Rebuilding Web3: Better economies, token design, and DAO structuring (with Mure and Shrapnel) – Games Growth with Upptic

00:00:00:03 – 00:00:20:22
Felix
Yes, I was going to make things a whole lot more fun. We all know the difference A good story makes to a good game. Tokens and monetary incentives should be secondary to the game itself. A good game will be able to stand on its own. A good token, not necessarily.

00:00:21:00 – 00:00:42:10
Xander
Welcome to the game’s Growth podcast. Today we interviewed two guests Felix Nordin, CEO of MURE and Francis Drake in Head of Economy of Shrapnel, as well as on the co-founders and really, really, really interesting conversation here. We talked about quite a few things, specifically around how to legally compliantly and technologically build and scale up through economies that we could have under our warrant.

00:00:42:11 – 00:00:42:22
Xander
What do you think?

00:00:43:01 – 00:01:06:09
Warren
Yeah, I mean, the thing that comes to mind is I’m thinking about what sort of clickbait title we can post this with. You’ll see that when it goes live. So people actually listen to it because I think it’s super interesting and compelling though, when people hear like navigating legal and compliance issues on the blockchain, I think people’s eyes might roll, but this is a super important episode and I thought it was a very interesting format too, because we have two sides of the same coin.

00:01:06:09 – 00:01:28:16
Warren
We have Felix from Mure, who is building a platform to help teams be compliant with launching what, three games to navigate various legal and compliance issues which some boring but can really make or break your business. And then we have shrapnel as one of the games that is very mindful of this. It’s trying to go very large scale and using this technology and thinking about these same issues from the developer standpoint.

00:01:28:16 – 00:01:31:08
Warren
So what did you learn in this and what were your key takeaways?

00:01:31:10 – 00:01:48:05
Xander
I would say if you’re really interested in the game design portion of it, a half to two thirds of the way in, we talk really explicitly about game design and token design within the context of shrapnel. I think that component is really, really interesting. Part of what I thought was most interesting, they talked about basically what rails you put around an economy.

00:01:48:05 – 00:02:06:23
Xander
How do you think about separating creative economy from player economy? What are the components of this that you can orchestrate in order to make sure that it’s healthy, sustainable, compliant with water? And these guys, the kind of two the smartest guys we’ve had on our podcast and these guys are so sharp, both hardcore engineers, even if it sounds like a topic in a super setting, I swear it is.

00:02:07:01 – 00:02:37:03
Warren
Yeah. Big Brain individuals this week. So I hope you all enjoy the episode. Let us know what you think and if you like more of this deep dive content. Awesome. Welcome to the show, everybody. We have What a Things Can Be. A super interesting episode today. We have two guests joining and in a pod. First, we have two guests in the same room sharing the same mike, which is perfect because for today’s episode, we want to dig into what we’re calling navigating the economic and legal labyrinth of Web3 and gaming.

00:02:37:05 – 00:03:17:18
Warren
And so we have my dear friend Felix, who is joining representing Mary. I’ve been trying to pronounce it right all day, who are developing a platform to help developers solve these issues. And then we have Francis joining who is the head of Economy Shrapnel, a team that is doing their best. And I think one of the most forward thinking teams as far as like building a long term sustainable gaming business in Web3 that requires both that you do the game right, but also that you are navigating these things that collapse so many web3 businesses that are treated often as afterthoughts in the realm of building an optimal and functional economy and compliant.

00:03:17:23 – 00:03:27:08
Warren
And same with all of the legal pitfalls that we’re kind of discovering as we go along in Web3 That’s my very long intro, yeah. Felix and Francis, welcome to the show.

00:03:27:10 – 00:03:29:11
Felix
Thank you very much for having us. It’s a pleasure to be here.

00:03:29:12 – 00:03:40:10
Xander
Awesome. So let’s just jump right in. We can start with this background. You tell us a bit about your your background and your path to get to finding Mure and you’re working with Z full time.

00:03:40:12 – 00:04:02:21
Felix
Yeah, Yeah, sure thing. So I always love solving difficult problems. Stems back from the early school days and university time. So for those who don’t know, my background is as a software engineer. I have a full on degree up to a master’s level. My master’s degree is in machine learning in the AI and coming straight out of uni and also made uni.

00:04:02:21 – 00:04:28:11
Felix
I started working as first a full stack engineer at Twitch and then when I graduated I moved on to applied Science. So basically a lot of machine learning in the AI, working at Twitch with mostly NLP problems. So natural language processing and it was a very fun and interesting realm when it came to solving problems. We’ve always heard about how the AI and machine learning hype came around a couple of years back.

00:04:28:15 – 00:04:50:09
Felix
I like to say that I was called before I was called a demon, that I worked with those problems. Even before people thought they existed and moved on from then when it actually became hot. So when it comes to me getting into Web3, I started briefly in uni doing some stupid investments into Etherium during the but it’s now to bull markets back, or we should call it.

00:04:50:09 – 00:05:11:18
Felix
Well, that was why when Etherium was dipping down hard so I never touched it again until 2020, 2021 when things got more interesting. And that was also around the time when I graduated and got more deep into the So called the shed, coining and digesting and made a lot of good friends connections, including people like Warren and I met Yuzvendra through Warren as well.

00:05:11:18 – 00:05:30:22
Felix
And around the time we first met was actually the time when I also decided to kind of move on from the Web two side and actually delve deep into Web3. So I progressed into becoming a full time software engineering lead at a small startup focusing on three consultancy and Web three product development, and then started doing a lot of stuff on the side as well.

00:05:31:04 – 00:05:54:15
Felix
One thing that I’ve known for is the decentralized investment organization or decentralized VC called Specter, which came to be basically the zero or alpha version of what is now become Mure, which is basically focusing on making it as easy as possible to bootstrap people in any type of financial services when it comes to using the good side of web3 and making it as accessible as possible.

00:05:54:15 – 00:06:03:04
Felix
We basically want to make it possible for anybody to fundraise or do transactions or anything using the blockchain within a couple of minutes.

00:06:03:06 – 00:06:24:13
Warren
Yeah, and I think that’s a great framework for identifying great businesses that need to be built is for solving a problem for yourself and then realizing other people have those same problems and product sizing that. That’s definitely a spirit. We try to embody that at Upptic. Every piece of software we’ve built has been first and foremost to solve one of our own problems, and then we try to refine, polish and open that up to other people.

00:06:24:13 – 00:06:31:15
Warren
So much respect. And then, Francis, tell us a little bit about your journey and how your paths eventually crossed with Felix.

00:06:31:17 – 00:06:54:11
Francis
I’ll give you an initial background on myself. I started off as an aerospace engineer doing a lot of stuff with mixing AI and drones together. So things on autonomous flight and optimizing, you know, how you can go from A to B as well as like just larger systems implementations and things like proportions for satellite. So then I kind of have it into this space because I realized that it does not pay very well in the UK.

00:06:54:12 – 00:07:17:06
Francis
I think the starting salaries like 25 to 35 K the starting salary in crypto is much higher if you could have trading. That is so just always kind of been on the periphery of the space. So since about 2012, looking into the market, doing research on things like Bitcoin and then kind of taking the leap once I finished my education to actually try and do something in the space full time.

00:07:17:11 – 00:07:35:18
Francis
So similar time frame to Felix to actually, you know, get your toes wet and put some money in the game. Also, not the greatest time. And then I kind of spent a lot of time looking on crypto Twitter. And so from the kind of aerospace side, I had a pretty good deep understanding of a lot of the technical side of this place.

00:07:35:20 – 00:07:55:05
Francis
And then also a lot of the problem space, like solving difficult problems is what I find interesting and then slowly find my way to shrapnel by just meeting the right people. It’s a very, very lucky story. I actually met Calvin, who’s the head of this dev over there, but a discord. And he just decided to hire me without knowing anything about me because he was like, he seems to know something.

00:07:55:05 – 00:08:15:16
Francis
And then shortly after I actually met Felix when we were trying to plan an AMA, the Shrapnel and Neo Tokyo, we ended up getting distracted talking about AI in his dissertation on natural language processing. And then I think three days later I was reminded by shrapnel. Hey, weren’t you meant to organize something with the Antonio shit? Yeah. So that’s kind of the initial story of how we cool.

00:08:15:18 – 00:08:23:08
Xander
Well, I want to start with the aperture opened all the way in, so just I want to talk about what’s the currency of Web3 and do in games, particularly.

00:08:23:14 – 00:08:41:19
Francis
On the Web3 side. We’re in an interesting place, right? Like we’ve just had the ETFs approved. It’s very clear that some kind of regulation is coming. I’m not sure how closely are following the Coinbase lawsuit right now, but the judge I think yesterday actually said, Hey, maybe it’s time to reform the Howey Test and how we decide what is a security and what isn’t.

00:08:41:21 – 00:08:59:20
Francis
So like, we’re at this kind of very pinnacle moment. This probably the biggest time in history for it, where we’ve had giant financial institutions come in, we’ve had regulators turn around and say, Hey, maybe we’re looking at this space wrong. I will not regulate is what the judges that decide, you know, what becomes the regulation coming in and saying that.

00:08:59:22 – 00:09:18:05
Francis
So it’s very clear that there’s some kind of uptick in adoption where the institutions are saying that this could be a legitimate thing, like we all think it is, and that’s why we’re here. So I think we’re in a very nice spot from the eyes being on us. I think the one problem we have is especially very recent history.

00:09:18:07 – 00:09:35:06
Francis
We’ve had a lot of people do very wrong things that were very illegal. So we’re kind of living with that. But it’s very clear that there’s money to be made, which is probably the only thing that matters for these banks that are coming in. So I think we’re in a very, very healthy spot with a lot of eyes and ears from the regulators listening to us.

00:09:35:06 – 00:09:57:12
Francis
And then specifically in gaming, I think it’s basically the same thing. Like we’ve had a lot of products, for example, like shrapnel that received tens of millions of dollars worth of investment and games as Double-A and triple-A quality take two to sometimes eight years, depending on how you’re actually going about development to actually make. And a lot of these game received investment 2 to 4 years ago.

00:09:57:12 – 00:10:16:07
Francis
So I think we’re about to be in a spot where this is going to be very, very interesting with all of the money that was poured into it. You’re going to see some really, really fantastic products coming out and with a little more regulatory clarity because people have already launched products comes, I think, much better and clearer visions for these crypto games that are going to come out.

00:10:16:09 – 00:10:27:08
Warren
Thanks, Francis and Felix, anything to add there? What’s the temperature check from your perspective? I know you and I have been closely following what your gaming space for a few years now. What do you think about this current moment?

00:10:27:10 – 00:10:59:12
Felix
Yeah, just as much as I like being optimistic as Francis came off as sounding there as well, I feel like it’s going to also come to a hard sell for a lot of products that are coming out there as well as will actually now figure out and find out who is building quality versus who isn’t and we all know that during the last ball into the bear market, there was a lot of criticism towards crypto gaming and so on, just because people in the gaming realm, they don’t want to touch anything that has a new crypto because that was scammy, it was scummy, it was dirty and it made it so even a lot of

00:10:59:12 – 00:11:38:10
Felix
the good people didn’t want to touch it. But the ten foot pole and I think it’s going to be good in the sense that we’re going to get some form of cleaning of the space in that sense. So good products like shrapnel and other primary genre games are going to come out and actually show what the quality should be and making it sound like it’s a top tier triple-A game or a high quality product with crypto aspects rather than the whole focus that had been before about just making quick and dirty money from playing a somewhat poor game with a lot of interest growing into Layer Two’s and other dedicated chains like Solana and Ava

00:11:38:10 – 00:11:58:18
Felix
X or Avalanche, I think things are going to open up a lot more and to know Francis will be able to talk more about that as well with what Chapman has been working on. But it’s going to be interesting to see what is kind of come out of gaming tech and so on in the future. I feel like to make it more sustainable and easy for people to get into that space as well as for Web3 in general.

00:11:58:18 – 00:12:15:19
Felix
It’s nice to see this upswing. I feel like it’s going to be, like I said, interesting to see what happens with the Coinbase lawsuit and I’m not sure if I am happy or sad to hear that the how it just is going to be changed because I’m worried that it’s going to become way, way stricter and way, way harder to define what a security is or it’s going to be.

00:12:15:19 – 00:12:21:22
Felix
Loosen up and make it more easy to distinguish what a national security token is versus what isn’t. But only time will tell.

00:12:22:00 – 00:12:42:10
Warren
Yeah, before going a little deeper into the specifics of how both shrapnel was a gaming team in your day as a platform are addressing some of these pitfalls we’re going to talk about today. Let’s identify the issues a little bit more. So maybe, Francis, you could start here. We’re going I don’t know if you’d call it like V 2.5 or V three of what?

00:12:42:10 – 00:12:57:13
Warren
Three gaming. Let’s identify from your perspective what has caused the high fail rate of, what, three games preceding this era. Just identify like what are the problems that really need solving with this current generation.

00:12:57:15 – 00:13:16:08
Francis
Yeah, I think the main problem I don’t think comes from the actual game development side. I think a lot of it is this legal and blockchain implementation. You think about a lot of the games about time to be made. So far it’s more either hyper casual, casual or single day type of games that have, you know, less than 5 million budget, let’s say.

00:13:16:10 – 00:13:49:01
Francis
And then on top of that, they have two of the swim lanes that they’re not used to having, having to work alongside of them, which would be a legal counsel that fully understands international law, that affects crypto and, you know, regular gaming law in each country and how that can be effectively implemented, which is extremely expensive. And then you also need, at least in the prior cycles, a lot of blockchain expertise to correctly implement all these things onto the chain itself, which basically doubles to triples your cost depending on how it is you’re doing it and what you’re approaching it as.

00:13:49:01 – 00:14:15:20
Francis
And I think a lot of folks didn’t necessarily realize this. So I feel like the earlier side of the gaming ecosystem for people that were very serious about this took on a monumental task and just didn’t have the money or the funds to do so. And a lot of these projects, start ups that are not funded by something like Zynga or a large conglomerate that can burn all this money to do the research and get this right first time.

00:14:15:22 – 00:14:44:05
Francis
So I think it’s just a way of struggle from a financial and capitalization point of view and also just not understanding the full problem scope at hand. I think a lot of the software tech suites that were pitching them, hey, you know, come use insert change name here, we’ll give you a grant and we’ll help you with development of a lot of that kind of failed and crumbled when the project got six months down the line and went, shit, this is actually Waymo work than we thought and we’re not getting the type of assistance that we thought we would get.

00:14:44:10 – 00:15:00:03
Francis
And the tools that were promised to us that we were told could do A, B and C and not capable of doing each of those things to the degree that we want them to. That’s where a lot of the failures come from. I don’t think there was actually too much issue with implementing the on chain gaming side of stuff.

00:15:00:03 – 00:15:07:16
Francis
From the game designers perspective, I think it was all mainly on the other side, at least for a lot of the projects that I was exposed to.

00:15:07:18 – 00:15:20:10
Warren
Felix Would love your thoughts here as well. Just the main failure points that you’ve seen in projects in your time and maybe you can say this into which of those problems that Mary is trying to solve specifically.

00:15:20:12 – 00:15:43:05
Felix
Right? Right. When it comes to just gaming and integration implementation side, I think one of the biggest problems is the cause is the fact that a lot of engineers like to find a when they find a new tool like a golden hammer, everything becomes a nail and it feels like there’s always this adjustment period where people figure out what the right balance is to be, for example, on chambers, off chain.

00:15:43:06 – 00:16:00:13
Felix
So in my opinion, for example, you shouldn’t overly tax and blockchain because they only get joking points and it’s going to become a bottleneck like we’ve seen when Etherium Solana, everything has just been surging in gas prices just because the network is congested and there are a lot of games that have basically been trying to build everything on top of the blockchain itself.

00:16:00:15 – 00:16:20:01
Felix
And I don’t necessarily see a good point in that. I think our different principles that are coming out from different blockchains have had a lot of value. For example, Bitcoin is principle of the compute itself isn’t necessarily relevant, only the outcome should be there can stand true for a lot of different areas like showing what’s going on in a state of a game or something similar like that.

00:16:20:03 – 00:16:49:14
Felix
And there are some like financial side aspects where you want to have the transparency and the security of the compute power on the blockchain to use, which I find is very, very relevant as well. That’s kind of where it comes in as well in trying to lower the barrier to entry when it comes to working with financial tooling and how to transact with the blockchain and making sure that you get the relevant information on the blockchain and then the other things you can just keep in-house and just make sure that you don’t divulge any private information and so on.

00:16:49:19 – 00:16:52:00
Felix
Those are my $0.02, I would say.

00:16:52:02 – 00:17:00:22
Xander
Can you talk specifically about how they solve those problems? Like what are the specific use cases that you’re building to address and sort of having that all work?

00:17:01:00 – 00:17:23:19
Felix
Yeah, Yeah. So the core problem that we originally set out to solve was fundraising, because that was, as I mentioned, what Specter has always tried to solve is making it possible for collectives or basically more than one person to make a collaborative investment by pooling funds and also making sure that everything is kept and you know, who has invested what amounts.

00:17:23:21 – 00:17:41:20
Felix
And then from there, when there are assets to be vested out and given to people. For example, if you invest in a gaming token, for example, like shrapnel, when the time comes, when the token would be invested out, then you would basically not have to assume that the person that helps pull the funds is also going to fairly distribute everything for you.

00:17:41:22 – 00:18:03:20
Felix
So we are a strong believers of the Trustless ness of execution for those things and making sure that the data that is on chain is the truth and it’s open and you make sure that any type of relevant like debt or whatever distribution that you’re looking to fix is going to be able to be executed upon whenever the person who’s going to do a claim can do so.

00:18:04:01 – 00:18:23:06
Felix
Now we realized as we got more and more clients coming in the door, that technology can be used for a lot more things than that. And we are now, for example, building like storefronts for people where you just want to make sure that you keep track of who has paid what to have, sort of like a order book or where people have ordered.

00:18:23:10 – 00:18:44:00
Felix
And then from there you can build off chain systems to send order confirmations. You can even handle basically emails with digital assets or just shipping information or so on, just using this as a quick and easy way of making transactions and making sure that money comes where money should go. Basically, where we want to go is even further than that.

00:18:44:03 – 00:19:07:08
Felix
The real vision that we’re looking to do is build something that could compete with SEPA or SWIFT multiple years down the line where we can actually leverage the benefits of crypto to get instant finality of transactions and know that money goes from one point to the next in a transparent way to make sure that that is the money where it should be going because there is a lot of power in naturally having that transparency as well.

00:19:07:10 – 00:19:11:20
Felix
So it’s a very lofty goal. We’ll see if we’ll ever get there. But am I right?

00:19:11:22 – 00:19:40:14
Warren
I can definitely relate that there are real pain points in Web3 investing specifically that need these kind of solutions. Like there are a lot of like smaller investment groups out there feeling that I started one that I’m also part of. And in a lot of these groups, it’s sort of like you make these investments and you’re just kind of hoping that because you sent some funds to an address X months ago that someone is tracking that and at some point it’s going to be followed through.

00:19:40:14 – 00:19:52:15
Warren
It’s like it’s kind of wild. Like sometimes it’s just like tracked in a spreadsheet somewhere, which is ironic when we have all this blockchain technology available. So as sector matures, like, absolutely these kind of solutions are needed.

00:19:52:17 – 00:20:09:07
Felix
Yeah, and that was the scary part because that was how we started as well. Then I was like, This is too error prone. It’s too easy to miss. Click on one cell in a spreadsheet and then all of a sudden all the numbers are seemingly correct. But one person has received a 10th of what they’re supposed to receive or something like that as well, or ten.

00:20:09:10 – 00:20:28:04
Felix
And then keep in check up. Yeah, exactly. And then if you can basically distribute out a lot of the factors to make it so you don’t have to be accountable for everything and the system can handle itself and people can come in and actually claim what they’re owed, then that makes life a lot easier as well, because if one person has a problem, they can reach out and you can solve it for them.

00:20:28:04 – 00:20:43:15
Felix
Making sure that everything is working for everybody as well, especially when you’re dealing with. I think at some point we’ve had up to like 600 different investors at one point in time, and that makes it very, very hard to keep track of what’s supposed to be aware right? Yeah.

00:20:43:17 – 00:21:07:22
Warren
I’d love to pivot now, Frances, and dig deeper into shrapnel and shrapnel as economy. I’d love your personal assessment of what shrapnel is trying to achieve, what you’ve learned from the past with constructing the economy for shrapnel. And to be blunt, like how you hope to differentiate it when we see such a near-perfect fail rate of token based gaming models.

00:21:07:22 – 00:21:11:09
Warren
And what you’ve learned from that and how you think shrapnel can innovate on that.

00:21:11:11 – 00:21:32:19
Francis
From the way we look at it, we have multiple different prongs in the economy from an overarching structure. The way to see the thought processes. You have this thing at the top known as trap, and then you have multiple different subsystems that are all completely independent from each other. So I’ll just focus on two. So you have the creator economy and the actual gameplay section of that loop.

00:21:32:21 – 00:21:50:01
Francis
And the way you design it is that if the creator economy for some reason and whatever that is, it collapses. Well, it does not in any way affect the actual player portion of that economy. So they’re completely separate and only connected from the top by what makes the game the game. And that is the fact that it’s wrapped tokens integrated.

00:21:50:03 – 00:22:25:05
Francis
So the end goal for each economy is slightly different. The creator economy is one where we want consistent, fresh, high quality content to be fed to players or to collectors if they’re collecting skins. The people to just have a high quality experience, like to have the shrapnel experience that they desire to have, whether that’s to use a pink unicorn skin or whether that’s to use some hardcore death metal skin from their favorite band, let’s say, very to separating and different experiences, but something that the creator economy should be able to support both of those.

00:22:25:06 – 00:22:46:00
Francis
And then it is about correctly attributing the value to the people that made that possible, which is the people making it they create similar to a robotics model or how UFO has been implemented in Fortnite, but making it slightly more controlled and constrained from the get go so that that quality can be made at a triple-A level without having to have a deep understanding of what to do.

00:22:46:01 – 00:23:06:02
Francis
You AFN has a few problems. They’ve opened up the door so freely at the start that there is a learning curve to get behind, and there is also a lot of struggles with making specific content because of how broad they’ve made the tools. Whereas the way we necessarily look at opening that up from the economy perspective is highly constrained scenarios.

00:23:06:02 – 00:23:25:04
Francis
So maybe it starts off editing just our maps out content and then over time branching that out so that if you want, you can go from this heavily curated tool to basically working in the unreal Editor. And the reason that’s connected to the economy is it’s the same thought process and idea of the way we open up the economy.

00:23:25:04 – 00:23:42:23
Francis
You start off with a very constrained environment that can be tested internally with the current employee base and slowly open that up and slowly add in potential errors in design or attack vectors for people to try and manipulate. But if you just drop it all at once, which I think is what a lot of people have been doing, that’s where the problems occur.

00:23:43:01 – 00:24:04:12
Francis
The same kind of thought process happens in the gaming side where initially, you know, you limit player trading between each other to certain different avenues and then we slowly add new features. Even adding new features in a peer to peer economy is interesting. For example, like if we have a base set of, let’s say six weapons and then suddenly you add a new type of weapon.

00:24:04:12 – 00:24:22:11
Francis
So it’s not an assault rifle, it’s not a submachine gun. Let’s say we had a like machine that changes the entire economy’s cost structure. And what we could do is we could add 15 weapons at a time and just drop them in. And that’s not really a great way to do it, because there’s now, as you said, good data are good examples of success.

00:24:22:13 – 00:24:39:23
Francis
So we want to see all these behavioral impacts of adding either new content or changing content. Let’s say we don’t even add something. Let’s say we feel like a certain weapon is too powerful, too many people are using it, so we reduce its power level. Okay, That also reduces the price. What’s the psychology behind that? How does that affect people?

00:24:39:23 – 00:24:58:23
Francis
So I think for us, the way we go about this is taking an extremely safe approach. Like you can treat these as actual assets to people, they care about them, they have financial value. So one of those two vectors can easily be attacked and you want to keep them as consistent as possible. And the only way to do that is to slowly make the changes.

00:24:59:00 – 00:25:18:10
Francis
Until you understand the deep implications of everything that you’re doing. The high level is lots of subsystems and then slow expansion over time and not just dropping an entire thing where, you know, there could be a day, zero hour that you just don’t know exists in your actual design. It’s very focused, curated extraction of information for us.

00:25:18:12 – 00:25:39:00
Warren
As you’re talking, I can’t help but thinking, you know, in the business of launching and scaling games, hit up Upptic. We are always talking with our partners about just the many, many failure points that can occur just for a traditional video game going to market, like what can break and obviously like we’re big bulls on what web three can bring to the gaming sector.

00:25:39:00 – 00:25:58:04
Warren
And in disclosure, which I should have said of friend, I’m a small investor in shrapnel vs the platforms that Felix has built. We believe in these faults or I do personally, but everything you just described, it’s this whole other layer of complexity and fail points in adding these top three economies to a business model that already has so many potential fail points.

00:25:58:04 – 00:26:13:03
Warren
So maybe it’s actually easier to look at this a little deeper from the opposite side of like what is bad token design. I know we talked about general pitfalls, but what are some themes that you’ve generally seen in bad token design that you have personally learned from or shrapnel has learned from this?

00:26:13:05 – 00:26:30:14
Francis
It’s I think part of it is trying to do too much at once, especially in gaming, right? You look at what a token is for is meant to make you absorbed in an ecosystem. Same thing works at a poker table. The reason they give you chips is so that you don’t think it’s real money. When you go from one country to the other, you can think of that as like a gaming currency.

00:26:30:14 – 00:26:49:04
Francis
Like you have to switch because it is a sub economy within the world, just like when you’re coming into shrapnel, like the currency that you have is meant to be a fictional piece, like it is meant to be slightly fictionalized and how you think about it, how you use it and what you can do with it. And I think that’s a story that a lot of people forget to tell.

00:26:49:04 – 00:27:11:09
Francis
When we’re doing a lot of this. We notice people were designing tokens around like almost purely financial models and then also replacing typical game usages with just token. And we’re going that’s token design. Like I would put some staking in, they would put some basic in-app purchases in and that’s done. So like really what you’re meant to ask yourself is like, what am I trying to get my user to do here?

00:27:11:11 – 00:27:32:02
Francis
Like, what is the behavioral action that I’m trying to push them towards? Because that’s what game design is really. You’re trying to make people perform actions and then enjoy it. And I think that’s how we approached our token design because we noticed a lot of this over financialisation of gaming, where the only motivation was profit or just going back to a default.

00:27:32:02 – 00:27:54:21
Francis
Like, Hey, this is a typical video game usage. Whereas we turned it around was like, maybe if we sat there and tried to think of, okay, there’s a giant list of new potential motivations that a person can have as a player with a token that has value. How do we connect that to traditional game design thought processes and designed something around making them do things with that token?

00:27:54:23 – 00:28:15:12
Warren
That makes a lot of sense. We talk a lot about how for a lot of teams it seems like the idea of like, okay, we need a token comes first and then kind of shoehorning into the game after that, mixed with with, for better or for worse, built a fundraising model in Web3 gaming, where VCs, at least in this era, expect there to be a token.

00:28:15:12 – 00:28:33:12
Warren
So that was increasing pressure on teams to shoehorn a token in. Yeah, if it’s not even in the original spec helix, I’d love to get your thoughts on the same topic and maybe also because you focus in this area, the emerging complaints issues we’ve discovered in using tokens in game design and what teams need to think about.

00:28:33:14 – 00:28:58:09
Felix
Yeah, yeah. So I mean, I love what Francis said. One thing that it reminded me a lot of is the typical things you learn about modeling and everything in uni when you do engineering is that you kind of want to build up a model that makes sense for the actual domain that you’re trying to facilitate as well. And so, for example, the defi terms of staking and liquidity provision and so on, it doesn’t necessarily make sense in a game.

00:28:58:09 – 00:29:22:12
Felix
So if you can build up that law and the understanding of what inner work is trying to achieve inside of the game itself, that’s going to make way more sense for the people. And it’s also going to make things a whole lot more fun because law is always important for those who are interested. I mean, we all know the difference a good story makes to a good game if you have outstanding mechanics, but the story’s boring, a lot of people will drop off because they don’t find something that hooks them.

00:29:22:14 – 00:29:42:06
Felix
It’s it’s just as relevant to think about that when you’re actually working with something. They could have monetary value. And I think the other key thing is and I’m not sure I know that Francis agrees with me on that one, that is that tokens and monetary incentives should be secondary to the game itself. A good game will be able to stand on its own.

00:29:42:07 – 00:29:59:12
Felix
A good token, Not necessarily. It’s going to be way harder because it’s just a token. It’s supposed to be used to transact for something. So you want to have that value in there, right? And that can be a perfect segue into talking about more token compliance and so on as well. And that’s where Francis is kind of one of my getting hands at times as well.

00:29:59:13 – 00:30:18:10
Felix
It’s very important to have good utility time better. We talk about when it comes to how we test and securities and so on, it’s very important to make sure that the token isn’t necessarily strictly tied to your type of organization, depending on where things are navigating. There are a lot of rabbit holes we can delve into there. I think that’s a separate conversation to talk about.

00:30:18:12 – 00:30:48:15
Felix
I think that the most important thing is making sure that when you build a game with a token to make it as clear as possible that a token is intended to be used for value outside of actual making money and building up good avenues where people can transact and exchange value that isn’t so strictly monetarily driven. The other side is making sure that you don’t frame it as or if you are to fundraise, that you’re looking to strictly make money off of it.

00:30:48:15 – 00:30:55:03
Felix
Because then again, there’s the how we test and there are a lot of different other areas as well. I think. Francis you’d probably want to chime in here. Yeah.

00:30:55:05 – 00:31:13:21
Francis
Yeah. I mean the main thing I think a lot of people forget is the gaming industry with a capital G, otherwise known as gambling also exists and that happens any time, you know, we get into the space. If you play a game or you do something, you make money as someone else’s expense, right? Like you bet on some kind of circumstance to happen.

00:31:13:23 – 00:31:34:16
Francis
And that that does happen and you make money or it doesn’t happen and you lose money. So I think it is very easy on the game design front for people, especially in the web3 space, to accidentally crawl into the capsule gaming space and open a whole bunch of different like doors that they don’t want to open that get them into a ton of different types of regulatory problems.

00:31:34:18 – 00:31:54:15
Francis
So I think that is one of the key problems that people end up walking into and don’t understand, I think, deeply enough, because you don’t just have one country potentially coming after you. You have every single country you’ve sold a copy of, game it coming after you. The other piece is understanding the separation in structure between the token, the actual company making the token.

00:31:54:15 – 00:32:10:23
Francis
Like all of these things, people always recommend different types of things. I think the core thing though, that differentiates that Mr. Dao is not the company that makes the game. The Dow is the thing that should be directing the company, that makes the game to perform certain types of actions and having a good legal structure there is always good.

00:32:11:00 – 00:32:36:13
Francis
The final piece coming into what Felix was saying is the token design has to have enough utility to be not just an argument for someone making profit. Like there has to be some good use cases there. the differentiate themselves and I think, you know, coming back to the whole idea of, hey, I just stake money in and things happen, well, there’s tons of things that can happen, but people seem to be focused solely on just giving you tokens back.

00:32:36:15 – 00:32:58:18
Francis
It’s like maybe, you know, as a gamer, I’d be happy to deposit, let’s say, $100 onto a platform, never touch that hundred dollars, but just get continuous rewards. It’s like buying, you know, an infinite season pass. So it’s like getting a battle pass over again or access to certain skins or exclusive access to content like this. So many different things you can do with staking rebranded as other formats.

00:32:58:22 – 00:33:08:17
Francis
That’s where a lot of these folks could get themselves into less legal hurdles if they just made a slightly more complex system that’s actually geared towards gaming and not just invest.

00:33:08:19 – 00:33:09:12
Felix
Yeah.

00:33:09:14 – 00:33:22:10
Xander
The second piece is really interesting because it really talks about how you can use cryptocurrency in a way that’s actually unique to the space you’re doing something that you’re not capable of doing in other games, and that’s what makes a Web3 game actually exciting.

00:33:22:12 – 00:33:40:05
Francis
The interesting piece there is like you’ve motivated someone to put money into the game, like someone has decided to put, let’s say, under dollars $100 into the game if they’re interested enough and you’ve done a good enough job that probably going to want to spend that after staking it like that, how we’re going to look at a piece of content and go, Yes, let me do that.

00:33:40:05 – 00:34:04:17
Francis
Yes, let me do that. So initially that was a carrot of, you don’t actually have to spend the money. You just have to deposit it. And it’s all good. And then the stick is like, look at all this dope stuff that we have done in our ecosystem. So like from a game design perspective, you’ve done the hardest thing to do, which is get people to pump money onto the platform to buy the content making because there was no push to be like, Hey, just deposit this and then we keep it forever.

00:34:04:17 – 00:34:14:22
Francis
No, it’s the push of like deposit this. You can draw on every one. And I think that’s like, you know, one of the nuances there. At least that’s all always thought about so much when it comes to what you can do in the space.

00:34:15:00 – 00:34:20:00
Xander
Right? And there’s like a much wider barrier of injury. If you know that it’s money, you pull back out and any time.

00:34:20:00 – 00:34:41:13
Felix
Yeah, it kind of also shows another natural progression to what you’re staking would be because. Now you have the time aspect of transit just mentioned as well where you stake for a while or then after a while, let’s say it’s a time based one instead of just taking the money out and just disappearing and that whole cycle ends, you can then see, okay, I’ve had a tried there, now I made some money and now I can actually spend all of that if I want to as well.

00:34:41:18 – 00:34:50:14
Felix
That goes into building more of an intricate loop and more perpetuity into the ecosystem loop as well, which there are a lot of avenues you can play around with those aspects.

00:34:50:16 – 00:35:05:07
Xander
It’s a psychological investment and then it basically, this is house money, this is earn money. Why not just spend it in the ecosystem that’s already invested in. Very clever. Yeah, I want to rewind that. You said something interesting, which I’ve always had a lot of questions about, and I think our audience may as well. You said the Dow is in the company.

00:35:05:07 – 00:35:20:22
Xander
The Dow is an instrument that’s designed to direct the company. So what you mean by that, you actually need to incorporate the business entities as well. And you’re using a Dow as like a middle layer to direct it. Or can you talk a little bit about the way that you think about that legal structure with the right way to do it versus what’s the wrong way to do it?

00:35:21:00 – 00:35:40:14
Francis
There’s lots of different structures you can adopt that obviously needs to be a company that pays employees in different parts of the world that built the game that often exists and will exist before a Dow actually exists. Then the way they work together depends on how you structured that token, because usually the Dow is on the token side and is actually representing that.

00:35:40:14 – 00:36:08:21
Francis
And so it’s all about the agreement that has been formed between the company that makes set products for the token issuing entity to have that token exist in some kind of ecosystem. And then like we can look to web to actually to look at the formations of the different formations, the gaming days, I’ll name three games. So I’ve online Runescape and Warframe Runescape takes this model of okay, we do streams, we take your opinions in on those streams, we do polls.

00:36:08:23 – 00:36:36:15
Francis
And if that poll gets more than 75%, we’ll start a process off that process could be implementation of a change based on the poll or if it requires development, develop something and then have another poll. You get 70% again, a piece of content that they feel tied those votes. So they actually enact all of them. There’s an online star model which has a council elected by the playerbase, which once a year they come to studio in Iceland, unfortunately named studio, if you’re familiar with China.

00:36:36:18 – 00:36:57:07
Francis
And then they then go there and they can look into every single process that’s going on. They get a full under the covers look. They can’t tell that to the necessary audience that they’re representing, but they can say, okay, you elected us this way. We think they’re going down the right path. We don’t think they’re going. That is not a final decision like it’s treated in the moonscape world.

00:36:57:09 – 00:37:29:22
Francis
And then you have Warframe, which just takes they go, you’ve been a player for a long time. You spent a lot of money. We know that you’re cool. All of you guys are on the council. We’ll listen to your opinion. But again, it’s not final. So each of those takes a different kind of approach. Personally, I like the Eve online model for having a council of curated members elected by a community, but I do think mixing that with something akin to the Inscape side of this, it’s like, okay, we have ideas, but like as a community you should vote on them to some degree, but it shouldn’t be a 5050 like, yes, there is a

00:37:29:22 – 00:37:53:07
Francis
contention in the decision. It is not a good enough decision to be made to implement and spend, you know, hundreds of thousands to millions of dollars on it. There is no contention. It’s like 75% plus. Great, fantastic. The whole cohort agrees on nearly the whole co-op. And that’s why you’ve seen, you know, these games either maintain a consistent popularity or since ultra and skate a release in like 2013, all it’s done is gameplay is because of these approaches.

00:37:53:09 – 00:37:59:16
Francis
So I don’t think we have to reinvent the wheel. We just have to apply this wheel to a legal structure that exists in the web3 space.

00:37:59:18 – 00:38:03:03
Felix
What he basically described now are different ways of having a DAO with a foundation as well.

00:38:03:07 – 00:38:23:01
Francis
You know, they keep basically a DAO like a decentralized autonomous organization. It needs a council. That council could be defined as anything. It could be people holding a token, it could be people elected by people holding a token. And the authority of that DAO also depends on the way you structure it, like its word be final and gospel.

00:38:23:03 – 00:38:52:05
Francis
Some of its words could be found on gospel, on certain decisions and on others, and some of it could mean absolutely nothing. And it’s all suggestive to a separate company that may or may not implement. So that’s all the different ways. Personally, I’m a huge fan of a very trivial and simple quality of life decision that’s being made actually by, for example, if if we’re talking about games, a gaming company because people think they know what they want, but they actually usually don’t when it comes to the space.

00:38:52:06 – 00:39:06:13
Francis
And then a lot of the larger vision and scope decisions being made by the community, which may sound reverse to a lot of people, but like they’re telling you what they holistically want to play. But like, I wouldn’t let the average user decide what mechanics will be best.

00:39:06:15 – 00:39:09:05
Xander
Right, for this buff, their favorite gun which isn’t good.

00:39:09:08 – 00:39:28:21
Francis
And the of exactly the incentives on the line. But the incentives are aligned if they’re telling us, hey, this is our interpretation of the products you’ve made, then that gives game designers a chance to go back and go, okay, So this is how you’re thinking about it, and that’s the path you want it to take, as opposed to doing exactly what you’re saying and saying, Hey, maybe the fire is too low on this thing and I can’t kill people fast enough like that.

00:39:28:21 – 00:39:33:07
Francis
Intrinsically changes the experience as opposed to changing your interpretation of the experience.

00:39:33:09 – 00:39:52:15
Felix
Yeah. And just time back to what you talked about earlier. I think a key aspect to all this was to make sure that people are aware if they’re part of the Dow or helping govern. The success of the product is to take the bait, except that those are the friends of this guy before as well. Because if you just drop a huge complex system on people, they will not be aware of all the intricacies that are going on.

00:39:52:15 – 00:40:06:20
Felix
But if you keep spoon feeding them and incrementally adjust them to so they can adapt to the complexities they’re in there, they are more likely to understand also what is good versus bad for the collective and the overall product versus the individual.

00:40:07:01 – 00:40:07:23
Francis
Yeah.

00:40:08:00 – 00:40:25:06
Xander
Right, right. I’d love to keep talking about this for another hour, but unfortunately we are getting to the end of our time. It’s been really interesting. I think we had quite a journey that you guys both for coming before we wrap, if anyone wants to get a hold of either one of you or wants to learn more about what a or shrapnel, where can they get the shrapnel?

00:40:25:09 – 00:40:47:10
Francis
It is just, you know, play shrapnel on Twitter. We actually respond to everyday, which I think some people don’t now. So if you messages that we will reply no matter what you say within reason for then for myself personally, it’s you know Francis Franken on Telegram or to me Esquire Twitter is the best place to come down for murder.

00:40:47:10 – 00:41:06:18
Felix
You can always email us. Hello at Muted Dot app. Can you go to the website as well? Mourad Dot app. We also mood app at Twitter. So if you want to join on Twitter, that’s when we’re still very small, but we’ll definitely respond to your ODB story. And if you want to reach me on Telegram or Discord or Twitter or whatever, I am.

00:41:06:18 – 00:41:17:20
Felix
Felix Naughton Basically everywhere I think I am. Felix TR Naughton Because somebody stole my handle on Twitter in 2011 and has been inactive since. And just email us, contact us, ping us.

00:41:17:22 – 00:41:38:00
Warren
Awesome. Felix Francis Thank you guys so much. I think this was an important episode for anyone building in Web3 Gaming. These are a couple of those important topics where we often don’t know what we don’t know but can absolutely be the deciding factors between success and failure in Web three business. If you don’t do your proper diligence and have the proper partners.

00:41:38:02 – 00:42:04:16
Warren
So thanks so much everyone for checking out the episode today. As always, it was brought to you by our team here at Optic. Here at Optic, we do all things to help games grow, games of all sizes and technologies. If you’re building cool stuff, come talk to us. We can help with user acquisition with the data science and analytics around that and with all of the creative developments needed for both growth within the Web3 ecosystem and with mass market mainstream game adoption.

00:42:04:18 – 00:42:11:23
Warren
So if any of that is helpful to you, you can reach us on our website. It’s ulta.com up TFC dotcom talk soon.