The underlying value of Web3, and how to use it for sound investment?
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The underlying value of Web3, and how to use it for sound investment?
The free market created by Web3 could be the largest incubator for future business innovation.
Navigating Web3 tides with focused insightsAuthor: Xu Xiaopeng, Mint Ventures
How Should We Define Web3?
For important concepts, it's essential to form our own definition based on understanding.
In my view, Web3 is a collective or abstract term for a new business model or mode of collaboration. Underlying this collaborative structure or business paradigm are key technologies—blockchain—built upon the internet, cryptography, and distributed computing. At its core, blockchain is essentially a massive data table (the term "massive table" borrowed from Professor Wang Jianshu’s explanation, making it intuitive) that every user on the global internet can read, with writing rights determined by consensus mechanisms.
Because this table is publicly readable and tamper-resistant, the cost of reaching agreement upon it becomes very low, thereby generating trust.
Since Web3 is an abstract representation of a model, there must be diverse perspectives and interpretations, leading to personalized definitions depending on the individual.
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Those who value personal sovereignty and data privacy emphasize Web3’s role in data democratization, seeing its primary function as enabling users to reclaim ownership over their accounts (identity) and data;
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Those dissatisfied with monopolistic internet platforms believe Web3 transforms the relationship between businesses and users—users should not only be consumers but also owners of products/protocols/platforms. They see Web3 adding “ownership” (own) on top of Web2’s “readable” (read) and “writable” (write) layers;
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Others see Web3 more as a philosophy promoting flexibility, openness, autonomy, transparency, and decentralization, with DAOs (Decentralized Autonomous Organizations) representing its best practice in human collaboration;
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Of course, many regard Web3 as a bubble-driven tech narrative whose main current use is providing a medium for speculation (cryptocurrencies).
All these views may be correct.
What Web3 means depends on what people need from it—and each person will find their own perspective accordingly.
Just like how a computer is a tool for calculation and statistics to an accountant, but merely a color screen for watching TV dramas to a retired homemaker. The technical definition—"an electronic device capable of high-speed data processing"—is irrelevant and meaningless to them.
So, what is the most important perspective on Web3 for investors?
I believe we should approach it from two angles:
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1. What fundamental economic and commercial value does "Web3" provide?
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2. How should business projects effectively leverage this value?
The Foundational Value of Web3: Free Market + Trust Machine
“In your opinion, what new value does Web3 offer compared to previous internet paradigms?” This is the most frequently asked question during researcher interviews at Mint Ventures.
Before engaging in long-term endeavors within Web3—such as entrepreneurship, employment, or investment—we should have a preliminary answer to this question.
When discussing differences between Web3 and traditional internet projects, commonly cited features include:
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Web3 projects introduce token incentives and place strong emphasis on economic models;
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Web3 projects are decentralized, with product direction often decided by community governance;
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Web3 projects emphasize sharing value with communities and users—users don’t just use protocols, they can also “own” them.
These characteristics are indeed more common in Web3 projects, but in my view, they do not represent Web3’s foundational value—they are not satisfactory answers to “what new value does Web3 provide.”
Because:
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Traditional internet products are also highly skilled at designing economic incentives. For example, content aggregation platform “Qutoutiao” (NASDAQ: QTT) attracted massive users through its “earn money by reading” model and successfully went public (though it has since declined). Game economies are also well-established in traditional online games; “Fantasy Westward Journey,” operating for nearly 20 years, maintains popularity due to its intricate in-game item and currency system—an inspiration for many GameFi designs.
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Decentralization is a means, not an end. Community voting via tokens closely resembles traditional shareholder meetings.
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If holding tokens equates to “owning the protocol,” then does holding company stock mean you “own the company”? In reality, it’s far more complicated than that.
In my view, Web3 truly represents a new “paradigm”—one encompassing not only blockchain technology and cryptographic applications built atop it, but also associated ideologies and innovation standards.
The core value provided by this new paradigm lies in broader freedom and cheaper trust, where the value of the former (freedom) is geometrically amplified by the existence of the latter (trust).
"Freedom" in Web3 carries rich meanings, including at least the following:
1. Monetary Freedom: Freely creating accounts, freely transferring funds, with property rights solely under your control and resistant to seizure by authorities.
2. Freedom in Collaboration and Contracting: Freely entering into agreements, transactions, and collaborations with anyone or any project via smart contracts.
3. Identity and Account Freedom: Accessing various products using an anonymous address without relying on centralized account systems—use and leave as desired.
And derived from these freedoms, more complex forms emerge:
4. Freedom of Product Composition: Projects can interoperate like LEGO bricks, combining to create novel services.
Freedom also embodies a cultural trend toward openness and transparency:
5. Freedom to Fork Code: With open-source contracts widely embraced, forking and re-creating existing smart contracts lowers development barriers, accelerating competition and iteration (though posing challenges to original projects).
6. Freedom of Open Copyright: Many IP-based projects adopt CC0 standards, releasing intellectual property into the public domain (Public Goods—non-excludable resources such as open knowledge).
Precisely because of these forms of “freedom,” the Web3 world built on blockchain has created the largest free market humanity has ever seen: accessible and participable anonymously from anywhere with internet access.
A free market provides the foundational conditions for free resource flow and large-scale human collaboration, production, and innovation—but a free market ≠ economic prosperity and development.
Because the movement of resources and collaborative innovation among people can only occur smoothly when transaction costs are sufficiently low.
The second foundational value offered by the Web3 paradigm is precisely “cheaper trust.”
Traditional trust systems rely on judiciary, coercive institutions, and cultural norms—these serve as shared consensus and dispute-resolution mechanisms for human cooperation.
Web3 offers a new trust system—one based on blockchain’s transparent public ledger, open-source auditable contract code, and unbreakable cryptography. With this new system, people can confidently interact with contracts and transfer funds, easily issue and authenticate digital artworks, and trust that their assets cannot be seized by authority.
Investment firm a16z says blockchain is about “removing gatekeepers,” which has at least two implications:
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1. Removing gatekeepers standing between people and access to or creation of services, restoring “freedom”;
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2. Replacing bloated, expensive custodians in the old trust system with a leaner, cheaper “trust” mechanism.
It is precisely the combination of broad freedom and cheap trust that enables the emergence of an unprecedented large-scale free market—the foundation for innovation and prosperity.
Of course, we must recognize that broad freedom + cheap trust is not an instant “final state,” but rather an evolving process driven by improving infrastructure and continuous product innovation.
During this evolution, greater freedom will be unlocked at lower trust costs—for example, ZK (zero-knowledge proof)-based Layer 2 solutions enhance capacity (lowering costs) while strengthening privacy (increasing freedom).
Applying Web3’s Foundational Value in Investing
Understanding Web3’s foundational value is crucial in investment practice—it is the starting point for evaluating projects.
When assessing early-stage Web3 startups, my favorite question is: Why must this project be built using Web3 methods? What problem does blockchain solve here?
If we assume “token incentives” are Web3’s defining feature and value, we’ll chase after “xx-to-earn” projects, believing “every internet product deserves to be rebuilt with xx-to-earn.”
If we believe “decentralization” is Web3’s primary value, we’ll find many projects worsen rather than improve after decentralizing.
But when we examine project value through the lens of “freedom” and “trust,” we discover that successful projects thrive precisely because they correctly leverage Web3’s advantages in freedom and credibility:
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Stablecoins enable fast, low-cost cross-border transfers worldwide. As long as you safeguard your private key, you don’t need to fear asset theft (excluding regulatory risks if using centralized stablecoins). People experience unprecedented freedom and efficiency in monetary transfers.
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Lending protocol Compound allows anyone with internet access to freely deposit and withdraw assets—no need for complex bank accounts or bureaucratic procedures—an unprecedented level of financial service freedom. More importantly, this on-chain bank operates without physical branches or large staff; people trust it solely because of its open-source code and smart contracts. Built on Web3’s trust system, it drastically reduces trust costs.
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Synthetic asset and derivatives platform Synthetix can theoretically mirror all financial assets—stocks, bonds, commodities, derivatives—offering users rich trading options: freedom in financial product creation. People trade these assets not because they’re listed on Nasdaq or CME, but because of transparent underlying collateral, open-source code, and oracles.
Outstanding Web3 projects identify significant shortcomings in traditional services regarding “freedom” and “trust,” then leverage blockchain’s strengths in these areas to deliver more competitive solutions.
You might say these are all DeFi (Decentralized Finance) examples. But do similar issues of insufficient freedom and high trust costs exist in social media, music, gaming, education, research, politics, and organizational management?
They absolutely do.
As infrastructure matures and waves of innovation and composability collide in the market to reveal optimal directions, proper Web3 business and social practices will gradually emerge across more domains—as long as problems are correctly identified and approached appropriately.
Web3’s Power Lies Not in Invading Old Systems, But in New Needs
We must recognize: As a new trust system, Web3 does not oppose traditional trust systems based on law, customs, and centralized institutions—in the long run, they coexist and collaborate, each suited to different contexts. This means some problems may seem solvable with Web3, but aren't actually necessary—and may even incur higher costs.
For instance, the recently trending concept of Refi (Regenerative Finance) often discusses putting traditional carbon credits on-chain. Similarly, real estate tokenization is frequently mentioned. Currently, both may fall into this category.
The reason: lack of demand and high costs.
On demand: Who are the actual users on-chain for real estate or carbon credits? Without demand, there’s no incentive to bring them on-chain. The clearest success case of bridging off-chain assets onto chain—driven by massive demand—is the US dollar stablecoin. Crypto natives needed a stable monetary medium, so they brought USD on-chain—leading to explosive growth in stablecoin scale.
On cost: Whether real estate or compliant carbon credits, these assets are issued, transferred, and authenticated within traditional trust systems. Getting those systems to relinquish control is extremely difficult. If regulators like Verra or Gold Standard don’t recognize the validity of on-chain carbon credit transfers, what purpose does tokenization serve? If land bureaus don’t register property rights bought from others, what good is receiving an NFT representing that house?
Leave traditionally governed assets to traditional systems. Web3’s real demand doesn’t come from importing off-chain assets, but from the “recreation” of valuable services and assets natively on-chain.
Yes, minting offline-created artworks as NFTs has limited significance. But when artists create new works digitally (“online” being a prerequisite for “on-chain”) and launch them first as NFTs on Ethereum, those works are born on Web3’s trust system—natively on-chain assets.
Mid-term, we are more bullish on projects native to Web3’s trust ecosystem—both in business models and assets.
Final Thoughts
The free market created by Web3 may become the largest incubator for future commercial innovation. Innovation flourishes most readily in systems without central control, where participants compete on equal footing. In such ecosystems, players dependent on administrative monopolies will be eliminated, leaving only those who accurately identify needs, relentlessly evolve, and maintain open mindsets.
This is the fundamental reason we believe in Web3.
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