How To Invest In Web 3.0
Web 3.0 doesn’t have a universally accepted definition, but it’s simply a term for the latest evolution of the web-based world. Integrating everything from machine learning and artificial intelligence to augmented reality and the blockchain, Web 3.0 offers exciting opportunities both for consumers and investors. As with any evolving technology, there are no guarantees of which companies and industries will be the big winners as Web 3.0 unfolds. However, these are the broad categories of investment opportunities that await those looking for a chance to own a part of Web 3.0.
Non-fungible tokens, or NFTs, are one of the first building blocks of Web 3.0. These “non-fungible tokens” are digital representations of items that are one of a kind, which can imbue them with value. NFTs are particularly prominent in the art space, with works from notable artists fetching high prices. In March 2021, the artist Beeple sold a digital artwork entitled “Everydays — The First 5000 Days” for a whopping $69.3 million. Another NFT project drew $91.8 million at the end of 2021. Overall, the NFT market is exploding, growing from $8.07 million in January 2021 to $4.8 billion just one year later.
One of the reasons that NFTs are exploding is that they will have great utility in Web 3.0. NFTs, as unique and non-replicable items, can be used as proof of ownership in the metaverse, where they can also be bought, sold and traded. In a sense, they can be used as a type of currency in the metaverse. Some of the most popular NFTs right now are avatars that can be used in the metaverse, and this demand is only likely to grow.
The metaverse is an all-encompassing description of the worlds that Web 3.0 will create. Through a combination of augmented reality, artificial intelligence, social media, virtual reality and other technologies, the metaverse will create something of an alternate universe that will in some ways mirror our own. While something close to this already exists in the interactive, high-technology online gaming world, the metaverse will expand upon this base to create entire new worlds. Big-name companies are already lining up to be players in the space, and even social media pioneer Facebook recently changed its official business name to “Meta Platforms” to reflect this shift.
Companies like Meta represent the easiest way to participate in the space, although Meta is such a diverse company that an investment there won’t be a pure play on the metaverse. A more direct way is to buy “land” in the metaverse itself. Via platforms like “The Sandbox,” investors can scoop up parcels in this digital universe, and prices have been rising. In October 2021, an average real estate parcel cost $2,620, but that shot up to $11,042 after Facebook announced its name change, according to CNBC. But that is just the “average” price. Just like in the real world, land in the metaverse adheres to the old real estate axiom of “location, location, location.” For example, in December 2021, a fan paid $450,000 to purchase land near Snoop Dogg’s parcel in the metaverse. Of course, land in the metaverse is purely speculative at this point, and only time will tell if values continue to rise or ultimately become worthless.
Cryptocurrency is the “financing arm” of Web 3.0. Crypto is already used to purchase NFTs, land and other objects in the metaverse, and developers see it as the financial engine of the future. Fintechs envision a future parallel banking system in the metaverse, where you can use cryptocurrency to buy or fund anything that you do in the physical world. In other words, you may end up using cryptocurrency to buy a car or a house in the metaverse, or to purchase an avatar.
Cryptocurrency can also be used as a straight investment platform, as it is currently, although many market participants would dub it a speculation rather than an investment. But if you’re a believer in the worlds that Web 3.0 could potentially create, it’s entirely possible that cryptocurrency could become more grounded in utility, rather than speculation. With literally thousands of cryptos currently available, one market theory is that a few top coins will eventually prove their utility and stability and rise to the top, being the ultimate survivors in the crypto world. If you can anticipate which cryptocurrencies these will be, they could prove to be fertile ground for investment.
The Bottom Line
While many investors, developers and futurists are excited about the evolution of Web 3.0, there’s no road map as to what it will eventually become. The same was true in the early days of the internet when it was simply a way to communicate and transfer information, with black screens and text only. While Web 3.0 might not become the essential part of daily life that the internet is, it offers the potential to offer a whole new world of investment opportunities. If you’re looking to get in on the ground floor, NFTs, cryptocurrency and direct investment in the metaverse are a good start — just understand the speculative nature of these types of investments and discuss them with your financial advisor.
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