It is crazy to watch how things have changed in a couple of months. In this post, I will share my observations and learnings, and some thoughts.

Observation 1. Many many many crypto games

The entire GameFi space is getting extremely hot, with new games getting added onto the gaming list on CoinMarketCap every day. As of today, there are 268 projects listed, while there are 150 at the end of August, almost doubled in 3 months. And honestly it’s really time consuming to keep track of things.

Observation 2. Games are either too simple or not released

Most of the games released now, are extremely simple web based games, similar to candy crush or some turn-based mobile games, but with poor quality and anime.

There are bigger games that people are anticipating, but they are far from releases. Among these I’m anticipating Illuvium and Star Atlas the most.

Observation 3. Game studios are integrating with crypto

Game studios are integrating crypto. And because they have already built games before, they can launch an engaging crypto game much more quickly.

For example, Thetan Arena was already a mobile game on iOS with a decent user base, and they are adding an NFT layer on top of their game. I downloaded the iOS game and played it for two hours, it was fun!

Overall, we are going to see “crypto companies trying to make a game, and gaming companies trying to introduce crypto” and SBF thinks gaming companies will win as the interview below. I cannot agree more.

Observation 4. Opportunities to support gaming studios

With more gaming studios integrating with crypto, we are going to see some big businesses being built out to help these gaming studios transition into crypto.

Recently, Forte raised an astonishing $725M (Wow!) just for this purpose.

There are other platforms such as Enjin and Wax, but I have not got the time to look into these.

Observation 5. Game publishing platforms are being built

In the traditional gaming world, we have Steam as a gaming platform. On crypto, Gala seems to be building the steam for Crypto games. Also, Gala has a really great founding team - co-founder of Zynga.

Observation 6. Open world games still need more work

There are a few projects trying to build an open world Metaverse, including Sandbox, Decentraland, CryptoVoxels.

Among these I’m most bullish on Sandbox, tho its games have not been released at all… I have got to play Decentraland before in April and I have to say the graphics quality is really subpar back then. And CryptoVoxels is more like a museum rather than open world.

Observation 7. Crazy valuations

Almost every game I mentioned in this post, has a booming and crazy valuation, especially after Facebook’s recent name change to Meta.

As of today 11/22/2021, their fully diluted market cap are respectfully

Illuvium: $10.6B (2x since September)

Star Atlas: $5.7B

Thetan Arena: $5.8B (10x since September)

Gala: $13.5B (15x since September)

Sandbox: $15B (5x since September)

Decentraland: $8.8B (4x since September)

As a benchmark, Electronic Arts, is only valued at $35B. And a lot of these crypto games have not even released, not to mention a large user base.

Closing Thought 1 - Act faster

Even though I studied looking into Crypto Gaming in early September, I did not initiate any position in these except a small position in Illuvium. I was often times scared by the crazy valuation - but it only got crazier :)

The learning here is often times the valuation does not matter that much, but understanding where you are in the market cycle, is important. Act fast and buy a good project when not enough people are paying attention.

Closing Thought 2 - Building games takes years and we are still early

Building great games is extremely hard and takes years to complete. Recently I finished reading Blood, Sweat, and Pixels - it tells great stories about how hard it is to build a game and I highly recommend it.

Considering most games only started building in late 2020 or 2021, it is unrealistic to expect great games released this year. It is more realistic to expect some big releases in 2022 or 2023. With this in mind, I expect there will be more potential in large games in crypto gaming next, and among those I’m most bullish in Illuvium, but that deserves its own post.

One caveat about these large crypto games tho, is whether their long development cycle can survive a sudden crypto market down turn - what if crypto market becomes bear again? You never know.

This post is not financial advice. Please do your own research :)

#crypto #gaming

I learnt this concept in my new startup, where things are extremely busy, and we have to ruthless prioritize constantly. This principle has served us greatly, as we are a scrappy startup where resources are extremely constrained.

The 80/20 rule is so influential that I start to think more about it in my investing work and daily life.

In investing, it’s astoundingly true that 80% of the gains came from 20% of all the plays. For me, most of these plays are high conviction macro trend plays, such as crypto, NFT, Cloudflare, etc. While 80% of the time, I waste my energy and efforts worrying about short term speculations. Reflecting on this, I came to understand that a key question to ask myself in investing is - is this something that will contribute to 80% of my gains? And the key question to answer this is - is this something a macro play that I have high conviction in?

In daily life, 80% of the happiness also seems to come out of 20% of the time. These could be the best movies you watched, the most important friends’ birthday parties, or the most memorable trips. These define the memories of your life. And if something disappoints you or you feel bored, take it easy - because that’s 80% of the life.

As bitcoin had a new all time high this week, I wanted to share why I had high conviction in Bitcoin. In 2020, I invested 25% of my personal portfolio into it. And now my entire crypto asset is much higher than 25%.

My thesis is mainly built upon 3 points:

1. Generational trend

2. Word of mouth marketing

3. Newer generations of products have larger value than its older generation

Generational trend

For this point, I highly recommend this video below from Thomas Lee.

The quick summary is - when the newer generation millennials grow up, crypto are the cool assets to buy, just like gold was in 1970s. Lots of their money will flow into crypto. Pls watch the video :)

Word of mouth marketing

The theory of Crossing the Chasm is still one of the best things I have learnt about. Basically for a product to go from early adopters to main stream, it has to rely on word of mouth marketing. And in the other way, tech products that achieved word of mouth marketing is either great products, or multi-level marketing.

Bitcoin, has achieved word of mouth marketing to some extent. Most of the people who bought bitcoin, just keep talking about it as an asset. With word of mouth marketing, Bitcoin is either going to become huge great products, or go to zero. I do not believe Bitcoin will go to zero, so it has to be the other way - go big.

Newer generations of products have larger value than its older generation

I haven’t found a formal theory for this one, but I tend to believe it.

Many great products, are basically things that have existed before, but in a different format.

Amazon was the internet version of Sears.

Tesla was the electric version of Ford Motors.

Bitcoin is basically the internet version of Gold. (This has become more true after the recent Bitcoin ETFs)

When such newer generation of products replace the older ones, they tend to have a much broader impact in the end, as a result also a much bigger market cap. Therefore, I believe Bitcoin will surpass Gold in market cap eventually.

I liked the color, and the concepts - dots are people, and there are all sorts of things connecting them.

Also, I definitely bought it hoping the price will go up, like other famous Art Blocks Curated projects.

However, the project did not take off. I bought it for 4 ETH, and could not sell it for 4.8ETH.

The next released Art Blocks Curated project, Fragments of Infinite Field, however, increased a lot in price.

I think it’s worth reflecting on what are the main differences between projects that led to huge price differences in the end.

One big difference is definitely the visual looking. Fragments look much better than Trossets in some way. I always find that, for good art, the more you look at it, the more attracted you are to it. Fragments does that.

Another big difference is make your art easier to understand. One failure point for Trossets that I realized later, is that the art is too hard to understand. For example, the artist set up the traits as something like this:

It was super hard to understand what different traits mean visually, i.e. all these words “Creu”, “Divideix”, are quite confusing. I spent a couple of hours before purchasing and did not figure out the pattern.

However, in the case of Fragments, it was super easy to understand. You pretty much have seasons, and snow/rain/storm.

With simpler concepts, Fragments is easier to propagate and be understood by others. It is easy for people to name the more valuable assets of the set, such as “Summer Rain”. See? It is super easy to understand! Trossets never achieved this. Once you have the more valuable part of the set, more people will be interested in participating in the game and flipping, etc.

So next time, when you are trying to evaluate an NFT project, ask yourself this - is the marketing simple enough?

Part of the reason that I really like Cool Cats, is that they got a simple marketing slogan, “We Love The Cats!”.

#NFT #marketing

I am planning to look through the Gaming list on CoinMarketCap, and select a few to invest into. I will keep updating about my research here.

To build horizontally is to build platforms or generic components for others, such as Stripe for payments and Twilio for SMS, where everybody builds on top of you.

To build vertically is to control and build everything end to end and optimize everything altogether, great examples are Apple products, Tesla, or GoPuff.

Personally I’m a big fan of building vertically, since you get to control things end to end and best design how everything fits together. For example, Apple does this a lot where they control everything inside their laptops, but other computer companies are more like fitting existing pieces together without much influence on the suppliers to push through innovation.

One fallacy about building horizontally is that you might scale faster in theory. But you have too much dependency on developers, and they may not wanna go as fast as you wish. So unless your platform is so simple and utility like Stripe and Twilio, it is really hard to pull it off.

Loot right now is taking the horizontal approach and that concerns me. We are relying on too many different sets of developers building stuff randomly here and there. In the end we might not have a cohesive ecosystem, and that affects user experience. Also it is not clear to me how critical Loot is as a component to a game.

In my view, the ultimate winner in the derivative NFT space is going to be a vertically integrated player that keeps building a cohesive experience. The end vision seems something like a game.

I really hope the Loot founding team go and build a game, instead of relying on the community to build this much. There should be one game and it better be really good.

In retrospect, BAYC team already started building a game. It seems they are ahead of others again.

But you may ask - why should I care about paradigm shift?

Basically there are two types of improvements, incremental improvements and extraordinary improvements. With incremental improvements, you just keep getting similar things, but slightly better, e.g. Litecoin vs Bitcoin. You can only keep getting such smaller improvements unless there is a big disruption. Paradigm shift brings this big disruption and opens doors for many experiments, thus brings extraordinary improvements, e.g. Ethereum vs Bitcoin is a paradigm shift.

Buying into paradigm shift is buying into innovations.

Paradigm shift is first defined in the book The Structure of Scientific Revolutions. If you do not have time to read the book, I highly recommend watching this Youtube video for the book summary.

1. Tokenmon holders can evolve Level 1 Tokenmon to Level 2 Tokenmon

2. SuperBunnies holders can evolve 3 bunnies into 1 tiger

The thesis for such deflationary NFTs sounds reasonable in theory:

• Level 2 NFTs may look amazing or are scarce in nature, thus causing people to evolve the NFTs

• As more people want to evolve their NFTs, they will have to buy NFTs with certain traits, thus causing the NFT’s price to go higher

• Then it’s a positive feedback loop from here

However, deflationary NFT will eventually have an issue with community. As more NFTs are burnt, say a project with 10K items are burnt down to 5K items, fewer people will be able to own one item. Deflationary NFT will have a deflationary community. Unless you can keep minting new NFTs by yourself. It is not clear yet how you combine minting with the current scheme.

In contrast, the mutant apes approach by the BAYC team seems smarter. Instead of having a deflationary NFT, you mint more NFTs with limited supply, thus expanding the existing community. The limited supply here is important, otherwise with unlimited supply you become the OG cryptokitties which is pretty much dead.

In summary, deflating or inflating an NFT will decide how the community grows. How the community grows is the root of an NFT project.

#NFT #crypto #deflationary #community

Loot was the most interesting thing I learnt yesterday.

We’ve seen too many profile picture NFTs, such as CryptoPunks, BAYC, Cool Cats, etc. While I love all these, they offer static images, such as

**Loot is different in that it only gives you the traits, and an API. **This is what I got:

Loot provides a platform for creators to create upon these traits. For example, you can generate more art based on these words,

The imagination is unlimited.

As an engineer in an AI startup, I spend a lot of time thinking about tech trends, building organization, building the company. Also outside of work, I’m quite into investing, NFT, crypto, etc. I feel a lot of value will be created by me just writing them down here in the public.

It is important to think about how to maintain this habit over a long period of time, i.e. years. A good framework to have is probably write at the end of the day with the biggest learnings and publish the next morning. I also see Fred Wilson have a fixed topic every Friday called “Funding Friday”.

Wish me luck.

Now in 2021, crypto has reached another all time high. I did a thorough study of what is going on to see if there is any investment opportunities. A lot of the activities in crypto are in the following 3 major catogories:

1. Ecosystems

2. NFTs

3. DeFi and Exchanges

Ecosystems

Ethereum remains as the biggest ecosystem for developers to develop smart contracts on blockchain. But it has really high transaction fees (e.g. costed more than $10 for me to send $1000 over the network).

Ethereum’s high transaction fees has led to many competitors, including Binance Smart Chain, Cardano, Polkadot, etc. I’m not an expert on these other chains, but it seems Binance Smart Chain has the most active users. But most of the applications are copy cats from existing applications on Ethereum.

Other blockchains could achieve lower transaction fees than Ethereum, but it is usually hard for them to attract and build a developer ecosystem. Because of this, many chains have built bridges to Ethereum contracts, so existing developers on Ethereum can deploy more easily on these other chains. For example, ETH-Near Rainbow Bridge, Avalanche-Ethereum Bridge.

Ethereum’s developers are also well aware of the transaction fee problem, and have been working on a solution for years, which is Ethereum 2.0. With the advent of Ethereum 2.0, the throughput of the Ethereum blockchain will be higher, and the transaction fee should be much lower.

Overall, I am bullish on Ethereum. The only real competitor right now seems to be Binance smart chain, but it’s more of a centralized solution, which diminishes its trust.

NFTs

I feel there is a lot of hype in NFT right now. Many of you might know, Beeple’s art sold for 69M, and then there is Snowden’s first NFT selling for $5.4M.

NFT offers true economic value for artists. Traditionally, it has always been difficult for artists to make a living. But now, it is easy for artists to just draw something and put onto NFT marketplaces such as Opensea, Rarible, etc.

My favorite NFT of all is CryptoPunks. It’s also the first NFT that existed on Ethereum and there is only 10000 of them. I’ve compiled a list of resources about CryptoPunks under my Twitter here.

I am really interested in acquiring a CryptoPunk, since there is good story behind it, and using it as profile picture is kinda cool. But the market seems way overheated right now, so I will keep watching and see if there is a chance in the future.

I also learnt there are NFTs as virtual land… which is insane. I learnt about it from this interview with MetaKovan who bet $69M on Beeple’s art, which I really enjoyed watching. So basically, you can buy virtual lands from Decentraland or Sandbox and you will be able to show all of your NFTs on the virtual land eventually. As of now, the virtual world looks poor in quality, and I feel they are scams.

DeFi and Exchanges

DeFi, yield farming, staking - these are all important concepts in DeFi. Read this article and you will have a much better understanding. Some of the DeFi projects are offering astonishing APY rates, as much as 10%. DeFi seems safe on the surface, since all the loans are collateralized with real coins, but I would not put money into it yet because I’m concerned with a potential bombing crash similar to P2P lending.

Exchanges are also interesting, read this article and you will have a much better understanding about the two most popular exchanges on Ethereum - Sushiswap and Uniswap. With that being said, on Binance smart chain, there is a similar project called PancakeSwap, which offers astonishing staking rates, such as 400% APY, which is absolutely crazy. It seems this is heavily backed by Binance since it’s the most popular app on the chain.

We can also trade stocks now on blockchain, which is fascinating. On Ethereum, we can do so with Mirror Protocol. And on Binance, we are starting to have Binance stock tokens. This offers real utility value because if I want to buy stocks and my money is in crypto exchange, I do not need to transfer the money and wait for 3 days for transfer. Currently, NASDAQ opens only 5 days and from 9am to 5pm every day, with blockchain, I think it’s totally possible in 5 years we could be trading stocks 24/7.

Summary

In summary, we are starting to see some crypto projects with real utility value:

1. Bigger marketplaces for artists to make money

2. Decentralized exchange where individuals take the role of market makers and make money out of it

3. Decentralized financing where individuals take the role of banks and make money out of it

4. Trading of real world tokens such as stocks

With these being said, I feel crypto world is just getting started, with Ethereum 2.0 around the corner, and there are lots of potential ahead!