The Big News: Web 3.0

The Big News: Web 3.0

Blockchain is often described as the “Internet of Value” which I think is an apt description. Building on that, let’s look at how Blockchain technology is ushering in the next era of the Internet: Web 3.0.

The problems with our current internet are essentially the same as those of our financial system. Namely, excessive dependence on intermediaries, which (as we’ve discussed before on the blog) adds an “intermediary tax”. Remember when Amazon S3 was down and it seemed like the internet stopped working? Or, how about the fact that we sacrifice our personal data so that other companies can profit from it? This is the intermediary tax in action.

The promise of Web 3.0 is “a completely decentralized version of our current internet, with no firewalls, no tolls, no government regulation, no spying. Information would be totally free in every sense of the word.” (ht to Silicon Valley, turns out they’re funny and factual). But how do we get there?

Fred Ersham (previously co-founder @Coinbase) gives a great overview on all the parts of the stack needed to build completely decentralized applications. We’ve come a long way, but according to Fred’s estimation, we’re only about 70% of the way there.

 dApps Developer Stack 2014

dApps Developer Stack 2014

 dApps Developer Stack 2017

dApps Developer Stack 2017

What does this mean from an investment perspective? In essence, we are in a phase of massive infrastructure build out, similar to the roll out of railroads across the USA. The internet protocols we use today are old, outdated, and were predominantly developed by governments and universities who lacked monetary incentives to optimize these protocols to their fullest.

In contrast, during this phase of infrastructure build out, we have an amazing way to monetize the development of Web 3.0 protocols through tokenization (i.e. ICOs). Open source developer teams can raise hundreds of millions of dollars from people around the globe in order to build decentralised file storage or “the world’s super computer”. We have the potential to build a much better internet, largely because there is now money being invested in it.

Were there booms, busts and bubbles in the railroad era? In the dotcom era? Absolutely. Just as there likely are today in the cryptoasset market. However, a great analogy from Olaf-Carlson Wee of Polychain Capital, helps to keep a long term perspective:

It’s obvious that if you would have invested in the early rounds of Apple, Facebook or Google, you would today be sitting on piles of money. However, Wee argues that you would have made even more money investing in early internet protocols like TCP/IP and HTTP. Think of the millions of applications and websites that use these protocols millions of times each day!

We didn’t have the ability to invest in the protocols of the first internet, but we do have the ability to invest in Web 3.0. Think about that the next time someone tries to pop the crypto bubble!


Interesting Articles

  • Pantera Capital is creating a new hedge fund focusing primarily on new tokens. They plan to raise $100 million with have $35 million committed from existing investors. LInk

  • Records shattered, then shattered again! New EOS Token raised $185M in first 5 days on the promise of being able to process millions of transactions without any fees. Link Simultaneously, Tezos has raised over $205M with 1 week remaining in their ICO. Link

  • EOS released a Token Purchase Agreement to hopefully rid itself of any legal issues. The agreement states that those in the US cannot participate and that the EOS token is not actually a cryptocurrency and has no actual purpose Link

  • Multiple banks in Portugal and Italy are being bailed out after nearly going bankrupt. If this is any indication to similar banking events that occurred in Cyprus in 2013 we could see a tremendous spike in the Bitcoin price. Link

  • Bitcoin’s price increase is compared to bubbles in Oil, Gold, the Nasdaq, and Homebuilders over the last 30 years. Link

  • WSJ’s take on Bitcoin puts a very pessimistic outlook on the currency due to the fees and slow transaction times. Link

  • Need some new podcasts to listen to? Coin Noob lists the 11 top cryptocurrency podcasts.


Chart of the Week

Lots of buzz around Bitcoin breaking out of this bullish pennant. We'll see how things fare heading into 1 August and the potential hard fork. 

BTC Pennant.png