Dizon, a game developer for 19 years was among the first in the Philippines to create online games. His curiosity about blockchain and smart contracts inspired him to develop games where players can enjoy and earn assets with real value.

Now, YGG partners with various games and builds its global network in Southeast Asia, India, Brazil and Africa to acquire non-fungible token (NFT), which are needed to play and lend these out to players so they can earn without upfront cost.  It has raised $20 million funds from various investors led by Andreessen Horowitz.

Key discussion points:

• Gaming industry has evolved and transformed from pure entertainment to earning crypto.
• YGG builds gaming communities not only in the Philippines, but globally.
• It partners with UnionDigital Bank to serve the growing play-to-earn community in the Philippines.
• YGG plans to raise more funds, after securing over $20 million in investment from global investors.

The transcript of the interview:

Emmanuel Daniel (ED): Hello, everybody. The gaming industry is transforming the entire landscape for digital content for tokens, cryptocurrencies, the way in which people make a living, and nowhere is this more profoundly true today, especially after the pandemic, than it is in the Philippines. Today, I'm speaking with the leader in the Philippines for gaming, for gaming communities, for digital assets, and how that's transforming the lives of ordinary people. 

Thank you very much Gabby Dizon for joining me today. I am very happy to have met you a few days ago. And then to do this formal conversation, where I want to sort of draw from your mind, where this is taking us, and how this is going to create a new global ecosystem, in terms of livelihoods, transactions and everything. So, you are the co-founder of Yield Guild Games (YGG). Just talk us through a little bit about your own personal journey in cryptocurrencies, in gaming, and in this guild that you have created.

Gabby Dizon (GD): Sure. So, my background is a game developer. I've been making games since 2003. I was a part of the team that created the first game out of the Philippines, then. In 2014, I co-founded the mobile game studio called Altitude Games, so we were making mobile games for iOS and Android phones.

In 2017, I got curious about blockchain when I heard about Etherium, and the concept of smart contracts. Smart contracts are immutable programmes that can transfer value in a public blockchain. In a way, it's a way that you can create digital money. And it was very interesting for me, because the concept of economies has always existed in online games. But now, the assets that you create can have real value. We studied smart contracts to see how this could one day potentially impact the game industry. During that time, in late 2017, CryptoKitties released and popularised the idea of the non-fungible token or the NFT. And NFTs were different from fungible or crypto tokens before then, because now you could store unique assets on the blockchain. We started with Cats that have their own unique DNA. But NFT's could be applied to different kinds of assets, especially in game assets. And yeah, this is really got what hooked me into crypto and from then, from 2018 to now really experimenting on what the application, so NFTs and crypto inside of gaming.

ED: So, the game that you originally invented, what was it called?

GD:  I was part of the Axie Infinity community. I wasn't part of the development team. But yes, I’ve been part of the community.

ED: So, that was the starting point. That was the original game. And then you developed it from there. Right? What's interesting is that there are 2.8 billion gamers around the world who play on the mobile device. I think close to like three billion gamers around the world. Is that about, right?

GD: Yes, that's right.

ED: And about 50% of them are in Asia, or in the Asia Pacific region, right.

Tell us about the evolution of the gaming industry. I mean, you just gave us your own evolution, which is the evolution of the gaming industry, which is it started as a game and then it went on to blockchain and now it's crypto-native, meaning that you generate income by playing, right? Give us a sense of how the gaming industry has evolved and where it is today?

Gaming industry has evolved and transformed from pure entertainment to earning crypto

GD: Yes, so the game industry has evolved a lot in the last, I would say 30 years and the predominant business model in the last 10 years or so, were free to play games. So, these were games that you could download for free, whether in the PC or on your phone, then other game would monetise via in-app purchases that people would pay for things inside the game. Now, these things were consumable, and the players didn't really own them. When you deleted the game, you basically had nothing left. With the advent of play to earn gaming, putting game assets on the blockchain, now you have permanent items that have some value that other people might want to pay for. So, this is a big shift because of all the time that people spend in gaming, it's usually purely for entertainment, meaning that you do not get any value back. Now you can centrally play the game and create, earn and own assets that have real value in the real world.

ED:  Right? So, thisis Axie Infinity, is that's the one that you… that's the game that you've worked on.

GD: I didn't make the game but yes, I was part of the community.

ED: Okay, a part of the community, right? So now, explain to me the whole idea of a guild. Why is the guild important?

GD: Sure. A lot of people play games like Axie and other games because apart from enjoying the game, they want to be able to earn some money and then own some assets. And typically, a lot of people who want to play the game don't want to buy into the NFTs. First, they want to play the game and see if they enjoy it. As a guild, we buy the assets and lend them out to our player community who loves discovering these games, as a way for them to try them out and earn some rewards. We split the revenue with our community. We typically keep only 10% of any rewards that are earned, most of it goes to the player and their community manager. So yeah, so the guild organises people, and we buy the assets and lend them out so that people, gamers can try out these games earn some value, some tokens or NFTs, without having to pay a gaming upfront.

ED: Are you a global originator of this idea of bringing gamers together this way and renting out the assets to them?

GD: Well, there were some people who are doing this in a smaller way, along with some friends of mine in 2020. But as the first guild that was professionally funded by venture capital, yes.

ED: Right. And how much technology is involved in creating platforms like, Guild?  Is it a platform, or is it a network? How does the technology behind work?

GD: Yes, I would say that it's both. We are, I would say, we're a network and a community of people. But we also have these assets. So, a big part of it is organising these assets, being able to transfer them in an automated manner, put them in the hands of our player safely, and building profiles so that we can discover what games they like, so it is both a network and a platform.

ED:  If a guild becomes successful, does it operate more, just like a Facebook or a platform in that way, or can guilds work with other guilds, and create a kind of a global network?

YGG builds gaming communities not only in the Philippines, but globally

GD:  Yes, so, we're actually creating a global network.  We've pioneered the use of subDAOs, which are guilds that are affiliated with YGG, but also have their own geographical focus.  Last year, we started with a YGG, Southeast Asia subDAO, which covers the rest of Southeast Asia, outside of the Philippines. We also have partnered guilds in India, with IndiGG, Latam, with Ola based in Brazil, Jambo in Africa and elsewhere.

ED: It's got a better chance of not becoming siloed in that if you belong to one guild, you cannot belong to another guild and transfer your assets around. But it can actually be a network of guilds?

GD: Absolutely.  That's exactly what we’re doing.

ED: Actually, this conversation is a little bit more complex than the conversation we're having, because there are people watching this video, who know nothing about gaming, and there are people who are already into gaming and want to ask the hot questions.  I'm trying to straddle the whole range. Let's not assume that the people who are watching this understand everything that we're doing. Okay, so the conversation we've had so far is there is gaming and there is the building of assets in gaming, where people buy and sell the assets created in gaming. There is the guilds created, in order to help people who don't want to be involved in the assets to sell, play the game. At the same time, rent them assets, make it cheaper for individuals to participate and then create communities around that. And that's what Gabby is involved in. And then the questions that I have, which is where is all this heading, right? Give me a sense of why you think you have been so successful in the last two years?

GD: With what we're doing, we're giving people access to the global crypto economy, which before then most people had to be able to buy in whether it was Bitcoin or Etherium, or other tokens you had to buy into it   to participate in the global crypto economy. What we're doing with play to earn, you can now participate in the global economy, with your time and skill and effort instead of money. I think this is a big unlock to most of the people around the world, especially in developing markets, who could use the economic access to crypto without having to buy in the first place. A lot of the people who are in our guild are from developing markets, whether it's Southeast Asia, or Latin America. And yet, they're learning about crypto and web 3, onboarding with a wallet and doing this without having any buy in to start with, so I think that's very important.

ED: Okay. Now, talk to me a little bit about your relationship with Union Digital Bank. This is a traditional bank or rather this a digital version of a traditional bank. And how that relationship came about, and why the relationship is important?

It partners with UnionDigital Bank to serve the growing play-to-earn community

GD:  Yes. UnionDigital is very interesting because they trying to create a new digital bank from the ground up, rather than create a digital extension of an existing bank. And, yeah, they naturally partnered with us because Union Digital is really looking at the use of blockchain technology to deliver its products as a pure digital bank. And a lot of the player community that we have within YGG is very savvy on crypto and would probably be very interested to use a pure digital bank such as Union Digital.

ED: Okay, when Union Digital Bank started, they didn't start because of you, right? Because of the relationship?

GD: No, no.

ED: Okay, so they wanted to be a digital bank. At some point, I have to speak with the founder of Union Digital Bank, which is a subsidiary of a traditional bank, which is Union Bank of the Philippines.  How does it work? How does the relationship work? And here, your entire ecosystem is crypto-native, meaning that you don't participate by putting cash or exchanging cash into crypto, you actually generate your own crypto when your gamers participate in your ecosystem. Then the question is, how do you monetise it? How do you make it, how do you spend that money, right? And that's where the relationship with Union Digital Bank comes in? What are some of the regulatory hurdles that you faced? In working with Union Digital Bank, and what are some of the real relationship, the real benefits that the customers get?

GD: When our community plays these games, and earns crypto rewards, whether they're tokens or NFTs, of course, they would want to find a way to cash out and be able to spend that money in the real world, and that's where digital banks like Union Digital comes in. YGG itself does not touch fiat money.  We don't convert tokens to pesos, US dollars of our community. We simply give them access to the crypto economy via the NF T's that we own. And that's where partners such as Union Digital comes in. They help convert the assets into Philippine pesos, for example, so that people can enjoy the fruits of their labour in these games in digital economies.

ED: Now, some of the regulatory hurdles that means what the regulator wants to know. Now, does that make you a regulated entity as a result? Because the assets are real, or rather can be transferred into cash?

GD: Yeah, so the regulation is around the transfer itself, from crypto to fiat, so our partners are regulated by the central bank to have an exchange licence, for example. So for ourselves, because we're dealing exclusively within the digital realm. We don't deal with those regulations directly. However, we make sure that we partner with licensed and regulated institutions.

ED: Now, but then that creates the possibility of money laundering, for example, which is essentially in your case is making money out of nothing, then, oh, yeah, I've got money. How do the regulators get around that, and therefore, do you see yourself being regulated at some point?

GD: So contrary to popular belief, blockchain is actually terrible for money laundering, because the transactions are completely on chain. And if you cash out your crypto, for example, in an exchange that requires know your customer (KYC), then it's easy to trace all of your transactions back to the originator. So while of course, money laundering probably exists, it exists at a smaller magnitude than actual cash, which is harder to trace. And there are now companies that deal with tracing funds and helping institutions like police investigators, for example, figure out the flow of money on the blockchain.

ED: Now, in terms of moving the technology that you're using on to blockchain, what are some of the things that you're working on right now, to enhance that experience of the players, the gamers on blockchain? I would imagine that speed is one of the issues. The other would be, what data do you capture in the transactions, and then making it immutable and transferable? I'm just imagining these things. But what are some of the technology issues that you are dealing with as you make that transition?

GD: Yes, so we're creating player profiles for people so that their wallets can show and reflect the experience that they have playing different games interacting with crypto protocols. So think of it, as a way for people to get experience badges that denote them as just having tried or experienced different kind of things, or fluent in different skills. And this will give them the opportunity to unlock unique experience where people may be paid, for example, to try out a new game or a new protocol, depending on what their experiences on chain. And yeah, this is the ecosystem that we want to build so that people can build their own on chain reputation system.

ED: So how much artificial intelligence (AI) is involved in that? Would you even say that there's AI there some way, like being able to process a lot of data and draw a profile?

GD: Eventually, once there's enough data for us to tranche, yes, there are AI involved, but it's more of creating a reputation system to start with.

ED: Okay, now, as your platform becomes popular in the Philippines, where are you seeing interest coming from, this adding to the community that you're creating?

GD: Yeah, so we're seeing interest from a lot of traditional companies that want to be involved with crypto and the metaverse and these online, virtual worlds and economies. So from banks, to retail companies, there's a lot of interest in what the meta risks could be, or what are these economies that are being built on top of blockchain. So we're helping translate that knowledge to the corporate partners that we are talking to.

ED: Corporate partners. So, how are they involved in the ecosystem?

GD: Yes, so were trying to figure out, a lot of companies are trying to figure out now whether you're a bank or a mall or a telco to figure out what your presence will be in online virtual worlds in the metaverse and that's, those are a lot. We're having a lot of those active discussions right now. 

ED: Okay. Unity, that's the Apple community, doing what I as a layperson think is similar to what you're doing, except that you're doing it with Pokemon Go, Monument Valley and so on. What are the similarities with what Apple, these big guys are doing, and what you're doing?

GD: Well, I think building gaming communities is something that is really common. The big difference is that we're encouraging people to own their own assets in their own wallet and be able to build a portfolio that reflects real value from the efforts that we put with gaming.

 ED: Okay, now speaking of real value, in the two years that you've seen growth, what is the size of that growth like in 2020, how many gamers do you have and today how many gamers and certain valuation to the amount of transactions that take place?

GD: Yes, so right now, we are close to around 30,000 what we call ‘scholars’, so the people who are borrowing our assets to earn money so these are happening across games like Axie Infinity, but also League of Kingdoms, Splinterlands and Cyball, and now we've partnered with over 40 games to buy their assets to lend up their communities. Most of these games haven't launched yet, but a lot of them are coming up anytime between the next 6 to 24 months.

ED: So, when you get investors, just talk to me a little bit about the investors that you've secured, and the kind of investment targets that you're looking at, in order for you to grow, and the utility of the investments. What is it mostly used for? Is it for development work? Or is it for the tokens, themselves?

GD: We have taken on investments so that we can buy the NFT assets that we can lend out to our community, and we're also hiring development teams that are creating products that will help our community and have an on-chain reputation system and be able to experience these different games.

ED: Okay, and where are you with investments at the moment?

YGG plans to raise more funds, after securing over $20 million investment from global investors

GD: We've raised a little over $20 million from global investors, such as Andreessen Horowitz, BitCraft, BlockTower Capital and a lot more.

ED: Okay. Now, when the tokens start to lose value because it's market forces, what happens to the community? And how does that evolve? Obviously, this is a maturing industry, token valuations, don't just keep going up, it goes up, down. And Bitcoin right now, as I speak to you, is on its way down for now, at least. What effect does it have on your community? What risks does it create for you as a business? And how do you think it will work out?

GD: Yes, there's a lot of volatility in these online digital markets, especially in the crypto market. We focus a lot on education. Of course, as prices fall then the value of people's earnings are less. We just want to make sure that people understand the risks involved and that's why we want people to earn this value with their time and skill and energy, instead of buying in so that people are able to earn these assets with basically sweat equity, instead of having to buy with their own money. And then as they develop a kind of more nuanced view, on what these markets are, then maybe they can make more informed decisions if they would want to invest personally, as well.

ED: Very important point you're pointing out, so that play-to-earn model that creates the integrity of your ecosystem is so easy to just allow people to buy in that is go to Union Digital Bank and exchange your cash for crypto and then get it.

But, that ability to come in through buy-in exist on your platform, doesn't it?

GD: Well, no, so we don't get people to buy or sell anything on our platform directly. We just give them access to assets, where they can earn from the games that they're playing.

ED: So, it's totally play- to-earn and then you build an ecosystem from there.

GD: Correct.

ED: Okay. Now, what is next steps for you on blockchain token, what are the things that you're working on right now?

GD: So next step for us is to really expand our coverage. We've barely scratched the surface with people who know about play-to-earn and we want to partner with more games so that people can have different choices on what they want to do when they get the metaverse and yeah, just make this available to anyone in the world who wants to be part of the metaverse or in these online virtual worlds and make some money out of it.

ED: When you say metaverse, is that your metaverse or is that a ecosystem of metaverses interacting with each other? This is something which even I want to visualise. How does gaming and community exist in a metaverse?

GD: Yeah, it's really the games that are part of by the NFTs that we buy into, the games are attached to them. And that's where we send our communities to be part of these different games.

ED: Therefore, in the metaverse universe, tokens have to be interoperable. It needs to be easily transmutable, right. What's the discipline that's creating that in your world, in the gaming community? Others like you talking to each other. What's making it possible for them to be network quality interoperability?

GD: Yes, so, what makes the interoperability possible is because the assets are built on a common blockchain, so that means it's easy to transfer value from one person to the other.

ED: Are the tokens available on OpenSea on NFT platforms for people to trade outside of the ecosystem?

GD: Yes, they're based on a common token standard, which means that they are easily tradable with one another.

ED:  Now, I'm asking you all these questions, because you're evolving in a way that is so antithesis to the way in which banking evolved, or financial services evolved. Financial services is essentially didn't create interoperability, but it created a huge monolithic payments infrastructure, globally as well as nationally. And it's a closed infrastructure. I'm talking to you to understand how the metaverse and the gaming universe is evolving and the disciplines that are being put in place, as it grows. You've pointed out to me, for example, that firstly, that is common understanding, it’s transmutable and that you want them to be token-native, in order to create the discipline of actually earning the token, and therefore, you create the ecosystem from there, and so on. So, you've given me a few ideas in that way. Are you looking to raise more funds now?  Is there a need for even more capital to grow what you're building?

GD: Yeah, it's possible that we'll be raising more funds in the near future.

ED: Okay. Good. Thank you very much, Gabby, thank you for spending time with me today.

GD: Alright. Thanks a lot.