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‘The beginning of something very big’: How one blockchain unicorn turned Vietnam into the world’s most surprising crypto startup hotspot

May 4, 2022, 12:57 PM UTC

In 2018, Norwegian game developer Aleksander Larsen had to look up where Vietnam was when coder Trung Nguyen asked Larsen to join his Ho Chi Minh City–based startup. Nguyen wanted Larsen to come work on his new project, a blockchain game called Axie Infinity. Larsen liked Nguyen’s idea but not enough to move to Vietnam. “It was too far away,” Larsen told Nguyen after consulting a map.

But Nguyen kept prodding, and, on a short visit to Ho Chi Minh City, Nguyen won Larsen over. Instead of returning to Norway, Larsen joined the startup’s cramped office on the outskirts of the city having decided to see where Nguyen’s vision and prolific coding could take the company. Three years later, Larsen’s bet has paid off in two ways: Axie Infinity has exploded in popularity, becoming the world’s hottest blockchain game. And Vietnam, which generates the majority of its GDP from agriculture and exports like textiles, has blossomed into a surprise hotspot for crypto startups, birthing firms eager to ride on Axie Infinity’s lucrative coattails.

“[Axie Infinity] became the first crypto-native really successful game,” says Larsen. “We basically shaped the entire industry in our image.”

Last year, the number of users playing Axie Infinity—a Pokémon-like game in which non-fungible token (or NFT) avatars battle each other—reached 2.5 million. Silicon Valley heavyweights like Mark Cuban and Andreessen Horowitz poured millions into the game’s parent company, Sky Mavis, giving the video game developer a valuation north of $3 billion and spawning other blockchain firms that are intent on replicating Axie Infinity’s success.

“Before the rise of Axie Infinity, the startup ecosystem in Vietnam was pretty small and limited,” Thanh Le, founder of Vietnamese startup and crypto wallet Coin98. “But Axie really inspired a lot of people to figure out how to build blockchain companies.” Since Axie Infinity’s launch, at least 10 Vietnamese blockchain startups have surpassed $100 million valuations.

“Sky Mavis gave a lot more confidence and motivation for crypto companies to actually do something,” says Loi Luu, founder of the Kyber Network, a Vietnamese decentralized finance startup.

It may seem like Vietnam emerged as a crypto startup hub out of nowhere, but insiders say the country was primed for a boom. The country consistently ranks in the top three in the world for crypto adoption, and it boasts a large pool of young, talented developers who work for a fraction of what engineers earn in other markets. With those components in place, Axie Infinity’s rise ignited a crypto market that’s now on fire, despite Vietnam’s government indecision on how to treat the new industry.

“It’s a gold rush,” says Corey Wilton, cofounder of the Vietnam-based horse-racing blockchain game Pegaxy.

Bitcoin in Vietnam

In 2013, the founders of a few crypto exchanges like Bitcoin Vietnam established their platforms in the country, introducing Vietnam to cryptocurrency for the first time. In 2017, crypto hit the mainstream globally as the value of Bitcoin climbed from $1,000 to $20,000. In Vietnam, too, Bitcoin gained prominence. All of a sudden, Bitcoin ATMs popped up on street corners, and crypto enthusiasts formed online communities to trade tips and discuss the coins.

At the time, one Vietnamese coder was barely paying attention.

“Everybody was talking about Bitcoin’s price. But as an engineer, I didn’t care,” says Nguyen, then a 26-year-old coder in Ho Chi Minh City. The focus on making money from Bitcoin nearly turned Nguyen off to the technology entirely. That was until he discovered CryptoKitties, an early blockchain game in which players traded NFTs—artwork that was stored on the blockchain—of cartoon cats. Nguyen thought he could make NFT characters do more than look cute and created Axie Infinity.

The founding of Axie Infinity

Just as Nguyen launched Axie Infinity in early 2018, the crypto market crashed. From 2017 to 2018, the price of Bitcoin dropped 85% to $3,000, leaving crypto startups globally struggling to stay afloat. Luu says being in Vietnam was the only reason his own startup and peers like Axie Infinity survived.

Sky Mavis CEO Trung Nguyen works on his laptop.
Sky Mavis CEO Trung Nguyen works on his laptop.
Courtesy of Sky Mavis

Market downturns “kill you because you don’t have enough runway to survive,” says Luu. “But the costs to maintain a team in Vietnam are significantly lower than if you want to run the same team in Singapore or Europe or Silicon Valley.” In the U.S., blockchain developers earn an average annual salary of $136,000, according to the Blockchain Academy. In Vietnam, meanwhile, even experienced software engineers make as little as $30,000 per year.

Axie Infinity did more than just survive.

In 2021, the game’s user base grew from several thousand to over 2.5 million as players in places like the Philippines found that the winnings from Axie Infinity could compete with local wages. As Axie Infinity’s popularity soared, so did the valuation of its parent, Sky Mavis, reaching $3 billion in October 2021, just three years after launching. It’s the most valuable of Vietnam’s four unicorns and $1 billion more valuable than the country’s No. 2, Momo, a mobile wallet firm.

Axie Infinity inspires a generation of startups

Since Axie Infinity became one of the world’s most valuable crypto projects last year, at least seven blockchain games have launched in Vietnam, attracting millions of dollars to the country from foreign investors. Some of the new games, such as My Defi Pet and MeebMaster, appear to be almost direct knockoffs of Axie Infinity. Daniel Nguyen, the CEO of Vietnam-based matching game HeroVerse, told crypto outlet BSC that he wanted to mimic Axie Infinity’s approach “exactly” when building his game.

“I was very inspired by the success of Axie Infinity,” says Pegaxy cofounder Steve Nguyen. “[Axie’s success] felt like the beginning of something very big.”

Vietnam’s new crop of blockchain startups are recruiting developers from the country’s burgeoning mobile gaming industry, which sprouted up around a title called Flappy Bird. Hanoi-based coder Dong Nguyen launched the simpler version of blockbuster Angry Birds in 2013, and it was a smash hit, with over 50 million downloads globally. Vietnam’s government considers Flappy Bird one of the country’s most important tech innovations, and the game inspired a generation of Vietnamese gaming startups, making the country one of the region’s fastest-growing mobile game markets. Five of Southeast Asia’s top 10 gaming publishers are based in the country, and the tens of thousands of young coders now employed in Vietnam are eager to work on the next big thing.

“There is just pure talent streaming straight out of [Vietnam],” says Pegaxy cofounder Wilton. Ninety percent of Pegaxy’s development staff work in Vietnam even though the jobs could be done from other countries.

“Crypto founders tend to be even more spread out around all corners of the globe…Web3 makes it easy for people to build anywhere,” says Arianna Simpson, general partner and lead crypto investor at Andreessen Horowitz.

Entrepreneurs are launching brand-new firms, but Le of Coin98 attributes at least some of the crypto gaming boom to the fact that Vietnam’s established online gaming companies are migrating to crypto. Amanotes, a Vietnamese game publisher launched in 2014 and known for its music games, recently announced its foray into crypto with a “music distribution system and gaming platform” in the metaverse.

“Vietnam is ready to become the next crypto hub,” says Huy Pham, an economics lecturer at RMIT University in Ho Chi Minh City. “There are so many crypto firms starting in Vietnam now. People here are willing to adopt something new.”

Vietnam embraces crypto

Vietnam’s entrepreneurs are bullish on crypto—and so are average Vietnamese, surveys show.

Brian Lu, founding partner at Infinity Ventures Crypto in Taiwan, says investors paid close attention to a ConsenSys report last August, which showed that countries in Asia were downloading MetaMask, the world’s most popular crypto wallet, more than in Europe or the U.S.

In the report, Vietnam was the third most popular destination in the world for MetaMask, trailing only the U.S. and the Philippines in first and second place, respectively. The popularity of crypto wallets in Vietnam shows that people are not just buying crypto, but they are actively engaging with crypto games and other platforms, Lu says.

The reasons behind crypto’s popularity in the country are not entirely clear. Some have speculated that it may be due to Vietnam’s large inward remittance market, the ninth-largest in the world. Crypto makes it easier for overseas workers to send money back to Vietnam. Others say a lack of public trust in the Vietnamese dong, the local currency, may be pushing people toward digital coins.

Pham says that Vietnam’s high internet penetration rate—70% of Vietnam’s population is online, and the country leads Asia in smartphone use—may also make using crypto more accessible.

Vietnam’s high crypto adoption rate allows startups to connect with local customers and test products domestically before launching globally. For example, Coin98, a MetaMask competitor, built a community of users in Vietnam for its crypto wallet before it attempted to attract users from other markets. Now, it has 2 million global users for its wallet, including 500,000 people in Vietnam, says Le.

Challenges of running startups in Vietnam

Pham acknowledges that Vietnam remains a long way from becoming a premier blockchain destination. Vietnam remains a “lower-middle-income country,” according to the World Bank, with half of the GDP per capita of its neighbor Thailand. “It is really hard for a developing country to lead in tech,” Pham says. Being located in Vietnam can make it more difficult for startups to find funding and talent, he says. Vietnam’s crypto market lacks guardrails, and investors worry Vietnamese blockchain startups may be scams, he says. Vietnam also lacks the premier universities that have formally trained tech workers in rival economies such as Singapore and South Korea.

Vietnam’s government, for its part, has been inconsistent about its stance on crypto. Since 2017, Vietnam has banned using cryptocurrencies as a form of payment. At the same time, the government has not taxed or regulated the buying and selling of cryptocurrencies as assets, leaving much of the space in a gray area.

“If there’s something that makes me a bit worried it is regulation,” says Pham. “But I don’t think that the government will let this opportunity go. It is probably the one opportunity for Vietnam to really lead the world in terms of a blockchain or cryptocurrency. I don’t think there will be another chance.”

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