INSIDER MAGAZINE: Web 3.0 is coming, with a very meta way of living

Click. Tap, tap, tap, tap. Post. Cha-ching! That’s the sound of Web 3.0. It’s the sound of someone getting paid to take a picture and upload a photo of their dog, or their cat, or their coffee, to the internet of the future. They’re not getting paid in cash but in the form of a digital token like Bitcoin or Ethereum that they can trade or sell online later. It’s arguably a better trade-off than getting paid in love hearts and likes — the current social currency on popular social media platforms like Facebook and Instagram. The idea that content creators and internet users are rewarded more proportionally in line with the effort or time they spend on the internet is one of the key premises behind the next iteration of the world wide web. Web 3.0 is the natural progression from Web 2.0, which is the current state of the internet. The internet started with Web 1.0 in the 1990s with mostly static websites that were used to broadcast and browse for information. Then Web 2.0 arrived in the mid-2000s, bringing with it the rise of social networks and user-generated content controlled by centralised services. Web 3.0 is supposedly about giving power — too long held by platforms like Facebook, Google, Amazon and Twitter — back to the people. It proposes to overhaul the internet in a way that would move popular online services over to decentralised technologies like blockchain. This so-called “internet of freedom” would be owned by users and “builders” and orchestrated with tokens. These tokens are either fungible — exchangeable units such as Bitcoin and other cryptocurrencies — or non-fungible tokens that represent unique, collectable items. Goldman Sachs says Web 3.0 will likely see more control by users over their data, creators monetising their content more directly with their “fans”, and a decentralised model that could see a breakdown of the mobile app store distribution model over the next five to 10 years. If all of that comes to pass, it would stand to reason that social network billionaires like Mark Zuckerberg will have to do things very differently. One element of Web 3.0 that has recently captured attention is the metaverse. The buzzword has gained traction since Facebook — facing dwindling user numbers amid an exodus of young people from its platform — changed its name to Meta in October. A concept first coined in the 1992 sci-fi novel Snow Crash, the metaverse is the real world transposed into a virtual reality where users are living and working in 3D spaces. Goldman Sachs estimates the metaverse will be worth at least $US2.6 trillion and up to $US12.5t in the most bullish growth scenario, where 33 per cent of the global digital economy adopts it and the world’s digital economy expands by 25 per cent. The question is, where does that leave large tech platforms that have made their fortunes from mobile computing apps? What place do they hold in a Web 3.0 world, where value and control accrues to the users of the network and not the company? A world where, if tech futurists are to be believed, companies will no longer exist? It’s a radical theory, but some believe member-owned “decentralised autonomous organisations” or DAOs could one day replace companies and even remove the need for CEOs and presidents. Leigh Travers, chief executive of leading crypto exchange Binance Australia, says it is obvious tech giants are determined not to be beaten to the punch. “A lot of the big social media operators are starting to make major investments in Web 3.0 because they know their business is going to be heavily disrupted,” says Travers, who is among a handful of industry leaders and company bosses on the bleeding edge of the space to speak to Insider. “So Facebook obviously moving to Meta, the founder of Reddit Alexis Ohanian has built a $100 million fund to invest in a Web 3.0 equivalent of Reddit and other social media platforms, (Twitter co-founder) Jack Dorsey has left Twitter — it’s pretty obvious this disruption that’s coming.” A DATA-DRIVEN MIGRATION It stands to reason that data centres will benefit from the brave new world of Web 3.0. Artificial intelligence, machine learning and crypto all require large amounts of computing power, which will be provided by facilities like NEXTDC. The ASX-listed company — which has a market capitalisation of almost $5 billion and is home to a range of businesses from “hyperscale” providers like Microsoft, Google and Amazon to government and enterprise customers — runs 11 data centres across Australia, including two in Perth. It provides the foundational layer for these applications and platforms, from blockchain to bitcoin and banking, and is where the elusive “cloud” lives. To provide a stable base for all of those systems, data centres are extremely powerful — which also gives them a sizeable carbon footprint. NEXTDC’s 20MW P2 facility in Perth’s CBD alone is capable of powering the equivalent of about 10,000 houses, says the company’s head of products, Adam Gardner. It’s a far cry from the first data centre NEXTDC opened when it launched a little over a decade ago — a 1MW facility in Brisbane — and from the 300MW facility it is building in Western Sydney. “There’s no doubt there’s no end in sight for the explosion of data, the explosion of compute capability that’s out there,” Gardner says, adding the word “explosion” is not hyperbole. Gardner believes NEXTDC’s data centres are well positioned to support Web 3.0 and the associated technologies its customers are innovating with for several reasons. They provide the ecosystems customers need to expand their business, which involves secure infrastructure with huge cooling systems, data halls and thousands of racks, where servers are housed. NEXTDC is also “carrier-neutral”, meaning it is not affiliated to any particular company and can house a diverse range of digital service providers. Perhaps most importantly though, data centres provide critical connectivity capability. NEXTDC prides itself on a 100 per cent uptime guarantee, meaning customers’ systems should always be operational. Experiencing an outage midway through a training algorithm or a significant crypto transaction could be disastrous, and costly. Gardner says running computer-intensive systems is just not something that can be done effectively or sustainably from an office. “The good part for us as a business and for our investors and stakeholders is that whether it’s Web 2.0, Web 3.0, Web 4.0, whatever that may be, the technology and the capability of data centres is unlikely to go away,” he says. “Web 3.0 is all around a decentralised application, so to speak, but that still has to live somewhere.” CRYPTO ON THE UP Much has been said about investing in cryptocurrencies but their necessity in Web 3.0 is beyond question. Crypto, along with giving investors a heart attack every few weeks with wild price swings, is in fact facilitating the rise of Web 3.0. Binance’s Travers is bullish in his predictions for the partnership between Web 3.0 and cryptocurrencies, which could replace traditional bank transactions. After some initial scepticism, he says customer research has shown there is strong interest from merchant processors — particularly those from major businesses and industries — to look at accepting crypto as a form of payment. Commonwealth Bank is among the first movers, announcing in November that it would become Australia’s first bank to offer customers the ability to buy and sell crypto assets through its CommBank app. More recently ANZ became the first bank to mint a stablecoin — which has already been used in a real transaction — linked to the Australian dollar, encouraging its customers to support crypto. “My prediction for 2022 was we’d see the year of merchant adoption and I still expect that in the second half,” Travers declares. “Much like we’ve seen huge adoption for buy-now, pay-later products as potentially a marketing strategy as well, I think we’re going to see that with crypto over the course of 2022.” Travers says the ability to use cryptocurrencies to make payments disintermediates financial institutions that have been enjoying fat commissions through the structure of Web 2.0. This means there is actually more money left over in the form of savings for users, he explains. “Every time you pay for your apps over the Apple store, Google Play store, that’s the traditional finance industry that is taking those returns rather than going to the application operator or staying in the hands of the user in the way of savings,” he says. “It can be a situation in Web 3.0 where every participant in these digital ecosystems is actually winning.” And because users in Web 3.0 can be rewarded with digital tokens for the work they do, such as bringing digital data and value to an online community, Travers says there is tremendous potential for rapid growth. “If you thought Web 2.0 was fast in terms of the valuation growths of these major tech companies, Web 3.0 is completely on another level, so it really introduces that upside investment opportunity for investors and helps to incentivise those power users (the first people to be active on a platform) with better rewards.” Cryptocurrency valuations are also expected to rise as the internet migrates to Web 3.0. Many major crypto platforms including Ethereum, BNB and Solana are what’s called “layer one blockchains”, Travers says, meaning they accrue value in part because of the commerce happening on top of them. “Web 3.0 is games, social, identity — on top of blockchains. So there’s more commerce happening on top and that’s only going to be a good thing … so I’d expect to see greater (cryptocurrency) prices,” he adds. “There’s some valuation input already in terms of forward-looking, so we’ll need to meet those expectations as well for prices to rise significantly.” But don’t expect the value of crypto to go through the roof anytime soon. Travers believes crypto prices in the short term will continue to be influenced by allocation of capital from institutions, as well as macro drivers. ‘’I’m very, very confident we’re going to see greater demand for digital assets but just in the context of those wider macro forces — interest rates, geopolitical concerns — then that’s adding to the risk,” he says. “Because they’re liquid investments, it doesn’t take much to see volatility.” Web 3.0 will also do away with the traditional email and password log-in process, with users to sign on with their crypto wallet address instead. The separation between digital identity and real world identity makes it harder to trace a person’s online activity. CLOUD OVER CONSOLES The next version of the internet is also expected to change the fortunes of artists and gamers. Artists will be able to earn the lion’s share from their sales thanks to NFTs, which present the opportunity to secure higher payout rates than distribution or streaming platforms and engage directly with fans. Meanwhile, new ways of playing games that involve the use of blockchains, crypto and NFTs are rapidly changing the landscape of gaming. Expensive and bulky gaming consoles like Playstation and Xbox are expected to be phased out eventually as games are streamed directly from the cloud. “People won’t actually have these consoles or the infrastructure next to them anymore, because all of that processing power in video streaming will just stream to them from the cloud,” says Pentanet founder and managing director Stephen Cornish. “The rise of broadband saw streaming replace cassettes and CDs and DVDs — this is the next level where low latency networks (designed to process a high volume of data messages with minimal delay) are able to replace the computer power. “So you’re actually streaming what’s happening in the computer to just any screen, rather than needing the computer.” Pentanet is a smaller, newer telco that has built Perth’s biggest 5G fixed-wireless network since it was founded five years ago. But Cornish says the internet services provider is right at the coal face of everything new — especially when it comes to cloud-based gaming. Pentanet’s GeForce Now cloud-based streaming service is growing rapidly, jumping from 20,000 Beta play testers to more than 92,000 active subscribers in less than four months. GeForce Now is powered by US gaming and computer graphics giant NVIDIA. The company’s advanced chips, needed for processing power and machine learning, are being touted as the engine behind Web 3.0. “Even the ability to mine crypto or run machine learning, artificial intelligence — all these things are run from the same infrastructure that is used for gaming, so we will certainly have the largest deployment of this infrastructure in Australia,” Cornish says. Pentanet’s telecommunications provide a solid foundation to build new technology and software on and will “bring benefit to telecommunications worldwide”, he claims. For example, Pentanet’s 13.4 per cent stake in tech company CANOPUS Networks — announced late last year — will allow it to create a rewards and loyalty platform for the internet. Cornish likens it to a frequent flyer system where customers will be rewarded based on how much time they spend on the internet and their activities online, incentivising them to stay loyal. “That is where we will start to inflect on Web 3.0, where these points and this currency can basically be minted into a new digital currency,” he says. “(CANOPUS) is like the final piece of tech that we need to power the vision, which is creating a new online currency. “It just so happens that we’re really good at telecommunications and gaming as well.” But there are still many barriers for Perth tech companies planning their transition to Web 3.0. Cornish says the ability to access capital to grow Pentanet — which listed on the Australian Securities Exchange in January last year — from predominantly east coast-based institutional investors will have a big impact on the transition. And the struggle to compete with the big miners for talent is real. “There’s this massive pressure for a public company to live over east. If you’re not mining, like, what are you doing in Perth?” Cornish says sarcastically. “There’s always been this dual economy here in WA: you’re either non-mining or you work for mining. “We have the opportunity now to create a digital economy that overshadows what we do in mining. “What you produce digitally in the world, the planet needs that just as much as it needs our minerals.” Cornish insists Pentanet is more than prepared to do the heavy lifting to cultivate the next generation of WA talent with the help of a few other big tech firms. But the industry will struggle without adequate support from the State Government, he says. Pentanet has grown its headcount to 80 people from about 50 a year ago. Its entire workforce — from staff working on the towers to software developers, sales and support employees — is based locally. Regulatory issues are also a significant hurdle given the decentralised model of Web 3.0. And not to be underestimated is the challenge of communicating what it actually is — and its significance — to investors and the public. Many of these new concepts, even the metaverse, are still too confusing for most people. Cornish says it is hard enough explaining Pentanet’s neXus product “let alone cloud gaming”. “My challenge of explaining our Web 3.0 applications — sometimes I don’t even bother,” he says. Pentanet’s neXus, a high-speed wireless internet connection that works through the air using innovative mesh technology, is due to come online in the fourth quarter of this financial year. GETTING INFORMED Education is proving to be a central plank in the construction of Web 3.0. Julia Buchholz, director of blockchain education startup TecStack, is teaching local lawyers and real estate agents about how the technology will change the future of work. Blockchain — a decentralised, public digital ledger of transactions — is the underlying technology that many cryptocurrencies operate on. “We said given that more than 25 per cent of Australians own cryptocurrencies, why can’t we pay our rent here (using crypto)? Why do I have to get a mortgage if I could use decentralised finance? And the reason why we can’t do it is because the regulators and the professionals who work in that space don’t even know what that is,” Buchholz says. TecStack has been providing training courses for REIWA in how the adoption of blockchain technology can assist property managers, buyers, sellers and tenants in the State. Buchholz says it is about teaching how blockchain can create trust in the often-times opaque property market, which has copped a bad rap over the years. “If we could use blockchain as a trust machine basically to believe what’s actually happening in the real estate industry instead of just blind trust, that would make a big change,” says Buchholz, also a committee member of PropTech Hub WA. “It will create immutability, accountability and real transparency . . . and this is something where the real estate industry is really lacking.” Property prices, currently verified on data providers like CoreLogic, could be verified on a transparent source like the blockchain where data cannot be changed or deleted, Buchholz says. Like Cornish, she is concerned government support for emerging technologies like blockchain is lacking despite the “absolute need for education”. “There is basically no support from the government for blockchain education. It’s really self-driven,” she says. People like Perth software builder and developer Andrew Henry are helping drive the grassroots movement to Web 3.0. Henry went down the Web 3.0 rabbit hole about nine months ago and has slowly been transitioning his business Gramercy Studios, which provides custom web apps and Web 3.0 consulting. He is also working on creating an online community, which he says will eventually turn into a DAO, for people who want to learn more about how Web 3.0 works. “It blew my mind — the transformation, the major shift in paradigm and how it’s going to change everything,” says Henry, who worked as ING Bank’s global head of credit finance and trading and global head of securities funding in the mid-2000s. Since sharing his excitement at a monthly beer club catchup with a few mates, Henry says he has been inundated with interest and offers of payment to set people up for Web 3.0. “That’s why I thought I need to build these communities to help people engage themselves and give them the confidence to do so, because I reckon it will lift everyone up,” he explains. “Most people are like, wow, I’m so interested, tell me more . . . but they are not involved because they don’t know how.” Henry is hopeful those who join his community will take their learnings back to the office and start a discussion about what opportunities Web 3.0 can generate for businesses. TIMELINE TO TRANSITION Web 3.0 is coming but it’s unlikely to be commonplace anytime soon. The final form it will take and exactly when it will be embraced in the same way as Web 2.0 depends on who you ask. Goldman Sachs says the global internet is in the “middle to late innings of the innovation curve of Web 2.0 (the shift from desktop to mobile computing and from local to cloud storage) and the ‘leaders’ of this wave of the internet are now firmly established”. “We acknowledge that we are still 20 years into Web 2.0 and expect the timing of Web 3.0 will be similar, if not longer,” the global investment bank said in its recent Framing the Future of Web 3.0 research paper. NEXTDC’s Gardner questions whether the world will consider Web 3.0 the status quo come 2030. “Probably — or it might be a combination (with Web 2.0) still. There’s still a huge incumbent Web 2.0 that people operate with, and Facebook is not going to go away overnight,” he says. “It’s very, very early days, and I think ultimately (Web 3.0) is a good outcome, but there’s going to be impediments to it becoming commonplace in the very short term because it’s still not legislated or regulated.” The Federal Government is considering new legislation to help Australia play a part in establishing Web 3.0 and has released a proposed cryptocurrency licensing regime. It estimates the Australian crypto sector could be worth $68.4 billion by 2030 and have 200,000 jobs. Whether Web 3.0 will spark the societal upheaval some tech evangelists promise remains to be seen. Extraordinary claims require extraordinary evidence, and there’s no claim more extraordinary than a full democratisation of the current world order. A decentralised internet owned and controlled by users who co-exist in an egalitarian virtual reality almost sounds too good to be true. But if there’s anything the world wide web has taught us so far, it’s that big players and corporate greed have a way of bubbling to the top. Web 2.0 is case in point, so why should we believe that Web 3.0 will be any different? Especially when tech billionaires like Zuckerberg, with all the wealth and talent at their disposal, are already jostling to position themselves as the leaders in this new space? Web 3.0 has some inspired ideas but they should not be viewed through rose-tinted glasses. Given the head start the tech establishment has, ordinary people who are meant to be the owners of Web 3.0 will have to get up to speed quickly to avoid a David and Goliath fight for control.

INSIDER MAGAZINE: Web 3.0 is coming, with a very meta way of living

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