How to Invest in Web3? Insights from Industry Specialists

Introduction

The digital landscape is undergoing a transformation, with Web3 at its helm. Often referred to as the decentralized internet, Web3 offers a vision of a user-centric online world, where data ownership and transparency reign supreme. As this new era dawns, the question on many minds is. “How to invest in Web3?”. With giants like Nike making waves in the gaming world through Web3, and the potential synergies between generative AI technologies like ChatGPT and Web3 becoming increasingly evident, the momentum is undeniable.

However, like any investment, diving into Web3 requires careful consideration, research, and guidance. This is where our expertise comes into play.

How to invest in Web3: Safe Investment Options

Safety is paramount when it comes to investments. As specialists in the industry, our experience suggests focusing on established Web3 platforms, projects with clear tokenomics, and entities that prioritize transparency and user security. The gaming industry, for instance, is already seeing the integration of Web3, with crypto games emerging as a significant market segment, accounting for about $5 billion of the $200 billion gaming revenue in 2022. 

Even if crypto scam revenue dropped 46% in 2022, not all bad investments fall within scam purposes. Many projects out there are legitimate and endeavor to offer increasing investment protection to ecosystem participants. Given that the technology is relatively new and open source, it is not always easy for builders to be 100% sure that their smart contracts will not be exploited causing irreparable losses for those who invested in their project. By opting for the safest investments and diversifying your portfolio, you not only minimize risks but also position yourself to reap the benefits of this burgeoning sector. 

Key Elements to Assess Crypto Investments

When considering to invest in web3, it’s crucial to understand KPIs affecting the project, especially those related to tokenomics. Evaluating the following metrics can enhance the chances of successful investment:

• Market capitalization: the multiplication between the asset price and its circulating supply. The higher the market cap, the lower the potential growth could be, but the investment might be safer. Always refer to this metric instead of the mere asset price that can be misleading.
• Token supply: the total number of tokens that will ever be created. An excessive circulating supply can create constant selling pressure if not balanced with deflationary measures.
• Token distribution: how the tokens are allocated (e.g., team, advisors, reserves). Optimizing token distribution plays a pivotal role in instilling trust among investors.
• Token unlocks: when and how many tokens are released over time. It’s important to regularly check the token unlock schedule to spot the dates during which a large token quantity is unlocked to be public. More supply in circulation often leads to higher selling pressure.
• Utility: the purpose and use cases of the token within the ecosystem. Remember that is the product/service that brings value to users, the token helps to capture the created value.
• Liquidity: how easily the token can be bought or sold. By investing in a liquid asset you make sure to spend minimal fees when trading against other assets. Furthermore, a liquid asset is less subject to market speculation.

By focusing on these KPIs, web3 investors can make informed decisions and assess the potential return on investment.

How to Invest in Web3 Crypto

It’s often hard to find proper information about crypto protocols in order to correctly assess their value. Following the steps below can help you on that:

• Research: begin by familiarizing yourself with the project’s vision and growth potential. Websites such as CoinMarketCap and CoinGecko are excellent initial resources for general insights, while Messari and Nansen cater to more sophisticated web3 users seeking in-depth analytics. Delve deeper by assessing various aspects of the project, including the team, investors, and tokenomics. For a comprehensive understanding, compare these elements with benchmarks from competitors.
• Choose a safe option: prioritize trusted and established platforms over newer entrants. Protocols with a track record of security are likely to maintain that reputation. Be wary of platforms promising unusually high returns; while you might accumulate tokens rapidly, an inflated supply could depress the asset’s price.
• Select a reputable exchange: centralized exchanges (CEXs), such as Binance and Coinbase, enhance the trading experience through their comprehensive security measures and highly accessible, user-friendly interfaces. However, decentralized exchanges (DEXs) like Uniswap also present viable investment avenues. To determine the best fit for your needs, explore the comparison between CEXs and DEXs.
• Diversify: don’t put all your eggs in one basket. Diversify your investments across various projects to mitigate risks.

Beyond cryptocurrencies, Web3 stocks represent another avenue for investment. Investing in companies like Coinbase and MicroStrategy, which have prices deeply correlated with the crypto market, offers investors an advantageous opportunity to positively engage with the success of the crypto market.

BrightNode: Your Trusted Partner in Web3

Designing tokenomics is not a one-size-fits-all approach. It requires a deep understanding of the project’s goals, the crypto market, and the needs of potential token holders. By following this guide, projects can ensure they’re not only creating a token that has value but also one that aligns with their overarching goals and the needs of their community. 

At BrightNode, we specialize in Web3 consulting, helping businesses and individuals navigate the complexities of the decentralized world. From understanding tokenomics to crafting impactful white papers, our team is here to guide you every step of the way. Our vast experience and deep expertise make us the go-to choice for those looking to invest in web3 by making informed investment decisions.