Web 3.0 Trading | Investing Opportunities (2024)

Some see Web 3.0 as the most important evolution in human communication to date; others claim it no more than a problematic fad. It has been hailed as the path for empowered individuals to reach a decentralized internet and decried as the plaything of a few powerful corporations. Its place on the cutting edge of modern tech is so novel as to defy any accepted definition, but countless companies are already fighting to stake their claim on this new frontier.

Web 3.0 may still be in its infancy, but the excitement and controversy which already surrounds it demonstrates its potential to be a defining feature of the internet for years to come, and traders should take note of its scope for innovation and returns. This guide will act as a Web 3.0 101, providing an overview of key features and definitions along with examples on how this innovative technology will impact online trading.

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Web 3.0 Basics

• Web 3.0 is envisaged as the next step in the internet’s development, offering users and developers unparalleled control over content.
• The term “Web 3.0” is still vaguely defined, as much of the technology associated with it has not been widely adopted.
• Proponents believe technologies like blockchain and artificial intelligence can help create a decentralized internet that is more responsive, customizable and interactive than today’s.
• Finance companies have been early adopters of the Web 3.0 ethos as blockchain technology allows for a range of trading innovations.
• Cryptocurrencies, decentralized autonomous organizations, and non-fungible tokens are among the trading products and services associated with Web 3.0.
• Cryptocurrencies have delivered huge returns to some investors in recent years, but the market is unregulated and notoriously risky.
• Detractors say Web 3.0 is already dominated by a handful of investors, negating any hope of decentralization.

Web 3.0 Explained

The most common definitions of Web 3.0 focus on the use of new technology, such as artificial intelligence and secure distributed ledgers called blockchains, to improve internet users’ experience by giving them more control over data and making websites and apps more responsive and interactive.

Before moving on to examples of this, it’s worth reviewing the web’s previous iterations and how Web 3.0 hopes to evolve from these…

Web 1.0 & Web 2.0

When the internet first made its way to private homes around the world it was revolutionary, but it’s worth remembering how basic it was compared to today. The earliest iteration of the internet – or Web 1.0 – brought users new and instant means of communication through email, messaging apps and chatrooms. But when it came to content, the internet was built on a primitive architecture of static web pages constructed with simple HTML code that left the user very little scope to interact and make their mark. The tools available for applications like e-commerce were similarly basic, with online stores usually consisting of a simple catalogue and instructions for placing orders.

The next evolution of the internet, known as Web 2.0, is associated with the advance to websites and apps which incorporate JavaScript and other programming languages to offer users a more interactive experience. The most influential examples of this are social media websites such as Facebook, Twitter and YouTube, which transformed internet users from passive consumers to active content creators.

But the advances of Web 2.0 also brought new and sophisticated innovations and disruptions to the business world, with advanced payment systems like PayPal, online marketplaces such as eBay, on-demand entertainment through Netflix and other streaming services, and the ability to instantly find work through gig economy apps such as Uber. It also saw the development of the world’s first cryptocurrency, Bitcoin, in 2009, paving the way for the explosion of blockchain-based coins, tokens and apps that has defined the cutting edge of internet tech in recent years.

With the internet now playing a ubiquitous role in how we work, socialize and entertain ourselves, questions arose about what form its next iteration would take. For many, the answer is already here, with the latest AI and blockchain innovations set to shepherd the world into Web 3.0.

Web 3.0 vs Web 2.0

A huge concern over the current state of the internet relates to the ownership and use of data. While millions of people use social networks and apps for any number of reasons, they may not be aware that the same apps are recording, compiling and exploiting vast reams of private information about their lives. It is this data that has propelled big tech companies like Facebook and Google to global dominance, as their command of huge amounts of data brings extraordinary business opportunities. As sculptor Richard Serra said, “if something is free, you are the product.”

Among the main proposed benefits of Web 3.0 is that it will wrest back control of this data from a few big tech companies by decentralizing the internet through a framework of applications and websites built with open-source blockchain technology whose code is available to all on hosting sites like GitHub. Gavin Wood, the cryptocurrency pioneer thought to have coined the term Web 3.0, described this step forward as “an alternative vision of the web where the services that we use are not hosted by a single service provider.”

Many developers also see Web 3.0 as an evolution in the way people will interact with the internet, with advances in AI and machine learning allowing for a more user-friendly and productive experience. For example, future advances that allow machines to read content semantically – understanding the meaning of words – would make for incredibly powerful search engines and greatly increase the interoperability of apps and programs online.

Another significant change that is envisaged with Web 3.0 is the adoption of non-fungible tokens (NFTs) as a way of signalling ownership of data online. NFTs captured headlines in 2021 when the market value ballooned to more than $17 billion, largely thanks to speculative purchases of artwork. But proponents believe NFTs will go much further in the future, with Web 3.0 interoperability allowing users to buy and own data that can be used in a variety of contexts. For example, you could purchase NFTs of cards to be used in your deck in a trading card game, as items in various interlinked online games, as personalized profile pictures or avatars used in social media, or even for unique music recordings. NFTs could also be used to furnish your plot of virtual land in an online space similar to the Metaverse unveiled by Facebook founder Mark Zuckerberg.

Finance & Web 3.0

The blockchain’s power for decentralization has already been demonstrated in the rise of cryptocurrencies. In little more than a decade, Bitcoin and other crypto assets have captured headlines along with the imaginations of retail traders, speculators and institutional investors as they blitzed through several cycles of runaway growth followed by precipitous slides.

In November 2021, at the peak of its last bullish phase, crypto’s total market capitalization was valued at $3 trillion. But we may be yet to see crypto’s true power to disrupt the finance world. Decentralized finance, or defi, is an attempt to harness the power of blockchain to take over functions traditionally held by banks and other large financial institutions – lending, borrowing, trading and investing – and hand them over to a peer-to-peer network. This is achieved through smart contracts, self-executing agreements whose terms are written directly into the code, which are currently primarily found on the Ethereum network.

Web 3.0 Trading

We’ve seen that Web 3.0 has some potentially revolutionary applications. But what does it mean for traders today?

Web 3.0 is too new, too dynamic and too diverse for any single guide to be useful for beginners or experienced traders. Rather, trading and investment opportunities exist in a variety of areas, including:

• Long-term investments
• Speculative trading
• Defi investing
• Staking

Long-Term Investments

Imagine being among the first investors in Google, Amazon or Tesla. This is the retail investor’s dream – a single good decision that sets you up for life.

Those companies are seen as blue-chip investments today, but at one point they were all little more than challengers in the tech marketplace. With new innovations paving the way for the type of advances associated with Web 3.0, investors have their eyes peeled for the startups or established companies which are best placed to capitalize on new technology.

Early investors in cryptocurrencies have seen even more extreme returns on their initial investment, with Bitcoin’s value rising from cents in its earliest days to a peak above $68,000 in November 2021. Since the rise of Bitcoin, thousands of new cryptocurrencies and tokens have sprung up. The most significant has been Ether, the cryptocurrency associated with the Ethereum network, which is considered the prime candidate to carry the Web 3.0 architecture going forward. In recent years, networks like Solana and Cardano have sprung up as rivals to Ethereum.

Individual investors should bear in mind that the Web 3.0 space is already dominated by several large investment companies and venture capital firms, such as Marc Andreessen’s Andreessen Horowitz. Twitter founder Jack Dorsey aimed a broadside at these firms, tweeting that they had effectively become the owners of the supposedly decentralized space. The scale of these firms’ investments in Web 3.0 present a challenge to individual investors, since they will have the power to shape the markets and snap up the most promising projects early.

So, traders seeking long-term investments in Web 3.0 should base their strategy on careful research. There are thousands of companies in the tech space, but only a handful will even have the potential to match the type of service provided by the reigning tech giants. If an investor identifies a company they believe has the potential to stake a claim in the Web 3.0 space, they should be sure to research the company’s roadmap and staff before putting any money on the table.

Likewise, thousands of cryptocurrencies and tokens are available, but very few currently fulfil any viable function, and the crypto trading space is notorious for scams and Ponzi schemes. Make sure you carefully research the white paper and developers of any crypto before you think about making a long-term investment in it.

However, if you do invest, make sure you study the charts to gain an understanding of the turbulence you can expect. Because of the highly volatile nature of crypto markets, one of the most persistent rallying cries among investors is to “hodl” – in other words, to hang onto coins or tokens you believe are viable in the long term, since the market has a history of reaching new all-time highs after major slides.

Speculative Trading

As of 2024, most of the money made (and lost) in Web 3.0 trading has come from speculative trades. The volatility of the crypto markets heightens the opportunity for profit, and platforms like Binance, Coinbase and Robinhood allow users to make leveraged trades on a wide range of cryptocurrencies as easily as trading stocks, ETFs and options.

At the same time, the crypto space has seen functionally limited but well-branded tokens claw their way to huge market caps after capturing the public imagination on social media. Dogecoin, the Shiba Inu-branded cryptocurrency created as a joke in 2013, became the classic “meme coin” thanks to its online popularity, with support from figures including Tesla founder Elon Musk propelling its value to a peak at more than $0.70 during a bull market in early 2021.

Similarly, the NFT space has seen some eye-melting profits, with NFTs from projects like Crypto Punks and Bored Apes Yacht Club being auctioned off for millions of dollars.

So, both small-cap tokens and NFTs are a tempting prospect for speculators trying to get in before the crowd and buy into the next big earner. Some lesser-known tokens are available on Binance, Webull and other large crypto exchanges, but these exchanges tend to wait until a token is well-established before adding them. As a result, crypto speculators often turn to specialized platforms and coins like Uniswap and Pancakeswap or other decentralized applications to purchase tokens they view as having potential. Meanwhile, NFTs are available on platforms like Rarible and various dedicated marketplaces, the largest of which is OpenSea.

As they are dealing with unregulated and highly volatile markets, crypto and NFT speculators should exercise extreme caution when investing and should only put down money they can afford to lose. The crypto world has had its share of shady stories over recent years, and for every Dogecoin there are thousands of tokens which have evaporated into nothing. If an investment does turn good, investors are advised to take profits soon and often.

Defi Investing

Defi investing is the form of trading that holds the closest to the Web 3.0 ethos, using smart contracts on a blockchain to cut out the middleman and allow direct investments in financial instruments, including loan functions normally overseen by banks. In other words, anyone with an internet connection can make an investment without going through a broker, bank, or cryptocurrency exchange. Instead, the investor uses a decentralized app, or DApp, to directly enter into transactions with another participant. Their agreement is mediated by smart contracts – software protocols which automate the parts of financial contracts usually overseen by lawyers and brokerages.

DApps can be accessed using applications like the MetaMask browser extension, which interacts with the Ethereum blockchain. While Defi investing allows users to avoid fees normally paid to middlemen, they will still be charged fees in the blockchain’s native cryptocurrency for transactions. These charges, known as “gas fees”, are paid to crypto miners to compensate for the expense of the computation necessary to keep the blockchain running. Since gas fees are determined by supply and demand, they can be very high at times when a large number of transactions are being made at the same time.

Another Web 3.0 innovation that is often associated with Defi is the Decentralised Autonomous Organisation, or DAO. DAOs aim to be community-controlled entities with rules encoded on a computer programme, and usually involve a decision-making protocol in which tokens or NFTs grant voting powers. Put simply, investment DAOs allow users to make a contribution to the organization and get a say in how it invests.

Besides potentially expensive gas fees, investors should also take care when entering the Defi world due to the increased risks associated with this novel and unregulated area. Since Defi involves peer-to-peer transactions, all investors are subject to counterparty risk, as well as the possibility that smart contract software may suffer from bugs or security vulnerabilities that could be exploited by criminals. One of the most famous exploits came in 2016, when the DAO set up to manage Ethereum was hacked and some $50 million of Ether stolen.

Web 3.0 Staking

Staking refers to the practice of using Defi protocols to stake tokens in exchange for interest and other rewards. Staking has obvious benefits for long-term crypto investors, since it allows traders to earn a return over various time periods on tokens or coins that would otherwise remain idle. It is also more accessible than other types of Defi investment, since anyone with an account on platforms such as Binance and Coinbase can instantly buy and stake tokens.

These tokens carry the same market volatility risks as any crypto investment, and it is worth noting that the tokens with the highest yields tend to have a lower market capitalization and thus be more vulnerable to fluctuations. At the same time, holding your cryptocurrency investments on trading platforms carries additional risks, since you may be unable to access your assets or lose them outright if the platform goes bankrupt or becomes subject to regulation.

Web 3.0 Trading Guide

The Basics

As with any investment, the first step for any trader interested in Web 3.0 is research. A wealth of knowledge is available online, including guides and wikis on cryptocurrencies, Defi, DAOs and everything else that populates the Web 3.0 ecosystem. Investors should keep up to date with tech news sites for tips on new crypto and blockchain projects, and check with online investment platforms, exchanges and trading desks for lists of available cryptocurrencies and tokens.

Many also subscribe to trading newsletters, listen to trading podcasts or follow personalities on sites like Reddit, YouTube and Twitter for tips on new Web 3.0 investment opportunities. But it is wise to exercise caution before putting any money down since new projects are known to pay influencers for endorsem*nt. Some crypto personalities also set up paid groups or forums to share advice with beginners, but be warned: taking advice from other investors leaves you open to schemes where influential names will hype up a coin to “pump” its value then dump their holdings for profit before the bubble inevitably bursts.

In the end, there are no ironclad methods to make money from crypto investment, and no trading academy or online course will tell you how to invest and guarantee you get a return. Having a broad knowledge base is the key to a profitable Web 3.0 trading strategy, so make sure you learn the basics, read the charts, get to know the metrics and study market history before you make an investment.

Web 3.0 Trading Tutorial

The easiest way for a beginner to get started with Web 3.0 trading is through a crypto exchange. Binance, Coinbase and Crypto.com are among the largest and best-known exchanges, and account holders can use them or even more general trading apps like Robinhood to trade and even stake cryptocurrencies.

If you want to go deeper into the world of Defi, you will likely need a wallet app such as MetaMask to interact with the blockchain. You will also need to carefully research a list of potential investments by studying their websites, white papers, reports and company values, checking daily trading volumes, and any rules or requirements related to trading crypto in your region.

Web 3.0 Trading Advantages And Disadvantages

Web 3.0 is the next frontier in tech, and many see it as the area with the potential for individual investors to make the highest profits. The last decade has made millionaires and even billionaires out of individuals who had faith in their tech or crypto investments. For many, the prospect of putting a small amount of their investment capital into Web 3.0 investments is too good to miss, given the potentially huge returns.

The downside of being on the frontier of new technology is that the Web 3.0 trading world can often seem like the Wild West, with danger and deception lurking around every corner. As a result, investors face a double risk. There is the risk of losing your investments to failed projects, scams, or bankrupt exchanges, but also the risk that the government will impose regulations which disrupt Defi and crypto investments and potentially make these areas unviable.

Final Word On Web 3.0 Trading

Web 3.0 is one of the most attractive trading opportunities for investors, since it offers the chance to be at the forefront of financial tech and, as a result, the chance to make tantalising profits. It is also the riskiest, with hundreds of failed projects for every one that makes money. Any investor tempted by Web 3.0 trading should do careful research work out a system that minimises risk, and ensure they are familiar with all the best tools and apps for trading on this new financial frontier.

Check out our list of the best blockchain and crypto trading brokers in 2024 to get started today.

FAQs

How Is Web 3.0 Trading Different From Traditional Trading?

Trading in the world of Web 3.0 is usually associated with decentralized programs and apps which cut out banks, brokerages and other middlemen. These applications usually work on the blockchain, and may incorporate smart contracts to automate agreements between counterparties.

How Do Investors Use Web 3.0

One of the easiest ways to take advantage of Web 3.0’s functions is to stake cryptocurrencies on an exchange. You can also research Defi and use a wallet like MetaMask to enter Defi contracts or invest in a DAO.

How Risky Is Web 3.0 Trading?

All trades carry risk, but investors in Web 3.0 should be aware that this area is so far largely unregulated, which heightens risks. Use our guide to trading in Web 3.0 assets to get started today.

Do You Use Cryptocurrencies In Web 3.0 Trading?

Most decentralized finance contracts are made using cryptocurrencies and digital tokens, and crypto is also the main currency used to buy NFTs.

Which Crypto Is Best In Web 3.0 Trading?

There is no way to identify which cryptocurrency or token is best, but Bitcoin has held the highest value, and Ether is the most widely used in financial transactions. A range of new rivals to Ether have sprung up in recent years, with coins like Solana and Binance Coin among the most notable. Other cryptocurrencies, such as XRP’s Ripple, have also been created to solve different problems, such as foreign exchange remittances.