What is Web3? Why should investors care? Investment Monitoring

In today’s digitally agile climate, investors and businesses understand all too well the importance of adapting to advanced technologies in order to remain competitive. For industrial sectors, this has meant embracing industry 4.0which has evolved from iterations of 1.0, 2.0 and 3.0.

However, industry 4.0 is not the only technological evolution; Web 3.0 or Web3, the third iteration of the World Wide Web, is being hyped in investment blogs, dissected in podcasts, and earning billions in investment from both. great tech and venture capitalists. So what exactly is Web3 and why should investors pay attention?

the evolution of the internet

Like other industries and sectors, the Internet is constantly evolving. Between 1991 and 2004, Web 1.0 was the very beginning of the World Wide Web. It was a collection of static websites, had very few content creators, and was a mostly decentralized neutral space. This was the era of personal blogs, Ask Jeeves, and dial-up Internet access.

Web 2.0, the current digital age since 2004, is centralized in closed platforms (a software system that is completely controlled). These platforms are owned by large technology companies, in particular Amazon, Facebook Y Google.

There are multiple content creators, countless ads, it’s easier to live and show your life (at least partially) online, and there are numerous ways to interact both with the Internet and with others through the Internet. It is the age of tracking users to create profiles, store data, and then sell that information for profit.

Web 2.0 has seen the rise of giant corporations capitalizing on the online space and perfecting the art of turning the user into a consumer or product (often unknowingly). So given that Big Tech has such tight control over what the Internet is and how it works, could the Internet ever evolve outside of Big Tech companies?

Believers in Web3 certainly think so. The term Web3 was created in 2014 by Gavin Wood (a developer of the Ethereum cryptocurrency) and, like previous web iterations, is open to wide interpretation.

What is Web3?

At its core, Web3 is the movement for the Internet to become less centralized under Big Tech. In terms of blue sky thinking, Web3 is a space built, owned, and operated by users who can earn an ownership stake by developing and maintaining Internet.

website 3 seeks to use blockchain technology create a more decentralized online space, with the goal of changing the user from product to owner. This is a similar concept to the metaverse, although there are important differences. While Web3 is a decentralized internet, the metaverse is more of a virtual world that could theoretically sit within that.

Benjamin Dean, Director of Digital Assets at WisdomTree, an investment management firm that specializes in exchange-traded products, offers the following definition: “Web3 is one of the few competing visions for what the next phase of connected interactions will look like. to the Internet…In one way it’s a branding exercise for venture capitalists and in another way it sums up those initial utopian hopes of what all this digital technology can do in people’s lives.”

Who is investing in Web3?

So if Web3 is both a philosophical vision of what the Internet should be and a growing technology investment space, who is really investing, and how do you invest in something designed to belong to everyone?

Dean says, “There’s a whole subset of people who are actually building the technology itself and building new companies and applications on top of the technology.”

Investors are essentially strategizing to ensure their current technology investments are relevant in the next wave of technological change by discovering and investing in Web3 pioneers. Dean says that venture capitalists and big tech companies are the biggest investors in Web3 and highlights Facebook’s decision to rebrand to Meta as an indicator of how seriously Web3 is being taken.

He explains that Big Tech companies like Facebook are trying to mold the metaverse concept as a means to ensure that “interactions that happen in the future continue to happen on platforms they can control.” However, this is at odds with the core concept of Web3 (the rejection of the Big Tech-owned Web 2.0 model), and there remains a difficult balance between Big Tech’s involvement in Web3 and the funding streams to come. . of them during the construction phase.

Unlike Web 2.0, however, big tech companies aren’t the only dominant investors. On May 25, 2022, Andreessen Horowitz, a US-based private venture capital firm, announced a new $4.5 billion fund targeting Web3 opportunities, following the launch of a crypto fund of 2.2 billion dollars less than the previous year.

“[Andreessen Horowitz] is going to put that investment to work in hopes of creating the next generation of businesses built on and using rails of digital or crypto assets,” Dean says. “This will be to try to bring back to people this Web3 vision of autonomy.”

What are these investments paying for when it comes to Web3?

Idealism aside, the Web3 concept has seen the creation of gigantic investment funds and prompted a rebranding of social media giant Facebook. So if investments are coming into the unowned future of the Internet, what exactly is being invested in?

According to Dean, many of these investments are in development at the protocol level. For example, a blockchain startup, ConsenSys, raised $450 million with backers that include Microsoft, Temasek and SoftBank. Big investments like these indicate a vote of confidence in Web3’s future. Dean says the investment “essentially became Ether [a cryptocurrency]”.

Alongside this is investment at the application level, building Web3 platforms and applications, which Dean describes as the combination of video game and cryptographic networks.

“Ultimately, you have investment flowing into edge services that are connected to Web3 technologies,” he says. “Even if you have a decentralized application, built on an open source protocol, you still need a strategy to get customers, you still need a business development team, you still need a legal team, you still need everything else that is associated with just running a new business. it’s growing.”

Much of the investment goes into scaling businesses that are based on the Web3 concept and technologies, so the investment goes to who will operate, maintain, and develop these applications.

It is impossible to know how fast Web3 will continue to develop and what the investments being made by Big Tech and venture capitalists will mean for the World Wide Web of the future. What is clear is that this evolution is something that Big Tech is taking seriously and that there are many influential (and wealthy) voices who believe in the idealistic concept of an Internet that takes the user off the digital “for sale” shelf and leads to the owner’s chair.

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