The web is evolving. It is turning from “Web 2.0” into Web3.

And the next iteration is very different from what we have now.

It relies on new technologies and offers its users some rights and benefits that are not available now.

In this article, we will look at what Web3 is and how it compares to the metaverse, which is another “future internet” that gets a lot of coverage—and causes some confusion.

What Is Web3?

Web3 is a set of technologies that could transform today’s internet. To understand Web3, it’s best to look at the problems we have now and the new technologies that solve them.

First, it’s centralization. You may not know it, but Amazon runs about one-third of the internet globally. Yes, about one-third of the global cloud ecosystem belongs to one company.

How? Amazon runs Amazon Web Services (or AWS), which works with hosting providers that sell “digital capacity” to run websites on.

So, your hosting provider likely just rents Amazon’s server space and resells it to you. In other words, Amazon is one of the world’s largest “digital landlords.”

Google is a household name. Alphabet’s (which is Google’s corporate parent) advertising business accounts for about 29% of the total digital ad spend. Meta (formerly Facebook) controls about 24% of the total.

So, these two companies control more than half of the online ad business.

The list goes on. Microsoft and Apple are other examples of “big tech.”

And these few companies have immense power over the internet.

Big Tech Leaves Its Users Powerless

Private enterprises don’t report to anyone other than their shareholders.

So, their users have no say in how they work or treat their customers.

And these companies have been shown to use some damaging practices to ensure revenue growth.

Web3 is the internet’s way of saying “enough.” It’s a digital revolution powered by the idea that the internet should be decentralized and maintained by the community as opposed to a few massive corporations.

Web3 uses blockchain to get rid of intermediaries like financial institutions or courts. Instead, it relies on a publicly maintained blockchain that ensures transparency and contract enforcement.

Web3 and blockchain go together because blockchain is decentralized.

Web3 Is Bigger than Blockchain

Web3 is an attempt to build a decentralized system for everything: money, laws, ownership, entertainment, and identity. If you use Web3 as it’s designed, there’s no corporation harvesting your data and selling it to advertisers.

One of the business models working for investors right now is the transfer of the traditional economic and legal systems to blockchain-based solutions.

Bitcoin has become the dominant force in the cryptocurrency area. Ether is another popular crypto.

Crypto exchanges facilitate crypto trading. Coinbase is one of the largest exchanges, and it has a market capitalization of $67 billion.

Companies building out Web3 infrastructure could be worth looking at, in our opinion. If their solutions to the Web 2.0 problems gain traction, they might become household names themselves.

How Does Web3 Compare to the Metaverse?

Web3 is a set of solutions to the shortcomings of the modern internet. Web 2.0 is controlled by corporations that develop proprietary protocols and harvest user data.

Web3 puts ownership and control in the hands of its users and the community that maintains the network.

The metaverse, on the other hand, is a shared digital reality. It provides users with ways to connect to each other, build economies and interact in real time. It doesn’t necessarily get rid of the idea of corporate presence or leadership. Meta (or Facebook) could still sell ads in three-dimensional virtual worlds and be a big player.

This friendliness makes metaverse an interesting area to look for investment opportunities.

So, while Web3 provides solutions to the problems of the current internet, the metaverse is a bigger idea. It uses Web3’s solutions like blockchain or non-fungible tokens (or NFTs) and puts them into an always-connected digital reality.

Web3 is focused on the digital infrastructure that will provide better alternatives to Web 2.0’s problems.

Metaverse could absorb both Web 2.0 and Web3 and use all the technologies we have so far and will develop in the future to build a massive digital reality.

How to Approach Web3 and the Metaverse

In our opinion, just because the metaverse is discussed more often doesn’t mean that Web3 should be ignored. Web3 is already powering trillion-dollar trends like bitcoin.

So, naturally, cryptocurrency is a Web3 native. While we do not provide investment recommendations in these articles, we suggest keeping environment-friendly cryptos in mind. They might have a better chance of survival if government regulators continue pushing for the crypto space to become “greener.”

Web3 gave the world NFTs, or unique assets that exist on the blockchain and can be traded. Over the past year, NFTs have been one of the most popular investment themes.

As a result, taking a look at NFTs could be another option.

NFTs are a part of a bigger Web3 “decentralized finance” (or DeFi) ecosystem, which also involves crypto. So, researching companies involved in DeFi might, in our view, also be a good idea.

However, beware of risks. Web3 is in its earliest stages of development, so there is a lot of uncertainty about which technologies will be likely to survive.

The Question Investors Should Think About

An intuitive way of considering Web3 and metaverse opportunities is by asking the question: “Would this investment work today?”

Digital ads are a lucrative space to be in, so the companies that move their digital ad business successfully to the metaverse might have a good chance of becoming successful there.

Gaming is a massive, billion-dollar industry, so a company that takes gaming to the metaverse might, in our view, have a shot at becoming successful.

In other words, the internet is transforming both in terms of the underlying technology and the economy that will be built on top of it.

The internet needs new infrastructure (Web3) to build a new reality (metaverse).

Understanding what it takes to build a successful business in today’s virtual reality should give you a hint as to which companies could become the winners of the “future web.”

Thank you for your loyal readership,

The Financial Star team