more money, and on top of that have equity or ownership of the community that they belong to, I think a lot of these jobs will be not that interesting to people around the world. So that’s where we see ourselves and we think that Yield Guild will basically be the major economic force in the Metaverse.

Yan (38:00): Yeah, and just one thing I want to touch on there, which was the example you brought about with the Uber comparison and the owning equity.

So just to zoom in and understand, the play-to-earn component, has two facets. One is the consumable assets, then the other is the game and incentivizing players to come play and the rewarding of tokens. So the way to kind of think about that is, with Uber, you have the business model early from the investment side as VCs come in and throw a bunch of money at it. That’s used to subsidize a lot of costs for them to grow as quickly as possible and achieve scale where cost can make sense. And so the idea is that VC dollars subsidize drivers and that’s kind of how it works.

Here, it’s a similar mechanism, but with a different distribution in the sense that you now subsidize and incentivize the drivers and the users through equity in the actual project. So the idea of you, imagine Uber rather than subsidizing drivers through VC cash is able to subsidize them by giving them very small slices of equity in Uber. And so now, not only are they like you don’t have this kind of consumer, it’s just a different relationship, where now the players themselves have a massive vested interest in seeing this succeed and, and it’s the natural way to build communities as well and create longevity and stickiness with the users.

But now, the users themselves, and the way that the equities transfer, as they own the token, they can stake it, and all that in-game spend, gets put in a community pool and gradually distributed to token holders and used for other incentives to grow the game. Every dollar spent in the game is kind of returned to the community. And the players themselves are part owners in the game.

Anil (39:52): Yeah, I always want to leave some pause there just so that all sinks in, everyone. Because I think that’s such an important aspect of it. Gabby, back in October, when you and I were going around shopping this to every crypto fund that we could talk to, and now, you have so much interest from pretty much everyone in the game. What is that moment that you think sparked interest like, makes it all click for everyone now? What has changed in the past few months, that people are like, “Okay, this is the future that the world’s gonna be building on, and I want to be a part of it,” Because something has changed in the past six months right?

Gabby (40:38): Yeah, for sure. A big part of I think that is kind of unique to the crypto scene I’ve actually been seeing is a lot of idealism in the crypto investors and releasing the documentary has helped. Just telling our story of how we are growing the crypto networks by onboarding people who are new to crypto via games, and then having them earn an income which, you know, may be a small amount to some whales, but especially meaningful for these users. Meaning, we are really harnessing the full power of blockchain and crypto networks to do good in this world.

It’s something that I’ve seen remarkably across a lot of the crypto investors, and now that the story is getting out, and now that we’re actually starting to talk to some of the more kind of traditional tech VC funds, they’re attracted by the kind of growth in this future of work story where we’re onboarding people to crypto networks, and basically having equal economic opportunity at a growth rate that is pretty much staggering. Because now, you can reach people from around the world where in your network effects used to be kind of limited to maybe certain countries or certain cities even.

But you know, we are an eight month-old DAO. But we’re operating in many different cities around the world simultaneously because we have Community Managers there. And this is just a model that we can basically scale around the world at the same time.

Anil (42:16): Yeah, I think that’s actually important to dig into. I remember a lot of the pushback that we received from crypto native funds, who were looking at DeFi protocols where you have these lines of code that can become infinitely scalable. Whereas, your guild has this huge human coordination aspect, which, you know, humans are the worst, right? Trying to solve human coordination is very difficult.

So, it might not be as scalable as something like a DeFi protocol, but what’s fascinating when you talk to, you know, Yan and I have been talking to a bunch of big family offices and big traditional VC funds, where Yield Guild is probably one of the first protocols and projects that we bring up to them. Because one, it shows a real world impact. It’s no longer possible to say that crypto is not positively impacting people’s lives. At the same time with this DAO structure and the tooling that we can be leveraging, it actually is way more scalable than human coordination in a centralized fashion, right? So it sits in the middle, where you get the benefits of almost both.

Gabby (43:24): Yeah, the human coordination is definitely a hard part. For example, pretty much any DeFi protocol will probably defeat us in terms of TVL (total value locked). But we don’t look at our protocol in terms of TVL.

We look at it, for example, like what’s the AUM (assets under management) of the NFT assets that we have? What are the fees that those are generating? And most importantly, how many lives have we actually made better? So it’s not in terms of people as statistics anymore, or how many users you have acquired. We’re actually looking at how many lives have we changed? And how have we changed their lives for the better? And as those stories come out, you see that the work that we’re doing is actually really relevant for this world.

Anil (44:10): Yeah, I guess I’m trying to think — there’s so many different ways we can, you know, go to next. Where do you see the next six months of Yield Guild? Obviously, we’ve been working with you guys hand in hand. I think there’s some exciting things right around the corner. But you know, what do the next six months look like for you guys?

Gabby (44:38): So we’re releasing the token next month. And it’s very important for us to do it at this point. We wanted to build an organic community without a token first, and I think we’ve succeeded in doing that. But we wanted to put the token out relatively early, because we kind of wanted to have the community to have ownership of the project as early as possible.

The most exciting thing in my mind is the community mining program that we are introducing later this year. So we don’t have a typical liquidity mining program in DeFi where a bunch of whales clock their liquidity in, and then they earn our token and then they kind of just sell them when they’re done, and then they move to the next protocol.

So we have what is called a community mining program, which is basically a meta quest system overlaid on top of our partner games, like Axie Infinity, League of Kingdoms, and Splinterlands. You get to perform quests in those games, and that’s how you receive the YGG token. This will be our primary method of delivering our token to our players, and our guild members. That means you have to be an active member of the guild if you want to earn tokens and not buy them.

Piers (45:55): Yeah, I think it would be great as well, if we could elaborate a bit on where the token sits in the ecosystem and some of the core use cases around that.

Gabby: So the primary way to think about the YGG token is that it’s an index of our farmable assets in the Metaverse. It is actually pretty complex, so it’s good that we’re talking about it.

YGG is a DAO of DAOs, and through most of the people that I’ve talked to, we’re probably the first implementation of this, in that, each of the games that we are working with is going to be its own subDAO as we call it, with its own token. YGG is kind of the mother DAO that will own a portion of that, and a portion will be owned by the players who are actually playing each specific game. So if I’m a gamer, and I really care about Axie, I want to own a portion of the YGG-Axie token. If I’m super passionate about Illuvium, I want to own part of the YGG-ILV token. And that gives you a localized feeling wherein I’m just not just part of a 20,000 person guild. I am part-owner of this game that I’m playing with maybe 20 of my friends, right?

But as the guild itself, the guild owns a huge part of the token of each subDAO, which means it’s almost a Berkshire Hathaway-like real estate conglomerate structure where you have a mother entity that owns significant stakes in different subsidiaries that are earning yield, that have assets. And this is a very, I would say, complex structure that I don’t think has ever been done before. But if you think about this, over time, as the Metaverse grows, we will be home to the greatest collection of yield-producing assets and NFTs in the best virtual worlds and games. And owning the YGG token will basically give you a slice of that.

Piers (47:53): Absolutely, that’s definitely one of the super cool parts. It’s kind of, as you alluded to earlier, this sort of multicellular organism, and that’s how it scales so much better right? You give people that granularity, they can sort of choose in which capacity, they do engage.

One thing I’d like to touch on a bit more as well is the kind of guild treasury overall, that war chest. If we could elaborate on that a bit, because obviously, again, you guys have these highly educated guild members who are the boots on the ground and often first on these games, And Yield Guild really has unparalleled insights into what the next great game is going to be, and the prime assets, and whether that’s virtual real estate, or there’s a productive functional NFTs. We’d love it if you could just talk a bit about the protocol treasury overall and its size and performance and what the objective is with it.

Gabby (48:43): Okay, so just a brief history of our fundraising, we raised $1.325 million USD in a seed round last October, and then closed another $4 million USD just last month. So we raised $5.325 million USD in total. But actually in that original $1.325 million we raised before we got the next round, we were actually at around at least $4 million USD in AUM.

A big part of it is that we made some early bets in games that we really believed in. So for example, we bought a lot of land in Axie because we knew that land gameplay was going to yield their AXS governance token, which is massively valuable. We bought some land in The Sandbox, which, you know, if it comes anywhere close to being kind of the Roblox of blockchain, then it’s going to be massively valuable. And I think the land itself has already grown around 10x from when we bought it.

With the treasury that we have, a big part of that really goes towards investing in the NFT assets, that is the core of the business model that we do. With the rest of the treasury, we also buy governance tokens of some of these games in the ecosystems that we believe in. The reason for that is: if we’re heavily investing in the ecosystem of a game — we’re buying NFTs, we’re bringing our community to a game — we want to capture a part of the value that we’re creating through its associated governance token. So that’s why we actually own a lot of AXS. We own the SAND token, we own the REVV token as well.

So it means that we’re an index broadly of the Metaverse and the assets that we own are a reflection of what we believe the best yield-bearing assets are in the Metaverse.

Anil (50:46): I think that’s such an important part because a lot of people and funds view Delphi Digital as this kind of premier crypto gaming investing fund, and we have all this good IP around it. The secret to that is just, you know, Piers, Colm and now Jeremy P as well. But really the secret is that it’s like we’re pinging Gabby and you know the Yield Guild team whenever we’re playing games and saying, “Hey, you guys like this?” and you know, “What are your thoughts here?” That unparalleled insight is just so ridiculous.

One other point I wanted to bridge into is — I don’t remember when it was, maybe August or September 2020, maybe Yan, you remember? — our team did this in very stealth mode, we purchased four or five axes for, I believe it was 153 or 160 grand. For us, we wanted to corner that Axie market as far as some of our favorite and the most valuable “digital battle pets,” as we called them in that post, that we thought would be the most lucrative long term, and had the most interesting attributes.

For us, as I said, you know, we’re busy running a company doing research consulting ventures. No matter how much fun we have playing Axie, which, you know, has distracted us many times over the past few years, at the same time, we can’t dedicate all this time to leveraging those assets, right?

So for us, Yield Guild also solved that problem of whales in the space. And I think this actually is a great window into thinking about the past few years of crypto gaming, and why it hasn’t reached mainstream adoption, is because the opportunity cost of people in crypto’s time is so high. Our friends and funds in the space that know their time is better served looking for the next 100x, low market cap, or just the next farm or something like that, which they can earn some ridiculous yields.

And on the flip side, Yield Guild actually bridges that where you give your assets that are immensely valuable and lucrative in the game, and help provide that to people who may not be able to actually purchase those assets for 163 grand or something like that. Maybe Yan, you can give some context before Gabby goes into just how powerful this is.

Yan (53:24): So part of the thought process behind what we’re investing in was to understand, even zooming out, Axie is still in it’s really early days. So there’s gonna be a lot of evolution in terms of the abilities and the moves. Also the game itself is always constantly rebalancing, which I think is really key to ensuring longevity, that it always stays competitive, and I think they do a really good job of balancing the meta.

But our idea was to look into and understand based on the mystics that exist and the rarity of what’s out there, relative to trying to find some of the really rare ones within the mystic group. And since those are already limited, the idea was, if we can find those, there’s potentially gonna be a lot of upside.

But at the same time, part of our concern was, how do we get some utility? NFT investing is always tough, like on the art side. I think you have to be a bit more ahead of the trend or really predicting some underlying smaller trends. Whereas we got more comfortable around this because we thought these were functional NFTs where something we’re really comfortable getting behind. We know that there’s always gonna be an underlying utility. And as the game itself grows, the value of these should naturally appreciate as more people are seeing it as a shrinking pie. So that idea was kind of the logic there.

And even in our conversation with Gabby, I kind of let him expand on what they’re able to do there, it was just another reason that we got really comfortable around it. Another reason we thought that these would have potentially have more value where it’s not necessarily just limited to the individual who owns them to really get value out of them. But there’s the ability to unlock more.

Gabby (55:23): So what we’re doing right now, we’re actually breeding our Axies, and then lending that out to our player base. But when we’re doing this, we’re basically limited by the amount of capital that we have to acquire NFTs. One of the major things that we’re preparing for is allowing anyone with their NFTs, to be able to basically stake them with Yield Guild and have our very large player community use them.

When that is unlocked, it basically unlocks millions of dollars worth of NFTs to be matched with our ever-growing player community. And now suddenly, we’re not bound by the money that we’ve raised. And our AUM can basically grow 10x, 100x, because we have outside capital coming in and providing assets that are managed by the guild lent out to our players providing opportunities to thousands of people around the world. So yeah, I think that is going to be absolutely massive. And yeah, that’s where we’re headed.

Piers (56:31): Yeah, I love that aspect for sure. You know, the ability to kind of turn those otherwise idle assets into something productive. And again, it’s just engaging all the assets out there. I’m always skeptical of using the word lubricate, but lubricating this whole economy and growing the ecosystem and whatnot.

But yeah, I’m curious, Gabby, you’ve got pretty much the best insight into all of this stuff. Also, the traditional game developer background. What do you see as the path of evolution — on what time timeline we can reasonably expect some of this stuff to really continue to break out? I mean, obviously Axie Infinity, even recently, was significantly smaller than it is now. It’s really going, you know, vertical with its growth. Are we going to see more of this? On what kind of timeline? And yeah, I’m curious how you think about that?

Gabby (57:18): I’ve been a game developer for two decades and I’ve seen major trends unlocked. So for example, when I was doing PC games in 2003, people were laughing at mobile games. And then kind of 2009–2010, free-to-play started becoming a thing, there were actually two games — it was Clash of Clans in the West, and Candy Crush, that made it absolutely massive. And then suddenly, everyone wanted to make a free-to-play game.

And now, what we’re seeing with play-to-earn, I think, what we need to see is one or two absolutely massive success stories. And Axie Infinity is the number one success story where they’re growing at basically 20–30% a week. They did a 5% growth day. The numbers are absolutely popping, and now they’re on track for something like a $1.4 billion dollar run rate, and the eyes are starting to turn and they’re like, “Holy shit, this business model actually works.” You can see that players are investing on user acquisition of other players — and this is a language that game developers can understand.

I was talking to another game developer last week and how I explained it was that game developers who are usually spending millions and millions of dollars on UA (user acquisition), paying them to Facebook and Google. With play-to-earn, you are externalizing your user acquisition cost to your player investors, that are investing in assets in your game, so that they can bring on more players for you. If you think about it that way, then like holy shit, who wouldn’t want that in their community right?

So like, I don’t know about the timeline, because things always take longer than you expect. But I don’t know with you Piers, I think you also talk to a lot of these big publishers and developers like, what’s going on in their heads?

Piers (59:19): I think, as you’ve alluded too, kind of, cats out the bag, everyone needs to be paying attention to it at this point. I think that kind of explosive proliferative power of those shared economics of those evangelical forces that are unlocked through that shared ownership — those aren’t going away. Quite obviously, I think from the consumer perspective, as soon as you see it once, maybe even if it’s not a game that otherwise would appeal to you yet, once you see it, once that consumer psychology shifts — there’s no way we’re going back, I don’t think. They’re definitely aware of it, having spoken to a bunch of them, people like Ubisoft, who have already been in this space for a couple of years, they’ve been experimenting. And I’m fairly confident that they’re starting to feel like the time might be right.

And then you know, for the others, it’s kind of a similar story. It seems pretty obvious that if you sit on your hands on this stuff, then, you know, could end up in trouble. And I totally think anyone that does, and refuses too, you know, ultimately once this does play out in its fullest form. Yeah, it’s going to be in a tricky spot on that front.

But yeah, I’d love to just talk about some of these opportunities. We talked about the Metaverse and how we’re going to evolve into these sort of increasingly pervasive and immersive digital environments. I don’t think it’s always going to be just games. I think, increasingly, all these stuff’s gonna blend together. I wonder whether you can sort of comment on that at all? Especially, in the context of your guild and where you guys sit.

Gabby (1:00:45): The most exciting part for me is that: I think what we’re doing now is we’re really building the fundamental building blocks of the open Metaverse. So first, you have the NFTs, which are your durable assets where you can build game experiences on. With Yield Guild, you have communities that are basically recruiting players, these people from around the world, and bringing them into the Metaverse so that they can start their journey from there. Even if they don’t have money, they can have their Metaverse identity, and they can be lent your first three Axies, and then you can start playing the game. And then over time, people will maybe buy their own plot of virtual land.

So I really see this as where the future of work is going. I think in 10 years, we probably won’t be logging on to a static website, or going on Zoom to have our meetings. We’ll be logging into our 3D avatars going in VR. Having a conversation such as this, you may show your real face, you may be showing your avatar. But I believe that we are headed for a Ready Player One situation. I don’t know if it’s 5, 10, or 15 years, like who can really tell? But the building blocks of that are already here.

The position that we play as Yield Guild is that we want to have that Metaverse available to anyone who would want to enter it. That’s why we want to be kind of onboarding, or what we call, the recruitment agency of the Metaverse.

Piers (1:02:34): Yeah, I totally agree. I kind of view it as, obviously, despite my best efforts, trying to get these two Luddites to buy a virtual reality headset, that side of things isn’t quite there yet. You know, the medium through which we interact with this stuff, obviously, still has a long way to go for at least perhaps the mainstream perception of what that stuff should be.

I think the important thing is that, even though you’re not necessarily immersed in it yet, all of this financial infrastructure and technology that’s underpinning it, that is going to support this economic membrane, is all being built right now. You guys are building it — it’s all in motion already. Again, the medium through which you interact with it might not be super sophisticated yet, but you know, all the eggs are being laid. For me, that’s one of the really exciting parts of that. Obviously, you guys are a big driving force in that hence my infallible enthusiasm for Yield Guild. Excited to see where it all goes. I don’t know whether Yan, Anil, you wanted to hop in with anything?

Anil (1:03:31): I think you know, Piers and Gabby, you guys both share this almost identical view of like, this is the Metaverse, this is the future, etcetera, etcetera. I always look at my own life — I wake up, I’m checking my phone, I’m on the laptop all day, so I feel like we’re already part of this Metaverse. Yield Guild is just like exactly where the future is going to be.

But you guys are already there, and not just building it, but you guys like, just the way that it’s being formed, right? Like you guys are building it with what you guys are building towards. It’s kind of like a beautiful aspect. I mean, you know Delphi Digital, our whole team has been so proud of backing Gabby, Owl, Beryl — your team’s been fascinating. The cause, mission, and you know one with the vision of yours is the most exciting thing to us. And obviously, we’re really excited for the YGG token to come out next month. Although, I think that quest mining is going to be really distracting towards the Delphi Digital team. So, you know, that might be shaky for that month or so.

But yeah, Gabby, you know we really appreciate the time. Any closing words or anything you want to say, before we hop off? Obviously, Yan, I’ll let you go before we go to Gabby, but you know, always a fan Gabby. Always a pleasure.

Yan (1:04:50): Yeah, and I just said it’s tough to assume it’s anything besides inevitable. You know, you can just think about how quickly it’s grown now. And then, on a longer term basis, just general demographic shifts and how every, you know, all the younger generation’s all digitally native, and then this is just going to seem completely natural to them. So yeah, it’s a transition that’s happening regardless.

Gabby (1:05:14): Okay, it’s hard to close. This has been an awesome conversation. But I guess, looking back on my career where I started making games purely for entertainment. Coming into crypto and learning about the basics of blockchain, digital ledger, and what it’s used for, combining that with NFTs, and now being able to combine DeFi elements and earn yield, and then use a DAO structure to start building the Metaverse — there’s a lot of concepts in there and we’re actually getting progressively more and more towards science fiction. And for me to be able to wake up every day and kind of work towards making this science fiction or reality for the rest of the world. It’s just the most amazing job in the world. That’s really all I can say.

Anil: I couldn’t agree more. Awesome, guys.

Piers: Gabby echoing Anil’s entiment, it’s always a pleasure. You’re always a source of inspiration and enthusiasm around this stuff. And yeah, I think I speak for all of us when we say we couldn’t be couldn’t be more excited to be on this journey with you. Looking forward to finally meeting in meatspace at some point. Hopefully this can be having a beer and discussing all things Yield Guild.

Gabby, appreciate you taking the time. Anil, Yan, likewise.

— END —

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A play-to-earn gaming guild, seeking yield around the Metaverse.

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Yield Guild Games

Yield Guild Games

A play-to-earn gaming guild, seeking yield across the Metaverse.