There are few areas of technology that are as exciting — and more disruptive — than Web3. Still in its infancy today, Web3 looks set to have a huge impact on both the global financial system, and our lives, in the years ahead.
To help investors capture the opportunities generated by the growth and adoption of Web3 technologies, eToro has developed the Web3Applications Smart Portfolio. Designed for long-term investors, this portfolio provides access to a range of decentralised application (dApp) projects at the heart of the Web3 revolution, and includes stocks of companies that have partnered with one or more dApps to develop and implement Web3 strategies.
Get ready for the next version of the Internet
The Internet has come a long way since its inception in the early 1990s. And its evolution can be broadly divided into three main phases: Web1, Web2, and Web3.
Web1, aka the “static web,” was the first generation. This was characterised by static web pages that were mainly used for sharing information. In this era, the Internet was primarily a tool for content consumption rather than content creation.
Web2, aka the “dynamic web,” was/is the second generation of the Internet. In this generation, we’ve seen the launch and development of social media, online marketplaces, and other interactive web applications. This technology has had a massive impact on our lives, as it has enabled users to create, share, and consume content, and transformed the way businesses and consumers interact.
Web2 has a fundamental flaw, however, and that is that users do not truly own their data or digital assets. With Web2, data and assets are stored on “centralised” servers owned by companies such as Facebook, Amazon, and Google. This means that there is the potential for issues such as data breaches, censorship, and a lack of control over personal information. In addition, many companies charge high fees for their services, limiting access to those who can afford it. This is where Web3 comes in.
Web3, aka the “decentralised web,” is the third generation of the Internet. This version of the web is characterised by the use of blockchain technology, cryptoassets, and other decentralised technologies designed to create a more open, transparent, and secure economy.
Web3 will offer a better, more secure way of interacting with the Internet. With Web3 technologies, users can share information and make transactions directly with each other, without the need for third-party intermediaries. This means more control over data ownership, lower transaction costs, better security, and improved access to financial services for all. Web3 will also enable new business models, increasing efficiency across a range of industries, from finance and healthcare to supply chain management and content creation.
The history of Web3 can be traced back to the creation of Bitcoin, the first cryptoasset, which was launched in 2009. Bitcoin introduced the concept of a decentralised, trustless, and immutable ledger that could be used for secure and transparent transactions. This led to the development of other blockchain-based platforms and applications, such as Ethereum, which in turn, led to the creation of a range of other exciting blockchain-based projects and technologies.
dApps will drive Web3
One way we will all interact with the Web3 ecosystem in the future is via dApps — software applications that run on distributed peer-to-peer networks rather than being hosted on a centralised server. dApps are similar to the apps we all have on our smartphones now, except that they run on decentralised networks such as Ethereum.
Web3 applications can provide solutions to problems that exist for many industries, such as high transaction fees, slow payment processing, centralisation, and a lack of transparency. And today, they are being developed to decentralise and improve a range of business models. Some potential use cases include:
- Financial services: dApps can be used to facilitate peer-to-peer financial transactions, such as the exchange of currencies or the transfer of assets.
- Identity verification: dApps can be used to securely store and verify identity information, such as for voter rolls or passport applications.
- Supply chain management: dApps can be used to track the movement of goods through a supply chain, ensuring transparency and accountability.
- Social media: dApps can be used to create decentralised social media platforms, allowing users to interact and share content without the need for a central authority.
- Data storage: dApps can store data on distributed networks run by computers scattered across multiple locations, making the storage more secure.
Examples of popular dApps include:
- Filecoin: Filecoin is a decentralised storage provider that enables anyone to rent out spare storage space on their computer. By allowing anyone in the world to join the network, it can create a huge source of data storage.
- Fetch.ai: This is a blockchain platform that uses artificial intelligence to help people automate transactions on the web, such as booking a flight or hotel room.
- Brave: Brave is a project that aims to create a privacy-focused Internet browser that provides a better user experience than today’s browsers.
Now, dApps all have their own tokens. For example, FET is the native token of the Fetch.ai platform. It’s used to consume services within the platform. Users can also stake their FET for the opportunity to have a say in the governance and direction of the platform. Similarly, FIL is the native token of the Filecoin platform. FIL is used to pay for storage and retrieval, and for any other transactions on the network. These tokens, and a range of others, are all available on the eToro platform.
eToro’s Web3Applications Smart Portfolio
To help investors capture the opportunities generated by the rise of dApps, eToro has developed a Smart Portfolio that provides access to both crypto tokens powering dApps (the focus is on dApps outside the financial sector), and innovative companies that have partnered with dApps to create new business models and enhance customer experiences.
Examples of cryptoassets in the Smart Portfolio include:
- FIL: The native cryptoasset of the Filecoin platform.
- FET: The cryptoasset that powers the Fetch.ai platform.
- BAT: The utility token made to be used with the Brave browser.
Meanwhile, examples of businesses included in the portfolio include:
- Nike: Nike recently released .SWOOSH, a platform that allows users to buy and trade digital collectibles such as virtual sneakers or jerseys. These items can be worn in video games and other immersive experiences.
- Samsung: Samsung recently signed a deal with blockchain company Theta Labs to launch an NFT ecosystem for its new range of Galaxy mobile phones.
- Oracle: Oracle recently announced that it is partnering with Web3 services platform Chainlink to help start-ups to sell their data.
Because Web3 is an emerging asset class and asset prices are extremely volatile, diversification is a major feature of this Smart Portfolio. In total, the portfolio contains 30 different securities with positions equally weighted. This does not eliminate risk, of course. However, it does reduce security-specific risk substantially. In other words, a large decline in the price of one or two securities is unlikely to have a major impact on the value of the entire portfolio.
Designed for forward-thinkers, the Web3Applications Smart Portfolio offers a straightforward way for investors to gain exposure to Web3. Through this portfolio, investors can direct capital towards a range of exciting, disruptive technologies, and position themselves for the future. For more information, click here.
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