Every few decades, a set of technologies converge to reshape the global economy and the system of human affairs. We saw this with the Internet, the convergence of content networks, computing, and telecommunications that took us everywhere, at once. Before that, it was power generators, electrical grids and light bulbs that provided us with 24/7 production.
- Generative AI and large language models like ChatGPT are making people and businesses more creative and diligent and unleashing new capabilities in the economy.
- Blockchains help individuals and businesses transfer and store value, automate complex business processes, and secure peer-to-peer transactions over the Internet without intermediaries.
- The Internet of Things connects everyday objects — from doorbells and thermostats to autonomous vehicles and road sensors — to data centers, forming a smart network for our connected world.
- Augmented and virtual reality takes the existing 2D web and transforms it into a spatial grid integrated with our natural environment.
- Biotechnologies leverage living cells and biomolecular processes to enhance human health through more targeted treatments and more nutritious foods.
- Advances in energy harvesting, batteries, and other storage technologies will revolutionize transportation, power grids, and public infrastructure with greener, cleaner options.
The world is entering a new era – call it Web3. Let me explain: Just as the term Internet has expanded from its original definition of online communication to describe an era that includes many technologies, business models, and social behaviors, so the term Web3 is evolving to describe an era consisting of the combination of technologies listed above, with new models and behaviors. These will define the next era of the Internet.
The way you look at them affects how much you value them
What does this new era mean for investors? In the mid-1990s, portfolio managers could choose between value stocks such as America Online, Blockbuster, Borders, Compaq, Dell, JC Penny, Kodak, Nokia, Nortel, Palm, Polaroid, Sears, Sony, Tower Records, and Xerox. Its leaders failed to embrace the first two eras of the Web in a timely manner.
If we looked at it through the lens of the Internet, investors would have valued it differently. Web3 requires a new lens and a new field guide to help investors distinguish between companies that are best led, best equipped, and most open to transforming themselves under a new paradigm.
As with previous eras of the Web, Web3 will become an integral technology for businesses. Businesses that exploit it will adapt to and have the opportunity to thrive in this coming era of digital disruption.
The future is bright, but unclear
For those who don't follow new technologies, innovations can sometimes seem like overnight success stories. Most often, it takes decades. Artificial intelligence is a perfect example. In 1965, researchers promised that artificial intelligence would fulfill all human tasks in the next 20 years. The first winter of AI came in the 1970s, after 10 years of investment in AI had yielded precious few results. Research and development has continued for decades through mild AI summers and decades-long AI ice ages.
After all, investor sentiment is cyclical. Last year, the consensus was that with the end of zero interest rates, the long cycle of technological innovation and investment was coming to an end. Web3 has been involved in this – for some time. Some pointed to the 2022 collapse of FTX to justify their concerns about Web3: This new technology, while innovative and useful in the hands of central banks or big corporations, has been entirely negative for society in the free market struggle. For them, it gave speculators new tools to bet on, and criminals new tools to evade the law. By this logic, the collapse of FTX was not due to the technology, but rather the arrogance or incompetence of those using it.
What Web3 means for investing in technology
All industries have setbacks. Did the Age of Exploration end when John Cabot disappeared in the Northwest Passage? Did the “Industrial Revolution” develop amid the Panic of 1873, when John Cook closed its doors and investors sold their railroad securities? Did we stop working on the Web when dot-com stocks tanked in 2001? Or do we find ourselves in each case at the beginning, rather than the end, of an era of astonishing upheaval, change, and progress?
This historical framework is useful for investors. It helps investors moderate their extreme views, whatever they may be, from exuberance or complacency to cynicism or dismissal.
As companies integrate Web3 technologies, perpetual platforms like Ethereum can accrue enormous value
ETH/USD
And Bitcoin
Bitcoin against the dollar
.
Companies that have planned their transition to these and other new technologies, and can weather the current market storm, can reap the rewards in the long term.
Alex Tapscott is an investor and advisor who focuses on the impact of emerging technologies – such as blockchain and cryptocurrencies – on business, society, and government. He is the author of Web3: Charting the Internet's Next Economic and Cultural Boundaries (Harper Business, September 2023)..
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