Under the wave of artificial intelligence and Web3, how to prepare for the next generation Internet?

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01. Preparing for Web3, the Next Generation Internet

In order to deal with the upcoming next-generation Internet Web3, we need to be prepared. In this new digital environment, our data is freely portable and uncontrolled, challenging the monopolies that currently exist. Web3 promises such an environment, and investors can refer to the evolution of the Internet to better understand this transition.

The first stage is Web1, which provides users with unprecedented access to information and connectivity (such as Yahoo! and Google). Then came Web2, which further enhanced the user experience by providing personalized user-generated content through applications (such as Facebook and Twitter).

As a next-generation network, Web3 runs on a global peer-to-peer infrastructure, which is supported by blockchain technology. Like Bitcoin, the Web3 network is decentralized, which means it eliminates middlemen and is not controlled by any single entity.

The core goal of Web3 is to solve problems such as data monopoly, privacy risks and algorithm bias, and promote a fairer and more open Internet. We will see a shift from platform-centric to person-centric data and identity management, resulting in new technologies and business models.

But to truly build such a network, users (both humans and machines) need to be actively involved. To achieve this, developers can use tokens to manage activities and record transactions on the blockchain. Additionally, other key components of this next-gen ecosystem may include smart contracts and digital wallets.

02. Investment in Web3 companies

Blockchain technology, with its "trustless" system, is seen as a solution to the lack of credibility with various traditional institutions. However, recent failures of crypto-related firms including FTX and Silvergate have sparked investor uncertainty about digital assets, clouding the future of Web3**.

Take a look at the chart below, which is the data from a recent Deloitte report. From 2016 to 2022, early-stage investors poured about $94 billion into Web3 companies, with most of the funding concentrated in the past two years, peaking at $13 billion in the first quarter of 2022. This corresponds with bitcoin's price slump after hitting an all-time high of nearly $69,000.

However, as Deloitte points out, there are some similarities between the collapse in digital asset prices and the bursting of the dot-com bubble in the early 2000s. Just as the Internet has become an integral part of life and work over time, the transformative potential of Web3 is likely to persist, attracting venture capital and private equity investors.

03. Artificial Intelligence, Corporate America and the Rising Star of the Metaverse

Attention to artificial intelligence (AI) is also growing, and this is reflected in corporate America. A study of first-quarter 2023 earnings calls shows a significant increase in the number of S&P 500 companies discussing artificial intelligence, according to an analysis by FactSet. During this time period, 110 companies mentioned AI, a marked increase compared to the five-year average of 57 and the ten-year average of 34.

In the same direction, real-time 3D virtual applications developed by companies such as Meta, Roblox, and Apple are expected to drive increased spending on AI servers. Spending on AI servers is expected to grow at an annual rate of 19% until 2032, according to the forecast. This is because of the increasing demand for generative artificial intelligence, and popular apps like ChatGPT and Midjourney are also a major reason for this.

"Generative AI" refers to applications that can create unique content based on simple prompts submitted by users. Earlier this year, ChatGPT became the fastest growing app in history, reaching 100 million users in just two months of launch.

To run efficiently, these metaverse applications will require advanced graphics and artificial intelligence processors, which will increase investment in high-performance AI chips from companies such as NVIDIA, AMD, and data center operators such as HIVE Blockchain Technologies. According to Bloomberg Intelligence forecasts, By 2032, AI server spending could account for nearly 30% of total workload spending, compared to about 15% in 2022, which is a significant increase.

04. Generative artificial intelligence, a trillion-dollar industry

But where can generative AI be used in the "real world"? McKinsey & Company found 63 such AI applications across 16 business functions. If applied, it could create economic benefits of US$2.6 trillion to US$4.4 trillion per year. This would increase the potential value of non-generative AI and analytics from the current $11 trillion to $17.7 trillion by 15% to 40%.

Goldman Sachs' forecast is more optimistic. According to the bank, Advances in generative artificial intelligence could have a significant impact on the global economy, with global GDP expected to grow by 7% (equivalent to almost $7 trillion) within a decade and boost productivity growth by 1.5%.

As an example, Amazon Web Services (AWS) last week announced the AWS Generative AI Innovation Center, a $100 million initiative to help customers develop and implement generative AI solutions. The move is part of the company's strategy to expand the accessibility of generative artificial intelligence to customers and partners around the world.

05. People will adopt new technologies faster

Understandably, some readers may be confused, but it's worth remembering that technology cycles typically occur every 10-15 years. Web3, artificial intelligence and digital assets are no exception.

Admittedly, widespread adoption of assets such as Web3, artificial intelligence, and blockchain will not be easy. The main hurdle may be user experience. For example, the process of setting up a crypto wallet can be quite complex and cumbersome, while standard web browsers may require additional plugins to support Web3 functionality.

To facilitate mass adoption, Web3 needs to provide a user-friendly interface, just as it did during the transition from Web1 to the current more interactive version of the internet. This shift is likely to be led by major tech companies like Meta who understand the potential benefits of simplifying Web3 for the average user.

The good news is that people seem to be getting better at embracing new technologies. A 2013 study by MIT's Technology Review confirmed this trend. For example, it took half a century for the telephone to become a common device in American households,** while smartphones reached 40% penetration in just 10 years**.

Likewise, progress on digital transformation is expected to be very rapid. According to a survey conducted last summer, 75% of retailers plan to accept digital currencies as a payment method within the next two years. Andreessen Horowitz predicts that blockchain technology, as the cornerstone of Web3, will usher in a new digital era that may have 1 billion global users by 2031. In contrast, the Internet only reached 1 billion users in 2005.