What changes should investors expect from the Web3 economy?

Franklin Templeton has unveiled a new research series analyzing how key tech-driven themes and secular trends are set to impact the world and investing.

The series, titled “Five Tech-Driven Megatrends Reshaping Society & Investing,” will be published in three parts over the coming months. It is authored by Sandy Kaul, SVP, Digital Assets and Industry Advisory Services, who joined the company in April 2022.

In the first installment of the research, Kaul drills deep into three commercial tech-driven innovation cycles that have occurred since the 1960s. She also discusses how the fourth wave, decentralization, will emerge and result in a new peer-to-peer economy.

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“Today’s focus on delivering tailored, customer-centric portfolios that deliver not only risk-adjusted returns, but also other goals-based outcomes and optimizations is a direct result of the AI, big data and cloud-computing capabilities enabled by the third cycle of tech innovation that began in the mid-2000s,” Kaul said in a statement.

She underscores the following five megatrends:

• Democratization of access - As network effects spread across platforms today, owners are looking to maximize profit while users are looking for a better experience and better utility. By turning network users into owners, Web3 commercial protocols can align incentives through rewards for participation and direct investment.
• Decomposition of business delivery – While businesses today compete by teaming up with other companies or apps to build unique ecosystems for users, Web3 will shift the focus of competition to providing composable and interoperable offerings that combine processes in fresh ways that get delivered directly to the user.
• Expanding power of the crowd - Feedback between businesses and consumers influences marketing and consumer demands. Web3 puts the power in the hands of the crowd, Kaul says: because goods and services can also provide utility, they must also appeal to crowd factors: prestige, influence, access, exclusivity, and reward.
• Institutionalization of the individual - Users can share their resources and assets, but platforms oversee regulating access, data, and cash flow. With the aid of Web3, people can make tokens that embed their assets, use them as collateral, control access, and join protocols that make use of their resources to directly monetize them.
• Quantification of behavior – Today’s consumers are grouped into cohorts based on pre-planned journeys and specific actions with the help of customer behavioral analysis. In contrast, the presentation of goods and services in Web3 is based on a life-centric model, which considers each user's resources, actions, and behavior.

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According to Kaul's research, the first three tech-innovation cycles have already had a significant impact on the asset and wealth management sector. As decentralization upends many facets of the traditional finance landscape in the coming ten years, the fourth tech-driven innovation cycle may look very different.

“As the fourth cycle unfolds, investment portfolios will expand to include more types of digital and physical tokenized assets, and investors will look to obtain a more multi-dimensional set of returns including a broad-set of income opportunities and utility—special access, unique offers or exclusive benefits—from their portfolios,” Kaul said.