Animoca Brands has invested in many Web3 companies such as Metaverse “The Sandbox” and ranked high in the Financial Times’ 2023 Fastest Growing Companies Ranking in the Asia-Pacific Region. Daisuke Iwase is appointed as the CEO of the Japanese subsidiary, and efforts are being made to expand domestically. How do they see the future of the world of Web3, which is changing at an amazing speed, such as the unprecedented NFT boom and the rise of the Metaverse?
Group President Evan Auyang, who is visiting Japan, and Iwase, CEO of Japanese subsidiary Animoca Brands KK, talked about the future of Web3.
What Happens After Crypto Winter
──The world economy has shaken greatly, and the market capitalization of crypto assets has fallen significantly compared to its peak in 2021. How do you perceive the current market conditions and the future of Web3?
Evan:What is happening now is a new Internet revolution called Web3. We are moving away from “Web2”, and the time has come for users to take ownership of digital assets and make their digital identities their own.
However, it will take time for Web3 technology to spread. The current number of Web3 users is close to the number of users in the early days of the Internet in the mid-90s. In other words, the stage of “finally starting to be accepted”. The number of wallets is still around 200 million, which is very small compared to the potential market size.
In fact, for general users to step into the world of Web3, more effort and knowledge are still required. At the moment, it is very important to be “easy to enter” and “easy to introduce”.
Looking back, in the early days of the Internet, there were many people who were critical of the Internet itself. “If you want to look something up, you should go to the library.” In the 2000s, such voices disappeared as the convenience became known and everyone started using it. However, it is inevitable that it will take some time before the technology is accepted.
Bitcoin was invented in 2008, but it’s only recently that various “applications” have emerged. The ICO boom was booming and “collapsed” in 2017, but at that time there were no applications at all. The most important change that occurred in the 2021 NFT boom was the birth of “real applications” for blockchain, and the development of infrastructure and applications for that purpose.
Projects to be culled, projects to survive
As people began to realize the potential of blockchain, the value of cryptocurrencies has greatly increased, and a lot of capital has been injected into this market. Markets have continued to rise and fall since then, but this cycle of booms and busts is inevitable while innovative technology takes hold.
For example, the “dotcom bubble” around 1999-2000 was an unprecedented surge. At the time, some people managed to get random dotcom domain names in order to sell them to big companies at a high price. However, in 2001, the “bubble burst” occurred, and the Nasdaq index dropped from over 5,000 to around 1,600.
Of course, there are companies that have been weeded out because of this, but there are quite a few companies that have survived and achieved development. Many projects are born during the boom period, but not all of them succeed. There are many that fail miserably. Ups and downs always happen.
On the contrary, it is only natural that a project of overproduction without content will fail, and I don’t want such a project to succeed. What should remain are useful projects, solid infrastructure, and good applications.
Thinking in the long term, the ups and downs in front of us are just “trivial things” for us. What we at Animoka Brands are trying to do in the world is develop applications that are truly needed. From that point of view, if it’s down like now, it’s not a problem at all. Ultimately, developers do development, and this is not enough to stop development.
What indicators are more important than market price movements?
──After the “NFT boom” that happened in the past two years, it seems that there has been no killer content?
Evan:What really deserves attention in the NFT boom is that “truly usable infrastructure” has been developed. Many new technologies have emerged in the last two years. Many high-speed Layer 1 (L1) chains such as Aptos and Sui have also emerged, and cross-chain mechanisms are evolving. The current layer is not a “speculation layer” but a “development layer”. People’s interest is not just price, but wallet performance, security, applications, and AI.
When we look at the market, we look at how many enthusiastic developers have entered, not the price action on the surface. I don’t mind the ups and downs of the market, but if developers are hesitant to enter or abandon important projects, it’s a problem.
However, the L1 chain, which is still dominant, has the power to attract many talents. Polygon, for example, has partnered with Immutable to work hand in hand to create synergies. Many developers attended the Animoka Brands event at NFT.NYC in April and discussed how they could work together to create a product. The passion for development is still firmly present.
The identity of Evan O’Yan, the leader of Animoka Brands
──What role does Evan O’Young play in Animoka Brands and how did you get involved?
Evan:His title at Animoka Brands is “Group President”. He is working to create a structure to realize the vision of founder Yat Siu.
Two years ago, Yat, an old acquaintance of mine, asked me to see if there was anything I could do to improve the governance of the company, so I joined as an advisor. At first, I didn’t intend to work full-time, but when I actually joined the organization, the organization grew significantly, and Yat began to say, “Isn’t it necessary to have a team instead of an individual?” As a result, from October 2021, he will be working full time.
My career is very different from an entrepreneur’s yat. After five years at financial institutions such as Bankers Trust and Citigroup in the United States, and eight years in consulting at McKinsey & Company, he joined Animoka Brands after working at a bus company in Hong Kong.
Ethereum Presence, Competition Between Chains
──Since last year’s update, the presence of Ethereum has increased. How do you see competition between chains?
Evan:We still think there are too few applications to talk about competition between chains. Currently, Animoka Brands takes a “stance that does not rely on a specific chain” and does not support any chain.
Which chain is appropriate to use varies greatly from community to community. Animoka Brands isn’t trying to build an ecosystem by creating its own chain either. Each chain was born with a different idea and has its own characteristics. We want each to succeed, and we never decide that this chain is the winner.
In the future, the time will come when competition between chains will get into full swing. However, many communities are still at the stage of trial and error, saying, “Let’s make it, let’s actually do it.” We also think that we should watch the movement.
Of course, Ethereum has a big presence. The upgrade clearly increased scalability. L2 chains using zero-knowledge proofs have also appeared. The chances of Ethereum becoming “permanent” are increasing. But that doesn’t mean other L1 chains aren’t possible. This is because each chain has a different management community and a different “thought”.
Hegemony of GAFA, era of DAO
──Will a giant entity like GAFA appear in the decentralized world of Web3?
Evan:Ultimately, it will be the “entrepreneurs” who will shape the world of Web3. This is why we hired Daisuke Iwase, who has both a vision and a proven track record as an entrepreneur, as CEO of Animoka Brands Japan.
However, I do not think that huge, absolute and dominant entities will be born one after another like in the Web2 era. From now on, it is the era of DAO. It seems likely that multiple DAOs, each with a wide variety of scales and ways of thinking, will coexist.
To introduce one of the ways DAO should be, “ApeCoin DAO” is one of the cases that is going very well, even if it is not said that there are no problems at all. Because it is completely decentralized, neither Yuga LAB, the creators of BAYC, nor Animoka Brands can dictate and impose anything. In fact, there have been cases where important proposals made by Animoka Brands have been criticized and rejected.
However, we were “extremely happy” that our proposal was rejected. The people who opposed it “actually read the proposal and considered it properly”, and it is also valuable that they offer their opinions in that way. Most importantly, the arguments generated by the criticisms resulted in better proposals. Of course, I thought the original draft was “good”, so I proposed it, but in the end, “it wasn’t good enough.”
In a GAFA-style organization, all important matters are decided top-down, and there are many cases where the people below have no choice but to accept or not. In comparison, ApeCoin DAO’s decision-making system is more democratic. The reason why ApeCoin DAO makes so many proposals about how to utilize assets is probably due to the adoption of such a decision-making process.
Why Animoka Brands Appointed Mr. Iwase as Japan CEO
──Does this mean that the attitudes of participating “companies” will also be questioned in the DAO organization? What is the corporate culture of Animoka Brands?
Iwase:As you can see from Bezos and Zuckerberg, the personality of the founder has a strong influence on the corporate culture. Animoka Brands is no exception, and is rooted in the Yat culture created by founder Yat Siu.
Yatto’s personality is gentle and open, and he always has a style of giving, giving, giving to help others. The management team he has assembled follows the same trend.
The supportive and open attitude of the members was evident when working with Animoka Brands from the outside, but it became even more apparent once inside. I think this corporate culture is very suitable for the Web3 era.
──How did Mr. Iwase become the representative of the Japanese subsidiary, Animoka Brands Inc.?
Iwase:Yat and I have been friends since 2018, when I started living in Hong Kong. Web3-focused digital label brand KLKTN (collection), which I co-founded and serves as CEO, is funded by Animoka Brands. The direct reason for this was when Yatto asked me to become CEO, saying, “I want to take the Japanese subsidiary of Animoka Brands to the next stage.”
KLKTN is a company that has strengths in domestic music, manga, and anime content, and although its areas of expertise are slightly different from those of Animoka Brands, their visions overlap in many ways. Therefore, I decided to accept the offer because I wanted to further deepen the cooperation between the two companies and produce better results.
What will happen to the stablecoins that matter in Web3?
──I would like to know your thoughts on stablecoins.
Evan:The presence of stablecoins is huge. Especially in times like now when cryptocurrency prices fluctuate wildly, it has become one of the important means of “safer short-term holding of assets on a decentralized chain”.
Regarding transparency, we are moving in the direction of ensuring a higher level of transparency. The development of stablecoins is very important, and there will be bigger and smaller ones in the future.
On the other hand, the debate on regulations will also deepen. Regulations and guidance will be necessary, and in order to become so-called “official”, issues such as the location of the issuer will also arise. The same level of transparency as USDC (a dollar-linked stablecoin issued by US Circle) is also required.
However, even traditional banks are not 100% transparent. A country’s legal currency is also backed by the vague term “the country’s economy.” Not all bank deposits are collateralized. Within the limits of regulation, banks are exercising great leverage. Looking at these points, it might be said that Circle is rather conservative in its operations.
Close relationship between Animoka Brands and Mitsubishi UFJ
──In Japan, Mitsubishi UFJ Financial Group (MUFG) is focusing on business development in the Web3 field, such as preparing a foundation for issuing stablecoins. How does Animoka Brands perceive the partnership with MUFG?
Evan:MUFG is a very important partner. As the largest financial institution in Japan, we have built various relationships, and by partnering with them, we will be able to bring many Web3 services to Japan. It should also demonstrate great power when bringing Japanese IP overseas.
Digital assets such as NFTs boil down to culture. Culture such as manga and anime is a very interesting existence in itself. It has a big influence on Asian pop culture, and the market is huge. That’s why we want to deepen our partnerships with IP holders such as Kodansha and Shueisha to bring the digital collectibles market to Japan and at the same time expand Japanese IP to overseas markets.
What I expect from the partnership with MUFG is the ability to realize it. We need infrastructure, we need markets, we need partners who know how to handle IP, but that’s not enough. It is essential to have a partner who has a strong local base and is well versed in overseas affairs.
5 areas Animoka Brands focuses on in Japan
Iwase:MUFG is trying to be proactive in crypto and NFT ahead of domestic companies, but it is still in the experimental stage. Their challenge is to utilize the assets of Japanese companies in Web3 and enter the global market.
First of all, we are planning to select several fields where blockchain can have a positive impact and create use cases and examples. At the moment, we are planning to implement Web3 in society in five fields: education, real estate, agriculture, retail, and healthcare.
In addition, we are exploring whether there is something that the Animoka Brands ecosystem can provide for the wallet that MUFG is developing. We would like to use Web3 to provide new value not only to IP such as anime and manga, but also to social infrastructure industries. Of course, it is not something that we can handle alone, so we are talking with MUFG about working with various companies.
──With the introduction of Web3 technology, society will become more convenient. However, in order for stablecoins to be used in everyday life, laws and rules need to be established. What do you think about Japanese laws and regulations?
Evan:Japan is a very attractive market, and while assets such as IP in Japan are important, regulations are strict and there is a strong demand for “legal business.” That’s why we made Japan the only strategic base in the world. We are confident that we will be able to have a proper dialogue with the regulatory authorities and provide services in a way that conforms to Japanese rules.
When will the next killer content be born?
──Animoka Brands has invested in a number of Web3 venture companies. Are there any areas that you are paying attention to from the perspective of venture capital?
Evan:The regional characteristics of the investment destination are hardly taken into account. Web3 companies are often run by global teams. The Sandbox is also founded in France, but its biggest development base is Argentina. Japan and South Korea are interesting, and the Southeast Asian market is also gaining momentum. I am also interested in the Middle East.
──What will come out as the next “Web3 killer content” following Axie Infinity and BAYC?
Evan:The “next content” is already appearing one after another. Last year, Azuki and moonbirds were popular, and more recently, memeland. In the future, not only PFP (profile picture) style things, but games and mobile apps will increase.
For example, the SF action RPG “Phantom Galaxies”, the MMORPG “Life Beyond”, and the wallet “Blowfish” are also worth paying attention to. Animoka Brands has also released NFT “Mocaverse” with the theme of community engagement.
There will also be a new music service launch in May, though details are yet to be announced. It’s a community that specializes in “interacting with fans”, and it’s a very cool service related to the Creator Economy, AI, and Web3. I think people will like it. Towards the second half of this year, more and more projects that have not yet been announced will be revealed. Please look forward to it.
Shigeru Sato: Currently serves as Chief Content Officer at Africa Web3 News & Discovery Platform “NODO”. After working as a financial and business reporter at Bloomberg and Dow Jones, she became deputy editor-in-chief of Business Insider Japan before becoming editor-in-chief of coindesk JAPAN in 2019. He will participate in the establishment of NODO in January 2023. Graduated from California State University.
｜Interview: Shigeru Sato
｜Written by Kazuki Watanabe
｜Photo: Airi Okonogi