Betting Big on Web3

The metaverse is built on the promise to revolutionize consumer and workforce experiences. For Animoca Brands’ Co-Founder and Chair Yat Siu, it must ascribe to an open model that allows for digital ownership and equity rights to its users. Otherwise, its power becomes frail. Egon Zehnder sat down with Siu, whose company is investing $2 billion in the development of Web3, to discuss what it has in store for its users and businesses, big or small, across all industries.

“What makes Web3 so powerful is ownership”

If in the early days of the internet we were readers, in Web2 we became creators, yet over-reliant upon third-party companies such as Facebook or Google who monopolize and capitalize on our data, according to Siu. And now we have entered a new era: Web3, in which we finally become owners thanks to blockchain technology. “The things we read and things we write are things we can own. The mental model is, data is a resource that can be owned by us,” says Siu.

It’s clear why this matters for us as individuals, but why does it matter for your company too? Because Web3’s main commodity is data, an asset more powerful than oil, according to Siu. In Web2, businesses use third-party data from companies such as Google, Facebook, Amazon, and so on to advertise and build business models on top.

But there’s the catch: They have to pay for the access to that data and they can’t reach out to their customers directly. Those users don’t belong to them, they belong to the platform in the Web2 world. “Whereas in blockchain, data is everywhere, and nobody really controls it. It’s on the public chain,” Siu explains.

The monopoly of data in Web2 engendered organizations like Animoca Brands to build a robust ecosystem to enable digital ownership. “The idea of digital equity is like building national economies who relied on physical property rights – but virtually.” Siu, whose company has invested in over 380 companies and owns subsidiaries such as The Sandbox, is emboldened by the principle that digital ownership is the sine qua non of Web3. Without it, it languishes. “It’s like Disneyland. We don’t have ownership, we’re tourists, we can check it out, but we never own it.” He adds: “What makes Web3 so powerful is ownership, so the idea of a Web3 world in which users don’t have ownership over their data is not a real Web3,” Siu argues.

“Through blockchain, you can know each one of your customers”

Web3 has implications for every industry for the simple fact that we’re all online, consumers are online, and many companies in today’s world distribute their products and services online. “Everything we do online is the perfect diary of who we are. It’s where we spend most of our time,” he explains, adding: “The data we create is really important. It creates the understanding of who we are. And Blockchain technology is crucial to this in that it gives us control over our own data.” Blockchain has a precise level of reliability by design. This means companies can know who their customers are and seek feedback in real time, which wasn’t feasible in the past. “To get feedback from a community you needed to survey, without 100 percent certainty of whom you were getting feedback from. Now, with blockchain, you can verify ownership so you know you’re getting relevant feedback,” Siu explains.

That is not to say that companies will be run democratically on feedback. But blockchain provides these tools and removes the middleman from companies’ work.“Every company, it doesn’t matter how traditional you are, is going to have to use these tools in order to be more efficient. Because instead of giving Facebook control of your social network, through blockchain you can know who is each one of your customers.” Siu uses the analogy of the big car companies such as Volkswagen or Toyota where entire commercial ecosystems have been created around the core product, the car. However, many of those ecosystem communities and related businesses are not created or run by large car companies. Instead, they are run by the data platforms such as Facebook, or smaller outfits that smartly leverage that data.

“Society functions like a democratic bazaar”

Siu, who grew up in Austria as a Chinese immigrant, believes the digital world is grounded on the principles of a democratic society. “Whether you choose a western philosophical approach around individualism, or an eastern approach around duty and community, you can see societally how the internet is set up this way. People have different views, but society is formed around this, we can live as a community amongst us.” In his view, the digital world is run like a democratic bazaar, guided by “self-discovery” and “self-governance”. 

Animoca Brands started five years ago with the mission to advance digital property rights and contribute to the establishment of Web3 and the open metaverse. To achieve this quest, Siu is betting on a $2 billion investment fund to nourish the companies that will form the ecosystem for this vision to come to life. For Siu, the idea of digital equity is like building national economies—but virtually. In that regard, there’s a vision of shared growth. “Any country that depends on the majority of its income on a single company or product is typically screwed. Whereas a country that has a very healthy SME index, for instance, which basically means a rising middle class, is doing much better. So that’s the model we have in mind,” he claims.

Decentralization is key for this principle. For context, several countries are either looking into creating a Central Bank Digital Currency (CBDCs) or already have one. Siu defends the safest bet is always on digital currencies from democratic nations as “property can never be taken away in an unreasonable fashion because it would create a revolt amongst the people which would mean that the government in question would change.” The contrary is true in places with centralized control. “Because they can decide to take away at a whim’s notice for whatever reason suits them.”

Democratic systems are not perfect. But they give voice to those who wish to engage in the system. For Siu, this is vital. “If you treasure your freedom, then you won’t accept a different type of setup. And I think most people today, at least in Europe and in America, would in no circumstances accept anything less. It’s chaotic, but they’d never give up their freedom. And the same is the case in the digital world.”

“It could be viewed as a digital societal political revolution if you will”

Although there may be dissenting views on what the landscape looks like, those on the outside of the industry tend to reinforce biases that investing in this market is highly unsafe. But not for Siu. “The industry is moving toward more decentralization. People are doing more self-custody, trading volumes on DEXs (decentralized exchanges) are much higher than before. These are the factors that outsiders don’t see,” he says. Rising regulation also helps, in his perspective. “Even if it comes in a little harsher than we expect, it creates certainty. And then people feel safe. What’s keeping people away is the lack of certainty.”

Ultimately, Siu recognizes the challenge of dealing with large platforms such as Meta (formerly Facebook), which is investing $10 billion in its own closed metaverse. But he firmly believes open outweighs closed. “Even though the narrative is changing, Facebook is demonstrating that it is very hard to compete with an open metaverse,” he explains while acknowledging that the platform still holds the largest number of users. But for him, the desire for a decentralized outcome in Web3 remains strong because third-party platforms don’t bring benefits to companies—big or small—as compared to an open metaverse. As Siu puts it: “It’s true digital ownership. It starts with digital rights. It could be viewed as a digital societal political revolution if you will.”