Web3 will go mainstream—when to expect it and how to prepare

The Situation: Everyone is talking about Web3. Our regular conversations with enterprise leaders tell us that Web3 combined with the metaverse is second only to cloud and 5G as emerging technologies keeping CEOs up at night. We explained what Web3 is and what it is likely to mean for how you do business in this HFS POV, Web3 can finally deliver the internet’s promise of democratized experience. Read it first if you haven’t already. Now let’s explore what it will take to make Web3 real and what could derail it, and then form a view of the near-term impact on your business.

There is much that is inevitable about Web3—it’s not if, but when

Let’s look at what could hold up Web3’s arrival. Web3 requires a global infrastructure. The good news is it doesn’t need anyone’s agreement or approval since it is fundamentally a peer-to-peer infrastructure with no mediators. It’s mediator-free thanks to blockchain; the data that drives it is copied and shared among every device accessing it, from mainframes to mobile phones.

But, people and machines need to use these connections, for them to become an infrastructure (a web). There are already decentralized social networks, an example is Mastodon, an open-source and federated network akin to Web 2.0’s Twitter. But the majority of us still congregate at the usual suspects. Why? Primarily because they already have our data and curate the social networks where our interests reside.

A revolt against our data being owned by someone else is the crux of Web3. In Web3 our data and networks become entirely portable. Democratizing the data democratizes the experience and potentially breaks the monopolies of curated social experiences currently held by the likes of Facebook owner Meta, Twitter, Netflix, and Amazon.

So, there may be no cost-to-change our website habits, in theory, but reality tells us a different story. Much like at the beginning of the web, most people engaged in Web 3 activities are relatively technically adept. The vast majority of the populous aren’t engaged in NFTs (non-fungible tokens), decentralized finance (DeFi) ecosystem, or any form of self-organized enterprise, such as decentralized autonomous organizations (DAOs). We face a steep and unfamiliar learning curve.

Scaling issues, energy costs, and compute power hold Web3 back—for now

If the daunting nature of the new were not enough, moving to a blockchain-based internet looks expensive right now. Blockchain was initially meant to enable cost-free transactions with no intermediaries adding “value add” costs. But blockchain is turning out to be very energy intensive to run, and most decentralized apps (DAPPS, see our previous Web3  POV) are placing very little code on the blockchain to keep those energy costs down. There are innovations around generating power and monetizing applications, which may reduce the cost challenge, but they are significant barriers right now for development, implementation, adoption, and sustaining these new networks.

Then there is the scalability issue. The larger a decentralized network becomes, the more likely it is for response times to slow. Each transaction must pass through the entire network and its nodes and devices, so with growth comes latency and a rise in demand for computing power. Chip manufacturer Intel estimates that while we may gain 10 times our current computing power within five years, Web3 will demand more like 1,000 times our current computing power. So if you are looking for a reason for advancements in quantum computing (read our quantum computing industry roadmap, here), Gan-based transistors, or Intel’s own advancements in photonics – this is it!

Our recent Pulse survey showed quantum computing lags far behind in the investment priorities of most enterprises. Less than 1% of technology leaders are focused on quantum computing as an investment area. However, quantum is very much on the mind of the hyperscaler and social networking firms, such as Microsoft, Google, and IBM.

Exhibit 1: Plans for adopting quantum are a low IT leadership priority

Sample: 202 executives across Global 2000 Enterprises
Source: HFS OneOffice Pulse Study, H2 2021

Moore’s law suggests a 20-year wait, but then there’s quantum

Moore’s law suggests we get to 1,000 times today’s compute power in 20 years – the level required for a fully-functioning Web3. Quantum computing could accelerate that timeline considerably. Three years ago, Google’s prototype quantum computer could make a calculation 158 million times faster than the fastest traditional supercomputer of the day. A quantum breakthrough, apart from disrupting almost everything else you can think of, would deliver the power required for Web3 in the blink of an eye.

Poor user experience is the biggest barrier, and that can be fixed

Cost and scalability may not be the main barriers to the arrival of Web3. More likely, it will be our experience of it that holds back mass adoption. Web3 is some distance from an intuitive, user-friendly interface. Anyone who has already experienced setting up their crypto wallet or messed around with other blockchain goodies will be able to tell you there’s a lot to learn. Not only that, but your existing web browser may not provide access to Web3. Rather, you’ll need a host of plug-ins and extensions to experience even the basics of this new paradigm.

Getting over all that clunkiness when we are used to “easy” will take a design focus on the user experience of the scale deployed in taking us from Web1 to Web2. We need a Facebook for Web3. Which, funnily enough, is exactly what Mark Zuckerberg and company had in mind when they announced their “Meta” rebrand.

You can imagine the competitive advantage of making Web3 easy for the masses, and it’s not a million miles from the job Facebook did with its Web2 iteration.

Exhibit 2: How the web has changed and where it is headed

Source: HFS Research, 2022

No resistance from the incumbent stars of Web2

The fact that Facebook (Meta) is going all-in with Web3 (via metaverse) and that the likes of Google Cloud are investing in Web3 suggests that the incumbent “winners” of Web2 won’t stand in the way of Web3. That’s significant because their current access to and ownership of data is a result of the infrastructure of Web2—and they have to give it up to deliver Web3. This dawning reality may be reflected in the fact that Google’s connectivity-focused cloud business is now growing faster than its data-led advertising unit.

Google Cloud Platform (GCP) says it is providing technologies for companies to take advantage of the distributed nature of Web3 in its current enterprises. Google has already revealed a Digital Assets Team to work with customers in non-fungible tokens (NFTs). It has ambitions to provide an enterprise-facing system to make blockchain easier to handle, too.

Exhibit 3: Focus attention and investment where the potential to create value is greatest

Source: HFS Research, 2022

The Bottom Line: Web3 is coming. Start developing the skills that will help your organization lead in a decentralized world

Estimates and calculations vary. Web3 could be widespread in five years or 20. But as Bill Gates put it: “We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next 10.”

First, catch up with our previous POV, Web3 can finally deliver the internet’s promise of democratized experience, for the HFS view on how Web3 aligns and supports the growth of the HFS OneEcosystem.

Next, upskill yourself. Try setting up a wallet to make payments to get under the skin of DeFi. Look into buying an NFT domain, for your website url, payment address for wallets, and universal username,  before the gold rush starts; it will prepare you well for the inevitable conversations you must begin with service providers.

And for our steer on which Web3 realm is closest to being ready for “prime time,” take a moment to study Exhibit 3, our quick guide to which blockchain-enabled initiates have the most value creation potential for enterprises in the near term.