I then reconnected with a man called Raman [Nambiar] who I had met while doing coding school for developing countries such as Papua New Guinea, and we started a fund investing in crypto because everyone was interested, and they wanted some professional investors to manage money for them.

Seems like quite a rabbit hole.

All of that is just the preamble to the big reveal, which was Axie Infinity. If you’ve spent any time trying to do any developing market tasks in traditional finance, traditional edtech way, you only have to watch the kids doing play-to-earn to realise this is simply an epoch-making transformation in terms of engagement and onboarding for kids in emerging markets.

Now, you’ve got a lot of things you have to wrap around it like earn-to-learn and micro-tasking. But as a tool for onboarding and for emerging market education, I can tell you – because I’ve been doing it for a decade in traditional ways – it’s a zillion-times better mousetrap.

You’ve got sort of two different perspectives here where you’re sceptical about bitcoin and crypto but quite bullish on play-to-earn, what’s the balance there?

The issue I have with people who think crypto is stupid or dangerous is, compared to what? I agree that there are elements that are – the pond scum that operate extractive businesses preying on vulnerable people should die in a fire, please don’t think I’m defending them.

But if you look at the web today, you do not do social media as a hobby, you do it as an unpaid slave of Google and Facebook. It’s modern-day slavery, just framed differently. Web 2 is unimaginably shitty, unfair, and gave obscene amounts of money to a narrow group of the scummiest, most exploitative, crazy Americans.

From a consumer’s point of view, it was great because you get way more variability of product and way more information, but as a producer, it’s unimaginably bad.

Now crypto sceptics have completely legitimate views that it won’t be any better if you let the crypto bros take over, but I think 99 per cent of people don’t realise a part of your net worth is contained within your social media profile – that’s an asset that is worth something. The problem with that particular asset is that it is a tenant of one of the social media monoliths, and therefore you can’t monetise it.

So is the attractive aspect of Web3 for you that financial freedom side, giving people control of their digital assets?

‘Anyone who thought that the round one model of play-to-earn guilds was actually going to be a functional economic entity was living an absolute fantasy.’

Mark Carnegie, venture capitalist

Just owning your own stuff. My kids have been shadowbanned on Instagram for no reason, and that’s a really awful experience. Hopefully, in time, what Web3 will do is let you create credit scores in emerging markets, and allow you to control your own digital assets.

In my mind, that perspective doesn’t really wash with what you’re doing at CGU, which is all about lending people in developing countries digital assets for play-to-earn games.

What I say there is: will it cost you something to play a game? Yes. That constrains people from being able to play games. So CGU will stake you on a joint venture basis to go and play that game.

Loading

You can take the view that is capital exploiting labour because there’s an unfair balance of power between the two. And there’s no knock on that. But have you ever been into a street market in Lusaka or Antananarivo and tried to borrow money? To borrow $10 they’d charge you 35 per cent interest a month. And if you don’t show up with the money at the end, life’s not good for you.

So you can say the joint venture arrangement is exploitative, but it’s better than what these people are living with at the moment. These play-to-earn guilds, if they’re properly managed, are a far more energising and innovative way of onboarding people providing you bundle them with other learning and financial discipline along the way.

You mentioned Axie Infinity earlier, it’s having a rough time with the valuation of its token and the recent $600 million Ronin sidechain hack. Do things like that threaten the long-term viability of the play-to-earn sector?

I hope so. Anyone who thought that the round one model of play-to-earn guilds was actually going to be a functional economic entity was living an absolute fantasy. If you think about AltaVista and all those early sites which paved the way for the current internet, Axie is like them.

Axie putting the Ronin sidechain on absolutely changed the game. Not because it didn’t get hacked for $600 million and not because it isn’t suffering currently, but because it took the micropayment fees down from $10 to 10 cents.

On a bit of a different topic, what are your thoughts on the current progress of crypto regulation in Australia?

The industry needs a home that has crypto-friendly regulation. If you’re trying to run a decentralised autonomous organisation (DAO) at the moment, you can’t run it in Australia, and there are a series of things you cannot do.

Loading

You can take the view that this is a good thing and we’re protecting investors, but you will lose some number – whether it’s one or 100,000 – of the most talented people who want to actually write code and be involved in this industry as a consequence.

Getting the regulation right will be such a big deal that you need a whole of government approach to it, and the problem about Australia is we just don’t do that. Australian politics and the bureaucracy is broken where a co-ordinated approach to dealing with this isn’t happening, and that’s not just in crypto, it happens in other industries as well.

So it’s about whether Australia wants to try to build a more sophisticated economy or if it just wants to rely on a 20-year bull market in natural resources.

The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.