Can Web3 Make Investing More Accessible?

view original post

Jon Stone is the founder/CEO of analytics firm TradeAlgo.com, headquartered in Manhattan, New York.

The internet is on the cusp of a revolution, and it is called Web3. This new, disruptive network will be made possible by high-speed internet satellites, open software and the ever-expanding capabilities of artificial intelligence (AI), machine learning (ML) and blockchain.

Web3 is the third generation of internet services, and it will be the next evolutionary step for investing. Ignore it at your peril. We’re possibly in the early stages of the biggest technological innovation since the internet. And the upside is potentially the most asymmetric in the history of capital markets.

The conversion to a spatial web will offer a new kind of digital information. Take the metaverse as an example. It will blur the lines between the virtual and the physical world, which would open up more avenues to create wealth in markets that are virtual. As a result, the redesign of the internet will change how we invest and collaborate.

How Will Web3 Affect Trading?

In Web3, trading algorithms and AI will play a key role. At TradeAlgo, we think these technologies can extract from decentralized structured data and turn them into meaningful insights and predictions for investors.

MORE FOR YOU

The majority of financial services professionals believe that AI will add a new dimension to financial services software. In fact, 83% of investors agreed that AI is crucial to the success of their firms and, by extension, the market, according to a recent NVIDIA survey.

Meanwhile, the Bank of New York Mellon Corp announced it is partnering with Google Cloud to create high-performance computing. According to Reuters, the technology “uses artificial intelligence and machine learning to predict when BNY Mellon’s clients’ U.S. Treasury transactions will fail to settle.” In other words, it will enable traders to crunch real-time market data faster. The result? Better and faster insights into the market.

What Form Might Web3 Take For Investing?

First, it may offer users more control of their data. Data privacy is a hot-button issue, and Web3 will allow users to control their own data in “cold storage” or in the cloud.

Next, Web3 could create a more decentralized investing style that eliminates middlemen. This year the world is watching a major battle between Apple and Epic Games over the iPhone maker’s control over the App Store. With Web3’s decentralized model, companies can bypass the distribution model and deal directly with customers. Centralized brokerages for investing could be disrupted by Web3 over the next five to 10 years, as well.

I think this disruption will feature three characteristics:

• Open: It will also prioritize being open. Web3-based software will usher in a new era of open-sourced transparency by a globally distributed community of developers. This simply means algorithms will be executed in full view of the world. Many archaic institutions won’t embrace these trends. For example, this level of transparency is a complete juxtaposition to hedge funds that currently deploy high-frequency trading for approximately 50% to 70% of the stock market’s total volume.

• Trustless: The network will be trustless. Participants can interact publicly or privately without having to rely on a trusted third party, such as a clearinghouse or a centralized brokerage.

Permissionless: Any trader and market maker can participate without authorization from a governing body. This means anybody has a chance to build wealth through investing without being required to go through brokerages, which gives them an opportunity to front-run trades for the elites before yours.

According to an op-ed from the Chicago Tribune, “When retail investors push the buttons on their phones and computers to place trades, in many cases, their orders never make it to the New York Stock Exchange, Nasdaq or other traditional exchanges. Instead, those orders get diverted to electronic platforms run by private market-makers who match buyers with sellers at a price they determine. Often, these orders happen behind closed doors, away from the public’s eyes.”

In the U.S. stock market, machine algorithmic trading firms soared to become the dominant market maker. Two of the largest, Citadel Securities and Virtu Financial, combine to account for more trading volume than the 230-year-old New York Stock Exchange.

And the rising popularity of retail investing led to another boom in the industry of private-exchange trading, which now accounts for approximately 50% or more of the U.S. stock market, according to SEC Chairman Gary Gensler.

Web3 could uproot these monopolistic private exchanges that hurt ordinary investors by offering much-needed transparency. Regardless of opposition from establishment elites, Web3 is here to stay with a wealth of opportunities for those astute enough to see the trend early.

Moreover, Goldman Sachs estimates that the metaverse component of Web3 could be worth $8 trillion.

It is entirely up to us to embrace Web3’s powerful technology and use it for the greater good. Web3 may still be a few years away, but if this digital land rush has taught us anything, it’s that early adopters will reap the rewards.


Forbes Technology Council is an invitation-only community for world-class CIOs, CTOs and technology executives. Do I qualify?