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Photo Credits: Animoca Brands
Yat Siu, Chairman and co-founder of Animoca Brands, recently shed light on the role of tokens and the purpose behind their Mocaverse project. He delved into the multifaceted nature of tokens and their potential to revolutionize asset ownership.
People frequently ask why a project needs a token. According to Siu, “Tokens are usually described as more efficient fundraising tools that are potentially non-dilutive to equity holders; alternatively, they are seen as utility constructs that can be used in games and other virtual environments in a similar way to virtual currencies.” However, he emphasizes that tokens are more than these definitions. They offer a new way to own an asset class that previously lacked ownership. Siu describes tokens as “a novel way to own a piece of the network effect.”
Our goal is to create a truly symbiotic set of relationships that will deliver value to our portfolio’s networks and reward the time, loyalty, and attention of Mocaverse users.
Network effects occur when the value of a network increases as more users join. This concept is pivotal to the value of top companies like Facebook and Google. Siu notes, “You are probably already familiar with the network effect: as the number of users of a product, service, or platform increases, so does the network’s overall value to those users.”
Metcalfe’s Law states that a network’s value is proportional to the square of its connected users. Some apply Metcalfe’s Law to Web3 networks, but Siu suggests that Reed’s Law might better apply, as it posits that the utility of networks can scale exponentially through sub-groups.
In Web3, owning tokens means owning pieces of network effects, which wasn’t possible in earlier web iterations. Siu explains, “Fundamentally, participation in Web3 based on true ownership of tokens means owning pieces of network effects, something that was impossible in the previous world wide web iterations.”
Siu points out that neither Metcalfe’s nor Reed’s Law accurately models networks like infrastructure projects or large social networks. He illustrates this with a comparison between Hong Kong and North Korea, noting, “The difference in the value (GDP) of these networks is primarily due to the value of the nodes in the network.”
In Web3, networks with higher potential attract more investment and activity. Therefore, aiming for a valuable network with significant network effects is crucial for anyone building in Web3.
There’s no single way to grow network effects. Effective methods include broad user access, attracting builders and investors, and maximizing transactions. Siu mentions, “One popular measure beyond focusing on growing the number of users in a network is to maximize the investment the network receives.”
Web3 networks must focus on user retention due to their open and permissionless nature. Unlike Web2, where network effects are monopolized by the network, Web3 offers users flexibility. Investment in cultural capital can create more network stickiness.
According to Pierre Bourdieu’s theory, cultural capital comprises intangible resources like knowledge and skills that impact social mobility. Siu highlights the unique role of NFTs in this context, stating, “These NFT-driven network effects might grow more slowly than fungible tokens but will create deeper and more loyal networks depending on the cultural capital they attain.”
In the virtual world, projects like Pudgy Penguins and Bored Ape Yacht Club, along with Animoca Brands’ Mocaverse, exemplify this cultural phenomenon.
Investment level indicates a network’s potential. Animoca Brands, a major Web3 investor, aims to grow its network and network effects, both economic and cultural, to expand the Moca Network. Siu states, “Animoca Brands is one of the Web3 industry’s biggest investors, with over 450 portfolio companies and a balance sheet measured in billions of dollars.”
Mocaverse integrates gaming, music, sports, anime, NFTs, and more into a cohesive ecosystem. Its Moca ID, an omnichain identity reputation layer, will bridge network effects across ecosystems. Mocaverse, which really kicked off about a year ago when it raised $20 million, aims to grow Web3 by rewarding and incentivizing the creation of cultural capital through a proof-of-loyalty mechanism.
Siu concludes, “Our goal is to create a truly symbiotic set of relationships that will deliver value to our portfolio’s networks and reward the time, loyalty, and attention of Mocaverse users.”