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 two 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 the DApp platform it is developing and his future outlook. (Click here to go to Part 1)
Startups need to venture into the unknown with trial and error
―― Many are skeptical about the potential and future of blockchain gaming and DApps, but what do you think?
It’s common sense to be completely unsure about the future of something so uncertain. However, I believe that if we press on for 10 or 20 years, the rest of the world will catch up and accept it.
Once everyone knows the formula for how to succeed and how to make money in a market, it’s too late to enter. At the very least, I think the value of being a startup is the ability to enter now.
“DApps have little potential because they can’t attract users and don’t have clear monetizability,” critics are likely to say. But they can’t see because they’re not doing it. There are some things you can’t see on paper. If they were in the midst of it, they’d start to see how to attract users and achieve monetization.
Think about the reason you were born, or the value of working on DApps. Our trial and error in blockchains and DApps will provide immense value not only to our lives but the entire world. If you just want to make money, gain prestige, or get famous, then wait with funds at the ready for the opportune moment once the market has matured. But those involved in blockchain and DApps right now, in the market creation stage when it’s tough to form hypotheses, are nevertheless testing their hypotheses with the PDCA (Plan-Do-Check-Adjust) cycle, discovering social value as well as product value, and enjoying the process itself.
―― Does this mean that as an entrepreneur and as a startup, you want to remain a blockchain pioneer?
Yes. User numbers are still low and monetization is still in the trial-and-error stage. But exchanges are doing active business now because they created the market through trial and error when others were still suspicious of cryptocurrency. Entering after seeing others succeed is one strategy, but entering when you still don’t know how it’ll go is another strategy and, I think, a way of life.
Developing a platform optimized for blockchain
―― What is RAKUN, your blockchain-based platform?
RAKUN is our core infrastructure system that uses blockchain technology. When we first started the project we called it “LuckyMe” and had in mind a system that rewarded social media posts, like Steem. As we made progress, however, we became convinced that the DApps market, including Crypt-oink, would grow, and realized that rewards were just one of the functions in the vision we were pursuing. We revised the overall concept and functions provided, and re-released it with the new name in November 2018.
The producer of RAKUN, Masaaki Hatamura (a director at Good Luck 3), is the person who originally established DeNA’s Mobage Town (now Mobage). If Mobage Town was the perfect platform for flip phones, you could say that RAKUN is the perfect platform for blockchain.
Using blockchain technology, we are creating games, media, communities, avatars, virtual adventures, fantasies, sports, tipping, digital currency exchange, and other types of entertainment through RAKUN. After launching it as a blockchain games platform, we will then expand it to offer blockchain amusements other than games. Ultimately, we intend to turn it into a virtual reality world of amusements like that of the novel and movie Ready Player One.
―― RAKUN claims to be a “new economic zone connecting the real and virtual”. Will you achieve that through cryptocurrency?
In the same way that bitcoin came to be widely used as a way to trade altcoins, RAKUN too has solid economic value and significance.
People say that cryptocurrency is just virtual, but many people live mainly in a virtual world and see their online personas as their true selves. It’s not necessarily that the real world is always the starting point with the virtual added on – some choose worldviews and lifestyles in which the virtual is their reality. Our blockchain game business will probably also be called virtual, but in the near future over half of Good Luck 3’s revenue will be in Ether. Such companies already exist and are bound to multiply. This is probably incomprehensible to people who see the world or market only in yen.
It’s not like I foresaw the future brought about by blockchain from the beginning. I’m not a prophet; I can’t say for sure what will happen. But being at the forefront of DApps does afford a certain view. It’s because the future can’t be seen clearly that innovation is destructive and much can only begin to be understood through hard work, sweat and tears, and trial and error. Maybe this feeling is only shared by entrepreneurs who have confronted destructive innovation.
―― In building an economic zone and raising startup funds, how do you think about ICOs?
I’m totally positive on ICOs. Funding is a major weapon in the entertainment business, and I’ve been involved in raising over 1 billion yen [$9 million]. I also think it’s an extremely effective way for startups to escape the valley of death.
As far as methods of fundraising go, we know that equity financing and debt financing have synergy. Raising equity makes it easier to borrow. Financing with debt, on the other hand, gives time to negotiate favorable equity terms. In the same way, I feel that ICO fundraising has good synergy with both equity and debt. And startups should welcome the new fundraising options being added to ICOs such as IEOs (Initial Exchange Offerings) and STOs (Security Token Offerings).
I think security tokens appear to be moving in that direction. Based on the characteristics of our business, we’ll probably use a utility token first. We have a clear use, the games, so it’ll be easy to give the token value. Ultimately, though, we’re thinking we want to attempt both utility and security tokens.
One challenge is of course how to ensure safety and security. It’s inherently a risky investment, so investors have to understand that, but any miscommunication between the investors and the business staff can lead to problems. Risk and returns are a set, so it’s important to create an environment in which people can invest in ICOs based on accurate understanding of the risk.
From Fukuoka to Japan to Asia to the world
―― With the establishment of the Fukuoka Blockchain Consortium and various trial implementations, Fukuoka is coming to be seen by some as the city of blockchain. Is it an apt environment for blockchain business?
I think that what’s important for startups is being able to ride trends while keeping one’s feet firmly planted on the ground. Tokyo is on the bleeding edge of trends, for sure, but trends come in waves and only those who successfully catch the wave can land on their feet when it recedes. Doing business also means making slow but steady progress, and Fukuoka’s physical separation, which limits the impact of downturns in trends, makes it possible to keep plugging away. Then at some point, the next wave to catch comes along.
There’s also the expression, “The wind blows from the west,” and as the westernmost Japanese city, Fukuoka is the perfect place from which to produce energetic regional Japanese city trends. However, broadening the scope to all of Asia, Fukuoka has Hong Kong and Singapore even farther west. I guess we need to keep moving west to continue blowing the winds of change from the west!
We’ve already set up offices in Singapore and Hong Kong. We want to always value our Fukuoka-born identity, but we also don’t want to cling to that too tightly. Taking the broader view of thinking of ourselves as from Asia, our goal is to achieve our corporate vision to “bring smiles to the people of the world by connecting their hearts”!
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.