Web3 Investment Opportunities: Everything is about decentralization these days. Web3 is the latest revolution in internet development and the new way to go online. It’s also built mainly on blockchain technology and uses Artificial Intelligence.
There is an ongoing transition from the current Web2 to the up and coming Web3. In the centralized current internet (Web2), tech giants have accumulated data from users and sold it off to third-party advertisers for revenue for decades (this is still happening).
Web3 is being built to give back the power to users and pay them for their content and time. Still in its early stages, the open source Web3 of the future promises collaborative work and data ownership for the users. Users can even make money with their own data by selling it. In Web3 social media platforms, users will be able to own the content on their profiles like their photos and personal information.
Web3 is also the best type of internet for cryptocurrency, especially Ethereum, due to being decentralized. Learn how to invest in Web3.
Some of the most effective and direct ways of investing in Web3 are cryptocurrencies, NFTs, buying property in the metaverse, gaming and investing on DAOs through tokens.
Web3 Investment Opportunities: Cryptos
Cryptocurrency is the most talked about investment people make in Web3. Developers in this space consider cryptocurrency as the “economic engine” of the future because it’s used for buying NFTs and parcels of land on the metaverse.
Bitcoin is the most secure cryptocurrency to invest in even considering its inherent volatility. Historically, bull runs in bitcoin have occurred every 4 years, so it would be wise to buy and hold this asset for that time if you do not need to spend the capital. Up to now, it has been the best performing cryptocurrency since its inception in 2009.
Custodianship is getting more and more mentioned now as the FTX crash followed other players like Luna and Three Arrows and made people realize that high yields are to be suspected of. Users are beginning to understand that self custodying assets is much more important in the crypto sphere than a big promise of returns from some entity that is arguably trustworthy.
Hopefully, as information travels from experts to beginners and common users, cold storage and self custody of bitcoin will become crucial aspects on how to store real monetary value while enduring a bear market.
Ethereum is the second largest cryptocurrency, native to most NFT marketplaces, but a different beast altogether than bitcoin. It ́s recent transition to Proof of Stake and the changes in its roadmap has had users somewhat skeptical since it has become more centralized due to its shift to PoS.
Web3 Investment Opportunities: NFT
As for digital artwork, it is currently on the downturn as the whole crypto ecosystem undergoes a ‘crypto winter’, but this is nothing to get discouraged about. The NFT hype is highly tied to the performances of the apex cryptocurrencies Bitcoin and Ethereum, which will have the rest of the altcoins mimicking their performances.
As for buying property on the metaverse, there isn’t really a right way to do it since it’s so early in its developing stage, but you can do it by estimating future cash flows based on existing advertising revenues.
For instance, if a company makes 10 million dollars in revenue through advertising regularly on Instagram or Facebook ads, they expect to get the same returns by advertising on the metaverse. The logic under this is that companies expect the same kind of views on a product as they would get on social media. So basically, if you buy a parcel of land in a high traffic area, the more it should be worth.
Tech giants such as Microsoft, Meta, Google and Nvidia have made big investments in the metaverse. Big names in entertainment like Snoop Dog have done it too. Companies like Nike, Adidas and Gucci also have set foot in the metaverse, making it a good Web3 investment opportunities. btw. you can invest in these companies too.
DeFi — another option for Web3 Investors
Decentralized Finance (DeFi) is perfect for Web3, and vice versa. DeFi yield farming is wide and offers a variety of options. Through lending, staking and participating into liquidity pools, there are high returns available compared to the ones offered by antiquated traditional banking systems. Some of the better known lending platforms for investing are Aave and Compound.
If you are into gaming, the play to earn format is already in play and it works. People are actually making a living out of it. Axie Infinity is the biggest example for earning crypto tokens while playing and players can swap them for tokens of value in real life.
DAO’s role in Web3 investing
Investing in DAOs is another Web3 Investment Opportunity. Through buying a token of a project you feel aligned with or that sparks your interest, you also get voting rights on the DAO ́s future decisions.
The key for evaluating a Web3 project is looking at what the future market potential could be.
The value proposition for users compared to the traditional systems and other Web3 alternatives, the project ́s use clarity and where the market might be 10 years ahead are real indicators to be taken into account as to whether you should invest for the long term or not.
The ecosystem ́s health of a project is also a relevant aspect to consider. Developer activity and its roadmap are big indicators of the state of where it is heading. The level of decentralization and proper functioning of governance mechanisms will show a clear picture of the project ́s legitimacy and if there is risk of a few parties driving the entire development.
If we happen to reach a bull market by late 2024 and beginning of 2025, booming activity on NFT marketplaces and the metaverse will follow. During these times of economic prosperity, new investors get sucked into the crypto ecosystem due to fomo and this benefits liquidity in developing markets and projects built on Web3.
Regardless of a bull or bear market, with enough due diligence, projects that are scams can be spotted. Decentralization and blockchain are words that get thrown around in the venture capital scene and in most cases, no one really knows if it’s actually decentralized or if that blockchain actually does what it says it does. Also, it’s important to avoid crypto assets with high degrees of centralization and not get fooled by good marketing.
Ultimately, the key for having the right mix of assets in Web3 is using math and intuition. Web3 is a nascent user-owned internet that may bring a different approach to finance and investing, but the fundamentals remain the same. The new Web3 ecosystem provides investors with equities and digital assets. Choosing a bit of both for diversifying your portfolio seems like the cautious path to follow.