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How to Invest in web3:

4 Best Ways to Invest

By Olaniyan SamuelPublished about a year ago 9 min read

When the global crypto market reached its peak in 2021, it was estimated to be worth $2.8 trillion, or six times as much as the year before. This increase was caused by the extreme popularity of cryptocurrency sectors like DeFi and DAOs. Anyone can construct a one-of-a-kind digital collectible using NFTs, but DeFi offers up to 100 times the yield of a savings account. Finally, DAOs enable the creation of trillion-dollar treasuries by online communities.

When these various sectors are combined, they form the Web3, a trustless, permissionless, and decentralized internet where users have complete control over their material. By now, you undoubtedly have a few questions, such as "What is Web3?" and "How did it start?" as well as "How do I invest in Web3 if it offers such amazing returns?" Starting with the initial query, let's gain a deeper understanding of Web3.

Web3: What is it? What Set It Off?

Everyone had access to Web1, a basic form of the internet, in the 1990s. Most of the information in this version is static, including news, digital print media, classified ads, and more. For users, it was essentially a read-only internet.

Web2, the dot-com boom brought on by faster internet, followed. Interactivity and sociability were the major factors that set Web1 and Web2 apart from one another. The latter allowed individuals to publish information on social media and their websites without receiving any payment. In the meantime, Web2 behemoths like Facebook and Google made the most money by selling users' personal information.

Then Web3, the subsequent stage in the development of the internet, appeared. With the use of blockchain technology, this new edition gives users the ability to read and publish material while also fully owning their data and digital assets. Users can selectively share or monetize their content utilizing Web3.

How Does the Web3 Ecosystem Function?

We now know what Web3 is and how it came to be, so let's look at the kinds of networks, protocols, and applications that make up its foundation.

Let's examine the mechanism in greater detail now:

Infrastructure Layer

It includes platform-independent protocols and virtual machines, which serve as the building blocks for blockchains. Examples of L0 include the Inter-Blockchain Communication Protocol (IBC), which enables communication across blockchains, and WebAssembly (Wasm), a binary instruction format for a stack-based virtual machine.

Network Layer

This layer is made up of distributed ledger platforms that support the creation of tokens and apps, such as Ethereum and Bitcoin. Developers work on Layer 1s for two reasons. One, it captures the most value in Web3, and two, it is now constrained by the blockchain trilemma, which is the major roadblock to the widespread adoption of cryptocurrencies.

Protocol Layer

Technologies that increase the scalability of L1s are used on the Protocol layer. For instance, the Lightning Network was built on top of Bitcoin to enable less expensive and quicker transactions. Arbitium, Polygon, and Optimism are examples of solutions for Ethereum, on the other side. Additionally, cross-chains that permit the transfer of cryptocurrency tokens between Ethereum and other platforms are also referred to as L2s.

Services and Optional Elements

Decentralized applications, or dApps, that excel at carrying out a particular task are included in this tier. Some Layer 3s, like Uniswap, are compartmentalized applications that users can interact with directly. However, these apps mostly serve as components that developers might choose to include in their consumer-facing apps. Several instances of Layer 3s include:

1• Aave, a lending protocol

2• Arweave, a storage solution

3• Yearn Finance, a DeFi aggregator

It's also vital to remember that most of these parts are constructed using Ethereum.

Application Layer

The Application layer, which is the top layer of the Web3 stack, typically serves as the starting point for a user's Web3 journey. Layer 4 instances include:

Web browser Brave, open-source MetaMask, cryptocurrency wallet Axie Infinity, blockchain game OpenSea, and NFT market

How to Invest in Web3 in 4 Simple Steps

In the Web3 space, traditional and cryptocurrency businesses (including MetaMask, Crypto.com, and cryptocurrencies) have a similar commitment to giving investors two asset classes to select from shares and digital assets. To diversify their portfolios, investors can also invest in a combination of the two asset groups.

Here are 4 simple methods for investing in Web3 and building a portfolio:

Step1: Determine whether you want to be a passive or active investor in the Web3 space.

Step 2: Asset Selection - Decide which projects or specific businesses you wish to invest in.

Step 3: Select the Right Mix of Assets - Asset selection is dependent on risk tolerance.

Step 4: Monitor & Rebalance - Keep tabs on and often rebalance your portfolio.

Let's go over each stage in further detail.

Step 1: Active vs Passive Investing

Purchasing an index, or a diversified portfolio that has already been selected for you is what is meant by passive investing. Active investing, on the other hand, is hand-selecting particular stocks or digital assets that you believe will perform better over time.

Although there are a lot of Web3-focused equity indexes, their numbers are gradually growing. A well-known ETF issuer this year, Simplify Asset Management, applied to start a new ETF that will invest mostly in foreign and US Web3 companies. Though the exact date of this ETF's listing is unknown.

Metaverse ETFs, such as the Roundhill Ball Metaverse ETF (METV), are also available to Web3 passive investors.

Let's examine the various passive Web3 investment strategies.

Different types Of Web3 Investments

Investments are usually a good thing, whether they are Web3 or traditional. Here are a few different types of passive investments you can make in Web3 if you decide to do so.

Cryptocurrencies are all the rage right now!

These are adaptable digital assets that can be utilized as a store of value or a means of trade.

A wonderful approach to generate some passive income and a great strategy to protect against inflation is to invest in cryptocurrencies like Bitcoin, Ethereum, Solana, Litecoin, and others.

However, given how volatile cryptocurrencies are, you should only buy after carefully examining the project or speaking with an investment expert.

You now have a huge selection of crypto tokens and NFTs to choose from when choosing digital assets. To learn about projects in each layer of the Web3 ecosystem, use tools like DappRadar, CoinMarketCap, and DeFi Llama.

Platforms for Crypto Lending

You can lend your tokens on these sites to borrowers who will return them with interest. In addition to diversifying your portfolio, it's a fantastic method to get some passive income.

It is imperative to compare several lending platforms to learn about their advantages and disadvantages before selecting one. Choosing a crypto financing platform that meets your demands is a crucial step because they are a relatively new phenomenon.

Non-Fungible Tokens (NFTs)

NFTs are digital assets that can represent everything from virtual real estate to music and art. Several NFT platforms have well-known NFTs like the Bored Ape Yacht Club, which is being sold for more than a million at the time this piece is being written, among others.

Another excellent option to generate some passive income is by investing in NFTs. Using the artificial intelligence provided by numerous decentralized applications, you can produce your digital art and convert it into an NFT. You could get some passive cash by selling your NFT. Additionally, you can purchase NFT stocks. This plan combines classic stock investment with the trendy, new NFT trend.

Step 2: Selecting the asset

You need a Web3 portfolio of equities and worldwide digital assets if you want to start investing actively.

FinViz, a stock screener, or Crunchbase, where you may sort through firms by "Blockchain" alongside their IPO status, are two options for finding worthwhile Web3 equities. The three most well-known Web3 stocks right now are Coinbase (COIN), Meta (FB), and Block (SQ).

Active Web3 Investments: Types

Let's examine a few current Web3 investments.

Earn Cash on Web3 Through Airdrops

An excellent approach to obtaining free tokens is through AirDrops. When a startup distributes free tokens among its community, this is known as an airdrop. This marketing tactic is employed to increase user acceptance and raise awareness of new blockchain projects.

Here are some pointers for taking part in airdrops:

1. Find well-known airdrops: Scams abound in the cryptocurrency community, and airdrops are no exception. Participate in credible ventures only.

2. Join the appropriate Telegram groups: To discuss airdrops among the group, crypto projects frequently use Telegram. This is a great way to be informed about the most recent possibilities.

Tokens that you obtain during an airdrop can either be kept or sold for a profit.

Bitcoin Mining

Although technically not an investment, mining might nonetheless pay you if you go through with it. Blockchains depend on mining, which enables users to gain rewards by confirming transactions on the blockchain.

Web3 is developing more quickly than ever, and this has increased mining's profitability. If you choose to go with this method, though, be sure to do your homework and comprehend the tools required.

The Model of "Play to Earn"

A new play-to-earn paradigm that involves playing games is used in several Web3 initiatives. Users can do this to win cryptocurrency tokens by taking part in games. This model has been used in well-known video games like Gods Unchained, Axis Infinity, and Splinterlands.

Step 3: Choosing the Right Asset Mix

The best asset mix for your Web3 portfolio may be determined by using two methods: math and intuition.

If you choose the mathematical path, it is strongly advised to use frameworks like Modern Portfolio Theory (MPT), which optimizes for optimum return at a specific degree of risk.

If you opt to follow your instincts, you can pick a side based on your level of conviction or risk tolerance. In this scenario, you would own a small number of stocks and digital assets, each of which would make up a sizable portion of your portfolio.

Step 4: Rebalancing and Monitoring

Your Web3 portfolio will have some assets that perform better than others by the entropy principles. We advise routine portfolio monitoring and rebalancing precisely because of this. You need to buy more underweight assets and sell some overweight ones to achieve this. assuming your convictions and risk tolerance haven't altered.

FAQs on How to Invest in Web3

1• Is Web3 a cryptocurrency?

No, Web3 represents the next stage of the Internet's development. With the use of blockchain technology and smart contracts, it will enable users to read and publish content while also fully owning their data and digital assets without depending on other parties.

2• Is Web3 part of a metaverse?

It is not a metaverse, Web3. It ultimately comes down to giving the people authority over and decentralized ownership of the internet. The metaverse, on the other hand, is a shared digital world that enables people to create economies, communicate with one another, and engage in real-time interaction.

3. Will Web 3.0 take over?

Yes, Web3 might be the internet's next big thing. Web3, or the third phase of the internet, will primarily rely on cryptocurrencies, blockchain technology, and most significantly, the concept of decentralization. Web3 might very well be the way of the future given how blockchain technology is developing and cryptocurrencies are taking off.


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