Today, the Internet is mostly controlled by “big tech” companies that touch almost every aspect of user experience. That website you’re surfing? Metaplatforms probably tracks your every move, while the site might work on Amazon Web Services Cloud (AWS).
Some call Web3 the future of the Internet. Built on blockchain technology, it involves cryptocurrency and non-fungible tokens (NFTs), but like any early-stage technology, it might look different in years to come.
However, we can begin to follow the breadcrumbs of companies playing a vital role in the development of Web3. Here are three essential functions of Web3 as we know it and the top companies that are fueling these three trends.
1. High Power Computing: Nvidia
Blockchain is a technology that tracks and records all the data it contains in an accessible and verified sequence, or “chain”. Blockchains are very secure because users cannot modify their data; the chain is constantly updated and verified by all its users, which makes them more secure than, for example, a company that keeps all its information on a single server.
Cryptocurrencies and non-fungible tokens (NFTs) are two examples of blockchain technology used, which often require large amounts of computing power to verify blockchain transactions in exchange for crypto. Nvidia (NASDAQ: NVDA) designs and manufactures graphics processing units (GPUs) for computing applications, competing with AMD and Intel. It should be exposed to increased future demand for blockchain applications and its necessary computing power.
Nvidia’s share price has fallen 30% from its highs of $346 a share, but even after its plunge the stock isn’t cheap, trading at a price-to-sales ratio of 25. On top of that, its market cap is already large at $630. billion. However, it is a proven blue chip title in a still very young and speculative Web3 industry. Investors can get broad Web3 exposure by adding this IT giant to the pullbacks.
2. Blockchain powered assets: Coinbase Global
Crypto projects do not pay US dollars as rewards for their support; they pay cryptocurrencies. Users need a way to exchange their crypto or participate in NFTs, and that’s where Coinbase Global (NASDAQ:CURRENCY) It is a cryptocurrency technology company that operates an exchange where over 73 million users buy and sell various cryptos.
Coinbase could play a vital role in the future of Web3, helping to bridge the gap between crypto and other blockchain assets and the traditional financial system. For example, it is launching the Coinbase Card, which will allow people to spend their crypto assets at merchants where traditional payments are accepted.
The company is also launching an NFT marketplace, giving this new digital asset a bigger platform. If Web3 becomes a new digital ecosystem, Coinbase could function similarly to a bank, facilitating commerce on blockchains.
The stock went public in 2021 and its price fell to less than $200 per share. Coinbase is very profitable, however, generating around $3 billion in net revenue over the past 12 months. If Coinbase can fulfill this “banking” role and grow its user base as Web3 matures, the company’s modest valuation at a P/S of 7 could leave plenty of room for returns.
3. Tokenization of Payments: Marqueta
A digital economy such as Web3 requires innovative new types of payment technology. Coinbase can’t just wave a magic wand and make its Coinbase card work without a hitch. Marqueta (NASDAQ:MQ) makes these innovative payment products possible through its Application Programmable Interface (API) that allows customers to create customized payment solutions.
Its software works behind the scenes, connecting new payment products to the traditional financial operating system that uses payment networks like Visa and MasterCard. He is the “middle man” between the new and the old. Marqeta can issue tokenized payment cards, making them suitable for Web3 applications.
Marqeta’s work goes beyond cryptographic applications; he has many different clients including To block, DoorDash, and more. The company generates revenue by taking a small portion of each transaction made with the products it powers. In other words, Marqeta generates more revenue as its customers grow. This model made Block its largest customer, accounting for over 70% of total revenue; however, as new products develop, it may reduce its customer concentration.
The stock went public in 2021 and has been steadily trading lower, now down more than 70% from its 52-week highs. The stock’s market capitalization is $5.5 billion, which values the stock at a P/S ratio of 10. The company is not yet profitable, but is growing steadily; revenue grew 56% year-over-year to $131.5 million in the most recent quarter. Investors are expected to follow the company’s growth as new products such as the launch of the Coinbase Card. Investors should also keep an eye on Marqeta’s progress in integrating new products in the future.
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