A chat about FTX’s gaming ambitions with the head of its $2 billion VC fund | ZDNet



When FTX announced that it would be launching an FTX Gaming division, we questioned what may have driven a company that specializes in cryptocurrency and NFTs to attempt entry into a market that had shown widespread hostility to both. In response, FTX reached out and offered to organize a chat with Amy Wu, the head of FTX’s push into gaming. I sat down for a conversation with the recently appointed VC lead to talk about FTX’s hopes for this new venture, the reasoning behind its venture into gaming, and how it plans to overcome the obstacles its ambitions may face. 

Executive background 

Wu came to FTX from Lightspeed, a major investor in FTX, where she served as a partner and the company’s top VC focused on gaming. She described herself during our talk as a lifelong gamer, and someone that continues to be passionate about gaming. 

While her personal passion for the media category certainly played an important part in Lightspeed’s, and subsequently FTX’s, respective initiatives, she and FTX’s senior leadership agreed that gaming was simply too big and too attractive of a venue for FTX’s technologies to be ignored, even if there were certain risks involved. 

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“So first, why gaming?”

The new gaming division lead made my job easy as we began our chat, asking herself “So first, why gaming?” This is the question that sat foremost in my mind, and likely the minds of many readers. Why would a company that was recently valued at $32 billion and relies entirely on cryptocurrency and blockchain-related technologies want to take the risk of delving into gaming? Even game developers and publishers themselves, who should be highly adept at communicating with gamers, have run into severe headwinds during early attempts to launch NFT-based and crypto-based products. 

The answer, it seems, is a combination of factors that makes Wu and FTX’s leadership think they have the formula to convince the tech-savvy gaming community that crypto and NFTs are not the evil, scam-filled, game-ruining money grabs some have described them as, but simply a new direction for gaming technology that they could ultimately come to enjoy.

If successful in this attempt to change gamers’ hearts, FTX could tap into a market that Wu described as bigger than music and video combined. FTX wants to help customers of its new segment tap into the wallets of the 2 billion gamers that produced over $200 billion in revenues last year. It’s not hard to see why such an untapped windfall of potential customers might drive the crypto exchange’s acceptance of a little risk. 

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The VC sees it as ironic that gamers are, as a group, so technologically savvy, yet many are still, as she put it, “super anti-NFTs right now.” It was clear to me during our talk that she is well aware of this obstacle. But, she also believes a path forward for crypto and NFT acceptance in the gaming community exists on a trail blazed by a far older gaming industry business model that had a similarly rough start: free-to-play games. 

NFTs and crypto as the next evolution of free-to-play

The FTX Ventures lead had previously referenced free-to-play games as a sort of inspiration when speaking with other media outlets. Her commentary on that game format was particularly important due to its sharing a similar early trajectory to where crypto and NFTs currently find themselves. 

When games using the free-to-play model began launching over a decade ago, they were often seen as low-quality money grabs, poorly-made titles that would nickel-and-dime their players by requiring them to open their wallets before allowing any real in-game progress. Free-to-play quickly became synonymous with “pay-to-win,” a generally-despised business model that entices players into skipping the hard work and practice typically required to make progress within a game. Instead, this payment scheme replaces gameplay achievements with options like simply buying new progression levels, paying cash for better weapons, or plunking down more than other players to skip straight to the endgame. 

For years, even free-to-play titles that strictly avoided pay-to-win mechanics were lumped in with their less scrupulous counterparts, earning a general disdain from the gaming community. Then, slowly, things started to change. Here and there, free-to-play games started gaining recognition as not only something that could be offered via non-predatory business models, but also as titles that were some of the best and most popular in their specific genres. 

Blockbuster successes like League of Legends from Riot Games (a current advertising partner of FTX), Epic Games’ Fortnite, and even Activision Blizzard’s Call of Duty Battle Royale mode, Warzone, all began their life as, and remain, free-to-play games. What was once a dirty word in the gaming industry had now become the vehicle driving some of the most played titles in the world. 

This transition was a long and complicated one, but it primarily focused on one thing: leaving gameplay alone. Each of these tiles, and similarly successful free-to-play offerings, tend to revolve around providing a high-quality base game for free, while relying on the sale of completely optional in-game items to generate revenue. The important factor here is that those items have no effect whatsoever on the actual gameplay. These cosmetic items can be skins for in-game characters or weapons, sprays the player can apply to in-game terrain, player portraits for the user’s profile, background graphics, particle effects, cinematic intros of their “play of the game” moments, and more. 

The forms these cosmetic offerings take are diverse, but they all share the same benefit of being an attractive way for players to personalize their play experiences, while also never providing an advantage to paying customers that isn’t equally available to players that haven’t spent a single cent. 

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Wu and FTX see NFTs and crypto as not only being able to offer similar benefits, but as what the VC called “probably the next evolution of free-to-play.” She firmly believes that NFTs and other blockchain-based digital items can, like current digital cosmetics, be offered in ways that are both attractive and beneficial to gamers. 

Wu blames the existing backlash against NFTs and crypto-based products on them having been historically offered to gamers in ways that she said “don’t improve the gaming experience,” or “very predatorial ways.” 

FTX’s leadership, including Amy Wu herself, appears to believe the best way to avoid these types of predatory offerings is to rely on the experience of the game companies they hope to serve. The exec pointed to the many game publishers that are already operating successful digital shops for in-game items. FTX doesn’t want to sell them a user manual on how they should introduce NFTs to their players. Instead, it wants to provide a “crypto-as-a-service” platform that publishers can use as a “whitelabel” solution to introduce NFT and crypto-based products via storefronts of their own creation. 

Wu envisions a “crawl, walk, run” approach among FTX’s potential gaming customers, with the crawl phase defining their initial research into Web3 technologies, the walk phase outlining the introduction of simple NFTs and crypto-based offerings, and the run phase seeing them introducing their own blockchain tokens to power the sale of fungible and non-fungible digital goods. Wu sees the launch of tokenized, in-game items as an important final step into the arena of blockchain-based digital offerings, a step that she believes could result in “a world of pain” for publishers that attempt it without proper guidance. 

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Unsurprisingly, she and FTX believe it’s much safer for the companies attempting to make this leap to rely on a ready-made technology platform and advisory service exactly like the one FTX Gaming plans to offer. This, according to Wu’s comments, creates an ideal combination of a ready-made technology solution with gaming studios’ own experience at managing and promoting digital economies in ways that are profitable and fair to customers. 

As a veteran of both the crypto and gaming industries, Wu is clearly aware that, even with FTX’s guidance, gaming industry customers may face some headwinds. When I asked if the play-to-earn model of distributing NFTs and unique digital tokens for in-game achievements would run afoul of the same regulators that took issue with the gambling aspects of in-game lootboxes, she agreed that it could be an issue given the “similar mechanics” at play. 

Still, one of the tentpoles of FTX gaming’s offerings, as Wu described them, is to not only help customers understand “how they should do what they want to do” in blockchain, but also how to “do it compliantly.” She sees FTX as being able to advise customers on “the whole stack.” The only aspect of the business FTX currently has no interest in providing is “the blockchain itself,” Wu said. 

The importance of choosing the right blockchain partners

While FTX intends to provide the platform and advice gaming industry customers need to successfully venture into crypto, it hopes those same companies will come to rely on Solana and Polygon as two of their blockchains of choice. 

More: Crypto industry status report:…

Read More: A chat about FTX’s gaming ambitions with the head of its $2 billion VC fund | ZDNet

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