Given that Web 3.0 — the next generation of the internet — will integrate a vast array of new technologies, from artificial intelligence and machine learning to decentralized finance (DeFi) and augmented reality, the opportunities for investors look robust.
The current internet infrastructure, referred to as Web 2.0, is dominated by a small handful of large tech companies. The stated goal of Web 3.0 is to put power back into the hands of users, not only big corporations. The implications for investors who become familiar with Web 3.0 innovations now could be significant.
What Is Web 3.0?
Web 3.0 is the third-generation of the internet. The term “Web 3.0” broadly refers to a group of technologies enabling the next-generation decentralized internet. This could include things like non-fungible tokens (NFTs), decentralized applications such as virtual private networks (VPNs), or privacy-focused web browsers, decentralized finance (DeFi) platforms, the metaverse, and more.
Many different types of cryptocurrencies, powered by blockchain technology, are also an integral part of Web 3.0.
💡 Recommended: Web 3.0 Guide for Beginners
4 Ways to Invest in Web 3.0
Investors wondering how to invest in web3 have a variety of options. Some of these include NFTs, virtual items inside the metaverse, and various related cryptocurrencies. These investments are not necessarily isolated categories and can often be intertwined with one another.
Non-fungible tokens, or NFTs, are digital art forms that contain a unique blockchain identifier so that each NFT is one-of-a-kind, at least in theory.
NFTs could have various use cases in Web 3.0. Applications like play-to-earn games could utilize NFTs for in-game items, digital artists could create and sell their artwork without the help of an intermediary like an art gallery, and people could prove ownership of digital goods or verify their individual identities through possession of an NFT.
Note: there have been instances of NFTs being stolen or duplicated, and some NFTs have already lost 99% of their value. An NFT of Twitter founder Jack Dorsey’s first tweet, for example, recently saw its highest auction bid come in at a price of 99% less than what its owner originally paid.
The term metaverse broadly applies to a virtual universe powered by blockchain and web 3.0 technologies like AR, VR, and crypto. The idea of the metaverse is that it enables more sophisticated digital interactions, including socializing, shopping, creating, and more.
There are also some items that exist inside the metaverse as NFTs. “Axies,” for example, are virtual characters owned by players of Axie Infinity. Axie Infinity is a play-to-earn crypto game. Some “Axies” have sold for high prices, as have tokens that can be earned in the game called “special love potion” (SLP).
Note: The Ronin network which runs Axie Infinity was recently hacked for $625 million dollars, making it one of the largest crypto heists in history.
Buying cryptocurrencies might be one of the most straightforward ways to invest in Web 3.0. Many of the platforms involved have their own tokens. There could be some overlap when investing in NFTs, the metaverse, and cryptocurrency.
Owning an innovative crypto like Ethereum (ETH), for example, could be seen as an investment in all three categories. This is because ETH is a cryptocurrency, most NFT marketplaces are built on the Ethereum blockchain, and some metaverse applications are also built on Ethereum.
By holding ETH, investors might gain exposure to many aspects of Web 3.0 at the same time.
In addition, buying metaverse items and NFTs can typically only be done with a cryptocurrency like ETH, a fiat-pegged crypto known as a stablecoin, or the native token of a particular blockchain network. Therefore, it might be difficult to figure out how to directly invest in Web 3.0 without first acquiring cryptocurrency, unless an investor prefers the stock market, which opens other doors for investors.
Investing in shares of relevant stocks could be an easier, and somewhat less risky way to invest in Web 3.0. In this way, investors can gain exposure to the technologies that are already helping to build the Web 3.0 ecosystem.
Here are some of the most popular stocks that come to mind for investors who are considering how to invest in web 3.0.
• Coinbase (COIN). Participating in Web 3.0 requires purchasing cryptocurrency. Coinbase is one of the largest crypto exchanges, providing services to 73 million users. They are also building an NFT marketplace.
• Apple (APPL). Apple could turn into an infrastructure play for Web 3.0.
• Unity Software (U). Unity Software develops 3D content for PCs, mobile devices, and augmented reality devices. The company’s platform can provide potential architecture for the metaverse, making it an attractive Web 3.0 opportunity.
• Advanced Micro Devices (AMD). AMD is a leader in producing semiconductor chips used in central processing unit (CPU) and graphic processing unit (GPU) hardware. The company is working to create artificial intelligence (AI) and graphics chips for Web 3.0.
• Block (SQ). Formerly known as Square, Block was created by Twitter founder Jack Dorsey. Block has integrated Bitcoin lightning payments into its CashApp payment app, demonstrating a willingness to integrate new web 3.0 technologies. The fact that Square changed its name to Block indicates that its founder sees the potential in blockchain-related endeavors.
Should You Invest in Web 3.0?
The answer to this question will depend on an investor’s goals, risk tolerance, and personal preference.
Investing in any newly emerging and mostly unproven technology can carry high risk. But if investors do their due diligence, the rewards can also be great. Investing in Bitcoin in 2012 was arguably much riskier than it is in 2022, and early Bitcoin investors saw spectacular gains (as well as outsize losses). It’s possible, though not guaranteed, that early Web 3.0 investors could also see returns.
Those looking for a safe place to park their savings for the future might want to avoid investing in Web 3.0. Those seeking speculative opportunities, on the other hand, might see Web 3.0 as an attractive bet.
💡 Need help determining your risk tolerance? Check out our explainer on what risk tolerance is.
For those wondering how to invest in Web 3.0, there are innumerable answers and opportunities. Given that Web 3.0 will incorporate so many new technologies, both digital and tangible, investors can take their pick. And this brave new internet world is just getting started.
Buying related stocks and cryptocurrencies present one way investors can pursue Web 3.0 opportunities right now. All you need is an online brokerage account with SoFi Invest. You can trade stocks, ETFs, IPO shares, and 22 different types of crypto. SoFi members also get complimentary financial advice from professionals, who can answer any questions.
Photo credit: iStock/filadendron
The information provided is not meant to provide investment or financial advice. Also, past performance is no guarantee of future results.
Investment decisions should be based on an individual’s specific financial needs, goals, and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . SoFi Invest refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC registered investment advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).
2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.
3) Cryptocurrency is offered by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.
For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, please visit www.sofi.com/legal. Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform. Information related to lending products contained herein should not be construed as an offer or prequalification for any loan product offered by SoFi Bank, N.A.
Crypto: Bitcoin and other cryptocurrencies aren’t endorsed or guaranteed by any government, are volatile, and involve a high degree of risk. Consumer protection and securities laws don’t regulate cryptocurrencies to the same degree as traditional brokerage and investment products. Research and knowledge are essential prerequisites before engaging with any cryptocurrency. US regulators, including FINRA , the SEC , and the CFPB , have issued public advisories concerning digital asset risk. Cryptocurrency purchases should not be made with funds drawn from financial products including student loans, personal loans, mortgage refinancing, savings, retirement funds or traditional investments. Limitations apply to trading certain crypto assets and may not be available to residents of all states.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.