Jez San is a tech veteran. Founding Argonaut software as a teenager in the 1980s, he went on to pioneer 3D gaming on the SNES (Super Nintendo Entertainment System) and work on various classic nineties games, including Star Fox and Croc.
Since moving on from Argonaut, he has turned his attention to gaming and online gambling. After founding online casino PKR.com in 2006, his latest project – Funfair Technologies – aims to solve the various problems with online casino gaming using the Ethereum blockchain.
I spoke to Jez about his storied history, what led him to the worlds of gambling and crypto, the pros and cons of Ethereum, and why he’s no longer a Bitcoin Maximalist.
I grew up playing games like Star Fox and Croc – which you worked on. What was it like working with Nintendo legend Shigeru Miyamato?
He’s an amazing guy. He’s very creative and had lots of strong ideas, but also some frustrating traits, such as his method for designing games. He’d ask you to work on a task, then he’d try it out, and if he didn’t like it he would just ask you to change it or throw it away and start again. It made for great games but unpredictable schedules.
He didn’t design games all up front, but continually, iteratively designed the games. So you didn’t really know when you were done, until you were done. That’s probably why they didn’t announce their games in advance. They didn’t really know when they were going to be ready, but the end result was amazing and they make the best games!
So you have a very extensive history in the gaming and casino industries, how and when did that lead you into crypto and blockchain?
I’ve been playing computer games my whole life. I started very young. During my time playing computer games I had a hobby of playing poker when we met up at the various conferences.
There, I found myself playing online poker and started thinking “this could be a lot better.” The poker that you play in real life with your friends is a lot more fun and immersive than the poker you’d play online…So I thought we could bring my computer games know-how and its interactivity to the poker world, complete with body language and tells, as close as possible to what we have in real life.
At the end of Argonaut’s [software] life, I invited ten of our best developers to join me in a new venture and that became PKR.com. It was the first poker game that had beautiful 3D graphics, realistic avatars and body language – a much more realistic poker game.
We did that for about 10 or so years and for many, it was doing really well. Then regulation came and affected the industry somewhat. They chopped up the market into different jurisdictions, and it became almost impossible for the small companies to compete on the same playing field..
The big guys like PokerStars ended up dominating the market. It turned out to be the end of PKR’s life, but during my time there I started getting more interested in Bitcoin and cryptocurrency.
When I started PKR around 2004, 2005, I looked into having a digital currency of our own and how to design that. At the time there were no cryptocurrencies. I started thinking about how to actually create it, but then the first investors we had in PKR were against it, so we ended up dropping the peer-to-peer idea.
But then bitcoin started becoming more popular. I first read about it in 2011, and bought it in 2013 and I thought “at least someone else has done this.”
I started attending the early conferences hoping to find real entrepreneurs and business people and not just anarchists – who I feared were going to dominate that world. I didn’t want to enter the industry unless it was going to be real commerce – proper business people. In 2013, I was pleasantly surprised that there were some of those people there. So I started getting heavily immersed in the crypto and blockchain world and I made some angel investment in some good (and bad) companies in the crypto space, I was a seed investor in Kraken for instance.
I did some early mining, but I wasted too much money mining it. In the end, as many people often advise, had I bought it instead of mining it, I would have ended up with cheaper bitcoin.
Then I started getting itchy feet. I thought “I want to start my own project again.” I thought, “what are my relevant experiences?” Technology and gaming. So I recruited some of the smartest people I know – Jeremy and Oli – and we started FunFair.
Could you explain how FunFair works and what it’s goal is?
So the problem we are trying to solve is actually a very serious one for people who play online games. Many of them don’t trust the site they are playing on. They are asked to deposit their own money into the casino’s custody before they can play.
Firstly, they are not sure if they should have won more than they did, because they can’t tell if the games are cheating them. Secondly, when they do win, it can be hard to get their money out because the casino tries to hold on to it for as long as possible and upsell more opportunities that basically make it tricky to withdraw their funds.
So we thought about how can blockchain make the experience better for the player. Not for the casino – although there are some benefits – but how do we make the player feel safe? How do we make the players feel like they don’t need to make a deposit into the custody of the casino? That’s the primary problem we’re trying to solve. It’s like the old saying in crypto: “if you don’t own your private keys, you don’t own your crypto “- it’s that same problem.
Why would you want to make a deposit to someone else’s casino account, so you can play their games on their server? You should be playing the games from your own wallet. And when you do win, you should have the money instantly paid back to your wallet.
The only way you can actually achieve that is to use smart contracts – and Ethereum had invented fully Turing complete smart contracts. We were able to build the entire game technology in smart contracts. Players are not really playing against the casino, they’re actually playing against a program that lives permanently on the blockchain. If the player wins, they get paid into their own account instantly, and the casino only gets paid if the casino wins, but otherwise, the casino has no custody of the player’s money. That makes it completely trustless and non-custodial – which is exactly what we were seeking.
However, if you just build games with smart contracts, you end up with a new problem: which is that blockchains are slow. Bitcoin is especially slow and Ethereum is not much faster. If you were playing the games at the speed that the blockchain runs, the games would be unplayable.
We therefore had to invent our own layer two scaling technology – which we call Fate Channels – which are our proprietary version of Ethereum’s state channels. They allow us to do instantaneous games, instantaneous wins, real time random number generation, detection of cheating from either side, dispute resolution- guaranteeing that the game is fair.
If you were starting FunFair today, would you still choose Ethereum?
Etheruem has some significant positives and some negatives. The pluses are that it’s the biggest ecosystem for developers: almost every development or innovative project is on Ethereum. I think 17 of the top 20 blockchain projects are on Ethereum. All the academics and all the researchers are on Ethereum and most of the live projects that actually work – that actually do something – are doing it on Ethereum. So from an ecosystem point of view – that’s where the innovation is happening. The innovation on the other blockchains is not really moving at the same pace.
Where it’s lacking is in scalability. It’s a very similar speed to Bitcoin, and it uses proof of work.
It’s only twice as fast as Bitcoin, which is nowhere near enough for a consumer product . You need a hundred or a thousand times the speed to actually enable live commercial applications at a rate that people can interact with. There are other blockchains that have come out since Ethereum that have tried to improve on it – EOS, TRON, Tezos, Cardano etc…
All these new blockchains are based on the pioneering work that Ethereum created to enable blockchain trustless applications, but with improved performance. But in many ways they did it at a cost. Some of them have done it at a cost of decentralization – compromising decentralization to achieve performance. Ethereum hasn’t compromised decentralization – it’s actually very, very decentralized, both from a node point of view, but also from a development point of view.
So if I was to decide today, it could be Ethereum, it could be EOS. It could be a new one. Dfinity comes out this year and Facebook’s Libra comes out next year, those are very interesting to us.
But I think long term Ethereum is still very unshakable in its lead as a trustless platform enabling blockchain applications.
Could you ever envision a scenario where you’d migrate?
Yes, migration is always a possibility, but more likely we will support multiple blockchains.
We’ve got our early work on Ethereum and it works perfectly and we will probably support other blockchains in the future as well. I don’t think we want to throw away the work we’ve done and I don’t think we want to leave the Ethereum community – it’s just too good. But we will definitely support other blockchains when they have the right access to the market and the right capabilities. There are some things we can’t do on Ethereum, but actually we can’t do them with any existing blockchain.
Dfinity is the first blockchain that can do group random number generation. We currently have a random number generator that works well but is limited to two parties, which is fine for all the casino games we have right now. But when we want to create multiplayer games we need a multi-party random number generator. There are weak ways of doing it today, but there are more robust ways of doing it with a more advanced blockchain, and Dfinity and Ethereum 2.0 fit the bill.
You raised your ICO in Jun 2017, do you think that the 2017 and 2018 ICO bull run was a net negative or positive for the industry?
I think that’s a great question. I think a net positive for some people. Looking at the thousands of ICOs, I do think some of them are good. But how many is it? 5%? Is it 1%? I don’t know.
Some of them are some great projects – run by excellent teams with good technology, and have put the funds that they raised to good use. I would like to think that we are one of those.
Then there’s a whole bunch of other groups that were naive, that raised way too much money, were perhaps a little clueless and didn’t know what they were doing. They weren’t dishonest, they were just inexperienced, and in over their heads, and they probably blew the money because they didn’t really know what they were doing.
And then there’s another group, which sadly were outright scams. Probably many of them were scams.
You can liken this to the tech boom of the year 2000 or the year 1999. All of those dotcoms. There were a lot of clueless companies that raised way too much money that went bust straight afterwards. But some really amazing companies came out of that era, too: We had Google, Amazon, eBay and Yahoo. We had some really solid companies come out of that tech boom, among the 99% that were rubbish and died.
It happens every time you have an innovation cycle – where there’s a step change.
It’s probably the same with ICOs. So I think there’s a net positive, but it’s a tiny minority of projects that are actually benefiting from the net positive, if that makes any sense.
What would you say your best argument against Bitcoin Maximalism is?
I used to be a Bitcoin maximalist, but then I saw the light. I used to think “why are you wasting your time on some altcoin, when bitcoin is the one true coin?” But that’s because I hadn’t seen the possibility of other applications because at the time I believed all the hype about bitcoin – all the ridiculous things that we used to say about Bitcoin: that it’s deflationary – it isn’t, there’s inflation – that’s how the miners are paid to secure the network; that we will be buying our coffees with it – we won’t, the transaction fees are way too high – and they’re not going any other direction other than very high.
The layer two solution that they’ve got – Lightning – the bitcoin developers seem to have thrown all their eggs in one basket. That’s just completely the wrong thing to do. Every decision that the Bitcoin Core developers have made seems short sighted.
But it doesn’t destroy their one use case: store of value. So they seem to be clinging to the one thing they’ve got left. It’s not going to be a medium of exchange and it’s not going to enable any other applications other than ‘digital gold’ – which they seem to be quite happy with.
And I think that’s wrong. I think the whole point of having a new technology that allows parties to engage in trustless commerce between each other should not just be about money – it should be about everything. It should be the entire application, how they actually do their commerce, beyond just the transfer of funds. That’s what smart contracts enable. You can run any application on top of a smart contract, you aren’t just limited to value transfer.
I think that anyone that now believes that Bitcoin is the only coin and that there’s nothing else that’s going to happen is basically saying there’s only going to be one use case for blockchain: store of value.
I liken it to DOS vs. Windows. With DOS, you could do some things you never thought were possible before, like spreadsheets, copying files, and sending files between parties.
But when an operating system came along – Windows – that enabled more applications to be developed, and more importantly, made it easier for developers to be innovative and create applications.
Until Windows and Mac OS came along, you didn’t have the wealth of applications that we now have for the personal computer world.
I see Bitcoin like DOS. It solved a fundamental problem and no one knew how to solve until Bitcoin: storing and moving value. But that’s not the end of it. Trustless applications can be extended much further.
That’s just opening the door to a whole wide world of trustless commerce. You can see that innovation happening in the rest of the blockchain world that has smart contracts. It’s just immense.
All the Decentralized Finance, the gaming, the stablecoins. The experiments and innovation going on in a world where you have programmable, trustless smart contracts are just incredible.
You can’t do much of that with Bitcoin because theitsy limited to just one use case and the bitcoin developer community doesn’t seem to want to do anything else with it. A single layer two solution is not the answer – and a payment channel like Lightning or a side chain like liquid is not enough to take them there. Those are baby steps. You need a hell of a lot more than that to enable the use cases that the smart contract blockchains enable.
So you’re a lapsed Maximalist?
Yes – I was definitely a maximalist in 2013 and 2014, but at the time that phrase didn’t exist. I believed that anyone talking about any coin other than Bitcoin was diluting the value of Bitcoin. But that was when I still believed that all the other use cases were possible with Bitcoin – and we now know… they’re not.
Finally, what’s on the Funfair roadmap for 2019 and beyond?
There are two major pushes for this year.
One is what we call the “onboarding problem,” which is how to get new users – real customers – to use the products and not necessarily care whether it’s blockchain or not.
We want them to use the products first. We experienced the fact that some customers don’t fully grasp what they are doing – having a wallet, keeping their money safe -all those things are actually hard, especially for someone new to blockchain. The existing wallets in the industry – although some are good, are lacking in features and usability. Many of them don’t run on the right devices – the devices that people actually use every day, like mobile phones, and many don’t work in a browser – they require you to download an app or install something on your computer, which people are loathe to do.
That’s not how people use the Internet today. If they arrive on a website, and they want to play a game, they want to play it straight away – they don’t want to be told, “oh, you have to get the right browser,” download this browser, download that wallet etc.
So we are building a web wallet, and mobile friendly games which we hope to launch soon. These core technologies will enable us to access a much wider audience.
The other big thing we’re doing is in our ecosystem. The way the gaming industry works is typically is through an affiliate network – where affiliates are marketing experts, spread throughout the world: there are thousands of them. They advertise locally and they find people who want to play games, and send them to the casinos and receive a revenue share for those players.
The problem is – just like in all gaming – that affiliates don’t trust the casinos to pay them on time or fairly. The affiliates are paid once a month or once a quarter. They send a lot of traffic to the casino and they aren’t confident if they’re going to be paid accurately nor even when they are paid, they don’t know if they’ve been paid the right amount.
So we have used ‘trustless’ blockchain technology to solve that problem.
We now have an affiliate system about to launch, which is completely blockchain friendly. When an affiliate signs up and brings new players to the game – they are paid their share of the revenue in real time when the player or casino wins.
Completely real time and transparent, just the way that blockchain applications are supposed to work – and just the way the smart contracts function. We think that’s a step change for the affiliate world and that’s going to enable us to recruit a lot more players by exploiting that network. We are giving them something that they’ve never had before: instantaneous payments and full transparency.