Dialogue with Lootex Co-founder: GameFi should consider how to increase the intersection between NFT collectors and gamers

Interviewer: Runsheng, ChainCatcher

Guest: David Tseng, Co-founder of Lootex

Since the NFT boom in 2021, the entrepreneurial and discussion heat around the NFT sector has been rising. Even during the bear market of the crypto industry in 2022, industry insiders held hopes for the innovative spark of NFTs. According to RootData, the total financing amount in the crypto industry reached $26.77 billion in 2022, with the NFT sector accounting for $3.456 billion, representing 13%.

However, for ordinary people, after encountering NFTs and developing an interest, a safe and reliable trading platform is their basic need. The NFT trading market Lootex, born in Taiwan, has sensitively anticipated the market prospects and demands for NFTs, and began betting on this sector as early as 2018. Lootex is a player-centric cross-chain NFT trading platform focused on building a player-centered auction house. It currently supports Ethereum, Avalanche, BNB Smart Chain, and Polygon networks, with plans to support more networks in the future. In January 2022, Lootex successfully completed a $9 million financing round, and its token LOOT was launched on Huobi's IEO.

From December 9 to 18, 2022, Lootex co-hosted the largest blockchain and NFT carnival event in Taiwan, "NFT Taipei," with several institutional platforms including BlockTempo, attracting significant attention from Chinese Web3 entrepreneurs. After the event, ChainCatcher invited Lootex co-founder David Tseng for a dialogue.

In the conversation, David discussed the entrepreneurial story and development plans of Lootex, as well as shared experiences in community operations and adapting to overseas markets. Additionally, he shared his thoughts on topics such as GameFi, gaming guilds, and P2E models. In David's view, although NFT trading platforms are emerging one after another, collaboration is greater than competition, and market differentiation should be sought. Given the small intersection between NFT collectors and players, a reasonable direction for development should be to increase the overlap between NFT collectors and players. Below is the full dialogue.

1. ChainCatcher: Please introduce your experience entering the crypto industry and the story of founding Lootex.

David Tseng: I first encountered blockchain in 2016, talking to many startups, but I didn't quite understand what kind of practical applications blockchain would produce. It wasn't until 2018 that I understood digital collectibles through CryptoKitties, which sparked my true passion for blockchain: it turns out that blockchain technology is not just about issuing virtual currencies. After that, I decided to focus on developing NFT technology.

I was also fortunate to meet my partner Justine Lu, who has a 10-year background in gaming. We both believed that NFTs would have a good development prospect in the blockchain field, and the combination of NFTs and games could help ordinary people understand the potential applications of blockchain. So, at the end of 2018, I co-founded Lootex with Justine Lu. "Loot" refers to virtual treasures in games, and "exchange" means to swap; Lootex represents the exchange of virtual treasures, symbolizing the autonomy and democratization spirit of free exchange.

Lootex is my fourth entrepreneurial project. Before this, I participated in three international startup projects and successfully raised funds in the United States. Although I had past experience in fundraising and business strategy, facing the new technologies and applications in the blockchain industry required a fresh start in learning.

2. ChainCatcher: What is the reason behind your bet on NFTs?

David Tseng: Actually, the case of CryptoKitties shows that there will definitely be someone making future star cards, and sure enough, NBA Top Shot appeared later. The Lootex team has a strong gaming background, and through games like World of Warcraft, we can see that the strong application scenario of gaming + social interaction is likely to happen in the metaverse. Based on the above, we had a strong intuition that the application of NFTs would definitely become widespread; we just weren't sure when.

Of course, we also didn't expect NFTs to become so popular; we originally thought it would gradually mature. But reality often has a strong FOMO effect—when it seems like the right thing to do, everyone suddenly believes that NFTs are the way to go.

3. ChainCatcher: What are the key milestones in Lootex's development so far?

David Tseng: There are three key milestones in the entrepreneurial process of Lootex. The first was in 2019 when Lootex collaborated with the movie "The Great Heist" to issue star NFT collectible cards. This was our first batch of early customers, and this case confirmed that loyal fans would indeed collect NFTs, allowing us to gain a correct understanding and adjustment of the market.

The second was at the end of 2020 and the beginning of 2021 when the cryptocurrency exchange MaiCoin invested in Lootex. This was Lootex's first round of financing, and at that time, the team only had three to five people. We were worried every day that the company would struggle to survive without revenue. When the NFT concept had not yet been understood by the public, it was MaiCoin's support that allowed the team to steadily build the Lootex product.

The third was in December 2021 when Lootex planned to issue the token LOOT, laying the foundation for a strong push into the gaming sector. Similar to the Apple Store and Google Play, game NFTs also need a professional platform to review content to protect users. After conducting many user interviews internally, we concluded that game assets are the most native digital assets and can be understood and accepted by the public the fastest. On January 24, 2022, Lootex conducted its IEO on Huobi.

4. ChainCatcher: What are the differences and advantages of Lootex compared to mainstream NFT markets like OpenSea?

David Tseng: The outside world may simply think that Lootex and OpenSea are both NFT markets, but we are actually quite different. OpenSea is somewhat like the eBay of the past, but the world won't only have one eBay; there is still much room for localized e-commerce development after eBay. The NFT market is similar to e-commerce and will evolve into different business models, especially since the NFT market is still quite small.

In terms of the NFT industry, I believe that collaboration is greater than competition. Lootex has had multiple discussions about collaboration with NFT markets like OpenSea and has also communicated with their communities. In my view, the key to differentiating NFT markets is to grasp the core users, and naturally, they will grow differently. OpenSea targets general users and almost does not need to help projects with customized promotion.

The biggest difference for Lootex is that it targets the intersection of gamers and NFT collectors, focusing on players. Additionally, Lootex engages in customized deep collaborations with projects, helping games create e-commerce pages and providing a full range of services including technical support and primary and secondary markets.

5. ChainCatcher: How does Lootex balance its focus on serving B-end and C-end clients?

David Tseng: For Lootex, the B-end and C-end are complementary. Since 2019, Lootex has had tools for B-end and a platform for C-end. Of course, there will be a focus on different aspects at different times. In the early development of Lootex, the ratio of B-end to C-end was about 8:2; during the boom of GameFi, the C-end rose to 90%. The future focus will also be adjusted in response to market changes.

6. ChainCatcher: How does Lootex ensure the security of users' assets?

David Tseng: Like OpenSea, many hackers attempt to breach the Lootex website. Over the past year, through iterative defenses, Lootex has resolved many core security issues. Importantly, Lootex does not hold users' assets; any NFT transaction is completed at the time of buying and selling. Even in the event of catastrophic losses, users will not be harmed, and the risks are much lower than those of CEX.

7. ChainCatcher: How does Lootex collaborate with gaming guilds? What are your thoughts on the pros and cons of the P2E model?

David Tseng: In collaborating with gaming guilds, Lootex has optimized aspects such as independent game mall pages, business asset management, and NFT rental services. Although gaming guilds are a great channel for localized game promotion, Lootex has not actively engaged in deep collaboration with DAOs because what is currently lacking are good game projects. Lootex will focus more on supporting and promoting the game projects themselves.

The value of the P2E model lies in creating good cases that expand the circle of Web3 users and inspire everyone to resonate with and understand daily life. However, during the P2E boom, the Lootex team has maintained a reserved attitude. The main reason is that when the P2E game model does not create other value, everyone only wants to extract value from it, and no one is genuinely creating value for the entire system, making it difficult to sustain over time.

Lootex's research found that the intersection and resonance between NFT collectors and gamers are currently very small. Most players care about game content and experience, while NFT collectors tend to be social, using ownership of valuable NFTs to symbolize social status. My personal observation is that if the gameplay does not improve, it is difficult to gain the favor of true players. A reasonable discussion direction should be how to increase the overlap between NFT collectors and players.

8. ChainCatcher: What do you think the crypto industry needs to do before the next gaming hit arrives? How long do you think it will take?

David Tseng: On one hand, the infrastructure needs a more complete framework. If the underlying technology does not break through, the cost of user experience above it will be very high. Although many new public chains have emerged in recent years, the maturity of Ethereum and L2 currently cannot support the TPS requirements of large MMO games, which may take several more years to build.

On the other hand, industry peers have already seen the potential of GameFi and the assetization of games, and everyone is looking for new applications and business models. What will this winning formula be? Axie and STEPN seem to have found it, and we can learn from their failures to see if we can find the next more sustainable game. The best approach is certainly to try a lot, leading to many original attempts.

For the entire industry, when technology solves problems and there is a suitable business model, the combination of the two will lead to a paradigm shift in the gaming industry. Predicting the timing is quite difficult, and regulation is an important variable affecting the timeline. The more certain the regulations are, the higher the probability of blockbuster applications emerging. The number of developers is also a variable; Web3 is currently relatively niche, and the more developers there are, the faster the influence and iteration speed will be.

9. ChainCatcher: Please share your community operation experience at Lootex.

David Tseng: Lootex started focusing on community cultivation early on, and I have two experiences to share. The first is collaborating with well-known brands, which can attract general users; the second is that Lootex focuses on attracting people who are passionate about the crypto industry, establishing discussion areas to gradually cultivate users. Lootex's management of Discord is also different from others; it does not target investors and short-term players, but rather adopts a player-oriented community management approach, focusing on the next fun NFT games and hosting live streams and online gatherings.

10. ChainCatcher: How does Lootex prioritize user interests?

David Tseng: As a trading platform, Lootex has always thought about who our most desired users are. After the explosive popularity of GameFi at the end of 2021, many game projects launched on the Lootex platform, bringing a large number of users. The subsequent problem was that these game projects could not fulfill their promises.

After serious reflection, the Lootex team decided to raise the standards for project launches to protect users from financial losses caused by short-term FOMO emotions. Thus, Lootex transformed from a completely open Web3 platform to a more conservative approach, strictly vetting the projects launched from the perspective of protecting users. This year, the games launched on Lootex are typically projects that are genuinely operational and being discussed by players.

After the transformation, the challenge Lootex faced was a decline in users, but user loyalty increased. In terms of the platform's attributes, this is ultimately more valuable for Lootex.

11. ChainCatcher: What difficulties has Lootex faced since its inception, and how did you overcome them?

David Tseng: Lootex started early in the NFT field, and our first challenge was self-doubt in our mindset. At that time, no one understood what NFTs were; we needed to explain what NFTs were and why they would definitely develop to investors. However, since you are only predicting that NFTs will happen without knowing when they will happen, and NFTs may not necessarily happen, you will face a lot of skepticism. There was more doubt than support, and at this point, self-doubt can begin to creep in. I believe many entrepreneurs have encountered this. It requires entrepreneurs to adjust their mindset and believe in themselves more.

The second challenge is the practical difficulty of fundraising. Because NFTs are innovative projects belonging to the future, sufficient funds are needed to sustain them until they truly become a reality. Justine and I provided the early founding capital, and we were also fortunate to secure funding later.

The third challenge is the scarcity of talent. For example, good engineers are incredibly hard to find, and you can't find them on regular job boards, while the salaries offered by startups are relatively limited. I constantly attended developer meetups to find people with shared ideals and passions to attract them to join.

It is worth noting that the volatile nature of the crypto industry means that the structure of crypto companies differs from that of regular companies, and organizational decision-making processes need to be faster. When the NFT boom arrives, there are only a few months to prepare for how to meet this wave of challenges.

12. ChainCatcher: As an international enterprise, how do you adapt to the cultural differences in different regional markets?

David Tseng: The best strategy for localized promotion is to collaborate with well-known and popular IP games for first-level market co-branding. At the same time, it is necessary to familiarize oneself with the culture, market channels, and marketing methods of the respective countries. For example, some countries rely heavily on KOLs, while others depend significantly on advertising keywords, requiring learning and accumulating different experiences.

In the past, Lootex mainly relied on deep cooperation with game content to acquire users, focusing on managing cooperative relationships and enhancing understanding of local cultures.

13. ChainCatcher: In the current context of going overseas for entrepreneurship, what do you think are the key factors affecting Chinese Web3 entrepreneurship? How is the regulatory environment for the Web3 market in Taiwan?

David Tseng: The key point for the development of Web3 still lies in talent. I recently discovered during technical research that Chinese-language technical content has begun to surpass English-language content, or at least is on par. I feel that in terms of the maturity of development culture and technology, Chinese does not lag behind English-speaking countries, and over time, this will gradually change the current disadvantage.

Additionally, regulation plays a crucial role; clear policies and regulations are more conducive to entrepreneurship. The United States started with software, and its culture of innovation and regulations are more friendly. Singapore also has clearer policies regarding cryptocurrencies; I was surprised to find that Singapore can attract entrepreneurs and investors from Europe and the United States to gather together during the Token 2049 event.

Taiwan actually has many well-known Web3 teams and has produced quite a few quality projects, thanks to Taiwan's good entrepreneurial ecosystem. In recent years, Taiwan has been actively discussing Web3 as a strategic development axis, but no conclusions have yet been reached regarding policies and regulations. After the events involving Three Arrows Capital and FTX, it is expected that Taiwan's regulations will undergo rapid adjustments in the near future.

14. ChainCatcher: As crypto moves into a deep bear market, how do you view the development prospects of the NFT sector? How will Lootex respond?

David Tseng: Looking at the objective data, the NFT industry has indeed entered a deep bear phase. In the long term, entrepreneurship is essentially a bet on the sector; as long as the sector is healthy, a bear market can actually clear the field, filtering out some inferior projects and leaving behind teams that are genuinely creating value. I believe that true builders and users will not leave because of this bear market.

During the bear market, the first thing needed is to adjust perceptions and mindsets. For things that were previously thought to definitely not happen or things that were taken for granted, careful reflection is necessary, and one should not be overly arrogant. Fortunately, Lootex completed a $9 million financing round in January 2022, so there is no pressure on operations in the short term, allowing us to focus on building during the bear market.

15. ChainCatcher: How do you view the relationship between the metaverse, NFTs, and GameFi?

David Tseng: In the future, whether in gaming or the metaverse, the boundaries with the real world will become increasingly blurred, necessitating social experiences similar to those in real life. The evolution of AR, VR, and blockchain technology is accelerating the arrival of this day. In terms of social needs, personalized expression is extremely important; in the metaverse I envision, many cultural brands will coexist in a virtual environment.

NFTs actually serve the great social demand; NFT technology can represent the ownership of all items by creators and collectors, making it an indispensable key technology. I am extremely optimistic about this because NFTs have shown significant improvements in both technology and attention. I believe that a social and casual game will first gain a massive user base and, leveraging the characteristics of Web3 technology, will generate some business models different from the past.

16. ChainCatcher: What are Lootex's development plans for 2023?

David Tseng: In 2023, Lootex will launch the V3 version, focusing on improving user experience and lowering the entry barrier to convert ordinary users into Web3 users. The V3 version will emphasize teaching users how to easily log in, search for their favorite game types, and participate in communities.

It is certain that Lootex will also lay out plans to promote business in the Japanese market in 2023. Japan is very close to Taiwan, and the local government has recently elevated the Web3 development strategy to a national level. Additionally, Japan has a rich array of IP and game development companies. We believe that 2023 will be a good opportunity to explore the Japanese market.