Creating Onchain Worlds That Outlive Their Creators: Web3 Gaming

Recorded in the new Hodl Up studio, with Michael joining remotely.

Hodl Up: First of all, congrats on the new studio.

Hodl Up: Oh, yeah. You should congratulate me as well.

Hodl Up: Congratulations. And congrats again, because I heard you lost more money on Flash Trade. I heard you staked some FAF on Flash Trade.

Hodl Up: I did. And the very day I decided to stake all my FAF...

Hodl Up: I know what you're going to say. It hit its all-time high.

Hodl Up: Yes, because I did it right after it reached its all-time high. Then I went to check whether I had staked my FAF, and I noticed I hadn't, because, as the professional DeFi user I am, I don't really confirm anything in my wallet. I just press stake and don't even confirm.

Hodl Up: The thing is, you don't know how the game is played.

Hodl Up: I know how the game is played, bro. I'm just not a good player. Let's talk soccer.

Hodl Up: Did you just say soccer?

Hodl Up: Yes, because I'm an American, born and living in Kosovo. Let's talk football. There are really good football managers who were bad at playing the game but are really good at managing.

Hodl Up: Coaches don't play, exactly.

Hodl Up: That's what I was trying to say. I'm a bit sick, by the way. I have a fever, so I can't really think straight. But I'm a gamer, a really good gamer, and I've been looking into Web3 gaming again recently. It comes in phases. I have the Minecraft phase, the two-week phase, and I have that for Web3 gaming as well.

Hodl Up: Web3 gaming is something I really hope will be an integral part of every kid growing up in 2050.

Hodl Up: 2050? I hope you're alive. Let's be realistic.

Hodl Up: Makes total sense. The same way we had GTA San Andreas when we were growing up.

Hodl Up: Or Counter-Strike 1.6. When I look at it today, it's so bad as a game. The graphics make my head hurt, but I used to love it for some reason. Graphics have become a key criterion in recent years, but even with games that came out in the 2010s, you didn't really care about graphics. You cared about the story and the gameplay.

Hodl Up: But there are games with good graphics, good gameplay, and good communities, in Web3 too. And what's the one game we keep hearing about every time we talk about Web3 gaming with anyone in this industry?

Hodl Up: Star Atlas, of course.

Hodl Up: Exactly, 100%. And what if I told you that Michael Wagner, the co-founder of Star Atlas, is joining us today in our new studio, virtually?

Hodl Up: Of course he is. We booked the call together, bro. I'm not the guest. What I'm trying to say is that we love Star Atlas, and at every conference we've been to, everyone knows Star Atlas. I really want to ask Michael about a lot of things that have happened in recent months, and years as well, because I remember that in 2022 Web3 gaming died. It literally died. If you talked to someone about Web3 gaming, they would curse at you and throw things at you, because they lost so much money buying the tokens at the top. So let's see where this goes.

Hodl Up: I have a lot to ask too. You know how much I hate airdrops, right? I want to ask him about the Zink airdrop and how they're going to go about it.

Hodl Up: The one in September. Okay, keep that in mind, because we tend to forget most of the questions we planned beforehand and just freestyle. All right, let's hop on the call and see where this goes.

Hodl Up: Hello, Michael. How's it going?

Michael: Hey, good morning, guys. Doing great. How are you doing?

Hodl Up: Perfect. It's evening for us, but still.

Michael: Good evening, then.

Hodl Up: Before we start and talk about everything, Dren and I were talking about Web3 gaming before you joined, and we wanted to get your story: the origin story of how you got into crypto and what you were doing before crypto.

Michael: Sure. I've told this story many times, so some listeners will probably be familiar with it. My background is in traditional finance. I hold a CFA charter, and I previously worked in investment management and portfolio management. I discovered crypto and Bitcoin back in 2013 through a friend who introduced me to the idea of mining cryptocurrencies with GPUs. We grew up as gamers, in a big gaming group, building all of our own PCs, so when he walked me through how to set up a mining rig with multiple GPUs in a milk crate, it was pretty intuitive to me and also pretty fascinating. So I dove in headfirst and went pretty deep. I ended up setting up some 30 or 35 GPUs on custom-fabricated rigs that I built all around my house. I never really made any money off it. These were the Scrypt coin mining days, late 2013 going into 2014.

I got into it right before the Mt. Gox collapse, and that led into a two-year bear market in 2014 and 2015, with things starting to recover in 2016. I stuck with crypto at various levels of participation, because I was still very interested in it and captivated by it, and we had some interesting things happen over those years. The small group of crypto enthusiasts I was in got really advanced with cloud mining. We were very early to the Monero network, got a custom mining program developed for us so we could mine more efficiently, and then scaled up to thousands of CPU instances on AWS for cloud mining.

In 2015 I made the decision that I wanted to go full-time crypto. I gave up my formal career and took a chance, because I saw the potential for the industry to keep growing and maturing. By 2016 I had launched my first company in the space, called Tokes; Multichain Ventures was the actual entity behind it. It was a crypto and cannabis company focused on financial services for the legal cannabis industry: point-of-sale software, a payment gateway, and conversion of received assets into a desirable portfolio of crypto assets, like stablecoins, for these businesses. We had a number of successes there. We ultimately worked successfully with the Nevada state government to get a bill passed that approved a closed-loop, tokenized financial system for the legal cannabis industry in the state.

That all happened around 2018, and going into 2019, as we were looking at bringing the service fully online, the pandemic hit. So in late 2019 going into 2020 the pandemic hits, the government shuts down, the program shuts down, and the big opportunity for that company evaporated right in front of our eyes. As a result, I kept scaling down the company in terms of personnel, because we didn't have significant financial resources, and there were two team members left: Danny Floyd and Jacob Floyd. Around mid-2020, having watched the opportunity with Tokes get eviscerated, I was talking to them about opportunities in DeFi, NFTs, and Web3 gaming. Fortunately, Jacob and Danny both have deep experience in game development, and they were very interested in pivoting the company or creating a new one and moving into the Web3 gaming space.

So around mid-2020, Star Atlas was conceptualized and formed, and by January 2021 we went to market with nothing more than a white paper and a dream. Star Atlas caught the attention of many people very early on. We caught the timing of the Web3 gaming and metaverse narrative perfectly in 2021 and saw some incredible success. Fast-forward five years, and we're still here. We're still building. We've gone through a lot of ups and downs, but I think we're in pretty exciting times, and I think the prospects for Web3 gaming are still extremely promising.

Hodl Up: Hearing this backstory, including Tokes, makes me feel a lot better about supporting what you've been doing, because the cannabis industry on its own has a lot of legal implications, let alone combined with crypto. I have the feeling you've been very prudent from the beginning, given your expertise and your transition from traditional financial markets into crypto and into what you're building today. And I have to applaud you, because at the many conferences we've been to, whenever we talk about Web3 gaming, Star Atlas has been synonymous with it, and we're really excited that you had the time to join us today. My question is: have you found the legal environment today, with the new administration, much more favorable for you to keep building? I'm not entirely sure, for example, whether a game that is intended to be globally available has to adhere to every nation's laws.

Michael: Great questions. First of all, I appreciate you recognizing that we do try to operate legally and ethically. Back with Multichain Ventures, we registered with FinCEN and were getting our financial services and money transmitter licenses. We always wanted to make sure we were fully compliant with the various laws, and that mentality carries through to our operations with Star Atlas.

I will say there's still a lot of uncertainty out there. There aren't really any clear definitions or guidelines for how a business like ours should be regulated. That said, we're certainly starting to see more progress towards a regulatory framework. Things like the STABLE Act and the CLARITY Act in the United States are starting to build a foundation for how you operate fully legally, establish a safe harbor, and find a path to decentralization. So a lot is still up in the air. Monitoring regulation is something we've done since the inception of the company, and I think it's still pretty much the Wild West, specifically on the Web3 gaming side. But with some of these new frameworks coming online and the bills that are passing, we'll likely be able to identify a path where we know precisely how we can operate and precisely what we can say.

One of the things I find challenging is that our legal guidance has always been, "Don't talk about the tokens." Don't talk about ATLAS and POLIS, because then it could be perceived as a securities investment, which is obviously not how we think of them, and that's not the reaction we want. But I think of our tokens as much a product of the ATMTA and Star Atlas suite as Holosim, our free-to-play game; SAGE, our RTS MMO in the browser; and our Unreal Engine client. The tokens are integral to all of that. So it would be fantastic if I could be more open about communicating their value proposition, not to stimulate speculation on the tokens, but just to look at their fundamental, intrinsic value. That's just one example, but I do think we're seeing some nice progress. There was very much a cloud overshadowing the industry for a number of years, when it seemed like the government was aggressively pursuing and trying to shut down various crypto businesses. Now it seems like that's been lifted, so the opportunity feels better, and we feel our prospects are better as a result of the clarity we're now getting.

Hodl Up: I want to go back to you mentioning 2021 as the golden year of crypto before the crash. I was really amazed by Star Atlas, and I'm not saying that just because you joined the episode. I heard about you back in 2021, because I'm a gamer myself and I explored Web3 gaming when it was at its peak. 2021 was maybe the year of Web3 gaming. All the tokens were skyrocketing. But after 2022 I didn't really go into Web3 gaming anymore, because most of the projects I knew didn't exist anymore. So many projects died. So what I want to touch on is how you survived. We also know Solana did this; it basically rose from the ashes. How did you manage to keep the team, or the vision of this whole project, alive? This is more of a philosophical question, by the way.

Michael: It's kind of a difficult one to answer. In simple terms, I would say just raw grit, determination, and perseverance. I've commented on this in the past as well, but on a personal level, I'm active in endurance sports. I race triathlon, I used to race cycling, and I'm a rock climber. I believe these endurance sports instill a sense of perseverance in people, because typically you're miserable. If you're driving down the street and you see a cyclist on the side of the road, their face isn't happy, and runners don't have a big smile on their faces either. You're forcing yourself to do something uncomfortable, but there are positive benefits as a result. I think bringing that mentality into running a business as an entrepreneur is very important, because 99% of the time things go wrong, maybe half a percent of the time things go right, and half a percent of the time things go exceptionally well. 2021 was one of those periods where things went exceptionally well for us, and we've been fighting for the last three and a half years or so through very bearish markets, very negative sentiment, a lack of interest in Web3 gaming, and major losses from having some of our treasury, our balance sheet, on FTX. We lost $15 million on FTX, so it was a massive hit.

What I will say is that a lot of credit goes to our team, because we have very talented people, but also very passionate people. Our work culture is one where people put in overtime because they want to, not because we're asking, "Hey, can you stick around tonight and keep building?" We manage essentially our entire company, which is remote, out of Discord. We have various virtual conference rooms set up, and I see people in there all the time building something. Again, they're doing this out of passion. One of the only reasons we were able to survive is that we have this passionate team that's willing to put in the hours and wants to see this vision come to life as much as the founders do. A lot of credit also goes to our community, who've ridden a very rocky road with us. They've been through the ups and downs and stuck with us when it could have been quite easy to abandon us, when some of the negative announcements happened or when sentiment turned down. The community has certainly carried us, and we have a really diehard, passionate core community right now that helps move things forward.

On the business strategy side, it was also about being willing to make the tough calls, and I think a lot of teams don't do that. It's cutting team, reducing scale, reducing scope, and focusing on specific products when the revenue, income, or investment doesn't exist. We've always made those hard decisions, because ultimately the most important thing is that the company survives and we have the opportunity to build another day. They are really hard decisions to make, because it never feels good to fire anybody, especially very talented people on your team. So I think a combination of all of those things has gotten us to where we are today.

Hodl Up: Cheers to hard decisions. I want to talk to you about Web3 gaming. I'm not saying this is the consensus, but based on conversations I've had with different people in the space, there's a feeling that Web3 gaming in general has regressed, and that what happened in 2021 was more hype than something that can really be used. I've heard a lot of people say you don't actually need Web3 to have good games. As a gamer myself, I tend to look at both sides of the coin, and I do feel that in-game economies add an extra dimension to everything you do in a game. What do you think is the current state of Web3 gaming? Do you think the misconceptions people have because of the way it regressed will be removed, and if so, how do we go about it?

Michael: I would certainly agree that gaming doesn't need the Web3 element to be successful. For the entire history of gaming, Web3 didn't exist, except for this very small fraction of the timeline at the end. My perspective is that the Web3 element is the economic layer. It's the financial incentive layer. It's genuine asset ownership, the free tradability of those assets, and the earnings potential from the game. In our case with Star Atlas, we were also very aggressive and progressive with the idea of the decentralized autonomous organization, the DAO. This is ultimately a way we can transfer the value of the Star Atlas IP into this community DAO and give Star Atlas the opportunity to persist indefinitely, almost into perpetuity.

Not all games are doing that, and I would say we're probably the most advanced at integrating every element of crypto into our gaming concept. That might not be right for every style of game. But for an open-world space adventure MMO, where we're building an entire universe and digital society, it makes a lot of sense. My dream, my goal, is that at some point ATMTA, the studio behind Star Atlas, is not the core developer. We're not around anymore, the game systems live fully decentralized on-chain, and the DAO is effectively the owner of the Star Atlas brand. That might be 20 or 30 years from now or more. But the way we've set up the economy within the game is that we have a direct funding mechanism into the DAO. Various game activities incur what is effectively taxation, a fee on users' earnings, and all of those fees go directly to the DAO. So we've architected it so that the DAO is self-perpetuating, because it has funding as long as there are players in the game, and it can use those funds to build the future of Star Atlas with or without us. That's our philosophy and our ideology around it.

Now, has Web3 gaming regressed? What I would argue is that people are looking for product-market fit again. Yes, 2021 was very much a hype cycle, and the models people were trying to use back then didn't work for everyone. Play-to-earn, for example, gets a lot of criticism. There's a pedantic argument about whether we call it play-to-earn, play-and-earn, or play-to-own. There's some nuance to it, but to me play-to-earn really just means: is there an earnings mechanism in the game so that players can capture value for their time while hopefully also enjoying the experience? Because if you're building a game, yes, you need a great game and a fun experience, because that's what brings people in in the first place. Some people will be attracted simply to earning from the game and won't care whether it's fun. But if you want a sustainable long-term product, it needs to be both: a fun game plus solid, sustainable earnings potential.

A lot of teams out there are now trying to find the new model: what's going to work, what's going to work at scale, and what's going to work for a wider audience. Some of that has led to people repositioning the Web3 side of their game. Some teams have pivoted all the way back to Web2 and dropped Web3 entirely. Obviously it didn't work for them, or at least that was their perception. What I do believe is that there is tangible value here, and value distribution that can be shared with players if you design these systems correctly. Our economic design throughout the game is something I really pride ourselves on at ATMTA. We've had the SAGE RTS MMO economy running for over two years now, and we've not had any major collapses in the currency or in the resource and commodity markets. A lot of attention goes into that, and I think that reliability has also helped us retain the players we have.

So which model is going to be the most successful: Web2, Web2.5, or Web3? I still think Web3 is the highest value proposition for the user, but it's going to take time to convince people of that and educate them about the benefits. I'll close this question with one final point, well, really two. I'm not fond of the idea of "just abstract or obfuscate the whole blockchain away, hide the wallet, and make onboarding as simple as possible." I certainly see a use case for that, and simplifying the onboarding experience is important. But I also think it's a disservice to the end user if we're not educating them on all the other benefits of being integrated into the wider crypto ecosystem. We don't just want to bring people into Star Atlas. Yes, we want user acquisition and growth, but once we bring them in, we want them to be aware that there's a whole ecosystem out there of DeFi, DePIN, NFTs, PFPs, marketplaces, and all the other things you can do in crypto if you have a fundamental understanding of how it works. To me, that's important. So again, I think Web3 is going to be the ultimate winner, because the value proposition is so strong for the player. But it will take time to reach a point where a wider audience is not critical and skeptical of Web3, thinking it's just scams and a money grab, and instead realizes, "Oh, if I spend time in this, I can capture some value back for myself while I'm having a good time."

Hodl Up: Back in 2021, I think the main issue with Web3 gaming was that most projects didn't really pay attention to the game itself. All they did was try to build hype by giving away loads of tokens as rewards for playing, and the in-game economies were not designed properly. That's my take. And I agree with you that there are multiple ways to do it, and of course it's going to take time until you get a close-to-perfect in-game economy that keeps the game running without the need for supervision or a central authority. But I see the vision. As a gamer, back in 2021 I was thinking, what if GTA 5, which I was playing online, did something like that, where you could somehow swap your in-game currency for real-life money? It made sense to me that someone out there was investing their time to make this a reality with their own game. It doesn't have to be GTA 5, of course. So my question is: in terms of in-game economies, what do you think is the main element that most founders and core team members in other Web3 games are overlooking? I hope you get my question, because I complicated it a bit.

Michael: If I may, I just want to touch on what you mentioned about GTA 5 having a crypto-based economy. I think it's a really interesting topic: how we'll see Web2 studios and publishers evolve and adopt crypto over time. I think that's going to be a relatively slow process, specifically because of the regulatory side. There's never been a moment in all of so-called Web3 gaming history when we've had clarity on how best to operate, and these established studios with mainstream titles are not going to bet their entire company on integrating crypto when they don't know what the negative consequences are. I think they're also going to be conservative because of the negative stigma among Web2 gamers that crypto is a scam and NFTs are a scam. As I said, they think of them as cash grabs. We'll ultimately overcome that perception over time as we communicate the value that's being distributed back to players. I know this wasn't your question, but I think it's more likely that we see a Web3-native breakout hit like Star Atlas before we see a GTA 5 or GTA 6 integrate crypto. That said, I've actually heard some rumors that GTA 6 might have crypto in it. I'm not sure. I might be wrong there.

As for what people are overlooking on the economy side, that's an extended answer. It goes really deep. In my view, you have to find a balance within the economy where players are able to specialize and find a niche for themselves where they can focus and create value. To put it a different way, where I think token economies fail in games is the inflation curve. What we saw very commonly in 2021 were hyperinflationary emission curves, because that brings players in. You can get massive adoption very quickly when you're distributing an enormous amount of value, with yields in the multiple thousands of percent. Obviously that's not sustainable forever, because somebody needs to be the buyer of those tokens on the other side. So you'd have these big farming events that pumped the token and got awareness, and I think there were probably some questionable actors as well who were just looking for a quick pump and an exit opportunity. The true builders have been building for years and are still here today.

Where I'm going with this is that the emission curve is not the way to create a long-term, successful token economy. What you actually need is a game environment that attracts spenders, or consumers, whom you can match with the producers in the game. Somebody who's willing to come in, play the game, and spend $20 a month for the entertainment value. And that $20 a month doesn't go to the game studio, to us at ATMTA. It goes to the other players who are producing goods and services within the economy. If you can find an equilibrium between those two, that opportunity will exist forever.

Hodl Up: I think one of the reasons you have such a well-functioning in-game economy is your background in traditional finance as well. That might have played a big part in it.

Michael: I'm certainly a contributor there, and I oversee the economy team, but I want to give a lot of credit to Chris Smith and Gareth Butler on our economy team. Chris has a PhD in economics, and he's definitely the mastermind behind the core architecture of the economy. I'm involved in bringing the player perspective, perhaps. So it's not all me, but it is one of the departments I directly oversee and have some experience in.

Hodl Up: I want to talk about Star Atlas and what you've been doing in the last few weeks. One thing I have PTSD from is airdrops, because of my past experiences with them. If I'm not mistaken, you have one of the biggest airdrops in Web3 gaming history happening in September. How do we make sure it's not a farm and dump? As I said, I have airdrop PTSD. I've gotten the short end of the stick in 90% of the airdrops I've participated in. So how do we make sure people don't just sell?

Michael: A couple of points here. First, we've never actually executed an airdrop for Star Atlas. We've never run a play-to-airdrop campaign. It's always been built on the concept that your earnings potential in the game scales directly with the amount of capital you've invested in the game. When you buy game assets, those are productive assets, and you can earn from them. So we've never done an airdrop for Star Atlas specifically.

What you're referring to is the announcement we made about Zink, z.ink, an identity-wrapped SVM L1 that we're launching and that we'll be shifting the Star Atlas game logic over to. The airdrop itself is a token airdrop, and we're expecting the mechanics for it to kick off in September. To take a step back: as I mentioned, this is identity-wrapped, or identity-linked. What we're creating is a unique on-chain user profile and avatar that's gamified like an MMO account. You progress, or level up, that account based on various on-chain and off-chain mechanics that we track. We're starting by focusing specifically on Star Atlas gameplay: things like playing Holosim or SAGE, competing in matches in the Unreal Engine client, staking ATLAS and POLIS in the lockers, and trading on the Galactic Marketplace. We'll look at adding some DeFi functionality and other social metric tracking.

We see this as mutually beneficial and synergistic between Zink and Star Atlas, because Zink really benefits from launching with Star Atlas on the network on day one. Part of our ideology is a fully on-chain game architecture, so our game systems produce millions of transactions per day right now. In fact, at one point we made up 20% of the total transaction volume on Solana, which is pretty wild to think about. So we're using Star Atlas game systems to bootstrap the genesis of this network. And Star Atlas benefits because the airdrop campaign drives users directly to engage with Star Atlas products. The thinking is that we're very excited about what we've built, and if we can get more eyes on it and more people playing, we think they'll convert into long-time Star Atlas users.

That's part of the answer to your question about how we prevent people from farming and dumping. There will certainly be people who want to farm and engage with no intention of sticking around. But the way we've set up the XP tracking mechanics, which ultimately determine each user's airdrop, is similar to what I described in the Star Atlas economy: the amount of capital you invest in the game determines your earnings potential. So the people who earn the largest share of this airdrop are the people most deeply engaged in Star Atlas products. There's really one path to earning a completely free airdrop, which is through Holosim, the free-to-play product, but XP generation there also has the lowest weighting. The people buying tokens and locking them, playing SAGE, and competing in the Unreal Engine client are the ones earning the most XP, and therefore the most of this airdrop.

The nice part is that it lets us focus on distributing the Zink token airdrop to hardcore Star Atlas users. These hardcore users are also the ones processing all the transactions in our SAGE game systems. So yes, what they're receiving is a distribution of value, but this network token is necessary for them to operate on Zink. What they're really receiving is a subsidy for their on-chain transaction fees, because once they get the airdrop, their operating costs are eliminated, at least for a period of time. I think that in and of itself is pretty powerful.

There are some other elements to the identity layer, like optional zero-knowledge KYC, which we want to introduce and which lets us achieve Sybil resistance. Then you can identify genuine, real users on the network and not just bot farms. The entire leveling system is also a way to pre-qualify users. We could decide you have to be at least level 20 to receive an airdrop, which means that if you came in and farmed with a bunch of accounts but didn't earn much XP on any of them, you won't receive anything. You have to meet a minimum qualification.

The final piece is the Zink tokenomics themselves. This could get a little complex, but essentially we're following a very similar inflation model to Solana. Solana has a fixed inflation rate on circulating supply with what's called an exponential decay function, so the inflation rate decreases at a consistent rate every year. In Solana's case, they started at 8% inflation with a terminal value of 1.5%, reached over about 13 years. In our case, we're starting with a higher inflation rate, 12%, going down to a 2% terminal value, but we're getting there over eight years. The core thesis is that if we can create a yield-rich environment for people staking and delegating tokens to validators, over the first two years especially, when the highest inflation occurs, that absorbs supply out of the market, and we're incentivizing people to stake tokens instead of selling them, because it's a yield-rich environment. It also heavily incentivizes the validators participating, which will help us achieve decentralization at a faster pace. It's certainly unknown whether people are just going to dump right at the start, but we want to make it very attractive to be a staker and not a seller.

Hodl Up: Now that you mention Zink as the upcoming SVM chain, I've seen a lot of takes on it, and I know even Toly, the co-founder of Solana, came to your support, because it was quite a debate on crypto Twitter, at least from what I saw. Many people were supporting it and were bullish on it, and many people were asking why a game like Star Atlas needs its own chain when Solana works just fine. Then I saw Toly coming to your support, and I thought, okay, maybe I have to side with the people who are bullish on this chain. In my perspective, Solana is losing some value when Star Atlas moves to another SVM, because, as you just mentioned, it once accounted for 20% of Solana's total transaction volume. So why do you think some people are against this? Some community members, or some people on Solana who have been Solana maxis for a couple of months or years: why do you think this debate is ongoing right now?

Michael: We knew this was going to be a contentious announcement, so it was not a surprise to us whatsoever that we got some criticism. Step one was managing and navigating our own community's sentiment, because even internally, and by internally I mean the Star Atlas core community, people didn't understand why we were moving to a new network. There were also questions about why we didn't integrate ATLAS and POLIS into the tokenomics of Zink. So step one was navigating that conversation, and step two was navigating the wider Solana ecosystem conversation.

As a starting point, I think people see this as bad because it feels like Star Atlas is abandoning Solana, which is not the case. I would make a strong argument that this is intended to be complementary, not competitive, with Solana. We're not trying to do Solana better. In fact, we're using a vanilla implementation of the Solana Virtual Machine. It's just a raw fork of Solana. We're not modifying consensus, and we're not really modifying the underlying tech. Our unique value proposition is the identity layer, plus the fact that we have Star Atlas game systems running on it. I would say it's more of a cultural play than a competitive one: build on Zink for reasons X, Y, and Z, if you like that environment better than building directly on Solana. But for most use cases, Solana is going to be better than building on Zink, simply because they don't incur the same level of transactions that we do.

I also want to be clear that we were solving a very real problem for our users, which largely arose in Q4 of last year going into Q1 of this year, with the memecoin trading and pump.fun. You saw much higher network congestion, and you saw priority fees get introduced and spike. Our users are very financially centric and motivated by the economic incentives of the game, and what we saw was that in some cases transaction fees on Solana were consuming as much as 30% of gross player revenue. That's an exogenous tax completely outside our studio's control. Simply because we're operating on this network, our users are making 30% less than they otherwise could. The second part of the congestion problem was that you're competing for block space, and certain transactions aren't settling, or not settling quickly, or you have to submit them multiple times. Because our game systems are fully on-chain, your game is essentially dead while transactions can't go through. If you click to engage in combat with another player and that action does nothing while you're getting attacked, that's not a good feeling. Or if you move on the map and don't actually move, it's a very frustrating experience for a gamer.

Those were some of the complaints brought up in the community, and that's when we started thinking seriously about our options. Should we use an L2 rollup solution? Should we move to a different chain? Or should we launch this SVM L1? We ultimately landed on the SVM L1, because what's important to me is that we achieve this fully decentralized metaverse concept, and you can't do that with a centralized L2 solution. And frankly, because we've put so much time and investment into building on-chain game systems based on Solana, moving to just about any other network would mean rebuilding all of them, which would put us years behind and cost tens of millions of dollars more. So the SVM was the main solution for us.

The Zink token was introduced simply because we need a way to incentivize growth in the network, on the validator adoption side as well as user acquisition and attracting builders. You have to find that funding somewhere. We could have used ATLAS and POLIS, but that would essentially mean diluting the ATLAS and POLIS pools, their stakeholders, and what we've committed to in terms of allocation. All of those tokens are either fully distributed or fully allocated to game emissions, in the case of ATLAS, or to governance participation, in the case of POLIS. Not wanting to damage the existing tokenomics at all, while still being able to provide incentives to bring new people into the network, we really needed to launch this with its own network token. That's how we landed where we are now.

Hodl Up: I think one of the reasons there were debates is not that people questioned whether you can pull it off, but that it was a bit unusual. In the past few months, with all the hype on Solana because of pump.fun and all the liquidity going into Solana, we've seen a lot of builders move from other layer ones to Solana, and the fact that you decided to do the opposite just felt unusual to them, not that you made the wrong choice.

Now I want to ask a little about the lore, because when I play a game, the main thing I look at is the lore. The only reason I played League of Legends, for example, is that I like the lore, not because I like the gameplay that much. The lore in Star Atlas is already deep, but I'm curious how much of the story is fixed or locked in, and how much it can truly diverge because of what players do.

Michael: I will say lore is my weakest subject across the Star Atlas universe. I'm not really directly involved in it. Danny Floyd, our co-founder, chief product officer, and game director, oversees all of that and created all of the underlying lore. I also want to give a shout-out to a guy on our team, Jose, who is super passionate about lore. He's written probably hundreds of pages of lore for the game. So, to your question, I think nothing is totally locked in. There are pieces of lore we consider canon, but they're also subject to change, because we're still very early in the game development process, in spite of building for five years now. There's a very long roadmap ahead, so it's still subject to change, but I think we have a really solid foundation.

One other item I would touch on is our DAO, which has been operational for a couple of years now and has been getting funded through these game transactions. What we've unlocked so far is a proposal process where people can request funding from the DAO through an ecosystem fund. That fund has paid for meetups, community events, and some third-party development, services, and tools that people are building around Star Atlas. An interesting proposal did come through, again pretty controversial in its own right because of its size. It was a proposal to work with a group of authors. "Ghostwriting shop" is probably not the right way to put it. It's called Sterling & Stone, and they do ghostwriting, but they're also very prolific at publishing books. It's a request for $600,000, and what they want to produce is a series of books, a series of serials, and daily content. The reason this external publishing house took an interest is the depth of the lore today and the potential they believe exists for the Star Atlas IP to break into mainstream media, specifically with opportunities for television or movies.

Hodl Up: This is literally what I was going to ask you, because I mentioned League of Legends, and I'm going to talk about League of Legends now. They recently launched their TV show, Arcane, and it's a massive hit. With a game like Star Atlas, and kudos on the graphics, by the way, they're amazing...

Michael: Thank you.

Hodl Up: ...there's a lot of potential to make a TV show or maybe a movie. This is more of a general question: do you think that in five years you will have scaled enough to have the time to focus on this cultural side of the game, like TV shows, movies, or books? Even though only a small percentage of the world reads books nowadays, you get my point.

Michael: We see immense potential in the IP as well, so we definitely want to focus on this transmedia approach. We already have a graphic novel in production. Twelve of 18 episodes across three acts have been released so far, and act three is coming out pretty soon as well. It's in comic book format, a graphic novel, but extended. It's really cool, and it's a fascinating story.

I think there's an underlying chicken-and-egg question here. Will we see more success by having a very successful game with a lot of players, like League of Legends, and then transitioning that IP into mainstream media? Or, given that we know we have a long development timeline for Star Atlas, is there an opportunity where the IP is attractive enough for the mainstream today that it ultimately leads to user acquisition in the game? Which funnel is the bigger opportunity? Is there potential for an IP like Star Atlas without a deep user base already? I think there is. I think we can be the next great sci-fi IP. We're an interesting hybrid between sci-fi and fantasy, probably closer to Star Wars than Star Trek, or maybe somewhere between Dune and Star Wars.

There's a lot of diversity in the characters and species in the game and in the history that's been written. Star Atlas takes place in the year 2625 now, it started as 2620, so it's 600 years in the future, and galaxies and species have collided. So I think there's a really rich story there, along with the representation of characters and all the unique manufacturers in the game, which are the framework for all of our ship and vehicle design. I think Star Atlas could be a very successful IP independently, because of the way it's been structured to date. What I don't know is whether we can get it out into the mainstream, and whether that would ultimately bring new players into this metaverse and cyber nation we're building.

Hodl Up: In terms of mainstream, in crypto alone, as I said, you're pretty much mainstream already, because there's not a single conversation about Web3 gaming where you haven't come up. So you're pretty massive at this point, let alone 10 years from now. Speaking of 10 years, I know it's a long time in crypto, but if we were having this conversation 10 years from now, what do you think Star Atlas would be remembered as? The first real digital nation, the first AAA blockchain game that showed how to build a functioning in-game economy, or something else entirely?

Michael: This is perhaps wishful thinking, but I think a 10-year time horizon probably isn't enough to establish ourselves as one of the most successful digital nation states, the cyber nation. The hope would be that we're considered one of the most successful MMOs of all time. Not just in Web3, but one of the most successful MMOs of all time. I think over 20 to 25 years we can start to shift the general public's mindset towards the idea of being a citizen of a digital nation, and that's where I'd like to see us go.

I also want to share one anecdote, since you mentioned hearing people talk about Star Atlas at every conference. There's a funny thing that happens when we show up as a team. If we're not wearing any Star Atlas apparel, you can walk through the halls and nobody pays attention to you. But as soon as you put on a Star Atlas shirt like this one, everybody walks up to you, "Oh, you're Star Atlas, I love it," and a conversation starts. So depending on the day, and whether we want to be engaged in these conversations all day, we decide whether or not to wear the Star Atlas gear.

Hodl Up: I'm wearing a Star Atlas t-shirt to my next party, if that's what's going to make people come up to me.

Michael: I would refer you to Gallia Merchants, a third-party e-commerce site that sells Star Atlas-branded apparel, equipment, computer peripherals, all different types of things. So a big shout-out to Gallia Merchants as well.

Hodl Up: I'm going to grab something there too. I'm trying to collect. I'm going to be the Thanos of collecting crypto merch.

Michael: I love that. My entire wardrobe is nothing but Star Atlas shirts at this point. I have all-black Star Atlas t-shirts, and that's what I wear every day. The same design, like five times, pretty much.

Hodl Up: To wrap this up, this is probably going to be the weirdest question I've ever asked. We talked about the blockchain you've been using and the blockchain you're working on, but let's say, hypothetically, no SVM existed in the world anymore. Would you be able to pull off what you've been building with Star Atlas on an Ethereum chain, or on Ethereum itself?

Michael: I would certainly say the answer is yes. Again, it would take a lot of time, a lot of capital investment, and re-architecting our entire game back end. But I do think there are other scalable networks out there, and over the 12 years I've been in the space, I've seen an incredible amount of innovation. We're still in the very early stages of crypto and crypto adoption, so I'm sure there are likely to be better solutions than Solana at some point in the future. I don't know what that looks like. But the back-end architecture question is something that could change if it needed to. What's more powerful about Star Atlas is the IP. It's the game systems, the gameplay mechanics, and the economic architecture. Those are the more critical pieces for success, and they're what bring users in and keep them playing.

Hodl Up: Perfect. Michael, thank you again for joining us on this episode. We're probably going to have more episodes in the future, because Star Atlas is still building and you're probably going to have more announcements to make. Thank you again, and have a good day.

Michael: Thank you, guys. There's a lot more on the horizon, so stay tuned, and we'll be in touch again. I appreciate the time.

Hodl Up: I think that went well.

Hodl Up: That went perfectly. One thing I really liked about Michael is his in-depth detail and explanations on everything Star Atlas is doing, especially the whole Zink situation right now. I've seen so many people talking about Zink, and crypto Twitter is full of trolls. One statement that really caught my eye was, "Imagine Star Atlas has been building for five years and they couldn't get their full game out, but they already have their own blockchain." When you think about it logically, it doesn't hold up, but from the perspective of someone who doesn't go into the details of the project and why Zink came to be, it makes sense. So I really appreciate Michael joining us today and giving this explanation to everyone who wants to listen.

Hodl Up: We've said before that one of the biggest issues with Web3 gaming companies in the past is that they tend to overpromise and underdeliver, and that's definitely not the case with Star Atlas. I like that Michael doesn't beat around the bush, especially with the more controversial questions. He answers them directly and isn't afraid to share his opinion. If I wasn't a fan already, they made me one.

Hodl Up: All right. Thank you very much, guys, and see you in the next episode.