Arianna Simpson on Yield Guild Games

Andreessen Horowitz's Focus on Crypto and Gaming Investments

Arianna Simpson, a general partner at Andreessen Horowitz, is currently concentrating on maximizing returns from the firm’s $2.2 billion third crypto fund for its limited partners.

A key area of interest involves startups that integrate cryptocurrency with gaming. Recently, her team participated in a co-leading investment in Virtually Human Studio, the creator of Zed Run, a platform for buying, selling, and breeding virtual horses.

The Rise of Play-to-Earn Models

Simpson is particularly fascinated by “play-to-earn” models utilizing NFTs. These models allow gamers to earn cryptocurrency, which can then be exchanged for traditional currency.

a16z has announced a $4.6 million investment in Yield Guild Games (YGG), a decentralized gaming organization located in the Philippines. YGG enables players to share in the company’s revenue by participating in games like “Axie Infinity,” a blockchain game where players breed and battle digital creatures called Axies to earn tokens known as “Small Love Potion.”

YGG provides players with the necessary funds to acquire Axies and other digital assets, allowing them to begin earning income. The expectation is that players will generate more revenue than the cost of utilizing YGG’s assets.

Insights from Arianna Simpson

We discussed the convergence of crypto and gaming with Simpson, who previously invested in companies like Dapper Labs and Celo before joining a16z. She also revealed the platforms a16z monitors to identify promising crypto startups.

Our conversation, condensed for brevity, is presented below.

Exploring the Potential of Digital Horse Racing with Zed Run

TC: What initially drew your attention to Zed Run, the digital horse racing platform?

AS: We discovered it through crypto Twitter, a significant source of our gaming investments. The community there is remarkably active and often the first to highlight innovative projects.

Zed Run represents a new level of engagement in crypto gaming. While CryptoKitties was an early NFT-based game that gained traction outside the crypto world, Zed Run offers more complex gameplay. The community’s enthusiasm is remarkable, with players creating detailed guides on racing strategies and course analysis.

Expanding Beyond Existing Models

TC: Are there opportunities to replicate this model across various sectors, such as digital car racing or a UFC-style platform where users can buy and wager on digital fighters?

AS: The possibilities within the crypto gaming universe are vast. The core principle is to return value and ownership of game assets to players.

Historically, players have invested significant time and resources into in-game assets, only to have game rules change or winnings taken away, leading to frustration. Blockchain-based games aim to address this by granting players genuine ownership.

Yield Guild Games: Empowering Players Through Play-to-Earn

TC: What specifically attracted a16z to Yield Guild Games (YGG)?

AS: The rise of “Axie Infinity” coincided with the pandemic and widespread job losses. This game pioneered the play-to-earn model, a crucial theme in crypto gaming.

Playing “Axie Infinity” requires owning three Axies, typically purchased upfront. This presented a barrier for those without financial resources. Gabby Dizon, a player in the Philippines, began lending his Axies to others, enabling them to earn tokens convertible to local currency.

YGG emerged as a formalized version of this practice, acquiring or breeding yield-earning in-game assets and loaning them to “scholars.” YGG then receives a portion of the revenue generated by these players.

The Role of Scholars and Asset Liquidity

TC: What level of gaming expertise is required to become a “scholar”?

AS: Managers oversee teams of scholars, determining who joins the guild.

TC: How can Axies be converted into currency, and who is purchasing them?

AS: Axies can be bought and sold on exchanges. Players may purchase them for breeding or investment purposes. Alternatively, players can sell the tokens earned through gameplay.

Growth and Community Engagement

TC: Currently, 5,000 scholars are participating in the game. Is the majority of them located in Southeast Asia?

AS: While Southeast Asia represents a significant portion of the player base, both “Axie Infinity” and YGG are experiencing strong international growth. Expanding globally is a primary focus for the YGG team.

Identifying Emerging Crypto Projects

TC: Beyond crypto Twitter, where are you actively searching for new and innovative crypto projects?

AS: We utilize Discord, Reddit, and other platforms. Discord is particularly valuable for gauging community activity, engagement, and discussion topics. This provides insight into the health and potential of a project.