Investing in Web 3.0: opportunities, risks, and platforms

Web 3.0 (or Web3) is the third iteration of the web, this time decentralized and without a central controlling entity. That is the vision for a new Internet structured around cryptographic tokens (cryptocurrencies), a new era aiming to revolutionize the experience within an interconnected network. But what are the investment opportunities in such an environment? Where are the challenges? Is it possible to invest in Web 3.0 while minimizing risk?

If we look back over the years, since the 1990s we have gone through Web 1.0, which is read-only, without any interaction, as in the case of Wikipedia; we were then met with Web 2.0, interactive with read-write capabilities, hosting blogs and social networks; and now we are approaching Web 3.0, a decentralized read-write-own web. As experts predict, it will be a more secure, reliable, and democratic web, where users can be rewarded for participating.

The term Web 3.0 is a fascinating one because it has two completely different origins, although these are not mutually exclusive. First, there's Tim Berners-Lee's Semantic Web, an augmentation of the WWW (World Wide Web) standards that make internet data machine-readable. This Web 3.0 seeks to return the Internet to what its original designers intended it to be from the very start.

Additionally, there's the version of Web 3.0—conceptualized by libertarian thinkers as web3 or the third phase of the web following Web 2.0—founded on the principles of decentralization, blockchain technology, and a token-based economy. In other words, returning the Internet to the user, and giving that user more autonomy. It is emerging as an alternative to Web 2.0.

As previously mentioned, these two potential futures are not mutually exclusive and, in fact, both are becoming a reality in unison, making the third version of the Internet a fusion of the futures envisioned by both Tim Berners-Lee (father of the web) and Satoshi Nakamoto (creator of the Bitcoin protocol).

Decentralized Web 3.0 is based on virtual and tokenized payments as an integral element of the functioning of the web, which is why decentralized finance or DeFi will be a fundamental part of the new web. If Internet users have the power, then their virtual assets will be what they use to express that power, as well as the way in which their contribution to the web is compensated.

Juan Merodio, founder of TEKDI Institute, points out the three key components to this new ecosystem: “Unlike Web2, where platforms and their data are owned by centralized companies, Web3 is based on decentralized networks where there is no single point of control and where it is normally the users that have control and access to all data or digital assets.” This expert highlights three aspects:

• Transparency. All blockchain technology is public and subject to audit.
• Security. Blockchain networks are inherently more secure.
• Inmutability. Blockchain records are permanent and cannot be modified.

Because it is distributed and follows a read-write-own model, Web 3.0 users can earn tokens by contributing to it, either by spending time on websites, helping to maintain them, collaborating with them, supporting their data flow, verifying that everything is running smoothly by validating transactions, reporting bugs, etc. "Blockchain technology facilitates the development of decentralized apps and the transfer and storage of value as tokens", Merodio explains.

Using data from 2021 and 2022, dappGambl analyzed figures released by NFT Scan and, in September 2023, unveiled a devastating statistic: 95% of NFT investments are essentially worthless, stemming from a smokescreen and a financial bubble akin to the cryptocurrency situation around 2017 and 2018, prior to any regulation. That is to say that less than 40% of companies make it to five years. What are the risks of investing in cryptographic assets?

The risk associated with cryptocurrencies, explains Felix Fuertes Argüello, CEO of Formación e Inversión, rests on three key factors: the treasury and consistent revenue of the protocol/blockchain, the active user community behind the token; and liquidity available on the exchanges or markets.”

As Juan Merodio explains, “although it has bad press because of scams that have occurred, that doesn’t mean there aren’t good asset investment opportunities in Web3, such as the following”:

• Tokens and cryptocurrencies. Direct purchase of assets – in a manner not unlike the way securities, currencies or commodities are acquired.
• DeFi Projects. There are platforms that allow transactions such as loans, trading, or secure token contracts.
• NFTs. Non-fungible tokens are unique digital assets that represent ownership of assets. For example, a cooperative social network can be converted into a series of interchangeable NFTs.
• Staking. This is among the most popular crypto investments and consists of locking in a certain amount of cryptocurrency in support of a transaction in the network.
• 'Classic’ investment in startups. Many companies are working to build an operational Web3, and investing in them is a chance to support the ecosystem.

“Cryptocurrencies can be seen as a valuable asset or token that empowers Web3,” highlights Merodio. For Félix Fuertes, a key development will be the future approval of Bitcoin ETFs in the US, since “we could see a tenfold increase in Bitcoin liquidity compared to current levels,” due to the fact that the Bitcoin network has a knock-on effect on the entire ecosystem.

It seems that the regulation of the crypto ecosystem will play a crucial role in the adoption of cryptocurrencies and Web 3.0 as the new phase of the web.

When Berners-Lee helped build the World Wide Web (WWW) in 1989, the concept of the semantic web was left out, like so many others, due to technological limitations. Security, for example, was confined to the nodes that made up the network (computers), and not to the network itself, which is why Bruce Schneier would never say that an Internet 2.0 is secure. A principal aim of the decentralized Web 3.0 is to secure data transfer across the web. To make it secure by default.

Moreover, one of its primary goals is to reduce the influence of the large tech corporations—the GAFAM (Google, Amazon, Facebook, Apple, and Microsoft) and the BATX (Baidu, Alibaba, Tencent, and Xiaomi)—while simultaneously restoring control of the network to users. This is part of the envisioned democratization of the network—a concept that was not realized in Web 1.0, and even less so in Web 2.0.

Blockchain as the framework technology for a new Internet is allowing the ideas of Gavin Wood (computer scientist and co-founder of Ethereum, who coined the concept of Web3 and founded the Web3 Foundation) to spread across the network, giving cryptocurrencies a structural role, which Félix Fuertes compares to the penetration of users in Web 2.0 social networks: “While web2 enabled the free transmission of information and data, web3 is the Internet of money.”

BBVA has become the first Tier 1 bank in Europe, and one of the first globally, to offer its clients the best of both worlds: by merging digital and traditional assets in a single portfolio. This allows for Web3 trading as well as buy-sell and custody operations with the assurance of a Swiss bank of the highest caliber. In this way, addressing the evolution of customer needs and the significance of diversification in investment, we are committed to advancing financial education and spearheading the digital banking revolution worldwide.