Web3 has opened up a multitude of opportunities for investors who are investing for the long term and should consider building their portfolio across multiple verticals such as blockchain and cryptocurrency assets, said Fadi Ghandour, managing partner of Wamda Capital.
Investors and consumers need to “rethink and realize” that the technology has changed drastically and serious disruption is already underway, Mr Ghandour, a serial entrepreneur and founder and former chief executive of logistics company Aramex, said in Dubai on Thursday.
Web3 is in its early stages and investors may not recognize its investment potential – much like investors doubted the investment potential of the Internet in the early 1990s.
“I take a very broad view of being early and being broad and not betting on … whether this startup or that startup is going to be a winner,” Mr. Ghandour said on a panel discussion at a conference of the Harvard Business School in the Emirate.
“What you have to do is pick five or six industries. Is DeFi [decentralised finance] Occurrence? yes it happens Will entertainment change? You bet that will change.”
However, the biggest question for investors is whether they are ready to take these changes seriously and are ready to back away from the negative headlines about the so-called crypto winter and digital asset collapse, he said.
Crypto winter dragged Bitcoin, the world’s first and largest digital token, below its psychological level of $20,000 in June. The slump wiped out $2 trillion of the sector’s total market value.
The digital currency gained some ground, but fell again. It was trading at $20,146.13 as of 16:56 UAE time on Thursday.
The market, shaken by the collapse of cryptocurrency Luna and related stablecoin Terra, was bolstered by the bankruptcies of major crypto companies including Celsius Network, which filed for protection in July after massive losses, and Singapore’s Zipmex, and job losses shocked .
All of this has led to a drop in venture capital funding for blockchain and cryptocurrency startups, which fell 29 percent to $6.5 billion in the second quarter of 2022, according to market research platform CB Insights in a recent report.
Critics say the sharp fall in the value of digital assets has cast further doubts on the sector’s stability and reputation as a strong asset class.
However, Mr Ghandour said the Ethereum blockchain’s software upgrade, known as Merge, which aims to reduce its huge energy consumption, is “proof of work” and will expand the use of this technology.
The merger will mark a radical shift in how transactions are processed on the Ethereum blockchain and how Ether tokens are created. The new system will use 99.95 percent less energy.
Investors who are unsure about Web3 or the Metaverse should consider investing through funds that specialize in investing in this space, Mr Ghandour said.
The Metaverse is believed to be the future of business and human interaction, projected to be worth $5 trillion by 2030, according to the latest McKinsey & Company report.
E-commerce, which has grown significantly over the past two years due to the coronavirus pandemic, is poised to account for more than half of the Metaverse market at $2.6 trillion, the consulting firm said in Value Creation in the Metaverse. It is followed by virtual learning at $270 billion, advertising at $206 billion and gaming at $125 billion.
In July, Dubai unveiled its Metaverse strategy, which aims to create 40,000 jobs and grow the emirate’s economy by $4 billion over the next five years.
The emirate will hold the inaugural Dubai Metaverse Assembly later this month at the Museum of the Future and the Emirates Towers.
The gathering is expected to attract more than 300 experts, policymakers and officials, as well as 40 organizations involved in the Metaverse.
“Serious investors are not a hit-and-run business. They’re in the long game business, and the long game is digital [assets] and Metaverse,” said Mr. Ghandour.
Exponential disruption is happening and “you have to invest in it and stick with it for the long term,” said the Jordanian entrepreneur.
Thousands of startups developing applications and solutions in the digital world need support and open dialogue with regulators, especially in the six-strong GCC business bloc, he said.
The startups creating “the future companies in the future economies” of this region need help beyond the sandbox and the ability to “interoperate across the GCC”, the lack of which is stifling growth.
Without that crucial element, “we are creating small companies rather than large companies that are able to serve across the GCC,” Mr. Ghandour said.
Yasmeen Al Sharaf, Director of FinTech and Innovation at the Central Bank of Bahrain, said regulators are accommodating and encouraging the development of the FinTech sector.
However, they also face challenges, particularly around the pace at which technology is “evolving and affecting the way financial services are designed and structured.”
Regulators may not acquire the technical skills and expertise needed to fully understand and properly oversee this technology due to the sheer pace of technological advances, Ms Al Sharaf said.
Updated September 15, 2022 at 1:25 p.m