Blockchain games, also called DApps (decentralized applications), play an important role as a component of the token economy. Successes such as CryptoKitties have emerged, but game design and revenue models unique to the blockchain continue to be discussed and explored within the industry. Amid this, Good Luck 3 Inc., together with CERES Inc., has developed Japan’s first Ethereum-based blockchain game, “Crypt-oink”.
For part one of this two-part series, we asked Good Luck 3 CEO Kazuhisa Inoue, who says his entire company is focused on blockchain and DApps, about how it got into DApps and how business is going.
From incubator to entrepreneur
―― What led you to start Good Luck 3?
In my previous job at Dream Incubator Inc., I was involved in launching a mobile games business at a subsidiary. It was cancelled midway, but I love not only games but all kinds of entertainment, so I thought, at least once in my life, I want to put everything into something I truly love. So I started this company. There happened to be a project development studio in Fukuoka, and I’m from Fukuoka, so I took the opportunity and the connection and launched it in Fukuoka.
―― You’re involved in lots of businesses in the entertainment field, from film production to talent management, but are games your core?
The size of the games market and the vast number of users are appealing. However, there are plenty of forms of entertainment apart from games, such as film, music, and comics. Games are just one of many forms of expression, and we don’t intend to limit ourselves in the pursuit of entertaining users. At the same time, though, as we think about where to focus our attention, we’ll make a decision based on our passions and emotional attachments, of course, but also the strengths and advantages of the company as well as market conditions.
Right now, our goal is to operate on the forefront of blockchain gaming with Crypt-oink as one of our pillars. The marketability and profitability of blockchain games are currently being explored but we think they have great potential.
Shifting the entire company toward blockchain
―― Does this mean that going forward, your business will focus on the blockchain?
In terms of entertaining users, the blockchain is just one method. But I do think it’s the biggest shock to the system since the start of the Internet, so we as a company want to seize the moment. This means turning the entire company toward the blockchain. In addition to Crypt-oink, we’ve already released another DApp called “CryptoIdols”.
The blockchain is attracting attention as the technology underpinning cryptocurrency, but another big change is the opportunity of ICOs becoming another fundraising method for startups, an important one for us realizing our vision.
―― Will you gradually taper off non-blockchain products like the Gudetama series you’re currently offering?
We think that well-known intellectual property (IP) content will start appearing in blockchain games in 2019 and beyond. If that happens, our relationships with IP companies like Sanrio [the creator of Gudetama] will be our strength. I see that as part of our blockchain business. In other words, while Gudetama Quest, which we released in November 2018, is not a blockchain game, it’s a product for which we anticipate that kind of future potential.
The company name is Good Luck, but you have to lay the groundwork to be blessed with good fortune. Chances don’t just come raining down – you have to have prepared to take hold of them. That’s what we believe. So it’s not as if shifting toward blockchain games means we won’t do anything else at all.
Making entertainment that can be enjoyed by a large number of users means tilling the soil, sowing the seeds, and waiting until they bear fruit. I’ve been involved in setting up new businesses and developing content since I was a student – over 20 years, six as a founder and CEO – so I know the importance of not only laying out a grand vision but also plugging away day after day. Right now we’re still in the seed-sowing stage, but it does feel like some buds are finally beginning to emerge.
The response to Crypt-oink as a DApp business
―― You released Crypt-oink over half a year ago, so how has the response been and what sort of growth do you see in the future?
There has been a growing response. In B2B business, it’s good enough to steadily bring in one contract after another, but B2C business is always changing, like climbing a staircase. Sometimes it goes straight up. We’re hoping Crypton breeding and racing have that effect.
Until now, the only elements forming the basis of transactions in Crypt-oink were outward appearance and number [with round numbers like 10,000th being unique Crypton]. A good comparison would be the pricing of pieces of art, where experts and amateurs differ significantly. If the only thing there is to go on is the qualitative element of appearance, it’s all dependent on personal preference and hard to compare value.
Racing, however, produces scores, which are influenced by numerous parameters such as speed, stamina, and unique skills. An easy-to-understand, quantitative index has been made, and we think this will result in a more agreed-upon market value and easier transactions. And with the added goal of winning races, it naturally becomes clear which characters and items one needs in the game. Once that happens, it’s just a matter of us selling those things.
As the operators, we of course need a certain amount of revenue to be able to continue providing the service. Once we become able to sell characters and items that users want, the content will become even more appealing to users. We’re at a point where we’re beginning to see signs of that.
―― Crypt-oink achieves unique, one-of-a-kind in-game characters by using ERC-721 standard non-fungible tokens. Is that why this framework appealed to you?
Collecting rare, one-of-a-kind items has always been appealing. For my generation, the Bikkuriman stickers were an example of that, and I have fond memories of carefully saving them in a booklet. I would trade them with friends, so while it was good that they were physical objects, that also meant they would one day get thrown away. With the innovation of ERC-721, even digital data can be an everlasting asset. What we’re doing is recreating the way we loved to play as children in an evolved digital form. What’s more, with the Crypton racing trial we released the other day, this digital data can even be enjoyed as a game!
Seeing your lovingly-nurtured Crypton actually move is really cute. Being able not only to have them but also to race them makes it into a game. I think we’ve been able to bring our strength as a game developer to the evolution of DApp business.
Hurdles to penetration are cryptocurrency usability and legal framework
―― What are some common characteristics among your current users?
Naturally, many of them are knowledgeable about cryptocurrency. Owning not bitcoin but Ether already narrows it down quite a bit. So we think the key is to figure out how to create a simple path to opening a cryptocurrency trading account.
What got me into cryptocurrency was a colleague paying me back for drinks in bitcoin a few years ago. As it was about 20,000 yen-worth [$180], I didn’t want to lose it, so even though I didn’t really understand it, I opened an account with an exchange to be able to use it. Even people uninterested in cryptocurrency would start to use it if something like this drew them in. That’s why we added the function to Crypt-oink that lets users gift Crypton to their friends. We hope it’ll spread as users tell their friends things like, “I’ll give you two characters if you’ll race against me!”
―― It would be smoother if it were possible to purchase Ether in the game, but the law stands in the way. Are you considering obtaining a cryptocurrency trading license?
As long as we don’t have a license, our users have to use an exchange. Thinking about user convenience, we do think obtaining the license and offering a trading function is an option in the medium to long term.
Or, if Ether and other cryptocurrencies gain popularity to the point where converting to fiat currency is unnecessary, the problem will solve itself. That future is more interesting to me and the one I want to help realize. If that does indeed happen, we’ll only have to focus on developing DApps.
Interview date: October 25, 2018
Editor: Makoto Nakazato
Photographer: Ayano Tomozawa
Good Luck 3 Inc.
Founder & CEO
Kazuhisa Inoue graduated from Tokyo University’s Department of Engineering and Science in 2004. Later that year, he entered Dream Incubator where he performed business strategy consulting for internet and mobile content. In 2011, he assumed the role of managing director at Delight, a subsidiary of Dream Incubator, and expanded the development base of its social game business in Fukuoka. Then in 2013, he founded Good Luck 3. Aspiring to construct a kind of “mobile amusement park”, it raised over 10 million in seed funding, acquired the content rights from Sanrio, and formed a partnership with Huis Ten Bosch Amusement Park.