The much-anticipated shift from the internet as we know it to a new decentralized web, often referred to as Web3, is underway. And while it’s still early days, investors already have several ways to get involved in this exciting new space.
So, what is Web3? Simply put, it’s a new, decentralized way of storing and exchanging data and value that is not controlled by any central authority. This new web is powered by blockchain technology, which enables a wide range of new applications and services that were not possible before.
Importantly, Web3 is not just a new way of doing things – it’s a wholesale shift in how the internet works. This shift can upend many industries and create a new wave of winners and losers. For investors, understanding Web3 is critical to making informed investment decisions in this space.
Direct Investments
There are several ways to invest in Web3. The most direct way is to invest in blockchain-based projects and companies building the infrastructure for this new web. These include projects like Patientory, Elliptic, and Passfort, which work to create a decentralized infrastructure for the new web.
Another layer of investment opportunity is found in the applications of this new infrastructure. These firms are building applications and services on this new decentralized web. Some examples include Aave, Celsius, Uniswap, and OpenSea.
Finally, investors can also invest in more traditional companies that are beginning to embrace and integrate blockchain technology into their business models. These incumbents are looking to benefit from the shift to Web3. Some examples of incumbents include Microsoft, IBM, and JP Morgan.
Blockchain Funds
Beyond investing directly in blockchain projects, blockchain-focused investment funds are another way to gain exposure to this space. These funds invest in various projects and companies in the blockchain space and provide investors with a more diversified way to gain exposure to this nascent industry.
These reduce risk by diversifying investments and offer the potential for higher returns by investing in various projects across the space. Some notable blockchain funds include 3AC, a16z, and Alameda Research.
Suppose you’re looking to take advantage of the growing opportunity in blockchain investing but don’t have many institutional funds’ sizeable minimum investment requirements. In that case, a Gridline Thematic Portfolio product may be a good option. These products invest in a basket of 5 to 10 institutional-grade blockchain funds, making it more accessible for the average investor. Instead of the traditional $500,000 minimum investment per fund, you can get started with as little as $100,000 across an entire basket of funds.
These private funds tend to be restricted to accredited investors, but there are several ways retail investors can get exposure to this space. For example, the Amplify Transformation Data Sharing ETF (BLOK) invests in a basket of companies building the infrastructure for Web3.
Even now, ETFs are focused on cryptocurrencies rather than just blockchain companies. The ProShares Bitcoin Strategy ETF became the first cryptocurrency ETF when it was approved by the SEC in October 2019. This ETF holds different Bitcoin futures contracts.
To be sure, investing in Web3 is not without risk. This is a highly volatile and speculative space, and there are no guarantees that any particular project or company will be successful. Investors should be prepared for wild price swings and only invest money they are comfortable losing.
That said, the potential rewards in this space are massive, and those who can identify the winners early on could see life-changing returns. Web3 is an exciting and potentially very lucrative investment opportunity for those willing to stomach the risk.