Web3 Could See The Dot-Com Boom Itself. Here’s How To Survive Breasts.

The dot-com boom is built on half-baked ideas filled with excitement and promise, but few products actually feel real. Unfortunately for many people, the money they invest is. When the bubble burst, they lost everything.

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I know this firsthand. I was there.

Anyone who has lived through that era of internet investing learns an important lesson: There is a fine line between thrill and loss, and it is imperative to clearly communicate goals and challenges to the public to avoid leading people down a path of fraud and financial ruin.

I’d like to say that startup founders took that heart and paved the way for honesty and integrity over the next two decades, but we all know that’s not the case — Theranos, anyone?

Lately, I’ve been witnessing the rise of Web3 and feeling it again: unbridled excitement about the potential to get to the bottom of the next web-based revolution — and the benefits that come with it. But I know from experience that 98% of it will be zero behind hopeful investors.

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Here are some questions to ask yourself to make sure your bets on Web3 don’t end up being the next Enron, or Theranos.

Does it solve the real problem?

Simply put, Web3 is the next big evolution in internet destinations. Web 1.0 was the place where access to information was democratized online; 2.0 is all about connecting people around that information, but it’s quickly becoming dominated by the small number of social media giants who control their users’ data. On Web3, the platform will be decentralized, built on the blockchain and users will be in control of their information. You won’t have to worry about what Facebook, Twitter, and Google are doing with the data you provide them — because you’ll have a single profile on a decentralized blockchain that runs between each platform without selling you to this giant company.

While the concept has drawn criticism from influential people like Jack Dorsey and Elon Musk, evolution became inevitable as more big players moved to the Web3 platform. But it’s important for investors to take a long view of this — Web3 isn’t here yet, nor will it be widely adopted.

In the rush to build a more robust Web3, some blockchains will collapse, and many of the companies building those chains will go to zero.

Meanwhile, it’s important for people to reflect on the actual use cases before throwing their money at startups in space. We’ve seen the gap in the social media monolith really start to widen as more and more people question the concentration of ownership around their personal data. But the big question remains whether the average user cares enough to move away from the convenience of these platforms and towards a decentralized system. The longer it takes people to move like that en masse, the more likely some blockchain platforms will prove to be overvalued.

We saw this in the dot-com boom, where companies just stuck a useless “.com” at the end of their names and watched the money pour in. It ended in great failure and a lot of questions.

Many similar questions need to be asked now that more companies are flooding the Web3 space. A product may sound cool, but what problem does it actually solve? Why is it important to ordinary people? And will they actually use it?

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Who was involved?

The story of Elizabeth Holmes is very interesting, but far from unique. Without any evidence, he tied small-scale investors with carefully curated personalities and big promises. However, for those who looked behind the curtain, they found a few things: many venture capital firms have continued Theranos, and there are clear questions about the motivations of its founders.

In the absence of solid evidence (or, with hard-to-understand evidence at all), seeing who was responsible and who was involved can be very helpful.

First, do your due diligence on the founders and what might be driving them. In 2018, a number of fraudulent companies took hundreds of millions from investors through initial coin offerings — a common, but largely unregulated, way of raising capital for companies on the blockchain. More than three-quarters of them, like Pincoin and iFan, turn out to be scams. While many investors are blindsided, there are signs that things are not above the board: promises of unrealistic returns, undiscovered founders, and pointless projects.

In this space of mysterious characters and grotesque claims, it can be helpful to sit down and see who’s backing what, and which platforms attract the best talent. Much like the dot-com boom, there’s a rush to make as much money as possible, as quickly as possible — but it’s a good idea to pause and pay attention to the details before risking your money.

Where’s the pickaxe and shovel?

These details will show you that not all coins and platforms are created equal. In the rush to build a more robust Web3, some blockchains will collapse, and many of the companies building those chains will go to zero.

It remains to be seen who will emerge victorious in the war between Ethereum, Solana, Avalanche and others. If you are looking for a safe investment, be sure to look for targets that are chain agnostic — meaning they can be used on any blockchain. These are typically tools that connect users with the blockchain to perform certain tasks, such as minting NFTs or allowing them to accept payments in cryptocurrencies. They are considered a “pick and shovel” app, and they garner huge investments from both private and public sources.

Just like the survivors of the dot-com boom, these companies have an important purpose and they’ve designed themselves to be tough. While still gambling, the picks and shovels route proved to be a safer bet.

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While some technology leaders with interests in the status quo argue there will never be a Web3, I see momentum in this space reaching critical mass. Giant corporations have ruled the way we use the internet for far too long, and there is so much money flooding into the war against them that the needles are starting to move in the right direction. I’ve been here before, and I know this feeling. This time, I hope more people will be protected from bad actors because 98% fall to zero and 2% live to fight.