Gabriel Leydon - How Web3 Onboards a Billion Users - [Web3 Breakdowns, EP.37]

Thematic Section

1. Free-to-Own Is the Evolution of Free-to-Play, with "Reverse Marketing" at Its Core

Gabe Leydon argues that free-to-own extends the concept of "free" from "the game itself" to "in-game assets," thereby solving the biggest challenge in user acquisition for games—lack of awareness.

• The original text states: "99% of video games fail… the number one reason why they fail is because nobody knows about them."
• Traditional free-to-play mobile games generate approximately $120 billion annually in virtual item sales, but players must pay to purchase them. Free-to-own, by contrast, gives away core in-game assets (such as NFTs) directly to players for free, allowing them to own assets before the game even launches. This incentivizes players to actively promote the game and hope for its success.
• Key mechanism: Players who receive free NFTs become "content distributors," forming a "self-driven community." This contrasts with paid models (e.g., $7,000 land sales), which, while generating short-term funding, create high barriers and small user bases that cannot scale.

2. User Acquisition Path: NFTs Before ETH, Free Giveaways as the Ultimate Weapon of "Reverse Marketing"

Gabe proposes that new users entering the crypto world should follow the sequence "get an NFT first, then get ETH," rather than the conventional "get ETH first, then buy an NFT."

• The original text says: "They won’t get ETH first. They’ll get an NFT first… That NFT could turn into ETH."
• Currently, the Ethereum NFT ecosystem has only 60,000 daily active wallets, primarily because paid barriers (e.g., $7,000 land sales) exclude the masses. Free NFT giveaways can significantly lower the threshold, allowing users to own assets at "zero cost" and then obtain ETH through trading or in-game monetization.
• Data support: After Reddit distributed NFTs to users for free, community sentiment shifted from "hating NFTs" to "accepting them," validating the emotional conversion effect of the free strategy.
• Falsification condition: If mobile wallets (e.g., Apple Pay, Google Pay wallets) are not integrated with Ethereum, or if the in-game trading experience is poor, large-scale user conversion may be delayed.

3. Economic Model: Shifting from "One-Time Sales" to "Trading Commissions + Ongoing Operations"

Gabe believes that the free-to-own business model involves "forgoing short-term NFT sales revenue in exchange for long-term in-game trading volume commissions and user stickiness."

• Traditional Web3 games raise between $50 million and $100 million in a single day through "land sales," but this only covers 60,000 active users. In contrast, free-to-own attracts hundreds of millions of users by giving away NFTs, with company revenue coming from:
• Traditional free-to-play mobile game in-app purchases (e.g., items, skins, etc.);
• NFT trading fees (leveraging Ethereum's programmability to set custom rates).
• The original text emphasizes: "The LTVs of a crypto player are so insane in comparison to Web2." Gabe notes that someone once paid $7,000 for a single NFT (e.g., Moonbirds), which is "impossible" in Web2 games due to credit card limits and refund issues. Therefore, even if free-to-own forgoes sales initially, player value is much higher in the long run.
• Notable risk: Gabe acknowledges that many companies will imitate free-to-own in the future, leading to intense competition, but "the free-to-play era is dead," and as a "wartime CEO," he is not afraid of competition.

4. Limiting Factor: Mobile Wallets Are the Biggest Bottleneck, but Game User Conversion Has Natural Advantages

Gabe points out that the key barrier to mass adoption is mobile wallet integration, while game players are already a natural target user base with "high stickiness and high willingness to pay."

• The original text says: "The thing that’s holding everything back is mobile wallets… Once Ethereum gets integrated into that wallet, it’s over."
• However, Gabe believes that game players (especially free-to-play mobile gamers) do not need to wait for full infrastructure maturity: they play games for 4 hours a day, are willing to pay for virtual items, and already have established Web2 payment habits. Therefore, converting existing free-to-play mobile game users into Web3 users is much easier than attracting "non-gaming users."
• Comparative data: Web3 game Axie Infinity has approximately 800,000 monthly active users (per the original data), while global mobile game players number around 3 billion, indicating enormous conversion potential.

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Mentioned Positions

Position	Guest's Stance	Key Data
Limit Break (Company founded by Gabe)	Allocating resources, core development direction	Raised $200 million (2022); positioned as a "Web2 and Web3 integrated gaming company"
DigiDaigaku (NFT project under Limit Break)	Bullish, cited as a case of free-to-own	Free mint in 2022, only 2,022 units (limited edition); divided into Genesis (rare) and common tiers; supports a "breeding" mechanism to generate new heroes
Axie Infinity	Neutral, acknowledges "many innovations and 800,000 monthly active users," but issues not elaborated	Approximately 800,000 monthly active players (stated as "800,000 monthly players" in the original text)
Castaways (Developed by Dayt)	Neutral, appreciates founder Dayt's ability to "pivot quickly"	Founder Dayt has shifted the project to a free-to-play model, achieving positive results

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Judgments Worth Remembering

1. “Free-to-own is the evolution of free-to-play, shifting users from ‘paying for items’ to ‘getting ownership for free.’”

—Gabe Leydon. Support: Traditional free-to-play mobile games generate $120 billion in annual sales, but users must pay; free-to-own gives away core assets for free, incentivizing users to become evangelists.

2. “NFTs come before ETH: The best path for users to enter Web3 is to get NFTs for free, then convert them into ETH through trading, rather than buying ETH first and then NFTs.”

—Gabe Leydon. Support: Current Ethereum NFT daily active users are only 60,000; giving away NFTs for free can significantly lower the barrier, making NFTs the “gateway to ETH.”

3. “The LTV of crypto players is far higher than that of Web2 players, because a single transaction can reach $7,000—impossible in Web2 (due to credit card limits, refunds, etc.).”

—Gabe Leydon. Support: Moonbirds sold for $7,000 each, while in-app purchase caps in Web2 games are typically $100.

4. “NFTs will replace traditional advertising as the core tool for brand marketing: giving away free NFTs is more effective than running Facebook ads, because users ‘own’ a piece of the brand.”

—Gabe Leydon. Support: Coffee shops, car manufacturers, etc., can build communities through free NFTs, with users actively promoting due to ownership.

5. “99% of games fail, primarily because no one knows about them. Free-to-own solves the ‘awareness’ problem by giving away free NFTs, making it a more efficient distribution method than paid advertising.”

—Gabe Leydon. Support: The original text states, “Almost every game fails because no one knows about it.”

6. “Mobile wallets are the biggest bottleneck to mass adoption—once Ethereum is integrated into Apple/Google Pay wallets, global adoption will happen instantly.”

—Gabe Leydon. Support: Currently, users need to understand concepts like wallets and private keys; integration would drastically lower the barrier.

7. “AI tools like Stable Diffusion are the ‘ultimate communication tool,’ converting text directly into images more efficiently than language—this has a huge impact on game content generation and user experience.”

—Gabe Leydon. Support: The original text argues, “Language is a temporary error, replaced by machine-generated images.”

8. “The three stages of NFT evolution: PFP (profile picture) → Club (membership) → Interoperable virtual world (software-driven).”

—Gabe Leydon. Support: We are now in the third stage; Limit Break uses “Adventure Tokens” to enable cross-chain permission interactions between different games.