Citi’s top crypto picks in Web 3.0

The current Web 2.0 features gatekeeper platforms, like Google, Facebook or Amazon, that persuade consumers to spend money through search engine results, social media algorithms or e-commerce algorithms and control much of the internet’s traffic flow.Investors have made billions of dollars from these “application” investments, buying exposure to the platforms that power internet use.Mr Tuchman said Web 3.0 was disrupting that model, with decentralised applications offering ways for users to generate income from their participation on the web, and blockchain technology would underpin these new applications.“Looking at decentralised finance, looking at decentralised autonomous organisations, these are the new models that are fundamentally changing the way we organise ourselves,” he said.“That’s what I’m fascinated with. But I’m also fascinated by what applications will end up sitting on top of them.”“Decentralised finance” refers to automating banking functions such as lending, borrowing and insuring. With automated market makers sitting in the middle of a market, people with money can put their capital to work just like a bank would, lending and borrowing with each other, and earn fees.A DAO, or decentralised autonomous organisation, refers to a group of people, or token holders, who come together to form a treasury and collectively make decisions about what the group should do.CoinFund president Chris Perkins, who was a banker at Lehman Brothers during the global financial crisis, said opportunities were growing each day.Investors might start with bitcoin, before moving on to understand Ethereum and the smart contract breakthrough. Then they might target DeFi protocols, which “could prove too clunky, so they’ll move on to Layer 2 protocols or something faster”.More optimised blockchainsCrypto developers are building faster and more optimised blockchains each day, and retail investors are targeting the likes of Solana or Polkadot, faster protocols that require less energy to maintain.Mr Perkins also referenced Aave, a DeFi protocol that allows people to lend and borrow crypto. The organisation has released a lending platform targeting institutional investors, called Aave Arc.Rather than a traditional “permissionless” blockchain, Aave Arc will offer private pools of funds where only participants who pass know-your-customer procedures can enter, on the lending and borrowing sides.“No one wants to finance terrorists, so the technology is evolving to solve these problems so quickly,” said Mr Perkins.“Building in know-your-customer requirements could mean Aave becomes the prime broker for institutional investors in this space.”

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