Yat Siu, Chairman and co-founder of Animoca Brands, shares groundbreaking insights on the future of tokens and institutional investment in the crypto space at Solana's Breakpoint 2024 conference.

Summary

In this fireside chat at Solana's Breakpoint 2024, Yat Siu, Chairman and co-founder of Animoca Brands, discusses the evolving landscape of token launches and institutional investment in the cryptocurrency ecosystem. Siu emphasizes the importance of understanding tokens as representations of network effects rather than mere fundraising tools. He highlights the shift in the market with the advent of Bitcoin ETFs and the increasing interest from institutional investors.

Siu explores the challenges and opportunities for projects looking to stand out in an increasingly crowded market. He stresses the importance of being able to communicate effectively with institutional investors and the value of having the right partnerships and backers. The discussion also touches on the changing dynamics of the crypto market, with millions of new tokens being launched and the need for projects to demonstrate real utility and value.

The conversation delves into the role of venture capital in the crypto space, addressing misconceptions about VC-backed projects and highlighting the different types of VCs and their investment strategies. Siu also discusses the importance of balancing institutional and retail involvement in the crypto market, emphasizing that mass adoption requires both user and institutional participation.

Key Points:

Tokens as Representations of Network Effects

Yat Siu emphasizes that tokens should be viewed primarily as representations of network effects rather than just fundraising tools. He explains that when launching a token, projects are essentially selling a piece of their network. The value of a token is derived from the strength of its ecosystem and the opportunities it provides to participants. Siu draws parallels between joining a blockchain network like Solana and accessing a vast ecosystem of builders, exchanges, and other participants. He argues that the true value of a token lies not in its yield but in the network benefits it offers.

The Explosion of New Tokens and Standing Out

The crypto market has seen an explosion in the number of new tokens being launched, with millions of tokens now available. Siu compares this phenomenon to the proliferation of chat rooms and mobile apps in the early 2010s. While this abundance can make it challenging for individual projects to stand out, Siu suggests that it also presents an opportunity for truly capable projects to differentiate themselves. He emphasizes the importance of being able to demonstrate the value and utility of a token, especially to institutional investors who are becoming increasingly interested in the space.

Institutional Investment and Its Impact

Siu discusses the growing importance of institutional investment in the crypto space, particularly in light of the recent approval of Bitcoin ETFs. He cites a survey conducted with The Economist magazine, which found that 60% of institutions plan to deploy capital into crypto markets over the next three years. This influx of institutional money presents both challenges and opportunities for token projects. Siu advises projects to focus on being able to effectively communicate their plans and stories to institutional investors, as this can be a key differentiator in a crowded market.

The Role of Venture Capital in Crypto

The conversation addresses the role of venture capital in the crypto space, with Siu dispelling some misconceptions about VC-backed projects. He explains that there are different types of VCs with varying mandates and investment strategies. Some VCs are forced to sell tokens after a certain period due to their fund structure, while others can hold liquid tokens for longer periods. Siu advises projects to consider the type of VC they partner with and whether they have the capacity to be a liquid investor. He also highlights the value that VCs can bring in terms of partnerships, relationships, and credibility with institutional investors.

Balancing Institutional and Retail Participation

Siu emphasizes the importance of achieving a balance between institutional and retail participation in the crypto market. He argues that mass adoption requires both user engagement and institutional involvement. While some may worry about increased centralization as institutions enter the space, Siu points out that institutional ownership of assets like Bitcoin through ETFs is still relatively low. He suggests that a more balanced market with roughly equal participation from retail and institutional investors could be beneficial for the ecosystem as a whole.

Facts + Figures

• Over 540 portfolio companies in Animoca Brands' ecosystem
• Approximately 40% of the conference attendees were planning to launch or had launched a token
• OKX and The Economist survey found that 60% of institutions plan to deploy capital into crypto markets over the next three years
• Bitcoin ETFs currently hold less than 7-8% of all Bitcoin
• The altcoin space increased by almost $300 million in market cap from the previous year
• 2-3 million new tokens have been created in the past year, with a similar number expected in the next six months
• OKX wallet certifies 120,000 new tokens every week

Top quotes

1. "Tokens are representations of network effects. When you launch a token, you're actually selling a piece of your network."

2. "The institutional aspect heralded with Bitcoin ETFs now means that if you want to stand out, you need to be able to demonstrate that your token actually is useful and interesting."

3. "Not every token has to be a billion dollars to be successful. We've gotten a little spoiled in the narrative of previous years where everything is like billion FTV or nothing."

4. "Mass adoption isn't just about bringing users, it is about bringing the institutions. If it wasn't for the institutional adoption, we wouldn't have the market we have right now."

5. "When you think about raising capital, depending on how much you're raising, you have to look at also saying, do you have the capacity to be a liquid investor?"

Questions Answered

What are tokens primarily representations of, according to Yat Siu?

According to Yat Siu, tokens are primarily representations of network effects. He explains that when a project launches a token, they are essentially selling a piece of their network. The value of a token is derived from the strength of its ecosystem and the opportunities it provides to participants, rather than just being a fundraising tool.

How can new token projects stand out in an increasingly crowded market?

New token projects can stand out in a crowded market by demonstrating real utility and value, especially to institutional investors. Siu advises projects to focus on effectively communicating their plans and stories, being able to pitch to institutions, and having the right partnerships and backers. He also emphasizes the importance of having a strong network effect and being able to manage both the product and public aspects of a token launch.

What role do institutions play in the crypto market's growth?

Institutions play a crucial role in the crypto market's growth and mass adoption. Siu cites a survey indicating that 60% of institutions plan to deploy capital into crypto markets over the next three years. This institutional involvement brings credibility, research, and significant capital to the space. However, Siu emphasizes the importance of balancing institutional and retail participation for a healthy ecosystem.

How does Yat Siu view the role of venture capital in crypto projects?

Yat Siu views venture capital as playing an important but nuanced role in crypto projects. He explains that there are different types of VCs with varying mandates and investment strategies. Some VCs can provide valuable partnerships, relationships, and credibility with institutional investors. However, he advises projects to carefully consider the type of VC they partner with, including whether they have the capacity to be a liquid investor or if they're forced to sell tokens after a certain period due to fund structures.

Is every crypto project expected to reach a billion-dollar valuation?

No, Yat Siu emphasizes that not every crypto project needs to reach a billion-dollar valuation to be successful. He suggests that the industry has been somewhat spoiled by previous narratives where everything was expected to have a billion-dollar fully diluted value. Siu points out that there are many successful businesses in the real world that are worth millions or tens of millions, and the same can be true for crypto projects. He encourages a more balanced view of success in the crypto space.