Timothy: 0:00

To me, data is your online assets. It's your aura, and they're stealing it from you in order to make themselves rich. That's why Mark Zuckerberg and Jeff Bezos and all these people are the wealthiest people in the world.

Joeri: 0:11

Hello everyone and welcome to the Web3 CMO Stories Podcast. My name is Joeri Billast and I'm your podcast host, and today I'm really honored to be joined by Tim Tello. Hello Tim, how are you?

Timothy: 0:26

Good. Thank you for having me.

Joeri: 0:28

I'm excited to have you on, guys. If you don't know, Timothy Tello, that's his full name. He's the CEO of 3thix and in his career he accomplished the first ever SEC-approved blockchain token in the world, creating the first fully cross-game, cross-platform, interoperable token for the metaverse. He also co-authored a patent for the use of blockchain technologies in games. Exciting stuff, Tim. But to start with, maybe can you share your journey into Web3 and how it led you to found 3thix.

Timothy: 1:09

Yeah, it started at the beginning, so I'm one of the people that is credited with inventing Web3 gaming. So I've been investing in the Web3 space since early days. It was one of the first checks in the Polygon, first checks in the Avalanche, and I got really excited about Web3 when the video game industry shifted to free-to-play and so with free-to-play coming into video games, I could see a consolidation of gaming tokens. With my background in video games and the only way I really understood I could do that and have the auditability that we needed was the blockchain. So we built the first ever blockchain gaming company. We got the SEC no action letter.

Timothy: 1:45

I actually hired Janty Kunani, the founder of Polygon, to come work for me as my lead engineer. He built Polygon for my old company, poq, and then, of course, rolled it out as Matic and was one of the originals. On Binance. We worked with Lewis Cohen to get the first SEC no action letter and then the first game on Apple, google, steam, second game on Epic, first credit card processing deal on crypto a lot of firsts. So it really set the pathway and we did it from a game first perspective.

Joeri: 2:16

Yeah, exciting, always when you are early, I would say, in this space. But what inspired you to focus on ethics in Web3 and why is it so critical? Maybe now more than ever?

Timothy: 2:31

Yeah, with video games, especially in Web3, we have to look at what does Web3 do to make anything better. I think one of the big misses that we see in the Web3 space is we keep building things that have no real general purpose. They're just a token with some kind of speculative value. They don't actually do anything to better the lives of people. They don't do anything to better the lives of technology, but what video games and blockchain could do and something that's very important is people don't realize that mobile gaming is much bigger than console or PC gaming almost two-thirds bigger. So the industry is about $360 billion, but two-thirds of that is all mobile and then mobile 80% of that.

Timothy: 3:13

All the money comes from ads.

Timothy: 3:15

With data laws around the world, like GDPR in Europe, ccpa, copa, compliance, et cetera we cannot advertise to people legally based on their personal information, but the blockchain is decentralized, so we could take and recreate the cookie via wallets and custodial wallets and then serve ads that then directly reward, through the smart contract, the consumer of that ad.

Timothy: 3:40

So instead of Facebook or Apple or Google getting the money for our data and our time, instead of Mark Zuckerberg taking advantage of our time, I think ethics is all about giving it back to those people. It's your time. You consumed it. You should get rewarded for it. So we pay you directly the money that is being given to us by the ad networks, and then you can use that money to then keep playing games, transfer the tokens or sell it on exchanges and cash out. So I think, now more than ever, we can't monetize mobile games. Unity went from $59 billion company to an $8 billion company in less than a year. Mobile games need it. The blockchain has the technology to fix it and people have the right to get paid for the data and the ads that they consume.

Joeri: 4:27

And if you would summarize this in a number of principles that you're advocating for in the Web3 space, then what would you say If?

Timothy: 4:35

I were to summarize it in principles. Essentially, you should own your data. I think that's a core belief in the blockchain space. I think the second one would be that decentralization is the key to removing personal information off of the internet, to democratize the digital ad space across the internet. And then this last part would be is to take back the ability to not be a commodity. So the Web 3 to Web 2, people have to understand what that means.

Timothy: 5:07

In Web2, we had to get payment processors like PayPal and others to step in because of the duplication rule. Right, we couldn't. If I sent you $100, what was stopping you from sending it to somebody else but also keeping a copy on your computer? The blockchain solved that. So all these middlemen that we have, like PayPal and Venmo, and all these payment processors but not just payment processors, but advertisers and title companies and people that are running deeds, all these middlemen that are sitting as almost like escrows, for everything is unnecessary and the blockchain can fix that. And so, by recreating the entire ad network of the internet, we can give it back to who it belongs, to the people and the people that have consumed the time, and that's what the blockchain provides.

Joeri: 5:56

Let's talk about your token. Can you explain the significance of creating the first ever SEC approved blockchain token and maybe how it impacts trust and security in Web3?

Timothy: 6:10

So the SEC. What we did is we worked to build a model that was compliant. So a couple of years ago, you might have seen that Binance USD was getting attacked by the SEC and they said, no, you can't because we followed this no action letter. That was my no action letter, and what it states is essentially that if you created a token within one economy that has no par value outside of that economy, it can never be considered a security, and so getting them to agree to that before Gary Gensler came in and was very strict on these rules was massive, because now it sets the bar for everyone who's trying to build on Web3. They can never come after you for these rules. So if you create a token, what it was designed for is a gaming token. That's, an ERC-20 token that has no par value outside of its economy. That can go from game to game. So imagine playing EA soccer, ea hockey, ea all the EA sports games, but one token goes from every single game, right?

Timothy: 7:11

Roblox switched to a single currency back in 2015. And when they did, they doubled their revenue every year for seven years. What is the difference between a Visa, credit card and a gift card? They're the same thing except Visa is accepted everywhere. If you can create digital economies with tokens that are accepted within those economies and you follow the securities law that we've built, then you don't have to worry about it.

Timothy: 7:34

So what we do is we get advertisers to come to us, right, we put their money into an escrow account, say a million dollars, to advertise. We then mint a million dollars worth of our tokens and then, as you consume ads, they're airdropped directly to you in your wallet for the cost that that advertiser paid for it. We never touch the money. And well, how we make money is we go to Roblox and say, hey, sell us your tokens at wholesale. We'll buy them at 70 cents on the dollar. And then we let players trade a dollar's worth of their token for a dollar with the roblox, and when they do that trade, I get to keep 30 cents, because what happens is roblox will then invoice me for the trade that they had the 70 cents. I'll send 70 cents to Roblox. I get to keep 30, right Now, that, right there. That whole model could never be a security. It's absolutely 100% compliant with all those systems and it's all one closed-loop economy.

Joeri: 8:34

Sounds like a perfect solution, but when there is a solution, there are problems, as you already mentioned. What are actually? If you need to also make a list of that, what are the problems that you're solving actually with your products?

Timothy: 8:49

The ability to advertise. So we have to understand what has happened since we've lost these IDFA and other advertising tools because of these data laws. So if you think of this Instagram and if you're scrolling past an ad, it costs the advertiser eight to 10 cents every time you scroll past it. It costs about $3 every time you click on it. We have about a 5% click through rate. So out of 100 people, five people click, but the other 95, they've already been charged $9.50 for those people just to scroll past it, then $15 for the five people that clicked. Then those five people go to their website.

Timothy: 9:28

2% of people buy and convert on a website. So that means out of the five people I sent, none of them are going to convert. I had to go back, multiply it by 10 to get to 50 to get to one conversion. So I've now spent, as an advertiser, 250 before one person makes a purchase. That causes inflation. Now products have to go higher.

Timothy: 9:49

It costs money for everybody, but in this model, because we're directly giving the money back to the consumer, that's then receiving the ad, what if, instead, the advertiser gives the money to them the $10 or whatever it is and you see it, but the next time you go to the store that you sold the ad for, you can spend that $10 in their store because you have their Target token or their McDonald's token or a Taco Bell token, or whatever it is that you can scan with the QR code out of a custodial wallet it transfers in. Now the advertiser is getting all their money back, every dollar they spend in ads. Their conversion rates now closer to 80%, not 2%, and the person that consumed the ad is getting directly rewarded for it, and we're diversifying wealth. In my opinion, that is the point of the blockchain is to diversify wealth and create a system of financial structure that is universal for everybody.

Joeri: 10:48

Absolutely, and Web3 is also different from Web2 is that you own your data, which you don't have. You mentioned Instagram and Facebook and all these other social media, so what role does data protection play in your vision?

Timothy: 11:04

Yeah, we don't use any of your data. So we are a credit card processor, we have our own payment process. We can do cryptos, nfts, casino et cetera, video games anything we want we can run and what we do is we look at the consumption layer of what you bought. So let's say, you're playing Roblox and you bought a pink shirt, and you bought a pair of sandals or whatever for your avatar and you bought all these different pieces. We'll compare those to other people and put you into data lakes and lookalikes and then we'll advertise that custodial wallet based on what you bought. You bought a pink shirt and slippers. You're probably a girl, so I can advertise to you based on a girl. I can look at the type of clothing you bought and say, okay, you're probably nine to 15 years old. I can advertise to you based on that. But I never need to know who you are or take any of your data To me.

Timothy: 11:54

Data is your online essence, it's your aura, and they're stealing it from you in order to make themselves rich. That's why Mark Zuckerberg and Jeff Bezos and all these people are the wealthiest people in the world, not because they've done something great. It's because they have a multiplier effect on every single person that uses their platform. They're collecting all the revenue for their data, all of it. They're treating you like, I like to say, a can of soup. Every one of them is a can of soup on a shelf in a grocery store. You got to take it back. You got to stop being a commodity and start acting like a product that wants to then spend money and be a part of society and take the power out of their hands.

Joeri: 13:28

Absolutely. That's actually also, if people ask to me that are not in Web3 space and want to have an explanation, that's how I explain it too, about owning your own data. Now, Tim, I also mentioned this in the beginning. You authored some patents, so I'm curious to hear more about that.

Timothy: 13:49

Yeah, so my patent is essentially the use of blockchain within a video game via custodial wallets. So what we're doing on a custodial level. I come from gaming and a lot of people in web three, I think have this, this idea that you have to have a non custodial wallet for it to be. I don't quite agree with that. I think in certain instances people don't want to know, and as they evolve maybe they will. But as of right now, I think the less they know it's Web3 and the more it makes their life easier, the more likely we are to actually roll people into Web3.

Timothy: 14:23

As a Web3 expert, I still sometimes get a little jittery when I'm sending large sums of money from one wallet to another, and that's a problem. We shouldn't have to have that feeling. A player going from a game on Avalanche to a game on Polygon should not need to know what chain it's on. That's irrelevant, and so if we could pull it back in a custodial wallet, add liquidity here and remove liquidity there, we can create a cake layer where they don't ever have to worry about it. I always used to say when I was speaking no one cares how the internet works, they just care that it works, and we had to get to that point Because right now we have so many of these people that have this like utopian idea of what Web3 was and what it should be, and all the control. I want to control it.

Timothy: 15:07

Who was the first adopters? They're tech heavy, very savvy, computer people. Your mom can't do that, doesn't understand, and so until something passes the mom test, it will never ever be able to be worldwide acceptance. So, like right now, we vr. We don't have it. Why we have great technology, we can make amazing things in vr. It doesn't pass the mom test. A mom, you cannot imagine your mom putting on a VR headset and sitting in your living room. And until that day comes that it does pass the mom test, that will be the moment that VR takes off.

Timothy: 15:44

So how do we make blockchain mom approved? We look at Roblox. Why is Roblox approved? One game, one token, thousands of opportunities within it. We need to bring that into it. We need to make it simplistic. We need to remove all the headache. We need to remove all the ideas of what chain it's on. You don't go on a website and ask what server it's on. You don't go on a website and ask what the hosting domain is. It doesn't matter. You type in a website and it goes there. That's it. Once Web3 gets to that point, we will have hyper, hyper amount of people coming in and throats.

Joeri: 16:22

I like that analogy with the mom tests. How much time do you think that we need in areas like AR, vr? Yeah, in Web3?.

Timothy: 16:34

It's hard to say. I think slowly we're getting there, and especially with, like my generation, right, the people that were born in the late 80s, early 90s. They're more technology savvy. We didn't get cell phones until I was in high school, so we're not the most savvy, right? The kids today are incredibly gifted at computers and software. But it's within this next 10 years, right? Right now, there's 4 billion gamers in the world. That's half of the world. By 2030, within six years, they're telling us that there's going to be closer to 8 billion. That's an insane number, because at that time the population of the world is supposed to be 10 billion. So they're saying we're going to go from half the world to 80% of the world will be playing video games. That tells you a lot to where we're headed. So if we can get gaming and we can make it very simplistic by using things like custodial wallets and using things like ad revenue and using things where there's intrinsic value to the player, that's catapult the entire industry forward.

Joeri: 17:37

Wow, those figures are amazing. What you just mentioned, it's like Web3 gaming, or gaming is everywhere. A question that I always like to ask to my guests on my show is what are you now the most excited about? You mentioned, obviously, a few things. I see that you're really passionate, but what would be the thing that you're most excited about right now, or maybe for the next period to come?

Timothy: 18:00

yeah, I think the convergence. I think we've weeded out a lot of the bad actors. I think a lot of the people that were coming here to create a speculation token, to do something on hype, have left. The only ones that are left are doing meme coins and no one really cares, other than people that are meme traders, but the, the actual web community, it doesn't pay attention to that too much.

Timothy: 18:20

But now that we're looking at how do we involve Web2 into Web3, at that Web2.5, that share gap, then one of the bigger problems with me is I was saying from the beginning we need to be here, not over here. This is too big of a jump. We're going too fast. Slow down, come back. People didn't want to agree with me and then all of a sudden now everyone's oh, we need to figure out how do we work with Web2 games, how do we do these things? So we give people Web3 dynamics, higher LTVs, higher retentions, better monetization, better pay decentralization, and we fix their ad problem with Web3, but we never make them convert to Web3. Ad problem with Web3, but we never make them convert to Web3.

Timothy: 19:04

You can be a Web2 game utilizing Web3 dynamics. By utilizing ethics. We can put ads in your game. We can reward them with our token and we can convert our token into yours and you never have to worry about it. You don't have to worry about Apple kicking you out. You don't have to worry about Google kicking you out. You don't have to worry about Steam kicking you out. We make it very simplistic to get what you need as a game developer and publisher, to get what you need as a player to be able to play games that use ads, so you can buy things in those. When I was growing up, I was lucky just to get the game. I couldn't afford to buy something in it. But now, if I would have known then what I know now and I could watch an ad to buy the things that I wanted or to actually cash them out and take them into the real world and buy a new game controller or a memory card or whatever it is that I want. That's a totally different landscape that every kid can enjoy.

Joeri: 19:55

Absolutely. Now. You mentioned AR, vr, blockchain, nft. Another buzzword, if you want, is AI, of course, and I'm wondering what is the impact of AI on your business? Or Web3 gaming? How do you see everything's evolving?

Timothy: 20:13

Yeah, so we use AI and machine learning. I think there's a big misconception of what's AI and what's not. I think we're getting a rebranding of machine learning. A lot of people don't really understand that. They just think we're having supercomputers tell us the future, and that's not quite what's happening. Instead, we have a very solid algorithmic expression that is scraping things and giving us complex math problems that says this person is most likely this right. So when I was explaining to you data lakes and lookalikes based on consumption, that's all ai, or machine learning. We're taking what we know about these given people in this space and we're matching them based on the things that they bought in a video game or online, and the ai does that a million times faster than a human could do it, and that's essentially what AI is and how it's being used across the internet.

Joeri: 21:03

Yeah, it's like I said. It's everywhere. There is this convergence. We just need to be aware that it is there. If you would have some advice for people now looking to build businesses in Web3 and let's say the ethical ones what advice would you give them?

Timothy: 21:21

Don't build a token unless you absolutely need one is the first thing. There's a lot of use cases for the blockchain without a token. The second thing I would say is always be raising. You never know when you're going to hit a winner. I think that's for all entrepreneurs always be raising, just like a salesperson should always be closing and then take greed out of it. So, at the end of the day, greed is inherent to all humans. We have no way of taking it and dispersing ourselves from it. The only way to do that is very early on. If you do create a token, remove the ability from yourself to do a rock pulse. Remove the ability from yourself to be greedy.

Timothy: 21:59

I pushed all of mine into the foundation. I pushed it away from myself. I have no opportunity to ever sell out of my own tokens and I created for myself. As the CEO, I had the longest besting period. I'm in it for the long haul and if you really believe in what you're doing, that's enough. And so, if you believe the four or five, six years down the line when your investing calls, you'll be okay If your investors probably won't take the same investing schedule as you are, but I doubled mine to my investors. They all have a three-year investing schedule. I have a six-year investing schedule and I did that on purpose. Mine doesn't even start until year three. I don't get a cliff and I don't want there to be a moment where anyone says Tim is doing this to become a billionaire. I'm doing this to give it all back. I'm doing this to do how it's supposed to be done. So in the Web3, especially with so much liquidity being available to you early if you do a token available to you early.

Joeri: 23:02

I love this advice and I see you have so many smart advices to give. And then I'm wondering where do you get all of that? Are you surrounded by a really good team? Are you in some kind of mastermind? Are you going to events? How do you get all of your wisdom?

Timothy: 23:16

I think I've had a lot of tutelage from some of the best entrepreneurs in the world. I've had three exits in my career, so this isn't my first startup. I've got to work with some of the best founders in Web3, guys like Amin, guys like JNT. These people have done incredible things to set us forward. I remember hanging out at LA Blockchain Week when Tim Draper and all the guys would just be there Joe Lubin, just hanging out in the hallway because no one knew who we were, and so getting to work with these people throughout the last decade has really set a pathway for some of us to do it the right way.

Timothy: 23:53

And then watching my family. My mom had a startup. I watched her how she'd been watching people I live up to. We got our first investment check from a company called Exola. They're the biggest monetization company in the world for video games. They have Roblox, they have Fortnite. They have all these major companies Watching how they operate, watching how people do things. And then for me, I've always been integrity driven. That's why our company is called Ethics. It's about being ethical, it's about doing it the right way, and so I lead with integrity. I do things the way I think other people would want to do it, and I do it the way I wouldn't be ashamed to explain.

Joeri: 24:32

Absolutely Now, tim. If people want to learn more about everything that you're doing, where would you like me to send them?

Timothy: 24:39

Yeah, you can check us out on our socials. Usually it's the Ethics on most different social media platforms. Our podcast hasn't come out yet It'll be called the Third Layer, but you can find us online through our socials, our website, ethicscom, and I invite you to reach out. We're all on the chats, we're all talking and usually even I will respond. It's feel free.

Joeri: 25:00

There are show notes with every podcast episode, so everything you mentioned will be found in there. If your podcast comes out, be sure to send me the link. I will be happy to put it in there too. Tim, it was really a pleasure to have you on the show. I appreciate the time, guys. What an amazing episode again. So if you think that this episode is useful for people around you, be sure to share the episode with them. If you're not yet following the show, this is a really good moment to do this. If you haven't given me a review yet, please do this too, because it helps me reach even a bigger audience and, of course, I would like to see you back next time. Take care.