Investing in Web 3.0: opportunities, risks, and platforms

Investing in Web 3.0: opportunities, risks, and platforms

Communications

It is the next generation of the web, where user experience and interaction will be more personalized, secure, and democratic. In Web 3.0, the crypto ecosystem is the essential component. Tokens, decentralized finance platforms, NFTs, staking with cryptocurrencies, and startups all open investment doors. 

Web 3.0 (or Web3) is the third version of the web, this time decentralized and without a controlling entity. Or at least that is the theory behind a new Internet structured on crypto tokens (cryptocurrencies), a new generation that aims to drastically change our experience on an interconnected network. But what are the investment opportunities in such an environment? Where are the challenges? Is it possible to invest in Web 3.0 while minimizing risk?

If we look back over the years, since the 1990s we have gone through Web 1.0, which is read-only, without any interaction, as in the case of Wikipedia; we were then met with Web 2.0, interactive with read-write capabilities, hosting blogs and social networks; and now we are approaching Web 3.0, a decentralized read-write-own web. As experts predict, it will be a more secure, reliable, and democratic web, where users can be rewarded for participating.

Imaging the future. What is Web 3.0?

The term Web 3.0 is a fascinating one because it has two completely different origins, although these are not mutually exclusive. On the one hand we have Tim Berners-Lee’s Semantic Web, an extension of the standard WWW (World Wide Web), in which Internet data is machine-readable. This Web 3.0 seeks to return the Internet to what its original designers intended it to be from the very start.

On the other hand, there is a Web 3.0 envisaged by libertarians as web3 or the third iteration of the web after Web 2.0, in which the basic pillars are decentralization, blockchain technology, and token-based economy. In other words, returning the Internet to the user, and giving that user more autonomy. It is emerging as an alternative to Web 2.0.

As previously mentioned, these two potential futures are not mutually exclusive and, in fact, both are becoming a reality in unison, making the third version of the Internet a fusion of the futures envisioned by both Tim Berners-Lee (father of the web) and Satoshi Nakamoto (creator of the Bitcoin protocol).

What does Web 3.0 have to do with cryptocurrencies?

Decentralized Web 3.0 is based on virtual and tokenized payments as an integral element of the functioning of the web, which is why decentralized finance or DeFi will be a fundamental part of the new web. If Internet users have the power, then their virtual assets will be what they use to express that power, as well as the way in which their contribution to the web is compensated.

Juan Merodio, founder of TEKDI Institute, points out the three key components to this new ecosystem: “Unlike Web2, where platforms and their data are owned by centralized companies, Web3 is based on decentralized networks where there is no single point of control and where it is normally the users that have control and access to all data or digital assets.” This expert highlights three aspects: 

  • Transparency. Everything in blockchain technology is public and auditable.
  • Safety. Blockchain networks are more secure by design.
  • Immutability. Blockchain technology cannot be tampered with.

Because it is distributed and follows a read-write-own model, Web 3.0 users can earn tokens by contributing to it, either by spending time on websites, helping to maintain them, collaborating with them, supporting their data flow, verifying that everything is running smoothly by validating transactions, reporting bugs, etc. According to Merodio, “blockchain technology allows for the creation of decentralized applications and the transfer and storage of value in the form of tokens.”

Ways, risks, and opportunities to invest in Web 3.0

Based on data from 2021 and 2022, dappGambl analyzed the data provided by NFT Scan and in September 2023 it presented a shocking statistic: 95 % of NFT investments are worth absolutely nothing and were based on a smokescreen and a financial bubble, not unlike the situation with cryptocurrencies around 2017 and 2018, before any regulations were put in place. That is to say that less than 40% of companies make it to five years. What is the risk of investing in crypto assets?

According to Félix Fuertes Argüello, CEO of Formación e Inversión, “the risk of cryptocurrencies has three fundamental pillars: treasury and recurring billing of the protocol/blockchain; active user community behind the token; and liquidity available on the exchanges or markets.”

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Ways of investing in Web 3.0

As Juan Merodio explains, “although it has bad press because of scams that have occurred, that doesn’t mean there aren’t good asset investment opportunities in Web3, such as the following”:

  • Tokens and cryptocurrencies. Direct purchase of assets, currencies, and commodities, not unlike the way securities are acquired.
  • DeFi projects. There are platforms that allow transactions such as loans, trading, or secure token contracts.
  • NFTs. Non-fungible tokens are unique digital assets that represent ownership of assets. For example, a cooperative social network can be converted into a series of interchangeable NFTs.
  • Staking. This is among the most popular crypto investments and consists of locking in a certain amount of cryptocurrency in support of a transaction in the network.
  • ‘Classic’ investment in startups. Many companies are working to build an operational Web3, and investing in them is a chance to support the ecosystem.

“Cryptocurrencies can be seen as a valuable asset or token that empowers Web3,” highlights Merodio. For Félix Fuertes, a key development will be the future approval of Bitcoin ETFs in the US, since “we could see a tenfold increase in Bitcoin liquidity compared to current levels,” due to the fact that the Bitcoin network has a knock-on effect on the entire ecosystem.

Everything seems to indicate that the regulation of the crypto ecosystem will have a fundamental part to play in the adoption of cryptocurrencies and Web 3.0 as a new web.

Does the concept of Web 3.0 have objectives or goals?

When Berners-Lee helped build the World Wide Web (WWW) in 1989, the concept of the semantic web was left out, like so many others, due to technological limitations. Security, for example, was confined to the nodes that made up the network (computers), and not to the network itself, which is why Bruce Schneier would never say that an Internet 2.0 is secure. One of the goals of the distributed Web 3.0 is to securely decentralize the transfer of data on the web. To make it secure by default.

Furthermore, one of its primary objectives is to take some of the power away from the big tech companies—GAFAM (Google, Amazon, Facebook, Apple, and Microsoft) and the BATX (Baidu, Alibaba, Tencent, and Xiaomi)—while returning control of the network to the users. A so-called democratization of the Internet that never took place in Web 1.0, let alone Web 2.0.

Blockchain as the framework technology for a new Internet is allowing the ideas of Gavin Wood (computer scientist and co-founder of Ethereum, who coined the concept of Web3 and founded the Web3 Foundation) to spread across the network, giving cryptocurrencies a structural role, which Félix Fuertes compares to the penetration of users in Web 2.0 social networks: “While web2 enabled the free transmission of information and data, web3 is the Internet of money.”

BBVA became the first TIER1 bank in Europe and one of the first in the world to give its customers access to the best of both worlds; combining digital and traditional assets in a single portfolio, allowing them to operate on Web3 and to carry out trading and custody operations with the security of a first-class Swiss bank. By meeting the evolving needs of customers and paying attention to the importance of diversification when it comes to investing, we focus on delivering financial education and leading the digital transformation of banking around the world.