FinTech: Jimmie Lenz Talks with Brett Seyler, CPO of Forte

Jimmie Lenz with Brett Seyler at DukeRecently, Brett Seyler, chief platform officer and co-founder of Forte Labs Inc. accepted an invitation to talk tech with Jimmie Lenz, director of Duke's Master of Engineering in Financial Technology degree program (FinTech).

Seyler is a games industry technologist and entrepreneur with expertise in mathematical finance, peer-to-peer architectures, and massively parallel distributed systems.

Forte creates blockchain technology for the games industry that benefits players and developers.

The conversation was hosted by Susan Brown of the Duke Engineering master's admissions and recruiting team.

This transcript has been edited for length and clarity.

Susan Brown: Hello and welcome to today's FinTech: Industry Q & A with Dr. Jimmie Lenz and Brett Seyler, CPO of Forte. I'm Susan Brown and I'm so happy to be with you two today. Welcome!
Jimmie Lenz: Good morning Susan! Thank you very much, on this nice fall, Duke morning. Brett, fantastic to have you here.
Brett Seyler: Thanks for having me.
Lenz: I really appreciate you making the effort to come to Duke. It's always nice to have visitors, especially with such experience as yours. Speaking of which, do you mind speaking a little bit about your background and the company?
Seyler:

 

My academic background is primarily math, a bit of finance. And early in my career, except for college, I did a little bit of work at a startup that was trying to price derivatives with some proprietary datasets. And that was fairly short-lived, as I got pulled into the games industry by some friends in the mid-2000s. And I wasn't really familiar with technology entrepreneurship. And then, that was sort of being thrown into the deep end. And we built, at that company—it was called Garage Games— we built technology that game developers use to author and operate games and do distribution. And I ran that business for a handful of years and then did something kind of similar at a company called Unity Technologies, which was also in the space, and very big now. And along the way, I'm very familiar with operating games and free-to-play game economies.

Some of that led me to an interest in blockchain, in part because the effort it takes to run these deep, modern, free-to-play game economies, it's kind of stretching at the seams in the games industry. And I think what's resulting from that is some stagnation, commercially, and also in-game designs. They're starting to look very similar under the hood and have some of the same problems. And so, having been through many cycles of games in the games industry—reinventing itself from being a relatively small industry when I started, in the neighborhood of 20 to 30 billion a year, to now 150 billion a year plus—that reinvention process has been a little while without a turnover or revolution. The last big one was mobile. When mobile distribution came online it kind of supercharged the benefits and advantages of free-to-play game distribution because you had direct response marketing to a global audience.

So operating these game economies, you start to notice, as a game designer or economist, you are responsible for deciding what inventory is on the shelf, what's in the queue for the content creators on the team, pricing everything appropriately, balancing these systems. And it was very, very difficult. And one thing game designers often want to do and struggle to do for multiple reasons, is run markets in these games—have players be able to transact with other players, have players be able to kind of behave as a cottage industry merchant in some corner of the game economy.

Lenz:

Well, I think that's really interesting, the market side of it, because it seems like you're at this point right now where the game economy is almost replicating the real economy— or what we'll call the real economy, I guess. The virtual economy versus what we have in the real world. And there are a lot of things at play there—in particular, in financial technology and things like that. And it's interesting, because you and I, we met at a conference, a Ripple conference, and bonded over the fact that we both saw the value of things like asset valuation and some of the aspects of blockchain, mathematics, and game theory. All things that we think about in economics.

Seyler: Yeah.
Lenz:

Right? And so it is, I think, really interesting that you're seeing that in the virtual world, but it's coming forward into the real world. So, I mentioned blockchain really quickly, and I know you've been a real big proponent in your thinking about it in a couple of different ways. Can you talk about the advantages that you see and maybe even your latest partnership with Ripple?

Seyler:

Yeah. So let's start with some of what we think are the native advantages of adopting blockchain tech for game economies. Fundamentally, we think that there's two things you potentially get out of it, if you can also solve some business problems. You can run markets with less counterparty risk, and assets are inherently marketable without the permission or necessity of middleman authority.

Lenz:

Right.

Seyler:

And being a middle man is pretty expensive for game publishers who already have a very, very tall order in trying to author a game that hopefully audiences like enough and stick with for years. So our approach to trying to offer game developers a way to use this technology is aimed at being as minimally disruptive to the way these games are built and operated now as possible.

So being able to introduce some portion of your game assets or game economy that is transactable in these ledgers, it lets you run a market less expensively. You still have all the challenges of pricing of assets.

Lenz: Market value.
Seyler:      

Yeah. But you get really quickly into traditional economic problems and game theory problems, as you pointed out. And yeah, we met at this conference at Berkeley that Ripple organized. And Forte has partnered with Ripple in a handful of different ways. We initially started talking to the technical team at Ripple because we were interested in, again, a minimally disruptive approach to introducing this stuff in the game economies. And that means, you're probably not going to have game economies offering players, or players offering other players the opportunity to transact in things like Ethereum or bitcoin or these other large, medium-of-exchange cryptocurrencies. They're probably going to want to have their own, silver, wood, steel, the kind of stuff you see in games. Maybe heroes and cards and things like that.

So you need to be able to create these things and probably underlying any of them that are nonfungible, is going to be a fungible currency as some kind of exchange, meaning exchange inside the game. So, it's really valuable if you can provide players, across a selection of different games, the ability to transact across these economies. So transact across these fundable token chains. And, in order to do that, this is a common problem, and blockchain is figuring out how to do cross-chain swaps.

Lenz: Sure.
Seyler: And the most common method is something called a smart contract, which has some game-theoretic problems, including the free option problem. And the folks at Ripple that initially started work on Interledger and this design, had a pretty novel approach for fungible currencies, where you packetize the value on either side of these cross-currency swaps and just start screening at a set exchange rate. So, you're not guaranteed to totally complete the transaction, but we thought it was a really novel design to address that game-theoretic problem.
Lenz:

It is a much smoother approach then we use in the public markets for publicly traded securities. You're taking all of that friction out. Which I think, at its heart, a lot of financial technology is about removing frictions. So you're doing it via a blockchain and you're thinking through it right now as far as tokens and different sorts of placeholders of value in games, we'll call them. But you're taking all those frictions out, which is something that I think people that are looking at financial technology and looking at FinTech from different aspects, whether it's in large companies, legacy companies, or startup type companies. Everybody, almost, is looking to remove frictions and you all are actually doing it, which is very different. And we're kind of seeing public markets a little bit, we're seeing a huge decrease in the number of public offerings, for instance, and it's not that there's any less financing being done in the world.

Seyler: And more liquidity in those securities too.
Lenz:

Exactly, exactly. We're seeing a very different world evolve. So I wanted to ask you, you've had several successful companies. By the way, the latest is getting a lot of attention from all kinds of different folks. But I wanted to hearken back, we're here at Duke University, we're at the Pratt School of Engineering, which has created a financial technology master's degree program. How do you think about that? Not only what we're doing, but how do you apply what you did in academia, applied mathematics and those kinds of things, to where you are today?

Seyler:      

Yeah. The branch of math that I spent the most time with was analysis, in applications to financial markets, weather, all sorts of common mapping. From pure mathematics to industry. And that's still applicable in a lot of the approaches we think are likely to be successful in our offer to game developers, to induce blockchain tech into their game economies, but also in traditional financial markets.

Lenz: Sure.
Seyler:       I graduated in the mid-2000s, there's been continued interesting work in the last 10 years. Especially around market design and trying to figure out how to create markets that are really resilient to different initial starting conditions and adverse age and behavior. So it's a really, I think blockchain is sort of connecting a handful of really powerful domains from academia that are completely relevant in commercial applications today. Game theory is a big one. Of course, just computation and being able to design and distribute a system. We are looking at a lot of control theory, kind of a combination of applied math and engineering approaches to figuring out how to do market making. And of course, traditional economics has a lot to offer in this space. And I think blockchain projects, for the most part, and markets, are still catching up to lessons that have been learned the hard way in traditional finance over the last few decades.
Lenz: Yeah. So it sounds like you're thinking that academia may actually be a little bit ahead of the curve.
Seyler:

Oh yeah. I mean, again, I don't know of all that many programs that are really trying to connect these. But to a degree, there's an interest in that intersection. Yeah, academia is advancing a lot of these commercial applications today. Every few months there's a new project or novel approach, whether it's a consensus algorithm or a market-making design. And a lot of that's coming out of strong academic departments.

Lenz:

Yes. Which is great to hear as we kind of undertake this at Duke and we offer blockchain classes where we're doing quite a bit along those lines. We're doing it within the engineering environment, which, from my experience, I really like. And to me, one of the things that separates having these kinds of programs in an engineering school from maybe other schools on campus is the fact that engineers build things. We enjoy building things. Almost every class has that hands-on nature rather than a purely theoretical nature. While we do have the theory in there and we obviously want to always be thinking ahead, we do try to keep very much that hands-on, building type of approach, which I think translates pretty well into your world.

Seyler:

Yeah. Yeah, there's projects out there that ... I think one really interesting example is Uniswap, which is fairly famous in the Ethereum and blockchain community, though I don't know how much the public's heard of it. It's authored by a young guy named Aiden who is, I believe he's mid-twenties, very little professional computer science experience, he's primarily an engineer. I think he had a chemical engineering background. I could be wrong about that, but I think that's correct. And he authored this really simple, at least on the surface, algorithm to make markets around pairs of crypto assets. So, the design is called the constant product market maker. And it's under a thousand lines of code, I think it's closer to a hundred than a thousand.

Lenz: Wow. Really?
Seyler: And he conceived of it looking at a lot of the work that was being done in public by thought leaders in the Ethereum space. And started working on it, got a relatively small grant from the Ethereum Foundation and shipped it. And it's now, today, if it's not the highest volume automated market maker, it's certainly close for some important cryptocurrency pairs like Bitcoin, Ethereum and Ripple-
Lenz:

Right. I think that's, it's interesting, you've referenced Ethereum a couple of times, and obviously that's become, I don't want to say a benchmark, but it's certainly out there and people point to it quite a bit as something that you can center around. One of the founders has been very prolific in talking about Ethereum and the purpose and things along those lines. Basically, stressing the fact that it's very global. And a lot of what we think about and we work on with blockchain, you have to think of it in a much more global terms, macro terms, than just North America or just the West. With your experience in blockchain and in gaming too, are you seeing the appeal as global?

Seyler:

Yeah. There are certainly hotspots and spots where there's, if you want to do something commercially with technology, there aren't bright enough regulatory lines to proceed with total competence, but yeah, it's a very global community. And I think Ethereum in particular and Ripple, especially now with the spring program, are doing a really good job of trying to make the platform, tech, and tooling much more approachable for people. That you certainly don't need traditional economics backgrounds, it can just be hobbyists and tinkerers and potentially produce something really interesting.

Lenz:

I think that's really interesting you bring that up. The approachability of some of the things that are out there now. I talk to students all the time about blockchain. When I'm teaching blockchain and machine learning, I tell them that these are still so nascent technologies. People say, at blockchain, we're at 1.0. I think we're probably at 0.5.

Seyler: I think that's fair.
Lenz:

And my analogy is always, I will ask, "So, what put a computer on everybody's desk? What put a PC on everybody's desk?" And I would argue, it wasn't computing power, or speed, or anything like that, it was Windows 95. So anybody could go in and turn it on and go to a word processing application. You didn't have to go to a DOS prompt anymore. In fact, I mentioned DOS prompt the other day to a class of students and they looked at me like I was out of my mind. But I think that we haven't quite reached that in blockchain, we don't have the Windows 95 type applications yet, that are out there. But they're coming and so I challenge students. This generation of students will be that generation that creates those applications, I think. But I would love to have your thoughts.

Seyler:

Yeah, I know there's this—I think it's definitely fair to point out, much of what we want, something with the ambition to be a trusted computation layer, it needs time to bake, it needs time to iterate, it needs time to really be tested under adverse conditions. But what you can already do with the designs that are out there is really exciting. And we're all operating on the faith that there's really smart people working on these problems and we're going to figure out the scaling issues and some of the consensus weaknesses and certainly some of the security issues, which, there are really interesting approaches out there. From secure by design, very careful, cautious approaches, to offering trusted computation, to here's a [inaudible 00:19:32] and complete sandbox and let's see if you can break our VM. I think this generation has a big opportunity to contribute both to the infrastructure that will probably be connecting people and their projects in the future and to creating application layer projects that are polished enough, easy enough to use that you have a chance at real mainstream adoption.

Lenz:

Right. I think that it's interesting to see how things will develop because it won't be what we expect. It never is, right? And that's the beauty of it, that's kind of the value. That's why I love working with students. Just some of the things they come up with, considerations I will never have. They'll come up with thing, like, "How'd you come up with that?" It's like, "Oh, well." But they have totally different experiences than I do or you do or Susan here, which is always kind of inventive and creative. That's why I absolutely love working with them. I love the fact that you came in to talk to us and to visit here with Duke today. It really is nice. I don't know if you have any parting words, probably got a lot, but I would love for you to, if you have some parting words, because I really do appreciate you coming in and doing this today.

Seyler:

I would just say, I think, the programs that you're putting together here is, it's really a phenomenal opportunity for students and I wish something like this existed—I mean, it doesn't still in a lot of campuses— but it definitely didn't exist when I was in school. And had it, there may not have been interesting jobs to take on that intersection of skills when you left academia. But now there's a wide variety of really interesting, fruitful applications for this particular combination of engineering, fairly high-level math, computation, game theory, economics. It's a really powerful sandbox to play in for this generation.

Lenz: We like to think so. Thanks again. I really appreciate it. Susan, I'll turn it back to you.
Brown:    

All right. Thank you so much, Jimmie and Brett, for talking with us today. I do want to note that if you have any questions, you can email us at pratt_masters@duke.edu. I'm Susan Brown, thank you so much for your time today.

 Earn a Master's in FinTech at Duke