"After DeFi, it’s NFTs and DAOs. We're Gathering Tinder:" Jihoz of Axie Infinity

Hello Defiers! This week’s interview is with Jeff Zirlin, aka Jihoz, growth lead at Axie Infinity. Axie is a digital game built on Ethereum, which involves cute animals going to battle against each other and allowing gamers to take control of their digital assets. Jihoz got into blockchain-based games with CryptoKitties after he was banned from his World of Warcraft account and lost all the in-game assets he had accumulated after years of playing. Then Axie came along which he thought had more utility and a bigger vision, so he joined the community and eventually became one of the first hires.

Axie is at the center of the growth of NFTs, which are non-fungible tokens, or tokens that represent unique assets, from a cute creature in a game to artworks and property. After CryptoKitties and Gods Unchained, Axie is the third NFT project with most historical sales. Axie is becoming a gateway to DeFi, as its leading users who have never owned cryptocurrencies, to use Uniswap and open CDPs.

The big vision is that as we increasingly live our lives in the digital world, digital assets will become more and more important and applications like Axie Infinity, will become more than just games, but places where people work and socialize. The key value that blockchains and NFT tokens add to this picture is that we’ll be able to actually own these assets. There will be no company or centralized entity able to ban an account and take their assets away.

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🎙Listen to the interview in this week’s podcast episode here:

Jeff Zirlin aka Jihoz: I've always been a collector of rare and interesting things, so I grew up collecting butterflies and insects. But during college, I also studied military and economic history, so I was really interested in central banking, things like that.

From Insects to Crypto

I started researching Ethereum in 2017, and then I actually found out about blockchain gaming and non-fungible tokens through CryptoKitties. That was the first experiment. I dove in as a community member, met a lot of really interesting people. I thought it was fascinating this idea of truly being able to earn your game asset and sell it to anyone, anywhere in the world. I thought that was awesome.

“I thought it was fascinating this idea of truly being able to earn your game asset and sell it to anyone, anywhere in the world.”

But obviously, CryptoKitties is kind of a very basic proof of concept. There are a lot of people in the community who wanted something more, something with a bigger vision some game asset with more utility, more fun baked into it. I actually found the Axie Infinity project right as it was starting and I was fascinated by this idea, the digital pet game, Pokemon built on Ethereum.

As a community member Web 3.0 is very community-driven ecosystem and ethos. I started out as a community member, just started helping out and my involvement and my kind of responsibilities start to grow over time. I ended up joining the team as, I think, one of the first hires and so that was kind of the start of this crazy journey.

Camila Russo: Were you a gamer before getting into Axie and CryptoKitties?

Lack of Property Rights

JZ: I grew up playing Diablo, World of Warcraft, I was a beta tester and I was in kind of prominent in a World of Warcraft guild when I was young. Actually, I had to go to boarding school, because I was playing WOW so much that my mom couldn't take it, so I was sent to go away. I’m a lifelong gamer.

Actually, I got banned randomly while playing World of Warcraft for things that my guildmates had done while I was away at summer camp. That was a taste of this idea that traditional gamers, we lacked a lot of property rights that we wouldn't necessarily think of. But there are a lot of, I think, gamers do lack a lot of freedoms that we would take for granted and we don't see our game assets as forms of digital wealth yet. But if people did, they would see that, they're lacking a lot of these property rights.

I had a taste of that in an early age when I was around 14 or something, I had my account banned. It was at the time worth, if I could easily sell it, worth a couple of thousand dollars.

“…we don't see our game assets as forms of digital wealth yet. But if people did, they would see that, they're lacking a lot of these property rights.”

CR: Were you able to get it back?

JZ: No. We had to start over. I think there's some kind of claim system, but that was a pretty negative experience for me back then.

CR: Wow. Okay, so that very clearly highlighted the value of a permissionless system where you actually own the assets within the game. That's a nice segue way for you to explain what Axie Infinity actually is and what value it has relative to traditional games.

Axies are Fierce Creatures

JZ: Definitely. Axies are fierce creatures. You can battle them, you can collect them. Axie Infinity is built on Ethereum. Players are able to actually build up a collection of Axies and use them across an ever-expanding universe of games. Axie Infinity isn't just one game, it's a series of game modes built on top of these game assets.

Now, we have a battle system similar to a card game. But you can breed Axie, which is also a separate game as well. Then we're also working on a land system, which is kind of like a Stardew Valley, Animal Crossing, Pokemon mixed with a little bit of DeFi token farming magic. We're really excited about that.

It seems like people have recently been very excited about this idea of like, oh, what if you could do yield farming, but in a video game? Well, we've actually been building that for the last year and a half or so. I think it's going to be a really timely release hopefully in the next half-year or so.

CR: Wow, that's so interesting. Let me see if I understood how it works. Players own different kinds of digital pets. Then they can use them to play with different games built on the Axie Infinity ecosystem?

JZ: Yeah, definitely. Right now, there's a main game that we have out, it's currently an alpha, it’s a battle game. You can play basically a card-based battle system against other players. Then we also have sponsors, like MakerDAO is sponsoring with DAI, Kyber Network is sponsoring with KNC. Digix is actually sponsoring with real gold. We're able to actually distribute those tokens to players on the leaderboard. I like to think that Axie is a pioneer in play to earn. We also have this idea of play to earn which is being able to actually earn an income or actual money just by playing a game.

CR: So the flagship game is this card battle between the different Axies. Then you mentioned other games including something that looks like yield farming, which is also built on the system. Is anyone able to make these games? How does it work? Is it that permissionless that anyone can build on the Axie ecosystem?

Building on Axie

JZ: Eventually, we really want to make an SDK to make building on top of the Axie game assets really simple and easy for anyone. Right now, all the major functionalities that have been built for Axie’shave been built by the Axiecore team called Sky Mavis. But we eventually do want the community to start making alternate games in the future built on top of the system. Right now, we have open API and obviously, a lot of the Axie-related data is on Ethereum. Our players have been turning out some really awesome fan sites and Axie-related websites such as Axiezone, Axieworld. I think that definitely, we do want to go in that direction over time where we have other game studios or the community building Axie games with IP.

CR: Very cool. Before we get off the topic of explaining Axie itself, I'm really interested to hear more about this kind of yield farming game. How will it work?

Axie Governance Token

JZ: The idea is that people are interested in the idea of earning tokens for interacting with the product. We have an upcoming governance token that a lot of people I think are really excited about. One of the ways that we will distribute that governance token is from basically harvesting it on top of a land plot that you can put your Axies to work on, there'll be structures on it. But we'll also send tokens to those land plots to be harvested each day.

“People are interested in the idea of earning tokens for interacting with the product. We have an upcoming governance token that a lot of people I think are really excited about.”

Animal crossing was just very, very popular. Imagine if you're playing that game and you woke up in the morning, one of your chores was to rather than getting your bells, you're actually harvesting a token, which is basically a native governance token for the game that you're playing.

I think our players are really excited about that. When we release it, I think it's going to be a watershed moment for the entire NFT space. It's like when Compound this past June, they released their COMP token and all of a sudden we saw TVL and DeFi applications starting to spike tremendously. I think once blockchain games realize that you can create a governance tokens, give it to your players doing things within your game ecosystem that you want to incentivize, I think that's going to be a major catalyst for NFT-based economies and blockchain games.

“I think once blockchain games realize that you can create a governance token, give it to your players doing things within your game ecosystem that you want to incentivize, I think that's going to be a major catalyst for NFT-based economies and blockchain games.”

CR: What can you tell us more about the token itself? What will users be able to do with the governance token?

JZ: We've been studying token design for probably almost two years now. I was an early member of the Synthetix community, just because I was looking at like, what are the interesting token models that are out there. I think generally, the idea behind the token is that we want to align incentives between the Axie Infinity core developers, Sky Mavis, and the rest of the community.

The token will be similar to some of the really nice token models that we've seen come out recently with kind of fee sharing, staking to incentivize holding, and gradually, these types of governance rights.

First, governance might be in the form of social signaling. And so right now, I'm not sure if you've seen there's a site called Snapshot, where communities are basically using their tokens to signal their support for different initiatives. Eventually, I think the holy grail is to have a governance where the voting actually is then automatically carried out on-chain.

I think basically, we're going to go with a progressively decentralized rollout. Also in gaming, what’s interesting relative to a true DeFi or a pure DeFi application is, you still need in a game someone to kind of carry out development of the game. It's not like where the thing is kind of born perfectly and the community can kind of often almost take over from a very, very early stage.

I think at the beginning, the token will be a lot about being able to earn it, stake it, will have a DAO treasury that will basically accumulate things like the marketplace commission, future sales, things that Sky Mavis, the core development team had in the past and keeping for ourselves.

CR: Where are those fees and commissions coming from?

JZ: We have an in-house marketplace. You can kind of think of it as an NFT DEX built in-house and we take, that marketplace does 97% of the Axie-related NFT volume and there's a fee associated with that. We also sell limited-edition collectibles. We've sold land in the past. We've sold 25% of the land and there's still actually 75% of the land in the universe to be sold at a later date. Things like basically primary sales and then also kind of fees from the smart contracts that we develop.

CR: Got it. What's the percentage fee for the trades?

JZ: Right now, we take a 4.2% cut for marketplace transactions.

CR: That sounds really high.

JZ: It’s interesting, it is very high when you compare it to something like Uniswap which takes 0.3%, things like that. It's interesting. Well, I think there are a lot of interesting experiments to come with what is the ideal fee. Then also, once the fee starts going towards the community, right now, there are some people who would want to try and bypass that fee, but maybe less would want to bypass that fee if it is actually going into the treasury.

CR: That's interesting. That fee with this new governance token will start going to a DAO and then distributed among token holders?

JZ: I think that's the general idea.

CR: Interesting. Then maybe token holders can vote to change that fee in the future and vote to change other things.

JZ: Exactly.

CR: You've mentioned NFT's, obviously, a bunch. Can you explain kind of in basic terms what these are?

NFT: Something Unique

JZ: Right now, NFT's are tokenized game assets, art, music is even coming. Generally, when you think of an ERC20, every single one is kind of generally is the same, it represents a protocol token, whereas an NFT is something that's unique. It might be, if you were to tokenize your house, it would be an NFT, it wouldn't be an ERC20. If you are to tokenize a piece of art, it would be in an NFT, not an ERC20.

“Generally, when you think of an ERC 20, every single one is kind of generally is the same, it represents a protocol token, whereas an NFT is something that's unique.”

CR: So they’re non-fungible, they’re not interchangeable because they're unique. And so taking this concept of NFTs and what we were mentioning before, the idea of being able to build on this permissionless layer that is Ethereum, having governance rights in the future, I wanted you to take these elements on then compare why these blockchain games are different from the traditional games. Why is there value in this space?

JZ: I think that on Ethereum, gamers, by default are born with a property rights to basically sell their game asset to anyone anywhere in the world. They also have the ability to earn tokens just by playing the game and selling them on something like Uniswap.

I think a lot of it is about how there's a marketplace which you can just see as an NFT DEX. What are the benefits of using a DEX. It's like being able to use it no matter who you are, where you are in the world. Basically, this idea of why do we use DEXs for ERC20s, well, those same principles can then be applied to game asset markets.

Earning by Playing

Next, another benefit is being able to earn a token just by playing the game that could theoretically have a liquid market. So right now, an early experiment that we did is with the Small Love Potion, SLP, it's you actually need it to breed your Axie.

As Sky Mavis, we don't sell it. It would be very easy if we were a traditional gaming company to maybe sell that potion and make a decent amount of money, but we don't sell it. It's dropped by playing the game, so the only way that you can earn it is by playing the game. And then if you want to buy that token, trade some of your money for time, you have to actually buy it from the Uniswap V2 pool, which has around 36 ETH in liquidity, so it's not small, it has a relatively significant amount of liquidity.

Play to earn, the way to scale that is with this idea of allowing your players to earn a piece of the game universe through a native governance token, allowing them to earn that by playing the game. I think that's the way that we scale play to earn.

This idea of being able to basically use a NFT DEX and then this idea of play to earn, I think those are the two most important benefits of a blockchain game. You see a lot of really interesting behaviors that emerge when the incentives are more aligned between the developers and the community. You get crazy evangelists.

“This idea of being able to basically use an NFT DEX and then this idea of play to earn, I think those are the two most important benefits of a blockchain game. You see a lot of really interesting behaviors that emerge when the incentives are more aligned between the developers and the community. You get crazy evangelists.”

The Next Big Thing

There are people who have gotten Axie tattoos. We have our own podcasts, right, for a very small game, it's kind of unusual to see the community organizing, creating all this content, getting tattoos, starting leagues, starting e-sport teams. But the level of loyalty and excitement is really hard to beat, because they do have exposure and kind of a real estate within the game. That's what inspires us.

We've been building throughout the bear market, and there was the time where no one was interested in having an ERC20. Everyone was like, ICOs were a bad idea, like we shouldn't have these tokens.

But actually, what happened is, we would have a lot of people come into our discord asking, how can I earn the token for this game by playing it? And it just kept happening over and over. Actually, a lot of people for some reason think that should be a good idea and we started to look into it more. Delphi Digital, who was very interested in NFT space from a pretty early stage, also helped us a lot with the token design.

I think there's a general kind of consensus within the theorem community that NFT's are the next big thing. That after DeFi, it’s NFTs and DAOs. I’m a firm believer in that. Right now we're gathering tinder and I think the match that kind of sparks it will be this idea of earning a native governance token by simply playing game.

“After DeFi, it’s NFTs and DAOs. I’m a firm believer in that.Right now we're gathering tinder and I think the match that kind of sparks it will be this idea of earning a native governance token by simply playing game.”

CR: Will be interesting to see for sure. On this topic, we're talking in the very abstract of the value of these games, do you have examples of actual Axie Infinity users earning, I don't know if a living, but at least supplementing their income because just by playing the game?

Grandmas in the Philippines

JZ: There are many different archetypes of people playing to earn with an Axie. But I think the most interesting and the thing that's gotten us the most attention recently has been players from the Philippines during the past recent pandemic, who have been playing Axie to actually put food on their family's table.

Players in the Philippines are earning between $3 to $6 an hour playing Axie, which is much higher than the minimum wage across in the Philippines. There was actually just an amazing CoinDesk article that came out about this phenomenon. There's an entire town in, I think northern Philippines, I think north of Manila, that is playing Axie, so like multi-generations, grandmas and mothers, and it's spread like wildfire there.

I think play to earn, even though it's slow and at a small scale, is making a difference for people in some of these developing countries. They have a lot of passion for the game. The guy who started the craze in his town in the Philippines, he earned a motorcycle by playing Axie and put all these stickers on it. I thought that was really cool.

“I think play to earn, even though it's slow and at a small scale, is making a difference for people in some of these developing countries. They have a lot of passion for the game.”

CR: Very cool. Why specifically the Philippines, do you know, or was it just kind of random?

JZ: This is also happening and Venezuela, Indonesia, basically places where there's a lot of people playing mobile games, people who mobile phones, and the minimum wage is quite low. You we do have these pockets of activity like that.

In Philippines, I personally, I visited the Philippines a couple of times and gave some talks there. There's someone named Gabby Dizon, who is influential in the gaming space there and very interested in NFTs and DeFi and he's been also kind of critical and key to us, kind of building up a core little community there.

CR: Can you give me a sense of the broader user-base and just traction is, so in terms of volume, users, what are you seeing?

Traction and Userbase

JZ: There are currently over 7,000 people who hold Axie. We currently have around 3,000 monthly active users. There's around 7,600 people on our Discord.

In terms of volume, there has been over 7,000 ETH, so a couple million dollars traded in game assets, in Axie-related game assets traded on our in-house marketplace.

CR: In total?

JZ: Yeah, 7,000 ETH in total.

CR: How does that compare with the rest of the NFT market and like, I guess, blockchain games?

JZ: Axie has the largest number of weekly active users. We just saw that come out from nonfungible.com on Twitter. I would say that in terms of traction, we're leading the pack right now in terms of Ethereum-based games. Then, in terms of volume, I think we're also up there. We've had Axie sales, one sold for 110 ETH, actually, just had one sell for 98 ETH recently.

There's also, a lot of people they talk about like the play to earn in the Philippines and they think that's awesome. I think that's awesome too. But we're also attracting art collectors and people who, see these Axie as beautiful and rare and are really interested in some kind of scarce and hard to replicate asset.

CR: Wow, that's crazy that they would pay that much money for an Axie. Do you think, are they actually playing with them or do they have them as a collector's item?

JZ: I think most of the people who are spending like 50 plus ETH on an Axie, they tend to be very active in the community evangelizing the game. But in terms of like playing the game on a day to day base basis, like grinding on the arena, they're not that kind of user. So the collectors, they’re kind of their own group within the ecosystem. They tend to be very helpful too. They might even fund like tournaments or fan sites, things like that. It's a kind of more like investors basically.

CR: I want to talk about how big the market for in-game items can be. Because I understand it's already quite big in non-blockchain games. I don't know if you have the numbers for that. How big is the in-game assets market and how does it compare with the blockchain game market? I'm trying to see what percentage of total gaming is blockchain games doing right now?

Minuscule Within Gaming

JZ: I think it's a miniscule percentage of the market right so far. It seems the entire and the global gaming market is in the hundreds of billions. That's also being boosted this year, especially, because of the pandemic, people are spending more time inside. We're kind of moving towards a digital-first world. The total market for gaming items is in the billions. But the gamers who are buying these items, they really lack basic property rights.

As we kind of change our lives so that we're spending more time indoors, we're spending more of our lives on a computer, we need to start thinking of our digital possessions as things that we actually own. I think that's kind of a leap that needs to be made and will be made. It's the idea of being your own bank, which is very popular with the DeFi crowd and has many benefits that we believe in as a community, those benefits will be just too hard to ignore over the long term.

“…we need to start thinking of our digital possessions as things that we actually own. I think that's kind of a leap that needs to be made and will be made.”

We in the NFT space for the most part, I think, believe that these freedoms that non-fungible tokens give gamers and enable gamers to access are basically things that in the long run give us as a space of big advantage that should draw in curious gamers, hobbyists at first. But I think it's a network. Each user adds more value than the last and eventually, I think, you start to see a stampede and more eyeballs, more volume, more headlines, better developers, more fun games coming up. So I think we're starting to get to that point, but I see a very long road ahead.

CR: It's so interesting, because this market is worth hundreds of billions of dollars, but right now, most of the value is basically accrued by the gaming companies and not gamers, right? Because, in these games, the gaming companies themselves are the owners of these assets. Gamers can't take them with them and just trade them independently. At the same time, I guess, not only are these companies owners of these in-game assets, but they're also reaping the trading volume itself. The uses are trading with a gaming company, not among themselves, so they can’t really get those profits either. Is that how it works?

Master-Slave Relationship

JZ: Basically, there’s centralization on two fronts. There's centralization in terms of the database that the game items are stored on. It's in what you would call in computer science, a master-slave relationship where the game creator always has the master key to being able to delete your game item. Then there's also a centralization of value accrual where all of the value is accruing and the balance sheet of entities that are creating these games.

I think there are blockchain games that offer a different path for both of those, where you're basically storing the data on a public visible decentralized ledger, but then also, by aligning the incentives between the core developers and the community through some kind of shared token or governance token.

CR: It's so fascinating. As we transition to this world where gamers are actually in control of their assets on and they can gain some of the value from trading them, how does this new world look? I'm interested in kind of this larger vision that you were talking about where we are going to be living more online and all of our digital assets will belong to us, whether it's currencies to maybe like clothing on our avatar to little things digital Tamagotchis or whatever. What do you think this world looks like?

JZ: There's this idea of Metaverse, and Andrew Steinwold‏ is someone who's kind of written extensively on this. I think everyone has different views on what it really looks like and I think that there will be many. But I think the general idea is that, in these metaverses gamers and people will have certain freedoms, digital property rights that just currently do not exist at scale in the current systems.

The people in the space, the Axie team, we believe in a future where work and play are kind of indistinguishable. We also believe in empowering players and giving them new economic opportunities. That's the basis of our vision. I think, as we pursue that vision, we see a lot of really interesting behaviors developing in our community.

“… we believe in a future where work and play are kind of indistinguishable. We also believe in empowering players and giving them new economic opportunities.”

Do we know exactly what the long term looks like? No. But I think if we generally pursue this path of respecting our users more, giving them more voice, getting more voice and stake within these ecosystems, it's very important because I think we're living in a world that, the physical world is becoming potentially like more totalitarian. Maybe within these digital worlds, at least, we can retain some of these property rights and freedoms that we might be lacking in the physical world

CR: Maybe it'll be a way to escape what we're seeing in the real world and just have more freedom at least in these virtual spaces.

How would you think DeFi plays into this? Is how are NFT's, how do you think they will connect with the DeFi ecosystem, if at all?

NFT-DeFi Connection

JZ: Right now, something like Uniswap is a vital part of our ecosystem. Our players, we've onboarded thousands of players or thousands of people onto Uniswap who've never used Uniswap before, because they need to go there to sell their love potions.

I think the DeFi infrastructure is really helpful, it's really interesting. I think one thing that we haven't talked about yet is, gas fees on Ethereum are really high right now. That could be fine for these DeFi applications that are handling huge transfers of value. But for something like a game, the gas fees could potentially really negatively affect smaller users. There's this idea of needing to migrate right to Layer 2 or an Ethereum side chain.

We're working on something called Ronin, which is basically an Ethereum sidechain, fully compatible, fully EVM compatible, application-specific. One thing is we would need is Uniswap on the chain or else we'll have, you know, a lot of complexities for users having to go back and forth.

“We're working on something called Ronin, which is basically an Ethereum sidechain, fully compatible, fully EVM compatible, application-specific.”

One thing that's awesome about DeFi is this idea of open-source code. It's like we could just have Uniswap on Ronin quite easily as well. I think what's awesome about the Ethereum ecosystem is everyone sharing their code. I think one of the things that people will be surprised about is, how easy it is to have something like Uniswap on an application-specific Layer 2. I think we may be one of the teams to kind of demonstrate that initially.

CR: Are you referring to a potential Uniswap fork on this Layer 2?

JZ: There are different models or different AMMs popping up, like Balancer is also really cool. I think something like Uniswap would be probably most simple.

CR: Right. But if you did a fork, the main draw of Uniswap is its liquidity. I mean, obviously, its UX and how it works are really important. But will it be useful to have a fork of Uniswap if you don't have the liquidity that's on Uniswap?

JZ: That makes sense. But the thing is, most of the liquidity related to the Axie-related tokens comes from our own community. I think and that's one of the benefits of having a preexisting community, is that the liquidity that is on Uniswap actually originates from our community, rather than from external sources.

CR: I would love for you to talk more about how high gas prices are affecting use right now on Axie. Are people still playing as much as they were? Or is it like attracting more whales than before? How have things changed?

Gas Prices Effect on Axie

JZ: The interesting thing is that despite Ethereum gas fees skyrocketing in the last couple of months, the last couple of months have been our fastest growth by far. I think it has to do with more people finding out about Ethereum, but also, this clear play to earn narrative and opportunity establishing. So actually, the high gas actually benefits Axie relative to other projects, because you're actually able to earn money by playing the game, so the gas prices are just a cost of doing business. I think the games that the high gas prices hurt the most are the ones that there's like a very slim margin of profitability which then gets destroyed because of the gas prices.

“High gas actually benefits Axie relative to other projects, because you're actually able to earn money by playing the game, so the gas prices are just a cost of doing business.”

CR: Are gamers on Axie, are they still profitable? Do you have metrics to show the percentage of gamers that are profitable even with these gas prices?

JZ: The interesting thing is that, so you can buy a team of Axie for, let's say, $30, and then you can earn around, let's say $5 an hour, just farming Love Potions. As long as you put in around 7 to 10 hours of work, you should be able to do it. Then there are also more complex ways of earning, collecting some of the capped supply Axie and things like that. There are players that have earned in the hundreds of ETHs with some of these more complex collecting strategies, arbitrage trading, market-making. So it's not just about people grinding it out $5 an hour at a time. There's also kind of more complex and detailed opportunities.

“There are players that have earned in the hundreds of ETH with some of these more complex collecting strategies, arbitrage trading, market-making. So it's not just about people grinding it out $5 an hour at a time. There's also kind of more complex and detailed opportunities.”

Some people hold mystic Axie, which are a type of Axie, think of it as the first edition cards of the Axie world, where they were only released at the start during the opening presale, and they have special aesthetics. There are people like those and those have done quite well as something to hold within the Axie universe as well.

CR: That's amazing. I mean, you're talking about arbitrage and strategy. Are you seeing a type of gamer that's coming from the hedge fund manager world? Is it like crypto funds trading Axie along with more like retail gamers?

Hedge Fund Gamers

JZ: I've had some of our first enquires from crypto funds that are looking to get into the NFT space and they're like, what should we buy? We want the governance token, when is that coming up? But also, are there in-game assets? We're going to see headlines. It's like, crypto fund buys digital land or cute pet for tens of thousands of dollars. That's the kind of headline I think that drives a lot of attention and in new Axie ecosystem as well.

CR: That's so funny. I mean, it's crazy, because that's when you start to see these worlds collide and the kind of interoperability of it all. I mean, there was this project, I think it was Rocket that was also using NFT's as collateral for loans, so I mean that's another way where like finance with gaming comes can start to mix.

Secret NFT Society

JZ: Actually, I have a system, I guess it’s centralized, where basically I will accept mystic Axies as collateral for zero-interest loans, so there are certain Axies that I'll accept. I think I've given out like 140 ETH so far and basically, just accepting certain really rare Axie as loans.

I also have a discord for all the people who have kind of used that system as a kind of secret society within the NFT space. But I guess, now, I'm talking about it, so it’s less secret.

“I also have a discord for all the people who have kind of used that system as a kind of secret society within the NFT space. But I guess, now, I'm talking about it, so it’s less secret.”

CR: That's amazing. I mean, I don't know if you're the only one. Maybe there's a community of people who have been doing this and just taking NFTs as collateral for loans and just like that's another way to make money with these digital pets?

JZ: I'm not really trying to make money, I purposely made it zero interest. It's just more like a nice pawn shop. Also, I have stake within the mystic Axie market too. It's a way to provide liquidity for a lot of people to get some working capital with them without, having to sell them.

CR: You've mentioned a couple of things coming up for Axie, the governance token, the Layer 2 scaling solution, so what are the timelines for those two?

Axie Roadmap

JZ: I would expect some news related to the governance token in the next couple of months. And in terms of Ronin, our scaling solution, Vitalik always says to assign numbers to your confidence intervals, so I'm going to try and do that. I would say 70% sure that we'll see something by at least Q1, 2021. Then the internal goal is to see something by the end of this year.

CR: I really want all these scaling solutions to ship as fast as possible.

JZ: I think it was Arthur from Defiance Capital recently said, we need yield farming or we need token incentive programs on Layer 2 to actually spur their adoption. I think basically, we will have these kind of promotions related to our governance token where you can actually earn them by doing certain things. But the majority of those will not kick off until our Layer 2 or our side chain is live.

Because if you require, people to send transactions to earn the governance token in any way, so let's say we awarded it to people for breeding or people who are trading on our marketplace, then you get kind of a perverse system where big whales are able to just trade gas and ETH gas fees for the governance token. What is the point of all this is, we want to get the token into the hands of the people using our products, not just some whales.

Basically, we're very excited about Ronin. We're going to see some very interesting programs for distribution of our token on Ronin, especially because we don't have gas as a limiting factor

CR: The token and the Layer 2 solution will pretty much go hand in hand then?

JZ: Yes, basically. We'll have some announcements related to the token. And then I think, basically, the mining, the biggest chance to play to earn the token will kind of coincide with the scaling solution. We want to show our community more about the land gameplay, which I mentioned earlier. We want to show them a more about that this fall. They’re like 80% confidence that we'll have some kind of maybe public beta or public alpha out in the next couple of months.

“The biggest chance to play to earn the token will kind of coincide with the scaling solution.”

CR: Super exciting. Okay, to start wrapping up. Wanted to hear the longer-term vision for Axie Infinity or just NFTs in general. We talked about what's coming up next in the very short term, but what's the big vision for say, the next 5 years, next 10 years?

Live, Work, & Play

JZ: The goal that we're building towards is that Axie is not just seen as a game. Axie is seen as a place where you can live, work and play. A social network where you can make friends and maybe even start a business with people that you met playing Axie, somewhere where you can work, farming tokens, helping someone out by taking care of their land. Or even building something, like building an experience using the Axie game assets and maybe charging some kind of fee to access it or having your own token associated with it that somehow has value.

“The goal that we're building towards is that Axie is not just seen as a game. Axie is seen as a place where you can live, work and play.”

I think very community-driven, some place where as a kid, I wanted to play games all the time, but my mom said, oh, like, you have to go to school. I was like, why do you have to go to school? Oh, so you can get a job and so you can earn money. I think, in the future, we're living in crazy times. I think, we're living in a future where people will be able to sustain themselves by playing a game. That was one of the only drawbacks, was that, you'd eventually have to leave to go to your job.

I think this idea of people being able to sustain themselves just by playing a game that's, I think, really compelling that we're working towards. I was just living in Korea and there’s a messaging app and they have these cute creatures and the brand is amazing. I actually still think that Axie can be something similar to that, where we draw people in using our stuff with these cute creatures.

But then we have a game store. We have chat functionality and like this community of evangelists and people who are interested in this technology to tap into. I think people tend to underestimate cute things, because they're cute, and they're non-threatening. But I think, we basically believe that blockchain needs to be more eye-catching, it needs to be more fun, it needs to be cuter to attract more people.

“Blockchain needs to be more eye-catching, it needs to be more fun, it needs to be cuter to attract more people.”

One thing that I didn't mention is that we're starting to see 40% of the people that have been starting to play Axie recently are people who have never interacted with crypto before but were referred by a friend. So I think, that's another thing that I think is really important is we need to manually onboard our friends to start using Ethereum applications. We can't just wait till it's very easy, like email sign, when the fiat on-ramps are very cheap and smooth. I think, that will help in the long run, but there are a lot of things that we could be doing right now that the Axie community members are doing right now to just get a kind of muggles and I guess, not Ethereum savvy people involved with these types of applications.

CR: Do you see blockchain games and NFTs as maybe the primary way that this technology gains mainstream adoption?

Gateway to DeFi

JZ: I think it's an interesting timeline, something that could happen. I do believe that blockchain games will be a great user aggregation layer for DeFi. This idea that people will come in for the games and we'll make wallets and be onboarded by something that's fun and cute or some kind of headline like play this game and earn money right play this Pokemon looking game and earn some money or being recommended.

But after that, once they're onboarded, we're seeing it firsthand within our community where they got in Axie, then got onboarded to Uniswap. They came to Axie, we told them to open CDPs. We partnered with Maker and basically gave anyone who opened a CDP during June of 2019 the ability to claim an Axie-themed NFT. I think these crossovers between gaming and DeFi are really important.

I think that DeFi is really important for the for, I guess the financial health of our future generations. But I also think that we need new types of work. DeFi right now is, I think great for people who already have a lot of capital, but I think blockchain games are going to be a way for certain people who don't have any capital to make a little bit of capital and be onboarded into the rest of the crypto economy.

“Blockchain games are going to be a way for certain people who don't have any capital to make a little bit of capital and be onboarded into the rest of the crypto economy.”

CR: Awesome. I love kind of this vision of you don't need to leave your video game anymore to go to school and make money because you're making money right there. That's pretty incredible. Well, this has been so interesting, Jeff, or Jihoz. Thank you so much. Can you show me that stuffed animal? Oh my God, that's awesome. So cute.

JZ: This is an Axie, actually, I met my wife because of this. I think I was holding this and because she thought it was cute, she came up and we started talking. You can also get a girlfriend and a wife if you play Axie Infinity. That's another thing that I want to leave people with.

The Defiant is a daily newsletter focusing on decentralized finance, a new financial system that’s being built on top of open blockchains. The space is evolving at breakneck speed and revolutionizing tech and money. Sign up to learn more and keep up on the latest, most interesting developments. Subscribers get full access at $10/month or $100/year, while free signups get only part of the content.

About the founder: I’m Camila Russo, author of The Infinite Machine, the first book on the history of Ethereum. I was previously at Bloomberg News in New York, Madrid and Buenos Aires covering markets. I’ve extensively covered crypto and finance, and now I’m diving into DeFi, the intersection of the two.