What Is Web 3, and Why Should You Invest in it?
Web 3 is expected to become the next-generation internet that will come to replace the currently existing Web 2.
Web 3 will be completely decentralized and community-managed. It will eliminate the dominance of big tech companies in the market and rely on online communities. It is expected to support the widest range of apps and projects, such as metaverse projects, GameFi, crypto, etc.
Web 3 is expected to provide ownership over the network to its users. There will be users who will provide processing power, and storage space, others will contribute to development tasks, and there will also be users who will play, provide content, etc.
Everybody will find their place in this decentralized online ecosystem based on equality. But more importantly, everybody will be rewarded proportionally for their efforts and contribution to the world wide web.
There are already projects that work on Web 3. Some of them are active in crypto gaming, others enable users to provide extra storage space and earn passive income from it, and some are selling digital art, etc.
The thing is that Web 3 is almost here, and some people already invest in Web3 to ensure sustainable passive income in the future.
Why invest in Web3?
Investing in Web3 looks very lucrative in the long term. By 2025, the Web3 market is expected to grow to an immense $176 billion, which will make a 700% increase compared to 2020.
Web3 will enable users to create content and share it and own data. This digital ownership will enable everybody who, in one way or another, contributes to the third-generation internet based on blockchain technology to earn money.
The decentralized internet, even though still a relatively new phenomenon, has immense potential for the future.
How to invest in Web 3?
At the moment, we cannot speak about one blockchain project that completely complies with the Web3 idea.
However, many of those reputable projects are working on speeding up the crypto’s mainstream adoption and mass acceptance of Web3.
You can start investing in those crypto projects right now. The following active investing options are available.
You may argue that it is more about earning opportunities rather than investing, but still, building blocks of a distributed ledger have always been rewarding. So when you are building these blocks, you get digital asset rewards for each new block that you add to the network.
Buying Web 3 tokens
the first and the most apparent option is to buy the digital assets (non-fungible tokens, crypto coins) of the project you want to support.
It is the easiest way to become an active investor. If the project succeeds, the value of these crypto tokens will surge, and you will benefit from the price difference.
Invest in IDO
Get your share in a promising DEX company. If you choose the right project, it may bring millions for you in the future.
Keep an eye out for crypto community AirDrops
At the initial stages, digital ecosystems give free tokens of other digital assets.
To be updated about the AirDrops conditions, join relevant Telegram groups, subscribe to the promising blockchain platforms updates on their social networks, and get crypto tokens for simple activities such as sharing and commenting on the virtual worlds’ announcements and ads for a better reach, and promoting blockchain technology in the ways they suggest.
Buy and hold cryptocurrency while the prices are cheap now
One of the best passive investment options is buying crypto tokens when the project is just launching its activities and when its digital assets haven’t surged in price.
Over time, the prices of digital assets behind the best-decentralized applications, decentralized finance platforms, and crypto world projects start growing and can deliver significant passive income to their early adopters.
Many decentralized applications allow for staking digital assets to earn crypto tokens and thus benefit from passive investing. A staking account works just like a savings account in traditional companies such as banks.
Use crypto lending platforms
If you want to access more funds for investing in Web3, use crypto lending. This is an efficient and fast way to get the required funds for more investment opportunities.
Join an ETF
Joining a popular ETF issuer such as Roundhill Ball Metaverse ETF may be a good option if you want to invest in Web3 and if you don’t have enough experience in crypto asset selection for investment.
Such funds know how to look for the most promising projects.
They can advise you on active investing options, assist you with your asset management, and even virtual real estate projects and traditional stock are on their list of investing opportunities.
Some projects pay dividends for the holders of their tokens. The dividends are distributed by smart contracts based on the number of tokens that an individual holds. So, while the project is afloat, you get free tokens every predetermined period.
Assessing risk vs reward with investing in Web 3
Before you invest in Web3, make sure you understand all the related risks and the possibility of rewards. The crypto market is very volatile, so if you find the right project, it can make you rich. But the possibility that the project will fail is very high, too.
That’s why invest only those funds that you can afford to lose and always assess your risk tolerance level accurately.
Tips for making informed decisions when investing in Web 3
How to choose the right investment opportunities when it comes to active or passive investing in Web3?
There are some points to pay attention to.
The team has the experience and is reliable
With Web3 and crypto projects popping up every day, it is important to understand to whom you are going to give your money.
Check who is behind the project. Make sure those are real people. Search for them on social networks, and if those are real people, look for proof that they are really involved in the project.
Project delivers value
Sometimes, it is difficult to determine for a non-specialist whether a project may be valuable in the future or not. But if you see that somebody just created a coin and that’s it, most likely, no value shall be expected.
Here are some problems that promising projects may be working on.
Inter blockchain communication protocol
Cross-chain communication is one of the major obstacles to the Web3 mass adoption. While there are bridges that connect different blockchains, this technology is not reliable and vulnerable to attacks.
Some projects are already working on solving this issue and creating platform-agnostic protocols that enable cross-chain communication. Once such a solution is created, it will gain traction, and its investors will benefit in the long run.
Blockchain technology has great potential, but it is not user-friendly at all. To access a DeFi platform, for example, a user needs to know what a wallet is and even to have one. Also, the basic knowledge of smart contracts is needed to understand how communication happens between different platforms’ components.
For now, even to access a P2E game, users need to be more technologically aware than the average population is.
That’s why in the future, we expect that teams will not only build digital ecosystems but will also create special apps to facilitate communication between ordinary users with these platforms and applications.
And that’s why investing in a project that is working on eliminating the gap between the Web3 world and ordinary users can be a wise choice.
The scalability problem plagues many blockchains. Verifying transactions, for example, in the Ethereum or Bitcoin networks, may take a lot of time, especially if the network is congested.
The so-called lightning network has partially solved the scalability problem for Bitcoin, and there are several Layer 2 solutions for Ethereum.
But still, many projects continue working on this problem. There are many new projects that claim to have solved this problem. But even with their immense potential, they cannot scale up endlessly.
That’s why for now, the scalability issue is still open, and thus, you can invest in a project that has a chance to develop something new in this sector.
Play to earn crypto tokens
We all like to play, and if playing brings money, it is better. Play-to-earn model projects are among the most popular in the crypto sector, and it looks like their popularity will continue growing.
But again, consider please that many teams are working on their P2E projects. That’s why it is important to choose those of them who bring something new and offer their players the top user experience.
So, top-quality user experience, exciting gameplay, an opportunity to play for free for those users who aren’t ready to buy in-game items and characters, and sustainability are the features that a P2E project shall have if it wants to stay afloat.
Everybody is working on creating the best metaverses.
For example, the founders of Bored Ape Yacht Club are working on the metaverse for the project. It may work out, considering that now, their NFTs are very expensive.
But we recommend focusing on projects that apply Artificial Intelligence, VR, and other technologies of the future that will provide its users with those immersive experiences that we expect from a real metaverse.
Moreover, the metaverse technology is used not only for playing but has many more applications. In such industries as construction, medicine, education, IT development, and many others, it is irreplaceable. That’s why projects focusing on these matters are the best for passive investments.
Investment through DAO
Decentralized Autonomous Organizations (DAOs) are built on a distributed ledger and may become the major governing bodies in Web3 in the future. They also give smaller investors an opportunity to participate in new promising projects with smaller sums.
There are many DAOs out there open to new investors, and thus, there are many DAO tokens to purchase. Buying these tokens can be compared to buying stocks in a company which makes investing in a DAO lucrative.
Many more options
Web3 is in development, and it will take time for it to be adopted massively. But it is going to change the world we live in, just like virtual machines did it once. That’s why now, it is the right time to pick your favorite projects and participate in them.
You can opt for active investing by building blocks for the internet of the future.
You can provide computational power to verify transactions.
Finally, you can create personal websites that will solve one or another problem of today’s web and help with moving to Web3.
Comparing traditional vs Web 3 investment strategies
Traditional investing is investing in bonds, stocks, or other financial instruments that are under centralized control. You can access these options in public markets, and investing in them requires following some rules.
In the traditional investment market, companies operate with billion-dollar treasuries. So, be ready that in the case of top projects, you need to be accredited to participate.
Those investments are mostly passive. You get your dividends for what you hold.
There are options to invest in Web3 companies’ stocks and bonds. We know that many public companies work on the development of Web3.
Take Microsoft, for example. You can invest in Microsoft bonds and stocks to get your share from the profits made by the company in the future.
Finally, you can invest in startups working on Web3 apps. This is one of the riskiest investments because this market is still not regulated properly; thus, protection for investors in case they are scammed is only provided to some extent.
Invest in digital assets responsibly
That’s why if you decide to invest in a Web3 startup, you shall be ready to take a different approach to the modern portfolio theory.
You can choose how much and when you invest: there are no regulators that will limit you depending on your income level, accreditation status, or any other parameter.
This is one of the main reasons why investing in Web3 can come with very lucrative opportunities but is also highly risky. And you have to monitor the performance of your investment portfolio constantly and get rid of overweight assets to continue benefiting from your investment.
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Disclaimer. This material should not be construed as a basis for making investment decisions or as a recommendation to participate in investment transactions. Trading digital assets may involve significant risks and can result in the loss of invested capital. Therefore, you must ensure that you fully understand the risk involved, consider your level of experience, investment objectives, and seek independent financial advice if necessary.