Southeast Asia is home to some of the world’s fastest-growing economies. E-commerce has been a vital growth accelerator in the region and a significant contributor to its digital economy, estimated to reach US$1 trillion ($1.3 trillion) by 2030.
Amid rapid urbanisation, an exponentially expanding number of new internet users and strong government support for digitalisation, a new phenomenon is set to catalyse the maturation of the region’s digital economy: Web3 — known as the decentralised web — which has its foundation in blockchain technology.
As it stands, Southeast Asia boasts a higher penetration of digital wallets, cryptocurrency and non-fungible tokens (NFTs) compared to the Asia Pacific region. With the growing demand for decentralised blockchain-based services from the fintech and e-commerce verticals, Southeast Asia’s Web3 economy is expected to double in value by 2030.
There are clear market drivers for the growing adoption of Web3 here: A flourishing creator economy, significant proportions of underbanked and underserved communities, and the rise of an increasingly technology-savvy generation. At the same time, demand alone will not be enough to sustain the growth of the Web3 economy.
Scalable IT infrastructure will be vital for Web3 to take off in the mainstream, enabling Southeast Asia to realise the full potential of its Web3 economy. Here, the cloud has a critical role in facilitating the development of truly decentralised blockchain networks that are also robust and resilient so that Web3 businesses can scale to meet the demands of an expanding user base.
The promise of Web3 for the region
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Web3 aims to enable more distributed and transparent software usage by allowing users to transact online transparently, remove unnecessary third parties and intermediaries and have more control of their data. This makes blockchain technology an important foundation for Web3 in creating secure and transparent governance for digital interactions.
As internet penetration grows and decentralised applications arise in various sectors, such as farming, this has brought forth a range of possibilities for the region. For example, in India, farmers are connected with direct buyers for their produce, thereby eliminating the middleman and maximising profits in a particularly tight, marginalised sector.
Blockchain technology enables smart contracts that automate the entire transaction when certain conditions are met. Consequently, the process is optimised by bypassing the extensive verification and documentation needs of traditional transactional Web2 software to offer more transparent, often cheaper and safer operations due to its data distribution.
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Southeast Asia’s booming creator economy has also benefited massively from blockchain technology, paving the way for a more equitable, transparent and rewarding digital economy. Creators can sell their work directly in peer-to-peer marketplaces to their audience, thereby expanding their revenue streams and retaining a larger share of the profits.
Blockchain additionally allows each transaction to be tracked on the on-chain data, which allows ownership and authenticity to be verified, eliminating the chance of illegitimate duplication of the creator’s unique works for gain.
Combining the power of blockchain with the cloud
While blockchain technology is central to facilitating the decentralisation that Web3 needs, growing demand requires that Web3 businesses reconsider the infrastructure powering their services.
One way they are already boosting the resilience of their applications is by building blockchain services on top of cloud-based products and services since cloud technologies address many of the pain points associated with infrastructure stability, security, and decentralisation.
While the blockchain excels at securing and validating transactions, it has scalability and storage capacity limitations. Blockchain networks (especially public ones) often struggle with scalability due to their consensus mechanisms and the need for validation nodes to process every transaction.
Furthermore, blockchains store this transaction data across all archive nodes, resulting in substantial storage requirements. This becomes problematic as user bases and transaction volumes grow. Cloud solutions can extend the scalability of blockchain networks by enabling the addition or removal of nodes as needed, thereby increasing the network’s capacity to process transactions and store data.
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Cloud infrastructure solutions can also be leveraged to offload the burden of the storage requirements that certain processing and archiving nodes possess. Some cloud storage infrastructure types allow blockchain nodes to operate more efficiently. For example, rather than storing the data off-chain, infrastructure can be scaled to handle demands, allowing on-chain data to be stored as it grows without the hassle of unnecessary migration and data transfers.
The significant computational power required for smart contact validation can also inhibit the scalability of Web3 operations. Offloading computational tasks to the cloud can help improve the performance, scalability, and efficiency of blockchain-based applications, allowing for faster transaction processing and smart contract validation like those performed by Bware Labs, which reported improved uptime, superior infrastructure service-level agreements and profitability.
In addition, the unique combination of having access to advanced cloud-based dedicated servers to support heavy blockchain traffic — alongside multi-local availability and transparent pricing models — was key for Blast, developed by Bware Labs.
Maximising benefits requires the right cloud service provider
Importantly, not all cloud solutions lead to the same outcome. Several key considerations come into play to reap the full benefits of a cloud-based blockchain. These factors are crucial to ensure optimal performance, security, and scalability within the Web3 space.
For one, when it comes to developing blockchain infrastructure, the combination of availability of hybrid and multi-cloud options is crucial, as this opens the door to blockchain interoperability and decentralisation. This must go hand-in-hand with transparency in regulatory compliance to ensure requirements are met across industries and regions.
Finally, given the large data volumes generated on blockchain networks, cost transparency will be critical to the profitability of Web3 services. While very few cloud service providers (CSPs) offer their cloud products with no ingress and egress data traffic fees, these assurances are vital as they will likely save businesses money in the long run.
As demand for Web3 services grows in Southeast Asia, it will be imperative for blockchain businesses to ensure they have the right strategies in place to scale their networks, delivering reliable and secure services. Especially now, when Web3 adoption is still growing, building trust in decentralised services is key.
The combination of blockchain and cloud technologies may well be a match made in heaven but will require strong and transparent partnerships between Web3 businesses and CSPs to drive Southeast Asia’s Web3 wave successfully. By leveraging the strengths of these technologies that work in tandem, the region will be poised to usher in a new era of trust, transparency and innovation in the digital realm.
Omar Abi Issa is a blockchain expert at OVHcloud
