Profitable ways to invest in web 3 projects
How can I invest in web 3? This question is popular among newbies in the web3 space who want to be a part of it’s community. One of the easiest ways to be a part of something great is to invest in it. Whether it be time or resources, there are ways to not miss out on all the action. You do this by investing.
Web3 is fast expanding, and organizations and individuals are also beginning to venture into investing. Cryptocurrency, DAO, Defi, NFT, and Blockchain have indeed become popular terms. However, a large number of people still do not know how to strategically invest in web3 projects like these.
In this article, we are going to learn about the investment opportunities in web 3,
Opportunities And Ways To Invest In Web 3
There are several exciting ways to invest in web 3. They are grouped under the following broad categories of investment opportunities.
Cryptocurrencies
Since Web 3 allows tokenization of solutions and products built on the blockchain, cryptocurrencies are such a simple way of becoming part of leading innovations and tech.
Cryptocurrencies are digital assets backed by the blockchain. They are also used as a hedge against inflation and the store of wealth.
Prices of cryptocurrencies are often determined by a lot of things. Some of these determinants include seasons in crypto such as bull or bear market, sentiments, adoption, and projects. Above all, traders’ decisions and trading patterns largely affect how profitable such a venture can be.
These cryptocurrencies allow people to be part of tech. They are also a means of investment, and transfer of value.
Cryptocurrencies like Bitcoin have history been highly profitable. In 2011, bitcoin traded at around $0.08. It witnessed huge gains, reaching an all-time high of around $65,000. Similarly, Litecoin at launch traded at around $0.30 and moved to an all-time high of $412.
While these crypto-assets and crypto market cap reached $3 billion in total investments, the recent decline has seen investors trading below $1Billion. This has made most crypto currency value drop by at least 50% since their all-time high.
Decentralized Finance (DeFi)
Decentralized finance (DeFi) allows cryptocurrency holders to do more with their crypto holdings. They can be stored either in stable coins or other assets while waiting for prices to go higher.
Decentralized finance is an invention that allows users to access services similar to ones provided by banks for fiat. It also allows users to borrow and lend cryptocurrencies. Furthermore, you can stake cryptocurrencies as well as yield farming or liquidity mining.
Let us clarify what staking and yield farming is in DeFi.
Staking
Staking is an easy concept in DeFi. Here, token holders delegate their tokens via their wallet to a validator. This validator helps to keep the blockchain network secure through a system called proof of stake.
The staking protocols/validators in turn offer stakes an annual percentage yield on their cryptocurrencies.
For example, staking 100 units of Bitcoin at a 20% annual percentage yield gives you 120 units of Bitcoin at the end of the staking period. You can make more Bitcoin while waiting for it’s value to go higher.
Depending on the protocol and tokens, some protocols allow staking for 7 days, 30 days, and more. During this period, these crypto-assets are locked in the vault till the unlocking period. You cannot gain access to your crypto currencies until the waiting period.
Yield farming
Unlike staking, yield farming is a bit more technical, providing liquidity for protocols and swaps. In a nutshell, they ensure seamless swaps of different pairs such as ETH/USDC. Yield farming or liquidity mining often gives a higher annual percentage yield when compared with staking.
The major difference between both is in provide liquidity. One needs two tokens of equal proportions such as USDC and Ether. They should also be of same value as at the time of providing liquidity. Every time people make swaps on these protocols, a percentage of the transaction fee is added to the liquidity.
For most platforms, one can easily remove liquidity and reward. The major challenge with liquidity mining is a concept termed impermanent loss. This means that both pools of provided assets are rebalanced to be of the same value. Indeed, this affects the value you get back at the end of the liquidity period.
NFT’s Play to Earn
Play-to-earn games are one of the newest investment trends in web 3. Here, users play games such as Minecraft, horse, and several other games using non-fungible tokens. Gamers are rewarded with tokens like in legacy, Axie Infinity, and Crab Add.
Play to earn is a growing industry that has caught the attention of several investors for good reasons. Sinnce Axie Infinity moved from less than $5 to around $180 all-time high, interest in this web 3 project has peaked.
Similarly, ‘move to earn’ allows people to earn cryptocurrency either by walking in real-time or navigating the Metaverse. This is powered by an NFT concept that allows users to purchase shoes of different attributes to walk and earn cryptocurrencies in the process.
In Conclusion
Web 3 offers an entirely new world of investment opportunities. Investing in cryptocurrencies, NFTs, and web 3 companies can be profitable. However, just like most business ventures, there are still several underlying risks.
Investors are advised to make proper research on any project before investing.
