Takatoshi Shibayama: 0:00

Hey, hey, hey, welcome to this week's episode of Blockhead's Blockcast. I'm your host, Takatoshi Shibayama. I'm also the head of APAC for Ledger. I aim to uncover the creative, intelligent, and radical minds who are shaping the crypto industry today. I'm as crypto curious as anybody that's tuning into this show. We're doing this together, guys. Let's go. Hey, we're back for another episode of Blockhead's Blockcast. Here today, we have the one and only Mr. Yat Siu from Animoca Brands. Welcome to the show.

Yat Siu: 1:15

Thanks for having me. Great pleasure to be here again on the podcast.

Takatoshi Shibayama: 1:15

Today I want to talk about Moca Network that you'll be launching and everything around it beause ID, self-sovereignty is a key issue that I personally believe in, and I want to gain some knowledge on that from you. But before all this, I have this burning question that I always wanted to ask you in this world of AI, AI bots and all these things coming in, you know, as a Gen Xer, knowing pre and post internet, I always feel like, you know, we're heading into this world of WALL-E. I don't know if you ever watched that movie. That's kind of where I see this world going. I'm trying to stay fit as much as possible so i don't become those people but you know i do feel like we're going in there right i mean obviously if you read the Brave New World i mean everything is all about distraction and then you know just keep people watching Netflix and then AI will do everything for us and then we don't need to do anything but It's also, on the contrary, you know, people are losing jobs, you know, even before AI, right? Everybody's been losing jobs, especially on a white-collar level. So where are we going with this technology? That's what I wanted to ask you.

Yat Siu: 1:49

I think maybe we can go a little deeper because I think anytime there's a new technology that's super disruptive, like sort of industrial revolution, you know, like a century plus ago, you have complete disruption of changes, of jobs, whatever, right? You know, I mean, everything that was horsepower basically disappeared and we basically became, entered into a motorized age, as an example. How many jobs were put out and how many changes have happened? I think AI is going to do exactly the same thing.

Yat Siu: 2:12

By the way, that was true for the internet some 25, 30 years ago as well, right? It completely disrupted media industries and our attention economy and everything around that. So I think change is inevitable. I think that's the one thing that we can always count on. The question I think that is more deeper philosophical is can AI replace humans, right? And that's the thing that a lot of people have also wondered back in the day. Oh, the machine in industrial age will replace a human. Turns out that humans were able to innovate and create and when you look at the sum total number of jobs and employment and general better care that we have, like I know a lot of people are saying, oh, the world is shit and everything, but just take a snapshot over the last hundred years, things have evolved much, much better.

Yat Siu: 2:51

You know, we live much longer. Average lifespan 150 years ago, 30, 35, okay? Like again, when we just look at it from the perspective of where technology has taken us and progress, we're in a much better place. So I think the question we need to ask is, can AI replace humans? And my answer to this is absolutely not. And I think there's a whole host of people who would disagree with me, and a whole host of people would agree. And the bottom line of that question is, the people who believe that AI can replace us is because they think that we are ultimately just a biological computer. So they think that humans are computational, they were just Some things were good at computation and some were not. And the computer can do things better and faster. And when we get to AGI, that's it for the human race. And therefore, we become obsolete. And then we get to Wall-E because basically we're just sitting there because we have nothing to do, which I disagree with. And the reason I disagree with this is because when you think about consciousness, intuition, that's not something that a machine can do.

Yat Siu: 3:47

Even today, AI is not able to create reality. entirely new axioms. I think the one moment where we saw something that was crazy was, you know, in the game of Go, I think it's Move 37, where essentially a new move was invented, but it was within very defined type of rules. And the comfort I take as well is, I don't know how much you've looked at things like Gödel's incompleteness theorem, right? But Gödel's theorem basically proved that even the base axioms of math, which is basically the foundation of our truth, so to speak, right? We think of math as something that's always true, cannot be proven. The conclusion that people like Penrose, for instance, Sir Roger Penrose, do in various other sets of both Nobel Prize-winning scientists and philosophers, is that ultimately this proves that we as humans and the universe is not entirely computational. And if that's true, then an AI cannot replace us. So that's kind of one way to look at this. So what does it mean? It means that as a human, we will augment ourselves with AI to reach new heights. So the primitive example is a calculator. You know, as a Gen Xer, grew up in an age where the calculator was probably just being introduced in classrooms. And I don't know, did you grow up in Japan or in Singapore?

Takatoshi Shibayama: 4:59

In the U.S. and Japan.

Yat Siu: 4:59

In the U.S. and Japan, right? So in those education systems, particularly in Japan, you probably couldn't even use a calculator because that was considered cheating, right? And certainly I grew up in that kind of environment. And because of the calculator, though, we were able to remove human math problems. machines, so to speak, who were very good, but we amateurized math. And how many people could now become doctors and architects, engineering or, you know, computer science as a liberal art because mathematics was made easier for everyone, right? And that to me is how I see AI.

Yat Siu: 5:31

And when you think about the recursion that happens in AI and the ability for an AI to keep talking to us and sort of reason with us, I actually think of that as a way of enhancing our thinking. So as a human, we will get into new heights and If you exercise your mind, Because of AI. And there was a very interesting study, George Land and Bethany Jarvis in the 60s. And it was a divergent thinking test. And the thinking test was actually created for NASA originally. Because in that test, they were trying to measure, well, you know, if you send someone to the moon in the 60s and shit happens, there's no guidebook, you know, if moon, this, whatever, right? Basically, you had to have someone who's creative, who could problem solve a situation that never happened before. Like literally invent something on the fly, right?

Yat Siu: 6:19

So you need to have someone very divergent. And so NASA was trying to hire these super divergent people. Makes sense. So they took a similar version of that test, followed children from when they were basically literally toddlers, and measured their thinking capabilities and how divergent, as in creative they were, 5, 8, 10, 15, and then did the same test for adults. Different adults, but basically followed the same children from 5 to 15 years of age. Take a guess how many... at age five scored divergently, as in very creative. By very high. Yeah, 91%. By the time they were 15, it was like 8%. And then the adults, 2%. Now, there's an interesting parallel where I look at this and say, interesting, because the 2% is kind of also the ratio of number of entrepreneurs and change makers in the world, right?

Yat Siu: 7:13

So really, are we made creative or are we born creative? And the conclusion was, and this was also the work of some of the great educators in the space, basically came to the conclusion that schools, for good reasons at the time, basically were removing creativity. Because creativity was dangerous. If you had someone who had revolutionary ideas, imagine a class full of Elon Musks. You'd cause chaos. It'd be hard to manage. But that was true 100 years ago. Today, it's a different kind of environment. So if you have an AI agent who can really bring out every individual creative talent, I actually think it's much more exciting for the human race. And we no longer have to worry about industrializing ourselves. We can literally become the super-powered individuals that we can be in, let's call it, the techno-optimist perspective. But the proof is that we are born creative, and we need to stay more creative in order to be, let's call it, not ahead of AI, but to really... integrate and really make the most of it. So I'm optimistic. I don't think we're going to be Wall-Es in the future.

Takatoshi Shibayama: 8:15

Yeah, no, no, no. I really am positively thinking that way as well, because I have two children. I know when they were five, they're very creative. Their minds were like all over the place, but like super creative. Now going through the education system, they're becoming more logical and thinking through less creative. And that's kind of where I see the problem is that our education system was built for the industrial age, right? We wanted to kind of have a cookie cutter type of people that will go into the office and do similar tasks. And If we don't change that educational system, we can't nurture these creative talents that we have.

Yat Siu: 8:52

I mean, just think about college, though. My daughter is going to college. And what's the biggest value of going to college? Is it what you learn? No, it's about how you interact with people, who you meet, right? So it's that connection. Because everything related to learning and facts, you can get online. And AI can tell you that. So I think that's going to change. And I think schools will completely be transformed in the way that we see it, which is also the reason why We're very focused on education as well with open campus because we think the world is changing very rapidly and not enough has been done about it. So I totally agree with you on that.

Takatoshi Shibayama: 9:27

Yeah. And I really hope that that would change because, you know, I already see like a kind of a generation of kids, you know, going through YouTube and watching all this stuff and just getting wallied a little bit and then just kind of fed this industrialized age education. So like, I really want this to kind of change. But even for those kids who are growing up and maybe they're not listening to this podcast, but how can like blockchain kind of come into that and change or augment us to create like a better world.

Yat Siu: 9:56

So first before we go to blockchain, I would say at the end of the day the most important person in this role is a parent right absolutely yeah and and i think the difference about parents then and now is that parents used to understand the world their children were in like hey let's play soccer Or let's play sports or let's go swimming or whatever, right? Like the commonalities were there. What I was doing as a child is what you're doing as a child. Now it's like I'm playing a game or I'm online on Roblox or something like that. Or hey, I'm buying NFTs.

Yat Siu: 10:27

For parents, it's hard to understand that, right? So I think it's much more an environment where parents have to learn the worlds of the kids. And the other thing is that certainly my parents' generation was very hierarchical. So the way I talk to my mother is very different than the way the children talk to me. It's probably true for you as well, right? And that comes from a place where The parents were the absolute authority of everything, and that's what they knew and understood. And even if they're not right, most of us will say, yes, mom, of course, right? We're not arguing with them, right? But our children are not going to do that, right? Our children are like, no, you're wrong. Or sometimes they're just objecting just because.

Yat Siu: 11:06

And that means that as parents today and parents of the future, we have to accept that we know far, far less than our children. in domain areas. And therefore, we become their children almost, if you know what I mean, right? And you're much more equal. Like, play a video game with your kids and they're just going to sort of, like, in a competitive environment, you lose. Absolutely. However, if you play cooperatively and you work together, actually, it's a bonding experience because in that experience, your children actually lead you and help you. And it changes that dynamic. And that's what I'm positive about.

Yat Siu: 11:36

It's a, you know, we talk about how we want the world to be more democratic. But we don't talk about what democratizes overall. And democratizing family dynamics is just as democratic, if not more, than just thinking about it at a government level. We're moving down our democracies, and this comes down to where blockchain is interesting. Because the whole vision of How do you sort of demonstrate truth in a decentralized manner? Blockchain is the answer. And this is what blockchain is so good at. Organizing at scale in a manner that you can trust because at least you know he's a real token holder or he's a real NFT holder and there is an absolute truth around that as opposed to someone forging and faking it is perhaps the most valuable thing that then helps break down sort of the structures of society.

Yat Siu: 12:18

You know, in the earliest of human societies, we as hunter-gatherers were not able to grow big cities because Dunbar's number, right? You were basically only able to remember as a person maybe 100, 150 people, right? So that meant that I needed a way pre-written to understand who owned what. And in a society where that was too large, it would break down. So in a small society like Hunter Gatherer, you knew this was your cow and that was my horse, and the proof was every other person in your community knew the same. And that was a consensus. So they were building consensus-based organizations.

Yat Siu: 12:58

But do that for a million people. Impossible, right? As a human. So then you needed a central government or a king or like a power structure that would say, that was your cow. But of course they could take your cow too, right? But the point is there was a central repository and the written language was a way to keep the record. But even then you could argue it because who had power basically could abuse it. And blockchain does it at scale without a central power. So now I'm able to scale essentially communal societies but with absolute truth and certainty about what you own and therefore the basis of that ownership can build commerce and sort of transactions. And just think about why do we do record keeping in the government? When we buy a house, why is there a ledger? Why do we care about this stuff? Why do we have accountants? And why are there so many of them in the world? Because they're the way to record keep society. They record keep society.

Yat Siu: 13:46

So we are in order. If we don't have a record keeping society, it would be chaos. We couldn't structure. We couldn't scale. We couldn't grow. So this is where blockchain is really powerful. And blockchain started doing this with effectively money and currency. Because money and currency is probably the most universal social construct in the world today. And that's why it's effective. But it can extend to everything. And you can see this, whether it's tribal token communities, NFC communities, even societies in the future. I expect everything to be on chain.

Takatoshi Shibayama: 14:12

Right. So basically, you know, you are now launching this new network called Mocha Network. Yes. And my burning question and second one is why now? And because there's a plethora of chains out there and then many of them have this digital ID and talk about like property rights and all that kind of stuff.

Yat Siu: 14:30

So let's start off with Mocha Chain as a construct should not be viewed as an L1 or L2 like other chains because it's not meant to be a chain like a polygons or like an Ethereum or something. It's meant to be a composable layer for people to build identity on top of. So that's really the way to think about it. In other words, it will work with every chain. We believe in an interoperable, multi-chain, cross-chain future. But you need a way in which you can naturally compose this sort of identity layer on top. And my mental model and our mental model for blockchain is it's the most open API framework in the world, right?

Yat Siu: 15:08

I mean, imagine if Facebook back in the day was actually on-chain and there was an API mechanism. It would be, basically, it would be bigger than Ethereum and Bitcoin as an ecosystem if it was onchain. But of course, it wouldn't be controlled by just Facebook, right? That's a totally different dynamic. That's how to think about it, right? So it's not competitive, it's accretive. The second thing is, What we're trying to solve, both philosophically and directionally, is what's the most important thing for us? It's property in our own name. So I don't know what the root of your name is, but certainly I grew up in Europe. And in Germany, people would have names like Metzger, which means butcher. Why? Because his great-great-great-great-great-grandfather was a butcher. So why doesn't he have a different name? Or maybe people are named after the cities they were from or the environment. Because most people never even had a name. right? They were slaves and serfs to a lord, right, who had a name. And maybe you took their name as well, right?

Yat Siu: 16:02

And so we think of property. What's the most important property? It's our own property first, right? Our own ability to own stuff can only happen if we own ourselves before we start owning something else, right, as a root. And so how do we do this on chain and prove it where you can then build your reputation on top of because that's the asset. That's your virtual reputation. Your reputation is your ultimate asset. Think about, you might lose money, but if you lose your reputation, what's worse? For a lot of people, it's your reputation, because your reputation is your ability to come back from something. Whereas with money, you can always kind of make more money in some way.

Yat Siu: 16:39

Sure, it's depressing if FTX happens and shit like that happens, right? But ultimately, you can rebuild it if you have reputation. On-chain, we don't have that, because we don't have a unified way in which we can attribute and score digital reputation. And that's also the reason why we have all these problems with the airdrops. We came to this conclusion, and the reason we built it is, you know, we have today over 600 portfolio companies. We're amongst the biggest investors in Web3. Every one of these projects is going to be launching a token. And what do they want? They want real customers that have real value that will use their product. It is no good if it's going to be a bot that you do not know that's just going to go there. And when you even KYC the wallet, it's not enough because We've had this experience where you KOC the wallet. It's a whole bunch of people from maybe Pakistan, India that sign up.

Yat Siu: 17:24

Unfortunately, a lot of those countries do that. And then they sell the wallet for $5 or $15 to some dude in Russia, right? And then we're just like, whoa, this is not what we signed up for. And of course, they're only trading. It's a bot and so on. And it brings it down. $50 billion of airdrops was given over the last four years, like $48 billion something. And over that, a huge chunk, maybe more than half, end up going into people who were not actually attributing value to the network. So you have to do that. I think of it really as the beginning of an online credit score. And because it's ZK, I can now attest it. So I can still have an anonymous wallet, but the reputation is attached to it so that if something good happens, I get more reputation. If something bad happens, I lose reputation, just like a credit score.

Yat Siu: 18:10

Now, in real life, we only do business with people that we can trust. But if I don't know you, then how do I know that I can trust you? And imagine if we were living in a trustless society, but in a society where we always have to fact-check. That means before you even buy bread, I'd have to look at your credit score, and I'd have to measure everything and make sure you're okay. Whereas we're in Singapore right now, right? You can literally, the fact that you can walk into a store, pick up goods and hold them in your hand and walk around without actually having to pay first. I mean, do this like a thousand years ago somewhere. It's impossible to imagine, right? But we do this because you have a high trust society, because you know that within the government and with the system and because you're Singaporean, basically you already have a reputation. You're already... level 10 or level 100 because you're Singaporean or because you're in Singapore, right? We need to create that.

Yat Siu: 19:01

And by creating that ecosystem, we're going to create much broader and bigger on-chain economies. That's our goal, build on-chain economies. And so what Mochaverse aims to do with the chain is we did it for our own, and now we want to give others the ability to build your own identity system and to build and compose on top of it. And that's where that comes in. And then, for instance, with the deal that we did with SK Planet, which has 20 million customers, That's a way in which they can onboard as well. And then the people who want to target the SK Planet users can now know, oh, he's a real user. And he's done this, this, this. And I don't need to know his name, but I can trust him. And we are doing this also with on-chain student loans in places like Philippines and Indonesia. And again, how do I give a student loan to someone if I don't know you? Over time, think about all the on-chain transactions I've done, all the things I've done basically with buying NFTs, holding them, doing whatever. That's actually a score I have. And I can now... Get someone sort of to give me benefits for that. Like, would you rather, for instance, give an airdrop to someone who's held a Bored Ape or a Pudgy Penguin or a Mocaverse and he's never sold it, but he's always done good things? Or would you... want to give one to a person who keeps flipping them and selling them all the time and sort of dumping the token immediately. I mean, as an example, right? So that's what you want.

Yat Siu: 20:14

And of course, that one then creates a flywheel for better behavior, which we want. Because once you recognize that there's a way to accrue reputation, then you will do things to defend reputation. If I have an anonymous wallet, it's like temptation, right? There is a group of people who, if there was $100,000 right here and the room was empty, some people would will take it and pretend. And what we want is a society who can just look at that and say, that's not my money. It's someone else's. I'm going to leave it there, right? And frankly, I think Singapore and Japan, for instance, are very high-trust societies. And it makes it function, whereas other societies around the world are not so. And then you have a breakdown. And I think crypto is much more in the direction of low-trust societies, which is why everything's over-collateralized. And to build this, we need to build this reputation score.

Takatoshi Shibayama: 20:56

But those kind of reputations are built over time, right? Because you build a country like Japan or Singapore where everybody acts in a social construct and they're expected to do so. That's why you generally believe people People are going to walk around with, you know, jasmine tea in their hands, a pep bottle, and then you walk around at 7-Eleven and you're eventually going to pay. But, you know, as you say, like a low-trust society, obviously it's hard to do. Have you been to San Francisco lately? I was in Paris too. Yeah, yes, yes. But, you know, if I play the devil's advocate, I mean, you know, I think a lot of people watched Black Mirror before where your social scores keep following you and you have to keep it up. So doesn't that kind of force people? It's a little bit kind of a authoritarian kind of concept where you have to like force people to do good things.

Yat Siu: 21:42

I mean, Black Mirror, in some ways, some people say, look at sort of China's social rating, right? It's kind of might feel like a little Black Mirror-ish. The difference is who owns it. So Black Mirror's example, the state owns it or a central organization owns it and controls it. And therefore they become the arbiters and they have the power. But if it's yours to own, then it's yours to give. And that's the difference. So it's your reputation. The reputation is there. You can't change it. However, it's yours to share or not.

Yat Siu: 22:11

So if I have a bad reputation score and I don't want to share it, the other party then has to make a determination as to why won't you share it, right? And sure, it may be a good reason or not, but then you have to be accountable for the action. The whole point is, how do we bring more accountability into space, right? And it's not that different than when you go for a job interview and someone does a... reference check and the reference check didn't turn out as good as they thought it was you have to be accountable for the action and explain it for instance right it's not that difference or between friends right when you do something bad right you have to kind of you know i mean you don't have to but if you don't you probably lose the friendship right so it's really about accountability right but the point is you have the freedom to share it or not whereas in a black mirror situation you don't have the freedom So you are automatically excluded and ostracized for an action that you may not want to do. So it really comes down to the conception of ownership.

Takatoshi Shibayama: 23:02

The Black Mirror was more like peer review, right? So the other peers would give you a five-star or a two-star so that you're always dependent on other people and how they look at you to get a good score. In this scenario, is it the same?

Yat Siu: 23:16

Well, it is because peer review is related to how you interact with the rest of society. So if you're just not someone who can integrate well with society... well, then it's tough. But I think it's tough in general. Like, I mean, if you go out like knifing everyone, I mean, okay, damage, like that shouldn't be a good thing, right? And I think while this may sound controversial, ultimately, it's about Are you adding value to your society, to your community in one form or fashion, right? And when you think about things like symbolic value and capital, like university degrees, university degrees and qualifications were really a way to measure your contribution or potential contribution to society, right?

Yat Siu: 23:55

So if you went to a good college, people would say, okay, I accept you. I give you a better job. I do this because I feel like you can do more because you've proven it in some way, right? And that's what we're looking for. We're looking for proofs but how do you scale those proofs, right? And beyond your high school grade. For instance, if you're a great gamer and you were able to coordinate a lot of people together and you got great peer reviews on Steam as a really cooperative person, actually that is a skill that can be used in the workplace, but it's not attributed, right? All these scores are separate and we're already accruing this value. For instance, why can't I take my Amazon seller rating and bring it to eBay or bring it to Taobao? I can't. And of course, it's by design because it's not owned by me. And why can't I take my reputation on Instagram and move it to Snapchat or move it to TikTok or vice versa? Because who owns it, right?

Yat Siu: 24:43

So I don't think the problem is the fact that there's peer review. It happens all the time, right? It has more to do with the fact that I'm not able to amalgamate the ownership of my different peer reviews and put them together. And then there's a score that And if others want to dig deeper, and they have the permission to do so, they can then make their own assessment, right? Whereas right now, we're asking users to sort of do mishmash and hodgepodge. Plus, also, it's a proof. For instance, on Instagram, we know that you can bot it or X, like the followers, are they real or not? And why do people pay money to create fake followers? Because it's reputation, right? It gives them benefit. If I have an Instagram account with a million followers, maybe I can get a $10,000 or $100,000 endorsement or free hotel rooms. But it could be a scam. Again, on blockchain, it certified. It's true. I know it's real. That's a real benefit.

Takatoshi Shibayama: 25:32

But nowadays, I mean, you know, all these platforms are centralized there's a lot of corporations that are heavily embedded to keep it centralized and they influence politicians they influence you know regulatory bodies to make sure that they keep it that way

Yat Siu: 25:47

i don't think so so i agree with you that that's what they want and the way that regulation works is that by creating more walls to make it difficult for small companies is how they do this however with blockchain the ultimate thing that all governments the governments aren't like hey i love facebook governments are just like how do i ensure that they privacy isn't abused. I think GDPR is a great example. Its intention was to protect the user. Its outcome was it excluded small companies or startups to participate in the same field. That's really what happened, right? What is the root is who owns the data. So in the old construct, the company who was getting your data was the only way to own your data.

Yat Siu: 26:27

Therefore, they had to go all those expensive ways to keep GDPR. And Facebook's like, yeah, sure, put that rule out there because you know what? Only we can afford that, or large companies. So it excluded the startups. But if it's on-chain and you are the owner of the data, which is what you could do with Mochaverse, for instance, and it was your data and you give permission whether you could access it or not, rules like GDPR no longer apply because you are the arbiter of your own knowledge and your own data. And that means that I give you permission And the other thing is, where is the data stored? Data is stored in a decentralized manner or in your own way, right? Then the government doesn't have a say because it's your property. And so it's okay, v ersus if the data was stored at Amazon or was stored in our servers and we maintained everything, then we are accountable and we have to report on it, right?

Yat Siu: 27:16

So I actually think that decentralized identity is not a solution just for things that are blockchain related. It's a solution for every company that wants to be able to say, I'm now managing and getting value from data from users that you give me permission to without having to deal with the complexity of all of that regulation. That's a value. I think there's ways to make money on data that the startups can't do because the legal overhead And the regulatory hurdles is just too wide because of precisely who owns the data. Just that simple question.

Takatoshi Shibayama: 27:48

But I think companies actually make money off your data, right? So they want you to willingly give their data so they can monetize it right?

Yat Siu: 27:54

How much does a user get paid for it is the point?

Takatoshi Shibayama: 27:58

Zero, right? But I feel like now everybody's been on the internet for so long and they're okay always accepting or not even reading the disclaimers and then they're not even asking regulators to give back their privacy data. So it feels like everybody just gives been up on that concept? And how do you change that paradigm for that?

Yat Siu: 28:14

They need to know what it's worth. And this is why blockchain and tokens are so powerful, because you can represent the value and you realize, wait, I'm getting paid to use this or I'm doing this for free. So that's the first point. The second one is on blockchain, you can also verify who your real followers are, your thousand true fans of the world, which again, you can't do on Instagram or one of those platforms as well. So I feel like It's all about sharing the value, whether it's economic or whether it's symbolic, it doesn't really matter. As long as you can demonstrate value, people will come to you. They're going to understand, oh, that's why I should do it, right? No, why do people go to Instagram? They don't go to Instagram because, you know, filters. They go to Instagram because they want followers and their friends are there. There's a network effect inherent, right? That's why they go there.

Yat Siu: 29:00

So there has to be a value for them. And what happens when you put that data on chain and I get paid for it, then I will do that as well. We saw this, you know, a lot of people are critical of play to earn because of its speculative aspect. But play to earn was an example of this big on border of people into crypto, especially places like Philippines, because they received value for it. And they recognized, wait, my time was precious. There is something that's there. It also comes with education as well. But I think we're starting off first with a wave of people who appreciate it, that there's value to be generated from that. What I expect to happen is that there will be very, very strong competitors in various segments. It's starting with finance, but it's going to go into gaming. It's going to social media. It's going to go all those areas where then the large companies will start to get threatened. They're going to face their quasi Kodak moments.

Yat Siu: 29:45

And so it's existential at that point. And then they have to accept it. If you remember in 2021, when NFTs were really, really getting super hot, right? And by the way, NFTs are still doing half a billion dollars of sales a month. It's not dead, but it's not what it used to be in terms of hype. How many big traditional companies were like, we're doing NFTs. We accept NFTs. Even Instagram had a way to display NFTs. X did it. Well, Twitter at the time. They all did it because they realized that there was a set of people going there that they would lose if they didn't do that. So that's basically what I expect. If FTX and Terra Luna did not happen in 2022, I think we would be well on the way. Terra Luna and FTX were the things that set our industry back reputationally and also an extremely hostile US regime. These are all things that no longer exist. And therefore, the pathway looks completely different than before.

Takatoshi Shibayama: 30:36

But when you go to people and say, protect your data rights, or even for me, I've been in a custodian wallet for a long time, and we go to them and say, and security is very important. Most of the people say, I don't give a shit. I want the features. I want how to make money. Just tell me how to do it.

Yat Siu: 30:51

But if it's worth $10,000, you give a shit.

Takatoshi Shibayama: 30:54

Yes, but even if I tell them that, even after FTX happened, you say, okay, you see that? Or even early this year when Bybit got hacked as well, that was our moment to go out and say, hey, isn't security very important? Yes, for a limited amount of time. And afterwards, they just don't care about it anymore.

Yat Siu: 31:10

But during the Bybit hack, how many more customers did you receive?

Takatoshi Shibayama: 31:15

Not many, actually. Not many. So that was another moment FTX was good because you know it made people really understand the value of security for a long period of time but Bybit did not

Yat Siu: 31:26

But do you think it's because Bybit was really really good at communicating and in solving the problem I think so yeah so if Bybit didn't solve the problem and they were actually really in trouble which kudos to them for dealing with this situation then I think it would have created less trust on exchanges and more capital would have fallen out right so I think it has to do with the messaging

Takatoshi Shibayama: 31:45

I think it is the messaging right so that's where I wanted to get to is Like, it's the messaging. So, you know, for you guys, or even for us, you know, in general, like, what is the message that we can embed security or embed importance of private rights.

Yat Siu: 31:59

I don't think the value comes from messaging security per se. Because when you're in an environment that feels secure, it's like in Singapore. We don't need to walk around with security or protection guards. We don't need someone on the side of the street saying, oh, watch out, it's red. Oh, car over there. We have ways in which you understand the rules because you don't have to worry about a car just running you over because there's rules. They understand it and there's safety implied. And you take that for granted so easily. And I think that same thing that creates incredible human adaptability is also the same trait that gives human complacency.

Yat Siu: 32:37

So therefore, what we need to focus on, I think, is value. So if you have self-custody, what's the value? Well, self-custody, which needs security, of course, the value is what you can do on-chain. So take an example of when people only trade tokens. And that's a primary purpose, which is where 80% of the market is on crypto right now, right? On-chain is 20% or so, right? Or give or take. Then an exchange is fine. And this is what we see. It's like 400 million people on exchanges, 50 million on-chain. Like that type of ratio, right? Whereas if you were to say, well, if you make more value through staking or through play to earn or these activities, then you would want to do more activities on-chain.

Yat Siu: 33:20

And I don't think the on-chain and off-chain will ever go away, you need both, but it's about how much value on-chain can deliver. So one of the reasons we're continuing to be bullish and supportive on blockchain gaming is because you can't play a blockchain game on an exchange, right? It's not designed for that, right? So to grow the space, you have to have a wallet, right? Okay, I can have MetaMask, but now my gaming assets are worth $10,000, $20,000. Oh, okay, now I need a ledger, I need security. How do I do that? Because it's worth protecting. They might go to a Binance and Coinbase and say, or Bybit and say, oh, I'd like to keep the assets here, but I still want to use it inside the game. And they're going to go, how do I do that, right? And that's not the point. That's not how it functions, right?

Yat Siu: 34:02

So the whole point is to grow the ecosystem in the space, you have to build much more value on chain. And so things like Hyperliquid or what we do with Open Campus on student loans on chain, building digital identity with Mochaverse, that's another one. Because again, if your identity is on chain, you're actually not able to share your identity across, right? So you could be sort of an alpha trader on Binance. You get zero benefits being on Coinbase or Bybit because the data isn't shared. Whereas if it's on chain, I can measure that and I can share values around that. And you as a company, you want that customer, right? But they are protecting those customers very, very jealously, obviously, whereas an on-chain is free for all.

Yat Siu: 34:41

So it's about adding that value. And I think just like with all industries, there's this avalanche effect that happens. So when you get enough mass, and I think there's a sort of a famous ratio, I think it's like 3% of a population or something, where I forgot the exact term for it. But essentially, it's how people look at if there's a movement or revolution, you need approximately 3% of some population to attach to it, right, for it to really sort of become inevitable. And crypto ownership has achieved it. So crypto ownership and owning tokens and Bitcoin and, you know, Ethereum as a speculative asset has fully achieved that. But using it on-chain... we're still about 50 to 100 million users behind. But that to me is the opportunity because once we reach that number, then we're going to essentially get to a point where when you look at the sort of diffusion of innovation curve, we're going to hit this sort of early majority stage where things are really accelerating.

Yat Siu: 35:33

I would argue that when it comes to on-chain, we're still at the cusp of innovator and early majority. So we're not yet at a point. Crypto ownership is beyond that, right? But on-chain activity is not there, right? But all the activity that's happening is driving people's attention because once you buy a token, you go, okay, what's it actually good for, right? Could I use it, right? Beyond just making money, right? And we saw this with Ethereum. The Ethereum... ICO days, as in 2017, 2018, that mindset is totally different from now. Right? You know, everyone was like, you know, it was kind of pump and dumpy, right? And there's a lot of people just buying tokens to do the ICO stuff. And now you have a lot of Ethereum guys are like, oh, Solana, that's beyond me, right? It's like we don't do this type of stuff anymore, right? Of course, after they've made money, they can start thinking about building their true societies. And I think this is what happened with Solana, what happened with Todd and all these ecosystems as they build essentially their virtual nations.

Takatoshi Shibayama: 36:27

And how do you get people to like stop, you know, thinking about speculation and then going on chain for real so that This is always the problem with crypto is that it always comes with speculation first. And obviously you need financial incentive for people to do things, right? So I get that part, but it's so much wrapped around this speculation that it distracts people from getting on chain.

Yat Siu: 36:49

The nicer word for speculation is risk, as in how do you take appropriate risk of some form? And the reason why I want to say that is because I think the probabilistic speculative nature, human nature is, is part of who we are. So I think anyone who's trying to defeat speculation is effectively also anti-capitalist. And we've seen how that worked out for Europe. So when you look at, for instance, markets at a free market, I mean, Singapore, Hong Kong, New York, those places, Dubai, hugely speculative, but also very capitalist. And then you go to a place like Europe, which has capitalism, but they're trying to tame capitalism.

Yat Siu: 37:31

And how do you tame capitalism? By saying speculation is bad and stuff like that. And I don't agree with that. I'm not saying that rampant speculation is good either. I'm just saying that it's a part of who we are and how life operates. And if you look at it from a risk perspective, we don't have progress without risk. Everything is a chance. I argue as humans, we are risk-taking right from everything. Even our relationships are risk. You see someone and you want to date them, It's freaking risk, right? And sure, online platforms try to de-risk it because you can swipe left and right. But the reality is that when you go meet them, it's still a risk. They can say no, right? And sometimes that rejection is worse than losing tens of thousands of dollars, right? So the point is, I think we're always attuned anyway to chance and risk, right? So I think that's one.

Yat Siu: 38:17

Therefore, we need to demonstrate that on-chain has more opportunities for growth and opportunity than off-chain. And we will never defeat, if that's the idea, speculation, because it's what we all do. I mean, don't tell me the stock market isn't speculative, right? And entrepreneurship is hugely speculative. Oh, let's open a restaurant. I mean, that's as speculative as it gets, I think. And yet people still open it all the time because of their passion or desire. They're taking risks. So I don't think that changes. Now, what will change, though, is that if our on-chain economies are more broader and bigger, and there's more opportunity, it will drive more people to do stuff there.

Yat Siu: 38:53

The thing about onchain is you have more options. So there's only one thing you can do in exchange, trade, okay? So it is literally, depending what you trade, could even mimic something like a casino. Depends what it is that you're doing, right? You know, with purpose and options future. And you can see that exchanges are trying to get better and, you know, with leverage and with like, you know, yield and all that kind of stuff. They're trying to obviously do as much as they can. But you can't compete with an on-chain economy or you can add so many other things in there as a result, right? And the other thing I would also say is the element of entertainment. A lot of people obviously trade to make money. I get it. But at a certain point, how many people trade just because it's fun?

Takatoshi Shibayama: 39:31

I think a lot of people actually do love it.

Yat Siu: 39:33

It is because it's fun, right? And it's the same thing as, yeah, you go to a casino because you want to hopefully win. That's a segment that does that. But most people I know go there just to have fun. And it's fun because it's communal as well. And there's a global kudos as well. Oh, you made money on this. Good for you, right? Those are things that actually all add towards sort of fun and entertainment. It's basically your digital leaderboard. And you get credit for that. Oh, you own 10 board apes? credit for that right you know that type of stuff whether you paid a lot or not it's kind of a secondary thing right.

Yat Siu: 40:03

So i think this extension of that is frankly speaking when you talk about gamification it's again just the nature of who we are so i don't think it's about sort of removing speculations about how we best integrate it in a way that's more holistic and of course also healthy as well if the only thing that you do can do with tokens is to speculate then we're putting ourselves into a corner, right? But it's not true, right? And the more we do on-chain, the more richness will appear from that, right? All this liquidity can then be used by others. Nice.

Takatoshi Shibayama: 40:34

Well, I think we're kind of at the end of our recording, but I haven't been this optimistic about crypto since probably like nine years ago. So thank you very much for your time. My pleasure. Thank you so much. Thanks for listening. If you like what you hear, give BlockCast a like and a subscribe on your favorite podcast channels, Spotify, Apple, wherever they are. For all your juicy Web3 news, keep updated on blockhead.co. You can also catch Valentine's Daily Views on the market on BRN. Catch you all in the next episode.