Web 3.0: How to Invest in the Next Internet Revolution

Today’s Internet will soon be disrupted.

Web 3.0: How to Invest in the Next Internet Revolution

The crypto boom of 2020-2021 was driven by Fed liquidity, and Bitcoin will face tough times when the risk of reduced liquidity explodes. However, just like after the tech bubble bursts, new technologies bring many innovative applications that won’t go away and in my opinion will become a central part of life. As a result, there is a lot of real value in the blockchain space outside of Bitcoin.

That’s why seven years ago Gavin Wood, the founder of Polkadot and co-founder of Ether, coined the term Web 3.0 – the next logical windfall for Internet technology. He envisioned a more open, trustless and permissionless Internet, with a vision of basic cryptocurrencies like Ether, Polkadot and ADA.

A complete independent financial system
Web 3.0 is not ruled by a few authorities (like the big tech companies), but by democratized online communities. It has emerged because social media companies are no longer valued by the size of their user base, but are measured in a more decentralized way. While the traditional financial community is busy chasing tech stocks, cryptocurrencies have created a complete independent financial system that is both decentralized, and highly innovative and autonomous.

People can borrow and lend on a decentralized marketplace. Two major innovations here are the emergence of trustless lending, and 30-second compounding. Both are remarkable. In the crypto world, you can’t run credit checks on counterparties, so another mechanism must be used instead of it to ensure that lenders don’t face undue risk of losing their funds. Instead, DEFI is solved by overcollateralization, where the borrower will typically lock in 150% of the assets he wants to borrow, and the lender contributes another 100%. Both parties’ assets are locked into a smart contract, and the borrower can use the full amount (250%) to invest, thereby increasing leverage significantly.

At any time, if the value of these assets falls below 120% of the lender’s principal, the investment is liquidated and the lender is automatically repaid. Thus, the credit problem is solved in a de-trusted manner.

In my opinion, the second innovation is more disruptive to traditional finance. In a traditional environment, the lender receives interest on its investment every month or every quarter. On a blockchain, it happens in every block. This means lenders are able to compound interest every 30 seconds. This can increase lending rates by 20-30%, yielding a competitive advantage in decentralized finance that is difficult for traditional banks to compete with.

Key feature: decentralized returns
Decentralized exchanges are essentially smart contracts that can exchange any two assets using a pool of liquidity. This means that not only can you decentrally trade any asset at any time (which even already includes some stocks), but it also allows startups to get funding from crypto users by providing a small amount of liquidity for their tokens, and then explain their value proposition to potential investors. This disintermediation is a key feature of Web 3.0.

With the advent of revenue aggregation and other smart contracts that have a lot of value, insurance platforms have emerged. These are another set of smart contracts that enable you to insure the paid-in capital of other smart contracts at a relatively low cost. In the event of a smart contract hack, you can recover the funds from the insurance.

Finally, a decentralized financial system would be incomplete without the equity tokens that emerge. Unlike the ICOs of 2017, many of today’s “governance tokens” come with inalienable rights similar to equity (often recorded in a smart contract). They have the ability to vote on platform governance and use of funds, and receive some or all of the platform revenue (e.g., transaction fees). With this piece of the puzzle, the financial system built on the blockchain is complete.

The future belongs to Web 3.0
While it is entirely possible that the valuation of all crypto assets will take a further hit from the withdrawal of central bank liquidity, the progress made in this area will not disappear again. Similar to what happened after the tech bubble burst, a whole new world of blockchain applications will be created and will continue to exist after the bubble bursts.

The current bursting of the cryptocurrency liquidity bubble looks more like the financial crisis of 2008 than a historical repeat of the earlier Internet bubble. In this case, the drying up of liquidity wreaked havoc on asset prices, but the fundamentals of the business remained sound.

Once liquidity diminished, non-revenue assets fell out of favor. Of course, bitcoin could also innovate and build a full DeFi infrastructure on top of the lightning network, but that is not currently the case. The Internet is not immune to corruption. at the heart of Web 3.0 are three goals.

To become an open network.

Cryptocurrencies are built from open-source software that can be accessed by anyone or any community. Projects like Coin Smartchain and Ether Classic were created from programming in Ether.

De-trust where possible.

The motto of many large technology companies is “do no evil”. But we have to acknowledge that so-called algorithms are doing us a disservice.

No Permission Required.

Anyone can participate in Web 3.0. With Bitcoin, anyone can be their own bank. With ethereum, anyone can own the rights to their own artwork. Code is law. Anything that is adopted in the system goes through a democratic process.

Web 3.0 aims to connect everyone, regardless of your social class, political beliefs or ideology. There is no doubt that the above innovations will outlast any bubble in crypto assets and change the way internet finance works.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/web-3-0-how-to-invest-in-the-next-internet-revolution/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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