The emergence of the metaverse and non-fungible tokens (NFTs), along with mainstream acceptance of cryptocurrency, decentralized finance (DeFi) and blockchain, continue to make headlines this year. In 2021, investors poured over US$30 billion into cryptocurrencies, nearly a fourfold increase from 2018’s US$8 billion investment. The cryptocurrency market also stood at a revenue of US$15 million in 2021 and is expected to grow at a CAGR of 6.9% to reach US$23 million by 2028. It demonstrates a growing excitement in the industry as investments and interests stream in.
One region that is seeing the most action is Asia-Pacific. Thanks to a boom in DeFi, cryptocurrency activities have grown over 700% in the region. All of this has boosted conversations around the future of digital technologies, more specifically, the future of the internet as Web3.
While Web3 is still conceptual, the applications and thoughts of its technology are being explored heavily now. Many experts believe it to be the next big thing, and some speculate that Southeast Asia is one of the best markets for the technology to take off. As several organizations and individuals are gearing up to dive into the Web3 space, we look at what Web3 is, its status and the potential implications for data and digital infrastructures.
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What is Web3 and how does it work?
Although Web3 is still a loosely defined term, there is a general consensus about what it is and who it’s for. Web3 is the next stage or phase in the development of the world wide web and the subsequent iteration of the current version of the internet we are all using, Web2.
While Web2 revolutionized the way we interacted online, driven by the exponential growth of mobile internet access and social networks, Web3’s potential revolves around how we conduct agreements and value exchange. The conception of Web3 was born with the idea to place the control of data back into the hands of individuals.
For this to happen, Web3 is based on transparent digital ledgers, known as blockchains. The network will verify everything before being accepted, and theoretically, before exchanges can happen without the need for a middleman. Any exchanges will then be recorded on the blockchain, establishing a trusted and verified record, making it harder to manipulate and misuse data. Today, most cryptocurrencies like bitcoin and Ethereum already use blockchain technology to record transactions. For Web3, a few experts believe it will provide increased data security and privacy for users to combat the influence of larger technology companies.
Examples that fit the Web3 archetype
Today, we see some web technologies that can qualify as examples of decentralization and the Web3 concept:
- As blockchain is foundational to Web3, the technology is the most obvious example. Its peer-to-peer managed and publicly distributed ledger to record and verify transactions gives the power back to communities, allowing participants to verify and audit transactions independently and relatively. But the Web3 blockchain typically involves public networks rather than private, so one of the largest roadblocks to its adoption is speed and energy. Public blockchains are slow as they take time for a network to reach consensus, and they also require lots of energy to function. Advances are currently being made to solve some of these challenges.
- Cryptocurrency focuses on decentralization in terms of digital cash, where it isn’t controlled by a central bank or government. So, Cryptocurrencies derive their value from investors instead of the country’s central bank. It also uses blockchain technology to record transactions, amounts and ownership. While cryptocurrencies are popular, it’s still limited in use.
- Another cornerstone of Web3 is NFTs. Similar to cryptocurrencies, NFTs can be bought and traded. But unlike cryptocurrencies, NFTs are unique and can’t be exchanged for another. Every NFT has a publicly-visible owner who can be verified. This enables creators to retain ownership rights over their work and claim resale loans directly.
- dApps, or decentralized applications, are applications that run autonomously. They provide functions and utility like traditional apps, including gaming, finance and social media, but they operate independently and are not owned by one organization.
Even outside of Web3, trends of decentralization also reach data management as the adoption of edge computing becomes more popular. According to the Global Interconnection Index (GXI) Volume 5, a market study recently announced by Equinix, digital leaders have more than doubled their rate of digital edge expansion over the last few years. In Asia-Pacific, with businesses rethinking operations away from centralization, edge locations are expanding interconnection bandwidth capacity at a 51% CAGR, with several metros approaching the volume and density of core locations.
In relation to Web3, Asia-Pacific’s thriving startup ecosystem positions the region as one of the top booming markets. Many locations in Asia-Pacific have solid and growing DeFi markets, and some are among the top areas for cryptocurrency engagement, demonstrating the region’s eagerness to participate in Web3 innovations. For example, Australia, Mainland China, Hong Kong and India are ranked among the top locations worldwide for DeFi adoption. Singapore and Australia are also among the world’s top three dynamic crypto countries in 2021. Further east, the Japanese government has included Web3-related growth as part of its Digital Japan strategy.
All these examples and real-life movements illustrate how the world of Web3 is developing and how it’s bringing levels of decentralization into the mainstream.
What does this mean for the future of data?
Although we are beginning the move towards decentralization, the full Web3 concept is still a work in progress. But one factor stands out—the need for a future-ready infrastructure.
We’ve already seen an exponential explosion of data being created from technologies, some of which required the creation of hyperscale data centers to address. Still, we will likely continue to see more demand for capacity or even new forms of infrastructure. As of now, creating, running, and using Web3 will demand huge data storage and the infrastructure we have now is not suitable enough. In 2021, it is estimated that Web3 projects and protocols rented several thousand servers, but the vast majority still don’t have the ideal requirements to meet the specifications and needs of Web3 workloads.
To enable Web3 success, digital infrastructures will need to offer new bare metal configurations that contain large storage capacities and even lower latencies. There is also speculation about how artificial intelligence (AI) can play a larger role in Web3. Due to the characterization as a peer-to-peer space, AI can support machine-to-machine communication and decision making, eliminating human intervention for certain tasks in the Web3 universe. This potentially can be additional pressure for stronger, more connected, and robust infrastructures to support it.
Supporting the future of Web3
As is the consensus, Web3 is a promising concept but requires advanced digital infrastructure to help it make headway. As more industry professionals move towards these new technologies, time will only tell when and if it takes off. When it does, we expect adoption in Asia-Pacific to skyrocket due to the tech-savvy population and heavy investments and use of blockchain in the region.
In the meantime, at Equinix, we are gearing up to support innovators as they create and trial Web3 technologies with agile digital infrastructures and ecosystem-rich data centers on Platform Equinix®. With the extensive global coverage and services like Equinix Metal™, we offer developers the flexibility to pick the best tools that enable them to experiment with solutions for a Web3 future. Watch this video to learn how Akash Network is leveraging Equinix Metal to create an infrastructure that powers Web3.