Ariana Simpson on Yield Games: Crypto and Gaming Convergence

Arianna Simpson is one of four general partners at Andreessen Horowitz who are currently investing in the venture firm's third crypto fund, a $2.2 billion vehicle, intending to return that investment and even more to the company's limited partners.

She has been monitoring more businesses that integrate crypto and gaming to that aim. Her team, for instance, co-led an investment in Virtually Human Studio, the company behind Zed Run, a digital horse racing platform whereby people can purchase, trade, and breed virtual horses whose worth grows as they compete against the other virtual horses.

Simpson is also fascinated with NFT-based "play-to-earn" schemes, in which players may earn cryptocurrencies that they can later exchange for their domestic currency if they wish.

Indeed, a16z said today that it had led a $4.6 million investment in Yield Guild Games' tokens, a decentralized gaming operation located in the Philippines that enables players to partake in the company's earnings by playing games like "Axie Infinity," a blockchain-based game in which gamers breed and combat digital creatures called Axies to earn tokens called "Small Love Potion".

YGG gives loans to participants so they may purchase Axies and other digital goods to begin the game and make money.

It appears that they are hoping to make more money than they have to pay YGG for the usage of its assets. However, if you want to learn more, we spoke with Simpson about the confluence of crypto and gaming yesterday. Simpson joined a16z after investing in several of the same businesses as the firm, including Dapper Labs, a blockchain infrastructure company, and Celo, a worldwide payment network. She also revealed which sites a16z constantly monitors to spot up-and-coming crypto businesses.

Connie Loizos of TechCrunch interviewed Ariana Simpson. The following are some of the highlights from the chat:

TC: Zed Run is a fascinating game. How did you learn about the digital horse racing industry?

AS: I believe it was crypto Twitter, which is where a majority of our gaming bets are made. The community there is fantastic, and it is frequently one of the first locations where fresh and interesting initiatives are announced. Zed heralds the start of a new era in crypto gaming, one that is more engaged. CryptoKitties, a collectibles game, was one of the first NFT-based games to catch the attention of individuals beyond the crypto sphere.

Zed is a creative expansion in the notion that you are playing with a digital animal, but the gameplay is far more complicated, and the community's enthusiasm has been wonderful to witness. Individuals are bringing up a variety of complex instructions about how to play the game, read [race] courses, and perform a variety of other aspects of the game, and tens of thousands of people all over the globe are reading them.

TC: Perhaps these already exist, but is there unlimited potential across verticals, such as a digital auto-racing equivalent of a UFC-style counterpart, wherein users can purchase and gamble on digital combatants in the hopes that their worth would rise?

AS: In the world of crypto games, there is an enormously wide variety of opportunities in terms of what is occurring and what will occur. I believe that the goal at the heart of this trend is to return more of the worth and ownership of these gaming assets to the players. That is something that has been an issue in the past. You may spend years amassing your collection of skins or in-game assets, only for the game to alter the rules, take them away, or do any number of things that leave gamers feeling betrayed and ripped off. [With blockchain-based games], the goal is to make games more accessible and give players genuine ownership over the space.

TC: This brings us to Yield Guild Games or YGG, your most recent investment. What drew the firm's attention to this company?

AS: During the pandemic, many individuals lost their jobs and were unable to support themselves and their households. This occurred around the same time as the development of “Axie Infinity,” among the first video games to pioneer the play-to-earn concept, which is quickly becoming a popular motif in crypto games. You will need three Axies to play "Axie Infinity," which means you will have to buy them all upfront. Naturally, if you are unemployed, you do not have any money, so purchasing these digital creatures might be a difficult task.

So, Gabby Dizon, who played "Axie Infinity," began renting his Axies to other gamers so that they could play and earn tokens that could be transferred to local money. So, YGG has essentially evolved as a type of production of what they were doing, so YGG acquires or raises in-game assets that yield, then lends them to 'scholars,' who are the beneficiaries of these in-game assets, and YGG subsequently reduces the in-game money generated by the gamers.

TC: Should a "scholar" be an advanced player?

AS: Some administrators oversee the groups of scholars; they determine whom to bring into the guild.

TC: Okay, so these Axies may be exchanged for dollars, but where and who is purchasing them?

AS: They may be purchased or traded on marketplaces, and other gamers buy them when they need to breed in “Axie” and require some [Axies], while others buy them for investment purposes. Moreover, they may not be selling the NFTs directly, but rather the tokens earned as part of the gaming.

TC: You discussed using cryptocurrency on Twitter. What about Discord and Reddit, for example? Where else would you go for fresh crypto initiatives that are gaining traction and catching people's attention?

AS: All of the aforementioned. The crypto network, in particular, uses Discord extensively, and what is intriguing about it is that it allows you to get a sense of how busy a group is, how involved individuals are, how frequently they communicate, and what they are talking about. It provides you with a glimpse into the larger community, which is crucial to consider when making an investment or assessing the health of a project.