The advent of Web 3.0 is transforming the digital realm by facilitating the development of decentralised applications, blockchain technology, and a more comprehensive and secure internet.
As the current paradigm undergoes a shift, it is imperative to comprehend the potential ramifications and opportunities associated with investing in this transformative epoch.
I am speaking with James Wo, the CEO and founder of the investment firm Digital Finance Group (DFG). We will delve into their insights on the most promising sectors within Web 3.0 for investment opportunities.
Infrastructure projects, compliance, and financial attributes, projects with a solid user base, and quick commercialization are among the topics we explore. We also discuss how they evaluate potential investments, the due diligence process, and the metrics they use to assess the potential for high returns.
What sectors within Web 3.0 do you find the most promising for investment opportunities, and why?
Infrastructure projects, such as layer1, layer2, and various others, are critical in shaping the future of web3 applications. The imminent explosion in this digital landscape emphasizes the significance of robust infrastructure as the underlying protocol. As the demand for web3 applications grows, the valuation of infrastructure projects is expected to rise significantly, presenting opportunities for substantial growth.
Compliance and financial attributes have become vital for projects in the current regulatory environment. With regulations maturing over time, compliance becomes essential for any project's future development and success.
Moreover, projects with solid compliance measures can attract user growth and generate substantial value. These projects can establish a solid foundation for long-term sustainability and success by prioritizing compliance and leveraging their financial attributes.
Among the various types of projects, those with a solid user base and the potential for quick commercialization stand out. This includes exchanges, wallets, and platforms that boast the largest user groups within the industry. A substantial user base provides a strong foundation for growth and market penetration.
Additionally, the ability to swiftly commercialize these projects ensures rapid monetization and realizing their full potential. By capitalizing on their existing user base, these projects can capture significant market share and achieve sustainable success in a shorter timeframe.
How do you evaluate potential investments in Web 3.0 projects? How do you assess their potential for high returns?
The primary evaluation criteria consist of three key factors when making investment decisions. Firstly, the background of the founders and core team is thoroughly examined to assess their capabilities in delivering the product.
Secondly, the project should exhibit significant technological or product innovation within a specific industry or niche rather than relying solely on hype.
Lastly, the tokenomics of the project play a crucial role as a healthy token economy system determines the sustainability of the project's development.
Could you walk me through a recent investment in a Web 3.0 project and explain why you chose to invest in that project?
We funded Ledger a short time ago, the hardware wallet with the largest market share, and the hardware wallet maker has always had a good reputation and a stable user base, and after the FTX crash, users are increasingly aware of the security of crypto assets, and the hardware wallet is undoubtedly one of the best options. Ledger, as the leading project of wallet track, will also develop into the leading project of Web3 infrastructure.
What trends or technological advancements in Web 3.0 will have the biggest impact on investment opportunities in the future?
With the increasing prosperity of the web3 application ecosystem and the growing congestion of on-chain transactions, there is a rising demand for solutions that address scaling issues, such as scaling or roll-up.
As a result, we made an investment in Shardeum, an innovative platform that improves upon Near's technology and offers new solutions to these challenges. In addition, Shardeum has already established a strong ecosystem, making it an attractive investment opportunity.
The significance of financial compliance has been underscored by recent events like the FTX and other CeFi platforms' regulations. Licensed platforms not only hold greater value and vitality for the future, but they also have the advantage of gaining users' trust.
How do you approach due diligence when considering investing in a Web 3.0 project?
Due diligence is generally divided into business, finance, and legal parts, with different approaches for different project stages. Usually speaking, early-stage projects are based on interviews, while mid to late-stage and mature projects are based on information and data review.
What metrics do you consider, and how do you verify a project's claims?
We consider the team's background, development capability, whether the valuation is reasonable, and the rug pull possibility. In addition, the authenticity of a project is generally cross-checked from multiple perspectives, including the team's experience and capabilities, whether the project's business logic is self-consistent, and the development status of competing products.
What is the potential impact of regulatory measures on investments in Web 3.0 in the future, and how might these measures influence one's future plans?
I believe regulation will play an important role in the future of Web 3.0 investment, ensuring investor protection and market stability while fostering innovation. Regulatory clarity can create a stable environment, attracting a wider range of investors and driving mainstream adoption of Web 3.0 technologies.
Compliance with regulations will impact investment considerations, especially for security tokens and projects in regulated industries, requiring thorough due diligence to mitigate compliance risks. Staying updated with regulatory developments is essential for an adaptable investment strategy that aligns with evolving compliance standards.
Ultimately, a well-designed regulatory framework can instill investor confidence, promote innovation, and establish a sustainable and mature investment landscape in the Web 3.0 ecosystem.
How important is a project's team and track record when investing in Web 3.0 projects?
It is essential to have a good track record. Many early-stage projects are just a concept, so the team's past background and experience will most likely determine the ultimate success of the project.
We believe that a solid and viable strategic plan and sound development, operational and marketing skills are the keys to success for web3 projects.
For people who are interested in investing in Web 3.0 but are hesitant due to the perceived complexity of the technology and the financial environment, what recommendations do you have for newcomers?
Web3's high investment risk is relatively high, so first of all, do not invest in projects you do not understand; there are the risks of rug pulls.
Secondly, Web3 investment is different from stocks, foreign exchange, and another traditional trading; you must thoroughly assess their investment philosophy and risk tolerance level and finally need to master using some web3 tools, such as Metamask, Discord, and so on.
Lastly, could you share any lessons learned or insights from your experience investing in Web 3.0 projects?
To ensure survival during industry black swan events, it is recommended to avoid leveraging or lending investments. Instead, focus on investing in projects demonstrating stable fundamentals and long-term value, such as Bitcoin (BTC) and Ethereum (ETH).
Conducting thorough due diligence and research and establishing an investment philosophy based on informed decisions rather than superstitions or blindly following large projects or institutions is crucial.