The financial industry is changing as we know it. We'd hear new innovations and technologies disrupting and challenging the traditional financial sector. These may include things like "Bitcoin", "Decentralized Finance", "Blockchain Tech", all of which are part of Web3.
Web3 is the new phase in the digital economy where the goal would be to empower users by giving them control and visibility of their data.
With the many emerging digital solutions, it can get overwhelming keeping up with everything, but one's things for sure - Web3 will continue to grow in popularity. For any person or business part of the financial community, learning about Web3 would be very beneficial, especially if you plan on investing at its early days.
What is Web3?
Before you start invest in anything, it's important that you have basic to intermediate level of knowledge on whatever it is you plan on investing.
"Web3" was first coined in 2014 by Gavin Wood, the co-founder of Ethereum and the ethereum network. Web 3 was described as a "decentralized online ecosystem based on blockchain."
"Decentralized" would mean that it does not require any entity to authorize operations, and in this case, it applies to financial transactions. Supported by "blockchain" which is a secure and shared database or ledger for financial services, Web3 aims to create a new version of the internet and challenging industries by empowering users to have control over their own data.
Growing in popularity and coupled with the user-centric philosophy of Web3, the investment vehicles and opportunities are endless.
History of World Wide Web
Before there was Web3, there were other generations of the World Wide Web.
Starting with the first generation from the 90s to early 2000s, the main intent of the web would be for users to read content through static websites, search engines and domain names.
Around 2005 came the second generation, which focused more on interaction and content creation. Here platforms like Facebook, Instagram, Twitter, Youtube grew in popularity because people were not only able to read and write, but they were able to make other forms of media like videos and podcasts. to interact with other people on the web. Web2 was starting to bridge the gap between consumers and customers, however these were still facilitated by centralized authorities.
The third generation of Web3 now allows users to do anything they want essentially, but the main difference between Web2 and Web3 is the power given to the community. Web3 aims to challenge industries by eliminating the need for an entity controling the operations, and giving back the power and control to the contributers themselves.
The Goal of Web3
Web3 gives users the opportunity of participating directly in cryptocurrency exchanges through smart contracts, without an intermediary.
Not only would users have more control and visibility over their data, but there would be more opportunities for investors available since Web3 can be accessed to anyone with a device and internet connection.
The goal of Web3 is to eventually replace traditional finance services by catering to an even bigger market - the unbanked.
Blockchain Technology and Decentralized Applications
One of the building blocks of Web3 are blockchain technology and decentralized applications or dapps. The core of these would be providing services/operations to anyone directly.
Unlike centralized finance where you'll need to pass by a bank or company to process a payment, in decentralized finance, you can proces payments and do other financial services user to user.
Decentralized Autonomous Organizations (DAOs)
Another proponent of Web3 are Decentralized Autonomous Organizations or DAOs. Think of DAOs as a community with a shared mission. The types of DAOs are:
DeFi (protocol DAOs) that create financial contracts through the blockchain
DAO operating systems (Aragon or Colony) that offer a framework for people to create their DAO
Collector DAOs, which can be used to curate NFTs
Anyone can make a DAO by first finding the right platform or operating system like Aragon or Colony. These platforms would have the tools and resources needed to make a DAO. Examples of DAOs are Ethereum Name Service and Uniswap.
Does Web3 exist?
Yes, Web3 exists as different types of digital assets.
Again, the main driving force of Web3 is to provide a more immersive experience to users when it comes to digital products, like with what virtual reality and augmented reality is trying to do.
How to build Web3 projects?
Building Web3 projects/applications can be done by anyone with the proper training. There are platforms available online (more on this later) that can provide you everything you need to build a Web3 application.
The main challenges in building a Web3 project would be costs, which can be raised through Initial Coin Offering (ICO) much like a fundraiser, and lack of equipment since these things are heavy on energy expenditure.
'Metaverse' or 'Virtual Worlds'
The latest news in Web3 would be the metaverse or virtual world, made popular by "Meta", previously "Facebook".
The metaverse allows you to create digital avatars who would live in their own digital reality. Metaverse gives users the opportunity to interact with other digital avatars, where you can purchase digital goods, lands and explore other virtual worlds.
It's no surprise that the metaverse is gaining more traction because of how it appeals to users. The more the metaverse will provide a pleasant user experience, the more that it will be a good investment. This is because the only way Web3 innovations can survive in the future is through its user activity.
Essentially, metaverse is the hottest trend right now because people said so. As long as there are people who are motivated to help grow the ecosystem and govern it, the metaverse is here to stay.
How to buy Web3 projects
CoinMarketCap is a resource that lists down places where you can purchase Web3 projects along with its currencies.
Web3 projects are available in multiple platforms online. The challenge would be finding the right platform to purchase. Do note that each platform has its own features and functionalities in terms of security, reliability, and liquidity.
Purchasing Web3 projects can be done differently, depending on the platform you choose. More on these opportunities later.
How to Invest in Web3
Investing in Web3 can seem daunting, but learning more about the Web3 space can help you find investing less initidating. It's recommended you refer to reputable sources such as books if you wish to learn more about Web3.
"How to Invest In Web3: Spatial Web (Web3.0 Guide, Web 3.0 Investing, Etherscan, Bitcoin, Cryptocurrency, Blockchain Technology, Decentralized Ledgers, Smart Contracts, NFTs, DAOs, DeFi, DApps, Meta)" by Partck Ejeke serves as a guide to learning more about the world of Web3.
There are many ways to invest in Web3. Finding the "right" investment for you would depend not only on your research, but also on your personal preferences. Investing in multiple opportunities is recommended to help diversify your portfolio. There are two types of Web3 investors:
This is when investors are more hands-on with the investment deciding process. This would require more time, efforts and research on the digital assets themselves.
Passive investing allows you to earn passive income by investing in assets, and hoping that it would provide a return on investment. This is passive as it would require less time and energy on the part of the investor.
Types of Active Investments
Working in Web3
Working in Web3 is an active investment which would give you a firsthand source of the world of Web3. Not only would you be able access things like crypto tokens, you'll also be able to gain more opportunities and resources to learn more about Web3. Joining startups, finding job postings and attending crypto-related events will help expand your network.
Blockchain projects usually give back to the community through free tokens. The act of this is called an "airdrop". The intention is to promote their business and engage with their community. Airdrops give you an opportunity to earn profit, especially if you're mindful of the market and have enough knowledge to sell them.
Crypto mining gives users the opportunity to earn rewards for verifying transactions on the blockchain in generating new digital assets. This counts as an active investment since there are specific equipment specific to this as it's very heavy on energy consumption.
Another way to engage in crypto mining is through joining mining pools or renting out cloud mining services.
Play to Earn
Play to earn is another way to earn money in the crypto space by playing games like Axie Infinity, Gods Unchained and Splinterlands.
Types of Passive Investments
If you're familiar with Bitcoin, Ethereum and Dogecoin, then you're familiar with cryptocurrecnies and how these work. Cryptocurrencies are digital assets that can be used as a medium of exchange.
If you're just starting out with cryptocurrencies, the one thing you should remember is that the crypto market is extremely volatile. This means that market data will continue to change and its difficult to project the future movements in the crypto market, thus engaging in cryptocurrency exchanges high-risk.
You can access cryptocurrencies through platforms such as Coinbase, Binance and other ecosystems.
Buying and Holding Cryptocurrencies
Buying and holding cryptocurrencies is a way to earn passive income if you follow the main principle of "buy low and sell high". It's important to keep tabs on the crypto market as what are popular currencies now such as Bitcoin and Ethereum may suddenly lose its value in the future.
You can also invest in stablecoins which are tied to existing currencies such as USDT.
Day Trading and Shorting
You can make profit from spotting market inefficiencies in its current price at that time. It still follows the same principle of buying low and selling high, except in this case you'll have to pay close attention to the market because of how volatile it is.
Cryptostaking works like a time deposit and rewards those who give up their right to sell cryptocurrencies and hold them into a staking pool. This helps especially if you understand the value you can get in the long term.
Selling NFTs are the rage lately, especially since Bored Ape Yacht Club, an NFT, was sold for $2.25 Million. An NFT or "non fungible token" can come in different forms like artworks, music, videos or trading cards. These are essentially digital representations of what we enjoy.
An NFT would capture a value of a digital asset by serving as a traceable certificate of authenticity that encodes its history of the digital file its linked. This certificate is encoded on blockchain technology, and would be unique to the person who purchases it.
To purchase NFTs, you can go to a marketplace like OpenSea, which isn't a public company, to invest in digital art. You're free to buy and sell digital assets, and even invest in multiple protocols and platforms.
Other Ways of Investing
Dividend Paying Tokens
Through a smart contract, holders can receive a share of profits generated by a project.
Buying stocks is a way to hedge inflation. Nowadays, there are different platforms where you can invest your money in stocks.
Many online platforms today allow you to invest in a private company.
Microchips are the computer chips needed to mine cryptocurrencies. As crypto gains in interest, more people may look into earning money through mining crypto.
Decentralized finance platforms like Decentraland, Ethereum Name Service, MakerDAO make use of a blockchain project to provide financial services without needing an entity to authorize is operations.
Companies Investing in Web3
Web3 will continue to grow as more and more big tech companies are investing in it. New investors can use this to their advantage by investing in a company that has purchased Web3. Some of these companies who have invested in Web 3 are:
Fashion Companies - Adidas, Nike, Gucci
Technology Companies - NVidia, Meta, Samsung
Miscellaneous Companies - Taco Bell, Mattel, Coca-Cola
NFTs - Bored Ape Yacht Club, OpenSea, CryptoPunks
Metaverse Games - Decentraland, Sandbox, Axie Infinite
Crypto Echanges - Coinbase, Binance, Kraken
DAOs - Uniswap1UNI, ApeCoin2APE
Venture Capitalist Firms - a16z/Andreessen Horowitz, Sequoia Capital, Tiger Global
EFTs (NASDAQ) - LEGR, BLCN, BLOK
The Future of Web3
Web3 continues to grow because more and more people believe in it. Since Web3 is more user-centric, its success would also depend on its users.
Right now, many people eagerly buy NFTs and are sold on Web3 because they feel a part of the community. They're motivated to contribute to ecosystem and other users participate actively in providing feedback.
Web3 paves the way for more investment opportunities to diversity your portfolio. Whether it be short term investing or long term, there is an opportunity for you with Web3.
The most important investment advice is to know what you're getting yourself into. Once you've done your research and gotten familiar with Web3, you can invest smarter and assure a return in your investments.