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.
Investors could, for example, purchase plots of virtual land in a 3D virtual world like Decentraland. If more and more people go into Decentraland wanting to buy land, it could theoretically increase in value, assuming Decentraland’s creators don’t continue creating new plots of land.
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 dozens of different types of crypto. SoFi members also get complimentary financial advice from professionals, who can answer any questions.
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