OnePiece’s Kezheng Jia and Langrenus’ Joey Kong on DeFi, GameFi and SocialFi

In this captivating discussion on The Silicon Dreams, Kezheng Jia (KJ) and Joey Kong, two of the VC frontrunners in the Valley, share their valuable insights on the transformative potential of the Distributed Ledger Technology (DLT) with host Soniya Ahuja, the CEO and founder of Orbis86. The thought-provoking conversation that aired on Radio Zindagi, sheds light on the disruptive power of blockchain technology and decentralized finance (DeFi), especially in the context of GameFi and SocialFi.

GameFi is the abbreviation of Gaming Finance, which refers to the commercial gaming industry in which players earn money. SocialFi is the abbreviation of Social Media Finance, which refers to the creator economy where content creators upload their content on social media platforms and make money based on the online consumption of their content.

Kezheng (KJ) Jia is the co-founder of OnePiece Labs, a Silicon Valley-based Web3 incubator venture capitalist fund. The company is due to launch its third batch of incubators in August 2023. He was also the former Web3 investment branch lead of UpHonest Capital, a tech VC fund.

Joey Kong is the co-founder of Langrenus Fund, a Web2 and Web3 investment firm, and a former employee of OKX Ventures, the investment fund of the leading cryptocurrency exchange OKX. He started out his career as an investment manager at JP Morgan Chase, a New York-based financial services multinational company.

Opinion on Decentralization of the Internet

Decentralization is the soul of blockchain technology. The need for a decentralized web is something that everyone, including KJ and Joey, agrees upon. It is more transparent, provenant, and tamper-proof. However, there are still certain systems that may not benefit at all from decentralization and may even be at a loss.

KJ believes that decentralization isn’t the answer to all problems. He carefully analyzes this often underlooked counter-opinion to whether everything should be decentralized and unregulated— “There’s many good things about blockchain and decentralization. But what native Web3 people say— decentralization all the way; like nothing should be tracked, nothing should be regulated; we’re free people, free money, free organization.

I’m a big believer of decentralization but I still feel there’s gonna be some level of the regulation and some level of the centralization; like mixed in the decentralization, just like AI, self-driving cars. Like Coke Zero— you cannot drink Coke Zero every day, even though we love zero sugar Coke.

Traditional web (has many) problems, say we cannot transfer our money during the weekends, the bank is gonna charge us fees… That’s my money and I don’t want to get charged to transfer it… Those things get killed by blockchain, (so) some money we should get decentralized but some money should not be decentralized.

If I look at the near future, the next three to five years, I’m definitely gonna see more and more decentralization come to our life, and not just Web3; many Web2 apps with everyday-life use cases, work, finance… you’re gonna see more. I guarantee that.”

KJ’s critique of decentralization to everything is valid, for example, Governments cannot put their military data, classified documents and other confidential information over a decentralized platform, where it’s fully transparent and traceable by anyone in the world. This puts the security of an entire nation at risk. That kind of knowledge and data transactions must only be centralized. Similar would be the case of nuclear technology, biogenetics, and a few more.

However, the past two decades of Web2 have resulted in wealth and resource distribution within the hands of very few entities, with the formation of huge centralized conglomerates, trying to dominate everyone. For example, the stock market— 70% of the entire stock market net worth is actually invested in just the top five corporate giants. There are hundreds of companies that make up the stock market, yet the entire stock market sits pretty much on the back of the five Big Behemoths right now.

That kind of power and riches can actually be a huge threat to the sovereignty of individuals and communities. Web3 enables the distribution of power amongst community members and helps bridge the gap in society. Not just the gaps between the rich and the poor, but also other demographic gaps such as the gaps in gender, ethnicities, nations, etc. Decentralization is a way to let everyone access opportunities, information, and free trade.

The Exciting Future of GameFi and SocialFi

GameFi, which happens to be one of the biggest use cases for NFTs and metaverse, is one of the least talked about subjects in DeFi. The gaming industry has more than 3 Billion users around the world. Web3 has a vast potential to transform the entire gaming industry.

Interestingly, Joey’s investment thesis is centered around the development of the Web3 gaming market. When asked about his company’s developments in GameFi models, he makes a noteworthy distinction between GameFi ad Web3 gaming— “We don’t want to call it just GameFi because GameFi is more like just P2E (play to earn), we would like to call it Web3 games or crypto games,”.

He adds, “Web2’s P2E games are not that fun in terms of quality, UI, UX… Web3 games are built on chains… there are many gaming assets that exist in NFTs that are on-chain.”

The key difference between GameFi and Web3 games is that GameFi involves simply any game from Web2 or Web3 that can be played to earn money as a reward. But Web3 games are on-chain, and make use of more immersive experiences like metaverse, utilizing NFTs, etc. Additionally, any money that you invest in Web2 games has no real-world value at all. Web3 games, on the other hand, can allow utilizing tokens, exchanging them, or buying digital collectibles, that will have value even if the player exits from the game, or the game itself gets shut down.

He then adds the example of the Ethereum founder Vitalik Buterin, about how he came up with the idea of the Ethereum blockchain— “One of the reasons he (Vitalik Buterin) started the Ethereum Foundation was that he wasn’t happy with a (centralized) game he played; and the (digital) assets he had (bought online for in-game purposes), didn’t belong to him. So when the game ended in a way, or they just decided to change the games… he lost the assets that should (rather) belong to him.”

Explaining how the company plans on getting more infrastructure being built around GameFi and SocialFi projects, he says, “So these are other cases that decentralization can help— you can protect your in-game assets and they would always belong to you like the other (crypto) assets. That could be a real game-changer.

I personally know many gaming studios that are embracing their arms to crypto and blockchain. They are working on some of the games that probably launch either next year or the year after. We’ve got some early allocation from Neo and Ontology (blockchain companies). Those are the Layer-1s… then there are the Move language ones… Although I fully respect those (Move language-based platforms), right now everybody’s talking about the EVMs (Ethereum Virtual Machine-based gaming platforms). I’m a big Ether guy myself.

(But) for the interface, I think the whole crypto and blockchain, and this decentralized culture is yet to be fully developed; we’ve only been doing this for like 10 years, after Bitcoin and Satoshi. Although artificial intelligence has existed since the 1960s, the GPT (Generative Pre-trained Transformer), which is one of the creator applications, (is a very recent technology). With iPhone Moment (Apple’s AI-based pro-camera application), we would love to see some more creator applications in crypto and blockchain in the future…”

KJ speaks about his new investment into a Web3 SocialFi project and explains how Web3 has the potential to transform the content creation experience for creators as well as the consumers— “SocialFi and GameFi, I see, are pretty much the same thing. They both provide two strong benefits to the community— ownership, and incentives. No matter whether you’re a creator, gamer, or a user, you own the information, your digital assets, your credentials…

Then the incentives, (in terms of) tokenomics are amazing for the creators. The followers and gamers also have ways to earn tokens. The game publishers can also earn tokens. So they definitely build a very successful and efficient economics to make everybody happy.”

He adds another huge benefit of Web3 social media— “For example, my phone number is 1234, and I’m using AT&T (a telecom service provider). But the next day I feel Verizon (another telecom service provider) has a better plan I want to go with, do I have to cancel my number and lose all the contacts of my friends? I mean 20 years ago, maybe 15 years ago you had to do that but now you don’t have to. You can just carry the number to the next service provider.

This is just like (the situation with Web3) SocialFi and GameFi. Say, I have all my information, and all the followers on Twitter, and today I suddenly decide I don’t want to use Twitter, I want to use Twitch or Discord. So I can immediately transfer all my assets, information, connections, etc. from Twitter to Discord, (which means that) you own the account. (Similarly with) GameFi also, you can carry all your NFTs, etc. from one platform to the other platform, play a different game… So this is amazing.”

He then goes on to give the example of Bluesky, which is the Web3 version of Twitter, created by the founder of Twitter itself– Jack Dorsey. He also cites the example of another recent headlining development which is the ERC 6551 token protocol. It’s a proposal to upgrade the Ethereum mainnet to enable dynamic movement of the NFTs.

According to him, “It’s gonna totally disrupt the Web2 gaming industry, token industry, NFT industry, everything… because eventually, my NFT is not just like a cute picture I can put on my profile, etc.; it’s actually a wallet. You can get everything connected to an NFT.”

With SocialFi, an entire economy is created, called the creator economy. It is built on the back of the introduction of social media platforms, which were meant to be just a fun way for people to connect. But then it resulted in the creation of an entirely new economic segment.

However, even with those Web2 platforms, there have been a lot of cases of creators not getting their due. For example, the recent case of Twitch when it forbade the creators from taking any sponsored ads outside of the Twitch platform. Albeit the creators make a lot of money from direct promotions all of which goes to them. In this case, the creators were able to fight back.

But there have also been cases when platforms like Twitch, YouTube, Facebook, Twitter, etc. outright shut down the accounts of creators and influencers. Those who are unable to fight back or get their previous accounts back, have to restart their journey from zero; some are even completely banned from the platform forever.

SocialFi decentralization could, therefore, be a game changer for this entire economy. Notably, the creator economy is expected to grow at an annual compounded growth rate of 30 to 100 percent a year. By 2030, it would be a multi-billion dollar industry.

Disclaimer: The article is a transcription of the interview conducted by RJ Soniya Ahuja. No statement or comment in the article is a direct or indirect portrayal of the writer’s views or opinions. The interview does not intend to promote, demote or demean any organization or community. It also does not intend to give the readers any financial or investment advice.