ByteDance angel investor Tim Gong: The future architecture of Web3 needs to support digital asset transactions based on massive amounts of personal information

Interviewee: Tim Gong, Founding Partner of SIG China, Chairman of ByteTrade

Source: MarsBit News

Editor’s Note: Recently, SIG announced a lead investment of $40 million in ByteTrade, a foundational software platform for Web3 information applications based in Singapore. Surprisingly, Tim Gong, the founding partner of SIG China, has taken on the role of chairman of the company. Tim Gong has a background in physics, graduated from Shanghai Jiao Tong University, and obtained a Ph.D. in Electrical Engineering from Princeton University. In the eyes of many investment banks, SIG gained fame as an early investor in ByteDance. Moreover, SIG has invested in over 260 companies, including Musical.ly, Agora, Flash Express, Banyu, WM Motor, Himalaya, and Yitiao, with a total investment exceeding $4 billion.

Today, the wave of Web3 is unstoppable. How do traditional venture capital firms view this emerging phenomenon, and why is Tim Gong supporting a Web3 project that is not well-known to us? MarsBit's special correspondent in Singapore, 0XF1, had an exclusive interview with Tim Gong. Here are the details.

1: Can you briefly introduce SIG, known in Chinese as 海纳国际集团?​

SIG is a financial technology company with a 35-year history. With advanced high-frequency trading algorithms and technology, it is one of the most important market makers and proprietary trading firms in the global quantitative trading market. SIG excels in compliance by trading with its own capital through leveraged trading, and it is a low-profile financial enterprise with few news reports and public disclosures. As a result, it has been referred to as a mysterious and opaque black box by The Wall Street Journal.

Haina Asia Venture Capital Fund is SIG's wholly-owned global VC. We are one of the more successful early-stage investment funds in Web 2. We were early investors in both ByteDance and Musical.ly. Since the beginning, we have been deeply involved in the development of these companies and are still one of the largest institutional investors in ByteDance. In addition, we have invested in over 260 startups in China, Japan, Southeast Asia, India, and the United States, with many successful exits and more companies just now "surfacing." Of course, this also includes ByteTrade, which we incubated at SIG.

2: From a venture capitalist's perspective, can you briefly summarize your views on the blockchain and cryptocurrency world?

I am very optimistic about the future of cryptocurrency. It is a natural extension of the information revolution—information has evolved from read-only (Web1) to read-write (Web2), and now to ownership and trading (Web3). The digitization and decentralization of information assets can solve many problems that Web2 platforms have not addressed, truly returning information ownership to users, preventing platforms from being undisciplined or even malicious, and making rules clearer and more transparent (which is what people refer to as code is law).

However, we are still in the very early stages of blockchain and cryptocurrency development. Today, all cryptocurrencies rise and fall with tech stocks, and the entire crypto market cap is still lower than that of Apple alone. From a financial perspective, crypto is far from being an "alternative asset"; it is more like a tech stock called "crypto." The Web3 based on cryptocurrency must establish a completely different economic model from Web2 to form a true ecosystem to become an asset type that is inversely correlated with traditional technology and finance.

This revolution of digitizing information assets combines SIG's strengths in financial trading and technological innovation. Therefore, I am very much looking forward to SIG making significant contributions in this industry.

A major characteristic of traditional financial markets is regulation. SIG's past tremendous success also comes from its strict adherence to regulatory frameworks and using technological innovation to generate profits. Today's Web2 platforms and the cryptocurrency market mainly rely on self-discipline, and their efficiency is achieved through self-disciplined centralized operations. The cryptocurrency market, while claiming to be decentralized, has many undisciplined behaviors in an unregulated environment, leading to unsatisfactory results. However, new technologies bring new possibilities. When we return information ownership and distribution rights to users in a decentralized manner, providing technology and financial tools for users to gain value, technology transforms self-discipline into code is law, which is our future.

3: How do you view the past, present, and future of DeFi?​

DeFi originated from dissatisfaction with centralized exchanges. Unregulated centralized exchanges often act maliciously, while compliant centralized exchanges fail to meet the demands for financial innovation. The rise of DeFi is a balance between these two aspects. On one hand, DeFi has relatively weak regulation; on the other hand, it empowers users to protect themselves (for example, by safeguarding their private keys and understanding the code). In this sense, I believe DeFi will exist long-term.

From a technical implementation perspective, DeFi also validates that blockchain technology is sufficient to support financial applications.

However, purely financial DeFi is like a source without water and a tree without roots; it cannot generate value in a closed loop. Therefore, many DeFi projects today, including some of the largest in the market, have unfortunately taken the path of Ponzi schemes, which is very disheartening.

I believe that sustainable DeFi in the future should be built on valuable information applications. It should create value through various applications to form an ecosystem, just like traditional financial banks that attract deposits and lend. The value generated by borrowers using loans must exceed the interest paid to the bank for this ecosystem to thrive long-term. For example, we believe GameFi creates value through games and uses DeFi for exchange and pricing. Thus, our vision of GameFi is play to earn, rather than the many earn to play projects today. The former uses finance to empower games, while the latter turns games into finance.

4: How do you view the essence of Web3?​

As I mentioned earlier, the core of Web3 is the confirmation of information ownership, pricing, and trading. Its essence remains the distribution (or "exchange") of information. Therefore, Web3 revolutionizes information distribution using blockchain technology and the financial paradigm of cryptocurrency.

In the era of Web2, two paradigms of information distribution have emerged: one is "people searching for information," represented by search engines like Google. The other is "information finding people," represented by recommendation engines like Bytedance. The commonality between these two paradigms is that large platforms develop and control "algorithmic robots," which determine what kind of information users receive. Today, these centralized Web2 platforms have brought tremendous benefits to humanity worldwide—efficiently and accurately obtaining and disseminating information (content, goods, services)—but they are also subject to some degree of skepticism: who are these robots really serving? Are the platform algorithms influencing people's thinking?

Innovations that qualify as Web3 must address these issues. This certainly includes everyone having control over their own information and control over the algorithms that distribute information about them. However, merely having these technologies is not enough. We also need an economic and financial system that motivates everyone to engage in these activities long-term.

5: To achieve efficient, fair, and low-cost information exchange or digital asset trading, what is the most important technology in Web3?​

The first core technology here is Personal Cloud, or a personal-controlled privacy information repository (storage), along with personal intelligent robot (computing) technology. There are many technical challenges involved: how can we achieve information exchange while ensuring user personal control? How can we make "personal software robots" as user-friendly as an iPhone? How can we encapsulate complex content distribution algorithms on resource-limited edge clouds/personal devices? Our core technology startup teams within SIG's investment portfolio have been researching these engineering problems for years, and we are finally producing the first batch of applications through ByteTrade, which I believe everyone will see soon.

A simpler analogy is that this distributed intelligent robot is like decentralizing Google’s search engine and Bytedance’s recommendation engine, giving it to each user to serve them intelligently and personally rather than serving a platform.

The second core technology of Web3 is, of course, the blockchain encryption digital asset technology that allows information to be priced and traded.

6: You just talked about the technology of distributed intelligent robots, which has already been built in the Web2 era. Can you delve deeper into how blockchain technology is used in the Web3 era?​

Through blockchain, the private information generated by users and the information distributed to users become digital assets that can be traded frequently. This allows the Web3 ecosystem to operate. At the same time, the value generated by Web3 information applications is also a necessary condition for blockchain DeFi to break free from the Ponzi curse.

Today, the biggest technical challenge in the blockchain ecosystem is scalability. Existing L1 public chains struggle to support DeFi financial applications, let alone national-level information distribution applications. However, if we recognize that blockchain is the "financial system" of Web3, we do not need to pursue unlimited on-chain scalability. After all, online banking in Web2 does not need to support TikTok's traffic.

I believe the future of Web3 is not that all information and processing logic must be on-chain (the so-called "fat protocol, thin application"), but rather that it fully utilizes the vast application ecosystem that has already developed in Web2. The vast majority of high-frequency application layer logic (such as video playback, AI inference, content acquisition, recommendation algorithms, trading matching, and price calculation, etc.) is completed off-chain (but online), and only the digital assets generated by them will be traded on-chain. In other words, Web3 is a combination of "fat protocols and fat applications."

Therefore, I believe the key to blockchain technology is its connection with off-chain systems (such as intelligent algorithm robots in Personal Cloud). This requires innovations in APIs, programming languages, no-code tools, virtual machines, and more.

At the same time, we also see great potential in multi-chain ecosystems. Only multi-chain can truly be decentralized. Each information application can have an L1 or L2 chain optimized for that application to record related digital assets, and then achieve interconnectivity through cross-chain bridges.

7: How are the future metaverse and blockchain, along with distributed robots, related?​

Imagine in the metaverse, you have an intelligent robot assistant. She holds the private key to your blockchain hot wallet, helping you sign payments at various micropayment points, recommending new places or virtual friends, tirelessly helping you socialize and chat, and even helping you monetize and trade your personal data to earn money. You just need to focus on entertainment or work. That is value.

The metaverse is built on a series of dApps that provide a Web2-like user experience based on distributed information interaction or digital asset trading in Web3. Applications that enhance virtual and sensory worlds run on these dApps.

8: The phrase "information is digital assets" has been frequently mentioned, but what is primarily needed to realize various application scenarios?

First, it relies on technological innovation and engineering practice. This includes the multi-chain ecosystem I mentioned earlier, combined with the off-chain peer-to-peer intelligent algorithm robots that form the Personal Cloud.

Second, it depends on discovering suitable application scenarios. Generally speaking, low transaction costs + clear benefits are necessary but not sufficient conditions. For example, in the metaverse, every interaction we have generates value. To realize this value, we must first ensure that this valuable information belongs to us and not to any platform, and then calculate the asset quantity through decentralized operations in the Personal Cloud. Finally, we can enable everyone to gain asset benefits through efficient and cross-chain trading robots. A typical example is a decentralized content recommendation engine running on the user's Personal Cloud based on user-controlled content consumption data.

GameFi and SocialFi have already opened up information application scenarios, digitizing information assets. For instance, StepN is StepFi, which digitizes exercise information, and these application ecosystems are still in the early stages of construction, far from forming a complete ecosystem.

9: Can you specifically introduce ByteTrade and what engines and functions BPC (ByteTrade Personal Cloud) has, along with a brief introduction to the recently launched products?

BPC is the first core technology of Web3 that I mentioned earlier. It involves personal information storage and intelligent algorithm robots that interact with the blockchain. We aim to build a decentralized software infrastructure for everyone to develop their applications on. This includes:

• Decentralized storage networks
• Next-generation smart contract execution engines
• API platforms for public chains and exchanges
• Recommendation engines
• Tools for building and packaging intelligent algorithm robots and cloud-native execution platforms

On top of this technical infrastructure, we have also built a layer of financial infrastructure through incubation, which aligns well with SIG's expertise in financial trading. This financial infrastructure includes:

• Wallets, especially automated wallets managed by intelligent robots.
• Cross-chain value exchange networks. For example, OBridge uses personal algorithm robots to establish a decentralized cross-chain bridge and exchange. Compared to today’s cross-chain bridges, OBridge has significantly improved security, capital efficiency, and compliance.
• Trading tools. For example, CODA has built tools and algorithms for trading options contracts in the cryptocurrency market. It is an important component of personal intelligent trading robots.

On this basis, ByteTrade will incubate applications for Web3 information distribution, including:

• PeopleMint, a SocialFi project aimed at content creators. We will experiment with content parsing, distribution, and corresponding token pricing and incentive mechanisms based on intelligent robots.
• Blocktube, a Web3 video distribution platform. Each video is an NFT. Users need to pay creator tokens to play videos. Users must pay for bandwidth when downloading, and they can also earn token rewards by uploading content to other downloaders. Developers can build personal intelligent recommendation algorithm robots containing different content.
• ByteChat, a decentralized instant messaging system. Each intelligent robot can become a chat server, and robots can communicate with each other, enabling communication between any users.

Please pay attention to these projects!

10: Given your age and experience, do you also need to go all in on crypto?​

Technology has brought tremendous revolutions and benefits to human society. Technology is developed by a small number of elites but ultimately belongs to the wealth of generations of humanity. If technology is only in the hands of a few, whether they are nations, families, companies, or platforms, they will seek their own maximum benefit. If the benefits gained are in a positive cycle, they will be used to establish a better ecosystem and order. But if it is a negative cycle, it will produce evil results. The weaknesses of human nature are often the best leverage points for profiting from technology.

In the Web2 era, the limitations on such exploitation came from either regulations (supervision) or self-discipline. However, in the Web3 era, technology truly has the hope of overcoming human weaknesses, based on decentralization and CODE IS LAW. The decentralization and DAOization of capital markets will certainly happen; the brand and grandeur of capital are not the most important aspects of Web3. As an industry veteran, I feel that my all-in value is very low, but I hope to encourage young people to strive to create a more open, fair, beautiful, efficient, and balanced world. Finally, I would like to quote a saying: we need more people to transition from HODL to BUIDL.