The future of money is here. The rise of Web 3.0 has encouraged a growing demand for investors and businesses to diverge from traditional financial ecosystems and adapt to the new world of digital finance.
For many first-time investors, it’s key to understand the difference between cryptocurrencies, as they have a vast array of unique value propositions and use-cases.Bitcoin is a permissionless and borderless form of digital money that is also a very effective long-term, store of value.
The inception of Ethereum, the second largest digital asset by market capitalisation, was a major paradigm shift. In contrast to Bitcoin, the Ethereum blockchain facilitates the use of smart contracts. Smart contracts can be programmed to perform incredibly complex tasks such as facilitating the operations of decentralised exchanges, in an automated and permissionless manner.
Web 3.0 has been aptly described as “the internet, owned by its builders and users, orchestrated with tokens”. Web 3.0 is already disrupting the finance, gaming, art and supply chain management industries (to name a few). Take finance for example, the average interest rate of an Australian savings account is currently: 0.05percent.
Anchor Protocol allows users to earn an interest rate of 19.5 percent on their fiat-pegged stablecoins. As the user interface of these decentralised applications improve and the technological barriers to entry are mitigated, the rate of adoption of these web 3.0 applications will increase exponentially.
For non-crypto natives, deciphering between the validity and potential of these different decentralised applications is often a fruitless endeavour. It’s akin to being able to tell the difference between Amazon and Pets.com before the dot-com bubble burst.
However, there is an effective way to have exposure to this nascent asset class without dedicating years to studying the nuances of blockchain technology. Simply invest in high-quality layer one protocols. Layer one protocols are the ‘base layer’ that the middleware and decentralised applications are built upon. Investing in layer-one blockchain tokens affords the owner indirect exposure to all projects built on it. This is because all projects built on these blockchains use the native token of the underlying (layer one) blockchain to pay the transaction fees.
Luna, which is the token of the Terra blockchain, provides investors with exposure to Anchor Protocol, as its built-on top of Terra. For those looking to get started in crypto, I would recommend investing in Luna and other high-quality layer one protocols such as Ether, Solana, Polkadot and Avalanche, as well as Bitcoin. These investments are an excellent way to start building the foundation of an effective digital asset portfolio. Although not a perfect analogy, you could compare investing in these layer one protocols to investing in industry wide Exchange traded funds (ETFs).
By Darren Abrams, Chief Investment Officer, Aus Merchant Investments
About Darren Abrams
Darren is the Chief Investment Officer of Aus Merchant Investments, part of Aus Merchant a digital currency provider for investors and businesses. Aus Merchant Investments goal is to bridge the gap between traditional and digital finance and offer wholesale investors a reputable, regulated option to invest in the blockchain space. They currently offer an AFSL authorised ASIC regulated Managed Investment Scheme that affords wholesale investors exposure to this emerging asset class, through a vehicle they are accustomed to. Since the scheme’s launch in August 2021, the actively managed scheme has experienced an increase in the value of funds under management of 43.39%, outperforming Bitcoin by 26.27% over the same period.
To learn more visit https://ausmerchant.io/
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