7 Ways How To Invest In Web3 In 2023 (No Gimmicks)

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Hardly a day passes without some reference to Web3 or decentralization.

From the explosive growth of Bitcoin to random strangers on the internet selling selfies as NFTs and making millions, it’s no wonder everyone and their grandma wants to capitalize on this once-in-a-life opportunity to grow their wealth.

According to Triple-A, global crypto adoption is around 4.2%, which equates to over 320 million crypto users. While Mckinsey’s metaverse study has observed a total of $120+ billion of investment inflows, with 15% of corporate revenues projected to come from this space in the next 5 years.

Web3 is the latest evolution of the internet, and it’s poised to revolutionize how users interact with digital content through decentralized applications.

It also strives to give control back to individuals rather than the centralized companies that reign supreme over them.

However, it’s not all rainbows and unicorns.

From falling crypto prices to the collapse of major crypto exchanges and rug pulls by numerous NFT projects, it seems you have a better chance of making money by going to the casino.

So while there are a lot of opportunities and potential to grow your net worth by investing in this space, the risks associated with them are also huge.

As an investor and a professional marketer who has worked for Web3 companies, I would like to give my thoughts and opinions on the proper ways to approach this endeavor.

In this article, I go through the 7 non-gimmicky ways to make the most out of your web3 investment and highlight certain pitfalls so that you have a better chance of making money.

Let’s get started.

What Is Web3?

Web3 is the future of the internet, poised to revolutionize how users interact with digital content.

It is a term used to describe a suite of decentralized applications and autonomous systems powered by blockchain technology that is drastically shifting how people use and access data online as opposed to the centralized architecture of Web 2.0.

This means that users now have more control over their data and how it is used and can connect to each other directly without relying on third-party sites or services.

There are applications in major industries such as finance, healthcare, and entertainment.

We have come a long way since Web 1.0 – the dawn of the internet – and with Web3, we are moving into a new era of digital possibilities.

What Are the 7 Ways How To Invest in Web3?

Here are my top 7 methods to invest in Web3 in no particular order:

1) Buying Cryptocurrencies

Cryptocurrencies are the native coins that are associated with a particular blockchain. These include Bitcoin (BTC), Ethereum (ETH), and Solana (SOL), among many others.

They are usually the primary transaction medium when it comes to any activity that occurs on that particular blockchain network.

If you had a time machine and went back to buy 1 Bitcoin in 2009, that would have cost you $0.00099.

Bitcoin's price history since 2009 — Source: Investopedia

And if you sold at an all-time high back in November 2021 for $69,000+, that’s a 6,969,696,869.70% return.

Not bad, right?

Well, the truth is nobody is that lucky, and I cherry-picked that growth statistic.

However, Cryptocurrencies like Bitcoin have made positive returns since their inception but are highly volatile,

Investing in them can result in good profits over the long term if you are willing to stomach the massive fluctuations.

They can be a great way to invest in the future of Web3 since it could very well be the main form of transacting, but it is vital to do your due diligence as this is still a relatively new asset class.

Important Tips When Investing in Cryptocurrencies

Continually assess your risk by making sure cryptocurrencies don’t make up a considerable percentage of your portfolio. I personally only allocate between 5-10%.
Stick to blue chips that have been around the longest with strong adoption by institutions and reputable investors. This means I wouldn’t invest in anything outside the top 20 cryptocurrencies in market cap. Anything beyond that is pure speculation.
Use a reputable online exchange or broker when purchasing cryptocurrencies. However, with the fall of so many exchanges, I wouldn’t trust any of them. Unfortunately, you don’t have many options but go through one if you want to invest in this asset class. So, if I had to pick, I would go with Coinbase for now because they are listed on the NASDAQ and are at least regulated by the SEC.
This brings me to my most important point, which is to ALWAYS transfer your crypto to a cold wallet like Ledger or Trezor. The reason is you don’t have ownership rights if left on exchanges. So even though you think you have them, you technically don’t.

2) Buying NFTs (Non-Fungible Tokens)

Even if you have been living under a rock for the past few years, I’m sure you would have at least heard some ridiculous news about pictures of monkeys being sold for a few grand or even millions.

Bored Ape Yacht Club #8817 — The most expensive BAYC NFT is Bored Ape #8817, which sold for an insane sum of $3.4 million.

NFTs can represent any asset, including digital art, music, digital collectibles, videos, tickets, and more.

They are unique digital assets stored in blockchains that are non-interchangeable and governed by smart contracts.

Hence, the term “non-fungible” means no two NFTs are identical, even if they look identical because they have a unique digital identifier.

If you want to feel sick to your stomach, here is a list of the top most expensive NFTs ever sold.

Most NFT projects have a limited supply, creating scarcity, and might have a very promising roadmap that could result in future utility for your purchases.

Bored Ape Yacht Club collection information on Opensea

Couple this with massive endorsements by influencers, social media hype, and greed, and you get an asset class that could literally make you rich overnight.

Sounds like the perfect money-printing machine, right?

Unfortunately, the majority of these projects fail, and investors lose all their investments as prices plummet to zero.

So why do I include it in this list, you may ask?

Despite its massive shortfalls, NFTs have proven to be a viable investment option that many investors, entrepreneurs, and even big companies have dived into, which yielded them positive returns.

Important Tips When Investing in NFTs

Be extremely careful not to over-allocate too much capital to NFTs, as they are a highly speculative asset. Even more so than Cryptocurrencies. I wouldn’t go above 5%.
Always do your research (this goes without saying) on the team behind these projects. Ensure that they are fully doxxed. This means being about to find information about them on social media about who they are, their professional experience, etc.
Check the NFT distribution and ensure that no more than 10-15% is allocated to the team (less is better). For example, if the total supply is 10,000, no more than 1,000-1,500 should be set aside for them.
They are active on social media channels and provide regular updates about the project that are actually being implemented. Don’t tolerate consistent excuses.
Most of the funds generated from the sale are put toward developing the project.
Ensure that the project’s treasury wallet is fully public.
Check the influencers promoting it and their track record in the space.
Check for any reputable companies or investors who are backing the project.
It’s better if the project has already existing utility instead trying to raise money and promising it in the future.
Ensure that the number of unique owners is high. Meaning that there shouldn’t be many people owning multiple pieces.
Beautiful art helps, but don’t let the overall aesthetics cloud your judgment and ignore everything I said above.

3) Buying Web3 Tokens

Web3 tokens are similar to cryptocurrencies but are usually issued by existing companies, which predominantly include those in Defi (Decentralized Finance), gaming, and NFTs.

These are built on top of an existing primary blockchain protocol like Ethereum and operate within its parameters.

Building tokens on Ethereum — Source: Binance

Think of it as cars on roads. You can make any car you want, but you still need a place to drive it and adhere to the traffic rules.

Another analogy would be the Apple software ecosystem. You can make any application you want, but you need to use the Swift coding language, use the App store to distribute your creations, and follow the terms and conditions.

I probably butchered those explanations, but I hope you get the point.

They have a wider range of uses, such as representing a “share” in a company, access to a platform or product, or other digital assets.

Note: You technically don’t have ownership if you own a token. However, there is some correlation regarding potentially receiving benefits if the company or project does well.

Aside from NFTs, Tokens are another way to get exposure and speculate on a Web3 project’s success and the benefit of a price increase.

Important Tips When Investing in Web3 Tokens

Tokens can have an unlimited supply because the company can issue as many as they want. However, if there is too much and no real way to use them, people will get rid of their tokens, and those left holding will lose.
Make sure there are use cases for these tokens and not just a way for the company to raise more cash.
Read the whitepaper and understand the token distribution. Similar to NFT distribution, the team should not hold most of the supply.

4) Staking Cryptocurrencies, NFTs, and Tokens

Staking is another way to invest by making passive income on your existing Web3 holdings.

It is the process of locking up your cryptocurrency, NFTs, or tokens in exchange for a proportional percentage of the network or ecosystem’s rewards.

In other words, staking is a way to earn passive income by allowing users to become network owners. The more you stake, the more you get rewarded.

The most common form of staking is proof-of-stake (POS). In this model, users stake their digital assets in exchange for the right to validate transactions on the network, vote on future developments, and participate in other governance activities.

You will be required to lock up your assets in a staking wallet for a particular duration, and usually, the longer you stake, the more rewards you earn.

This ensures that validators will act in the network’s best interest, as they have a financial stake.

Similar to placing funds into a savings account, it’s a way to earn some passive income with your web3 tokens.

Important Tips When Staking

Many platforms promise insane returns like double digits rates per month, year, or even daily. Don’t believe that nonsense, as it’s a recipe for failure.
The majority of platforms have minimum staking periods. If you decide to unstake your assets prematurely, you might lose any rewards up till that time.
Specific platforms are centralized, so you essentially give away ownership of your assets during the staking period.
Staking doesn’t make your investment immune to fluctuations in the underlying price.
The network can still be hacked, and you might lose your assets.
You can be subjected to counter-party risk. If other validators are dishonest or try to game the system, you can be penalized too.
It’s important to note that each platform has different terms, mechanics, and rewards.

5) Buying Web3 Native Stocks

Many tech companies are actively involved in developing Web3, that are listed on stock exchanges.

These can include centralized crypto exchanges, like Coinbase (COIN), social media platforms like Meta (META), previously Facebook, or even Bitcoin miners like Cleanspark (CLSK) and HUT8 (HUT).

Here are other companies you can consider:

GPU (graphics processing units) manufacturers like Nvidia (NVDA) and Advanced Micro Devices (AMD) provide the hardware for miners.
Semi-Conductor Chip manufacturers like International Business Machines Corporation (IBM), Micron (MU), Qualcomm (QCOM), Intel (INTC), Taiwan Semiconductor Manufacturing (TSM), Nvidia, and AMD too.
Banks like JPMorgan Chase (JPM), Goldman Sach (GS), and Morgan Stanley (MS).
Payment Solutions companies like Block (SQ).
Video Game Software Developers like Unity Software (U) and Nexon (TYO:3659).

Just like a traditional stock, you can use your preferred online broker and purchase stocks that you feel have the highest potential for growth in the long term.

Important Tips When Investing in Web3 Native Stocks

The companies with their primary business revolving around the success of Web3, like Coinbase, CLSK, and HUT8, have a much higher risk of failing compared to the rest that has other business verticals and are thus more diversified.
Consider these companies highly speculative and keep your percentage allocated to these companies extremely low.
The majority of Web3-reliant companies are still not profitable.

6) Buying Proxy Stocks

Like the previous method, proxy stocks are a way to get indirect exposure to the Web3 ecosystem in companies that are not explicitly developing products and services for the space.

Instead, the companies could fall into these categories:

Have invested in Web3 projects
Possess cryptocurrencies, NFTs, or Tokens on their balance sheet
In partnerships with other Web3 native companies
Adopted crypto payment methods

Some prominent names include Tesla (TSLA) and Microstrategy (MSTR).

Important Tips When Investing in Proxy Stocks

Proxies are usually less volatile, but it depends on their level of involvement. Microstrategy has a very high concentration of its treasury in Bitcoin, thus posing a much more significant risk should the underlying asset fail.
By using proxies, you also can utilize traditional derivative instruments like options to hedge and manage your risk.

7) Be a Content Creator

This last method is a little unconventional.

However, the success of Web3 has a direct correlation to the future exponential growth of the creator economy and all its participants.

It embodies what the new version of the internet offers to individuals like you and me.

Look at it as investing resources into developing your brand by creating content in a specific niche and building digital real estate.

I know it starting can be a little daunting, so I have an article about how to overcome content creation fears if you are interested.

But the ability to monetize your audience directly as a content creator in the future once the ecosystem has fully matured presents the best risk-to-reward potential to grow your wealth.

Important Tips When Being a Content Creator

Be aware of potential scams and fraudulent activities. Many platforms and services that offer to help you generate revenue can be misleading, so do your due diligence and research before getting involved.
Understand the technology behind the platform you are utilizing.
The industry is still very new, and you want to prepare yourself, not dive in blindly.

Why Is Web3 Important?

It can potentially change how people interact with technology and how businesses operate in the digital space.

With more startups, products, and services launching every day, it presents an opportunity to get in early and benefit from what could become a revolutionary shift in how the world functions.

If you are an investor, this means some excellent returns if the industry grows.

Furthermore, suppose you are a content creator or a business.

In that case, you stand to benefit significantly by being able to monetize directly through your fans rather than going through a centralized platform that takes a big chunk out of your profits.

Ultimately, investing in Web3 could open up a world of possibilities for those interested in taking advantage of the latest advances in technology and finance to make capital gains and avoid paying middleman fees.

What is the Web3 Ecosystem Like?

It’s the next step in the evolution of the internet, where users can hopefully live a life straight out of Ready Player One.

With the Web3 ecosystem, users can experience the latest in artificial intelligence, blockchain technology, virtual worlds, and the semantic web – a smorgasbord of cutting-edge technology.

These are the building blocks that provide the tools necessary to create dApps, or distributed applications, that offer a new level of user control, security, and privacy.

It also facilitates the development of a new digital asset economy, where users can create, store, and manage their own data, digital assets, and identities.

With the emergence of Web3, users will hopefully be able to interact with the web more securely and efficiently compared to the present.

What About Investments in the Metaverse?

Investing in Web3 is inherently betting on the success of the Metaverse. While the two phenomena have different technologies, they are both parts of the broader decentralized web that are actually closely connected.

Both terms are used so interchangeably online that it confuses so many people.

Heck, even I’m confused.

But I like to think of Web3 as the observable advances in the hardware, software, and infrastructure of the next phase of the internet. While the Metaverse is a theoretical concept that illustrates a new wave of online experiences as a result of Web3.

So if you are already invested in any of the methods mentioned in this article, you are getting exposure to the Metaverse.

How To Invest in Web3 (FAQ)

Why Is Web3 Not Fully Implemented?

The technical aspects of Web3 are complex that require significant resources and expertise to be implemented. It involves building new infrastructure, as well as new protocols and standards that are compatible with the existing web.

There are also no clear guidelines and legal protection from governments and other regulatory bodies. This lack of clarity creates uncertainty and gives rise to many bad actors operating dishonestly for financial gain.

This ultimately affects users’ confidence and slows down the rate of adoption.

As such, most companies are still hesitant to commit the necessary time and resources to progress the industry at the speed we expect.

Should I Invest in Web3?

I am not your financial advisor, so please do your own research before investing.

Do note that this is a very risky sector to go all in because you will be more likely to lose your pants than be a millionaire overnight.

What Will Web3 Be Like?

Honestly, nobody knows, and it could very well be a major flop. However, I am an optimist and foresee it as part of our everyday lives.

Probably not what is depicted in Sci-Fi movies, but a world that is more open-sourced, transparent, and equal.

To Sum Up

Investing in Web3 may present a unique investment opportunity, but it doesn’t come without extreme risks.

While no one can predict the future, you should take the time to understand the technology and its potential applications.

Also, do your due diligence and assess the risks associated with any investments.

Finally, with proper risk management, you can capitalize on its potential and reap the rewards in the years to come.

If you like this article, please don’t forget to share it with those who think investing in Web3 is some magic money-printing machine with zero risks.

Also, leave a comment below if you have any other methods to recommend and for me to add to this list!

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About the author

Brendan Aw

Brendan is the Founder and Editor-in-Chief at brendanaw.com™, where he helps others succeed in the creator economy. Before launching his blog, he was the marketing manager at various E-commerce, NFTs, Crypto, Marketing Consultancy, Finance, and E-sports companies. He now works on his family’s luxury lighting business in Cambodia while documenting his journey as a creator online.

Learn more about me.

7 Ways How To Invest in Web3 in 2023 (No Gimmicks)