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The internet has connected the world in more ways than any other technology. With people getting more concerned about their data and privacy, however, the internet in its current state seems inadequate. There are serious concerns over how big companies handle and monetize user data, creating the need for a better or alternative internet. Web 3.0 is an alternative that is becoming popular because it puts the internet's power back into the hands of end users. We’ve answered common questions around Web 3.0 investments in this guide, in a way any beginner investor can understand.
How to Invest in Web 3.0
Web 3.0 offers investors different investment vehicles that can cater to different risk appetites. Nevertheless, just like every form of investment, investing in Web3 is risky and should only be done with adequate research and a good strategy.
The most common Web3 investment options are stocks, cryptos, and NFTs. However, there are also less popular investment methods you can consider, such as angel investing or buying into the IDO (Initial DEX Offering) or ICO (Initial Coin Offering) of a crypto company. In both methods, you invest in a company by participating in a seed round or buying its coin before launch.
One thing to note is that most of Web3 investing is based on narratives: investors spreading the word on what a company is doing to grow the Web3 ecosystem. However, you shouldn’t depend on narratives when making decisions.That’s because some Web3 influencers push a good narrative about a project to get people to buy into the project, and then they end up dumping the project. Instead, focus on investments with a reasonable historic performance, like these three options.
Invest in Stocks Involved With Web 3.0
Stocks are one of the easiest ways to get into Web3, especially as they give you some level of Web3 exposure. Several companies actively involved in Web3 are Web2 companies with multiple sources of income, and so might not be affected by a Web3 downturn like these Web3 stocks:
- Coinbase (COIN): Coinbase is the top Web3 stock for anyone looking to invest in Web3. The American crypto exchange serves as a key stakeholder in the crypto ecosystem, facilitating the conversion of crypto to fiat, and offering an all-inclusive wallet that supports NFTs.
- Meta (META): Meta might have raised dust when it changed its name from Facebook, but it’s still an important player in the Web3 space. Currently, Meta is building two Metaverses: Horizon Worlds and Workplace, for gaming and co-working, respectively.
- Apple (APPL): Apple is planning to launch augmented reality (AR) glasses to help people experience the Metaverse better and might even let users install third-party apps in a bid to encourage Web3 adoption. Currently, it has integrated a lot of AR features in selected devices.
- X (formerly Twitter): X is the preferred social platform for Web3 conversations. With founder Elon Musk being an open supporter of Dogecoin, X's stock might be a good buy. Additionally, X supports NFT integration and allows people to specially display their NFTs as profile pictures.
Best Online Brokers
| Platform | Account Minimum | Fees |
| Merrill Edge | $0 | $0.00 per stock trade. Options trades $0 per leg plus $0.65 per contract |
| E*TRADE | $0 | No commission for stock/ETF trades. Options are $0.50-$0.65 per contract, depending on trading volume. |
Invest in Non-Fungible Tokens (NFTs)
NFTs are unique digital assets on a blockchain. They show ownership and cannot be copied. You can buy an NFT from a secondary marketplace such as OpenSea or Magic Eden or choose to mint them and hold for a profit.
NFTs are important Web3 investments because they can be used to unlock special privileges or as an investment in a Web3 company.
Invest in Cryptocurrencies
Cryptocurrencies are digital currencies operated by a decentralized entity on the blockchain. Like regular money, crypto can be used to pay for goods and services and as an investment option. Crypto allows direct exposure into the space and is a good fit for people who want to aggressively invest in Web 3.0
Crypto is highly volatile. So, if you’re a risk-averse trader, you might want to consider other lower-risk options like crypto ETFs and fractional shares. These options provide you with direct exposure but cushion you from the market's daily volatility.
Best Cryptocurrency Exchanges
| Company | Transaction Fees | Currencies | Minimum Deposit or Purchase | Trade Limits |
|---|---|---|---|---|
| Kraken | 0.00% to 0.26% | 185+ | $1 | No |
| Coinbase | 0.00% to 0.60% | 200+ | $2 | Yes |
| Crypto.com | 0.00% to 0.075% | 250+ | $1 | Yes |
Know the Risks of Investing in Web 3.0
Web 3.0 investments, like any other investment, poses some risk to investors. The biggest risks are volatility, security, and reliability on existing Web3 investment processes and infrastructures.
- Volatility: Prices of Web3 assets change widely over short periods, which could be a huge plus or minus for your portfolio, depending on the time and market demand.
- Security: Smart contracts issues, security breaches, and hacks are common occurrences in Web3. If a project is attacked, it could lead to a big loss of your capital. As a safety measure, go with projects that have undergone a full audit.
- Reliability: The best Web3 investments are not always reliable. Your best bet would be to go for projects with strong real-world use cases over hype.
Why Invest in Web 3.0
The foundation of Web3 is built on emerging technologies such as blockchain tech, smart contracts, and AI. An investment into Web3 positions gives you the chance to be an early adopter of these disruptive technologies.
Web3 has the potential to overturn how we do almost everything, from shopping to payments to the way we consume content. As an investment class, Web3 will shape how companies will raise startup capital and generate money from their funding rounds.
Most importantly, investment in Web3 is largely profitable and can provide impressive returns over shorter time frames.
To get the most out of any Web3 investment, you must:
- Use a secure wallet to store digital assets like cryptos and NFTs.
- Never share the PIN/password to your wallet.
- Avoid projects with little or no social media presence and vague roadmaps.
- Never open unofficial links or claim "free giveaways."
Factors to Consider When Investing in Web 3.0
Investing in Web3 can be challenging, especially if you don’t have a clear plan or failed to do your research. It’s essential you consider these factors before you make a Web3 investment:
- Your investment goals
- The team behind a project or company
- Your risk tolerance levels
- Web3 regulations in your country of residence
After you have clearly designed and mapped out your investment goals and the investment timeline, you need to know the founders behind the Web3 project of interest. Choose projects with publicly known founders. You can easily reach out in case the project goes south. Assess your risk tolerance level and go for a project allowed in your country to avoid legal issues with your investment.
FAQs
What Is Web 3.0?
Web 3.0 (or Web3) is a general name for the new, user-centric version of the internet that integrates new concepts like decentralization, blockchain tech, artificial intelligence (AI), virtual reality (VR), and augmented reality (AR) into everyday internet use. It is a decentralized version of the internet that promises to help users better control their data usage and sharing while enhancing monetization and reducing exposure to data manipulation.
The concept of Web3 is not to make our current internet obsolete; it’s to integrate these technologies into the existing infrastructure, allowing everyone to freely use the internet. For example, if you make a Facebook or Instagram post that goes against Meta’s community standards, the social media giant could take the post down or ban your account. This would likely be impossible in Web 3.0 since most platforms will be decentralized.
Although it is still a work in progress, many individuals, companies, and even governments have started to position themselves adequately for web3. The Hong Kong government is preparing to adopt a framework for integrating this technology into many of its city's processes.
Since Gavin Wood coined the term in 2014, Web3 has grown to offer potential for diverse opportunities. In recent years, there have been lots of conversations around Web3 and the opportunities it offers investors. While Web3 investment opportunities have become an industry buzzword, many have yet to realize its importance and how they can invest before it officially launches.
Can You Invest Directly In Web 3.0?
No. You cannot invest directly in Web 3.0, but you can choose to be an active or passive investor through a variety of investment options. Active investment options include cryptocurrency and NFTs, while passive investment options involve buying stocks in companies actively engaged in Web 3.0.
What’s the Difference Between Web 2.0 and Web 3.0?
Web 2.0 is the current internet, which has birthed innovations like social media, e-commerce stores, and search engines. These innovations have made content king and provided a way to create content, unlike in Web 1.0, where internet users could only access limited information. Although beneficial, these Web 2.0 innovations introduced data and privacy issues, giving tech giants access to tons of user data.
Web 3.0 is an upgrade to Web 2.0 and offers a way for internet users to control their data, use decentralized technologies to store and share information, and voluntarily conceal their digital identities. In Web 3.0, users will make faster and cheaper payments for goods and services using cryptocurrencies. With Metaverse development currently underway, Web3 could change how we experience the world around us, opening us to more immersive experiences e.g the Metaverse.
Is Investing in Web 3.0 Safe?
Web 3.0 investment options are more volatile than regular investment options. Although not completely unsafe, there is a big risk of ending up on the wrong side of the volatility. This is why it’s critical to have a good level of knowledge, do your research, and come up with a robust investment plan.
Another issue of concern is in regards to the current state of regulations. This new technology is still very much unregulated, and governments and regulating bodies could institute policies unfavorable to investors.
Who Should Invest in Web 3.0?
Web 3.0 investing is not for all types of investors, especially those with a low-risk appetite or who are looking to get into investing gradually. It is a fast-moving investment class that requires some level of industry knowledge, patience, and timing. The nature of Web 3 investments makes them a good fit for investors who fall into any of the categories below.
High-Risk Tolerance
Investing in Web 3.0 is highly risky. As a Web3 investor, you should have a huge risk appetite and only put in money you can afford to lose. The volatility of many Web 3 assets makes it a highly unpredictable asset class.
For example, between February 20, 2023, and March 10, 2023, Bitcoin rose to $24,500 and plummeted to $19,500 before touching $30k. Without a huge risk appetite, you could prematurely sell your investments and make constant losses.
High Capital
To make tangible returns on your Web 3.0 investment, you need to put in a significant sum of money. Since it is recommended that you use not more than 10% of your entire portfolio to make Web3 investments, you need to have a diversified portfolio that is not fully reliant on this investment class. A higher capital investment would yield more returns but could also translate into more losses. Consider investing in leveraged assets and futures trading if you have a big risk appetite but limited capital.