Daryl Xu: Building B3, The Next Evolution in Crypto Gaming Infrastructure

Introduction to Deli Podcast with Daryl

Welcoming Daryl and Background

• The episode introduces Daryl, founder of B3, highlighting a long-standing relationship between him and the host, Pierce.

• Pierce expresses pride in being an angel investor in B3 and excitement for its upcoming token launch.

• Daryl acknowledges Pierce's influence on his journey into the crypto gaming space.

Daryl's Journey into Crypto

• Daryl shares his entry into crypto in late 2015, initially focusing on enterprise blockchain applications for Fortune 500 companies.

• After experiencing a downturn in the market around 2017-2018, he joined Coinbase as part of the go-to-market team.

• At Coinbase, he contributed to launching various crypto products and played a role in developing Base from testnet to mainnet.

The Appeal of Gaming

Personal Connection to Gaming

• Daryl discusses his lifelong passion for gaming, recalling experiences with games like Diablo II and Starcraft.

• He relates Elon Musk's statement about gaming being therapeutic to his own experiences growing up as a gamer.

Opportunities in Crypto Gaming

• Observing early successes like Axie Infinity inspired him to explore how Coinbase could scale gaming by leveraging its large user base.

• He reflects on the potential for gamers to earn money through gameplay, emphasizing missed opportunities if that had been possible during his youth.

Founding Team of B3

Team Composition and Structure

• The founding team consists of former Coinbase employees: himself, Victoria Hying (co-founder), and Sean Gang (CTO).

• Each member shares a strong passion for gaming; Victoria dreams of bringing "The Sims" on-chain while Sean is working on an open-world RuneScape project.

Understanding the Challenges of Blockchain Gaming

High Costs and Support Needs for Game Studios

• The high compute costs associated with blockchain technology are a significant barrier for game studios, often requiring hundreds of thousands of dollars annually, which is unsustainable given their thin profit margins.

• Game developers seek publisher-like support, including marketing, distribution, and financial assistance to scale their games effectively once they are ready for user acquisition (UA).

• To address these challenges, a proposal was made to build a Layer 3 ecosystem on Base specifically focused on gaming, aiming to reduce transaction costs significantly—about 1/100th of the current costs.

• The team behind this initiative is lean, consisting of 12 full-time members and around eight contractors, mirroring the initial structure used when launching Base.

Differentiation in a Saturated Infrastructure Landscape

• Developers need more than just basic support; they require deeper knowledge about launching economies on-chain to stand out in an increasingly crowded market.

• The discussion highlights that while many chains are being launched without clear purpose or direction ("ghost chains"), there remains potential for growth as content and applications develop over time.

• Ultimately, success in gaming will hinge on creating fun and engaging content rather than merely focusing on infrastructure; this sentiment has been reiterated frequently within the industry.

Future Outlook for Blockchain Gaming

• Large-scale games may benefit from having their own dedicated chains due to high throughput demands. This approach can prevent excessive compute costs associated with using existing Layer One or Layer Two ecosystems.

• Running proprietary chains allows developers to reinvest accrued fees back into their ecosystems or even take on roles akin to publishers by onboarding third-party titles.

• The current perception of an oversaturated infrastructure landscape may be temporary; as more applications emerge over the next few years, the situation could improve significantly.

Building Community and Culture

• Community building is essential in differentiating offerings within this saturated market. Successful examples like Abstract demonstrate how fostering culture can attract talented builders to create innovative applications.

• By establishing a supportive environment similar to what was done at Base, there's hope that AAA developers will create compelling games that could attract millions of users into blockchain gaming.

Conclusion: Games as Onboarding Tools

• There’s strong consensus among industry players that gaming serves as one of the most effective avenues for onboarding large numbers of users into new technologies.

Overview of B3 Ecosystem and Its Core Products

Introduction to B3's Offerings

• The speaker discusses the expectation of challenges in presenting their offerings, particularly focusing on the flagship product, Basement.

• An overview is requested regarding the core products within the B3 ecosystem, emphasizing engagement with developers.

Structure of the B3 Ecosystem

• The B3 ecosystem is structured similarly to how Base was developed, consisting of a blockchain layer and applications built on top.

• A significant issue identified early on was the lack of consumer apps visibility on Base; users struggled to find quality applications beyond a few popular ones.

Discovery and User Experience

• To address user experience issues, Basement is introduced as a discovery platform for on-chain gaming, akin to a homepage for crypto games.

• New users can easily access games without prior crypto knowledge; they are prompted to create wallets only after reaching certain milestones in gameplay.

Current Metrics and Future Plans

• As of now, B3 mainnet boasts approximately 6 million wallets and 200 million transactions within six months, positioning it as one of the leading Layer 3 solutions.

• The next phase involves launching game chains that promote interoperability among different gaming ecosystems.

Economic Incentives for Interoperability

• The concept of game chains isn't new but aims at enhancing interoperability between them while addressing economic incentives for collaboration.

• Examples like Godzilla and Maple Story illustrate potential user onboarding challenges without economic motivation for cross-chain interactions.

Referral Incentives Model

• A unique aspect of their ecosystem includes referral incentives where revenue generated from user activities across chains benefits both developers and platforms involved.

• This model encourages cooperation among various chains by ensuring mutual financial benefits when users engage with multiple platforms.

Conclusion: Vision for Gaming Super Chain

• The speaker expresses excitement about building an interconnected super chain vision that incentivizes collaboration among gaming entities.

Understanding User Engagement in Crypto Gaming

Current Landscape of Crypto Users

• The active user base in crypto is currently estimated to be in the low millions, including various types of traders.

• There is a concern that without a broader economic framework and incentives, competition will remain limited to the same pool of users.

Nostalgia and Game Development

• The discussion highlights the nostalgic appeal of platforms like Mini Clip, which resonates with users who remember logging in during the early 2000s.

• The evolution of gaming experiences aims to blend new and old intellectual properties (IP), creating seamless user experiences on-chain.

Reviving Classic Games

• Many successful games being revived are those that evoke nostalgia, leading to high engagement metrics such as playtime.

• Currently, there are around 300K active users on Basement, with nostalgic games showing significant popularity.

Collaborations with Original Developers

• There are plans to collaborate with original game developers from Mini Clip to launch crypto versions of classic games soon.

• Excitement surrounds potential adaptations of co-op games where players can engage through smart contracts and leaderboards.

Unique Opportunities Enabled by Crypto

• The integration of wagering mechanics into casual gaming could enhance engagement among friends through competitive elements.

• Crypto enables unique multiplayer experiences and real-time wagering opportunities that were not possible before.

Future Prospects for Gaming Growth

• The potential for exponential growth in gaming is tied to finding viral loops that attract new users beyond initial players.

What Makes a Successful Gaming App?

Overview of Popular Gaming Apps

• Discussion about a popular app in the UK that allowed users to watch advertisements for lottery ticket entries, generating excitement among teenagers and university students.

• Mention of similar concepts like "Pull Together," highlighting the appeal of engaging with games that offer potential rewards through participation.

Crypto Integration in Gaming

• Reference to "Crypto the Game" and its innovative approach where players could invest small amounts for a chance at significant prizes, such as 20-30 ETH pools.

• The speaker's wife is skeptical about crypto but might be swayed by initiatives like Bitcoin strategic reserves or on-chain versions of popular trivia games.

Onboarding Casual Gamers

• Emphasis on creating smooth payout experiences for casual gaming, which can lead to viral engagement and easier onboarding processes.

• Curiosity about trends in AI and gaming within the crypto ecosystem, noting more experimentation happening in this space compared to traditional sectors.

AI Integration into Games

• The importance of integrating AI in ways that enhance product offerings and provide value to token holders, with an upcoming token generation event (TGE).

• Plans to embed AI agents into casual games, allowing gameplay outcomes to be influenced by these agents' interactions.

Future Developments with AI Agents

• Excitement around developing text-based adventure games where outcomes vary based on player interaction with AI agents.

• Consideration of launching an AI agent platform in partnership with existing launchpads rather than building it from scratch.

Understanding Client Needs in Game Development

Ideal Client Profile

• The ideal client is someone experienced in game development due to the complexities involved; passion is crucial for success.

Understanding the Future of Gaming and Crypto

The Intersection of Gaming Experience and Crypto Belief

• Emphasis on seeking individuals with extensive gaming experience who also genuinely believe in the potential of crypto to create new experiences, contrasting with previous cycles where many participants were less committed.

Challenges in Traditional Gaming

• Discussion on how traditional gaming faces stagnation, with innovation stalled and new titles often being mere remixes or sequels rather than original creations.

Role of Crypto in Driving Innovation

• Assertion that crypto could address issues within traditional gaming by fostering innovation, as major studios like Riot and Activision are hesitant to back unconventional ideas.

Support for Game Developers

• Highlighting the importance of backing builders with innovative ideas; crypto funding can support projects that may not receive attention from traditional gaming companies.

Tech Development Flexibility

• Noting that while technical capabilities are important, the focus is more on finding passionate builders; tech development can be handled internally to support game creation.

Shifts in Developer Talent Landscape

• Recognition of strong developer talent becoming available due to layoffs in big studios; many developers are now aligning ideologically with crypto projects.

Youth Trends in Gaming Preferences

• Personal anecdote about observing youth trends through a nephew's preferences, indicating a shift towards games like Genshin Impact over older platforms like Miniclip.

Building an Ecosystem for New Titles

• Commitment to raising capital and community support at B3 to foster an ecosystem encouraging innovative game development aimed at creating breakout hits.

B3 Token Overview

Key Features of B3 Token

• Announcement regarding the imminent launch of the B3 token, which will have significant implications for both users and developers within the ecosystem.

User Benefits

• Users will be able to stake B3 tokens for rewards from various game chains launching alongside it, enhancing user engagement within this open gaming ecosystem.

Governance Role

Early Access and Governance in Gaming

Early Access Features

• Discussion on early access to games and new features like wagering, indicating a focus on enhancing user engagement within the gaming ecosystem.

• Emphasis on governance participation, allowing users to vote on protocol direction, treasury allocation, and funding for new game studios.

Developer Incentives

• Developers will utilize B3 tokens for accessing tools and services within the ecosystem, establishing a currency model for transactions.

• Introduction of referral incentives where developers earn revenue from user transitions between chains, further integrating B3 tokens into the economic model.

Future Developments

• Plans to enable a DeFi ecosystem that facilitates trading of game assets and tokens once launched, with potential revenue sharing for B3 token holders.

• Anticipation of fees generated from these activities benefiting B3 token holders directly or indirectly.

Governance Functionality and Community Involvement

Governance Mechanisms

• Expectation that governance functionality will be available close to launch, enabling community proposals for funding games through governance forums.

• Two primary funding sources: the B3 Foundation and the B3 DAO, allowing token holders to vote on which games receive financial support.

Talent Discovery

• Acknowledgment of both established talent and grassroots developers; community involvement may uncover hidden gems in game development.

• Recognition of how modern game engines empower small teams or solo developers to create innovative projects without significant funding.

Community Engagement in Game Development

Supporting Indie Developers

• Highlighting examples like "Out of Action," an indie game developed by a solo creator facing challenges with traditional crowdfunding platforms like Kickstarter.

• Discussion about alternative funding methods that could increase visibility and support for indie developers outside conventional avenues.

Future Prospects

• Encouragement towards exploring blockchain-based solutions as potential alternatives for indie dev funding while maintaining creative integrity.

Understanding Grant Structures in Crypto Gaming

The Role of Engineering and Business Mindset

• A strong engineering team is essential, emphasizing a business-oriented approach to execute various components effectively.

• Discussion on the importance of structuring and marketing grants within the gaming sector, highlighting lessons learned from past experiences.

Grant Structuring Insights

• The foundation leads discussions on grant structures, with labs collaborating closely to ensure proper funding for partners.

• Critique of overly complex milestones that misalign developer incentives with ecosystem goals; simpler, achievable targets are preferred.

Risk Management in Grants

• Emphasis on providing financial support based on early signals rather than unattainable user milestones; this supports developers' scaling efforts.

• Traditional grant models often shift risk entirely onto developers; a more balanced risk-sharing approach is advocated.

Developer-Friendly Funding Approaches

• Historical perspective on grants being more favorable to developers by offering upfront capital to facilitate game development despite inherent risks.

Market Positioning and Ecosystem Synergy

• Anticipation around the performance of early cohorts backed by the foundation and their potential impact on the market.

• Discussion about leveraging connections within the Base ecosystem for growth opportunities in gaming.

Building a Seamless User Experience

• Focus on creating an excellent product experience while acknowledging the synergy between B3 and Base ecosystems for mutual growth.

Onboarding Gaming: The Future of On-Chain Experiences

The Role of Basement in On-Chain Gaming

• Discussion on the purpose of Basement as a homepage for all on-chain gaming, not limited to B3 but also including games from other chains like Solana.

• Plans to expand support for Basement to include additional chains, emphasizing the importance of a multi-chain ecosystem in gaming.

Key Learnings from Building in Crypto

• Reflection on experiences in crypto and the evolution of understanding over time; curiosity about what insights could have been beneficial earlier.

• Emphasis on the rapid innovation and volatility within crypto, advising against jumping onto new trends without conviction in one's project.

Staying Focused Amidst Market Challenges

• Importance of maintaining focus on core passions (like gaming), especially during market downturns; historical reference to launching Base during a bear market.

• Acknowledgment that creating one’s own narrative can lead to significant opportunities within the crypto space.

Team Dynamics and Support Systems

• Highlighting the value of having an amazing team; small teams can achieve remarkable outcomes when they work well together.

• Recognition of the need for strong supporters and thought leaders who provide macro perspectives while building products.

Navigating Long Feedback Loops in Game Development

• Discussion about the challenges faced by game developers, particularly regarding long feedback loops and maintaining morale during tough times.

• Insight into how understanding both crypto and traditional game development is crucial for sustained success in this industry.

Passionate Commitment to Crypto

• Notion that successful builders often possess an addiction-like passion for crypto, which drives their continuous engagement with developments in the field.

Exciting Developments in Crypto Gaming

Current Landscape of Crypto Gaming

• The speaker expresses excitement about the current state of crypto gaming, highlighting innovative products and approaches within the industry.

• Discussion on maximizing token efficiency through various incentive campaigns, such as airdrops, to enhance value for users.

Impact of Regulation on Crypto Gaming

• The speaker notes that negative sentiment from app stores has been a significant barrier for crypto gaming distribution.

• Clarity in regulations could encourage game developers to take bolder steps and prompt app stores to relax their rules, facilitating wider distribution of crypto games.

Importance of Stable Coin Integration

• Emphasis on the need for clear stable coin support and integration within gaming platforms to enhance user spending capabilities.

• The discussion includes how existing spend ceilings in app stores limit transactions, suggesting that increasing these limits could benefit the market.

Shifts in Developer Mindset

• Developers are now more willing to explore blockchain integrations as regulatory clarity increases; previously hesitant teams are beginning to act decisively.

• There is a sense that while narratives around regulation are promising, substantial implementation details remain uncertain.

Future Considerations for Token Economies

• Concerns about money transmission laws and licensing requirements highlight ongoing challenges for developers navigating regulatory landscapes.

• Acknowledgment that government acceptance of stable coins will reduce friction for developers who have been cautious due to fear of legal repercussions.

Critical Role of Payment Systems

• Payments may not seem exciting but are crucial; integrating stable coin payments effectively can significantly impact game development success.

• The importance of addressing tokenomics early in development is stressed; retrofitting later can lead to complications and failures.

Building Balanced Token Economies

• Developers must consider creating balanced token economies from the start rather than treating them as marketing initiatives.

The Intersection of Gaming and Crypto

Expanding the Crypto Experience

• The overlap between crypto development, token-oriented projects, and traditional game development has historically been minimal but is now growing. Regulatory aspects and app store policies are evolving, which may attract more participants to this space.

Personal Impact of Digital Experiences

• The speaker reflects on their most impactful digital experience, emphasizing the significance of games in shaping their engagement with technology.

Formative Gaming Experiences

• Diablo was highlighted as a pivotal game for the speaker, marking their first deep engagement with gaming. They also enjoyed Pokémon and various console games during their childhood.

• The speaker recalls playing a bootleg version of Diablo due to financial constraints, showcasing their dedication by investing countless hours into character development and item collection.

Nostalgia and Monetization

• Reflecting on past experiences, the speaker muses that if they had opportunities to monetize their gaming time earlier in life, it could have led them down a different career path in game development.

Current Gaming Engagement

• The speaker mentions enjoying modern games like "Off the Grid," where they've logged over 300 hours. They express nostalgia for the immersive experiences that early MMOs provided.

Favorite Games and Community Connections

• RuneScape is mentioned as another significant game that left a lasting impression on the speaker. They note its strong community ties and how it resonates with others who share similar interests.

Game Development Inspirations

• A co-founder is working on a RuneScape-inspired open-world marketplace project, indicating ongoing innovation within gaming influenced by classic titles.

Reflections on Literature's Impact

• When asked about impactful books, the speaker cites "When Breath Becomes Air," which narrates a surgeon's journey through cancer diagnosis. This book emphasizes life's unpredictability and encourages pursuing one's passions despite challenges.

Philosophical Insights from Reading

• The takeaway from this book stresses taking action when one has conviction in something important. It serves as motivation for both personal endeavors and professional pursuits in gaming.

Emotional Resonance of Literature

Launch Insights and Ecosystem Engagement

Discussion on Launch and Ecosystem

• The speaker expresses excitement about the upcoming launch, indicating a positive outlook for the project.

• Daryl is acknowledged for making time to discuss the developments, highlighting the importance of collaboration in this phase.

• There is anticipation regarding which studios and game chains will be involved, suggesting a diverse ecosystem.

• The conversation emphasizes community engagement, particularly how people can participate in funding decisions through voting mechanisms.