As Web3 becomes a major new industry in the startup technology sector, the question of how it will involve business and IT is posed more frequently, as it has been with each previous cycle of digital innovation.
When it comes to often-controversial topics such as cryptocurrencies, blockchain, and NFTs, it can be challenging to separate the signal from the noise amidst all the innovations in the world. There is little doubt that the technological advancements underlying these trends have created a significant innovation wave under the umbrella term Web3.
Cryptocurrency, blockchain, and non-fungible tokens (NFTs) have experienced numerous hype cycles and investment rounds. Despite difficulties, the industry has grown steadily year after year, even though significant portions of the sector are experiencing severe downturns. The question is whether Web3 has attained enterprise significance.
What is Web3? Everything you need to know about the decentralized future of the internet
I’ve seen proof that Web3 development services are an important type of business technology. Should the average organization spend time and money understanding and implementing Web3’s many complex ideas and technologies? Is it important and inevitable to invest in and develop new ideas? Let’s look more closely at what’s going on.
Web3 has grown up
One indicator of a technology trend is its venture capital activity, which attracts the current crop of rising stars and top talent to new, green-field opportunities. Here is where Web3’s recent evidence is particularly impressive: Andreessen Horowitz is already in its fourth and largest-ever Web3-related fund, Crypto Fund 4, which raised a record-breaking $4.5 billion last month for a variety of blockchain-related investments that will shape “the next generation of computing.” Another indicator is the prevalence of decentralized applications or “Dapps” in Web3 ecosystems.
Having followed and participated in the industry-altering Web 2.0 revolution a decade and a half ago, it is clear to me that, at the very least, the underlying technologies of Web3 development services are here to stay. This is strong cryptography combined with digital signatures for trustworthy transaction chains, decentralized and collectively owned ledgers such as blockchain to underpin them, and long-term digital value stores such as Bitcoin. On the other hand, crypto exchanges, NFT marketplaces, and even cryptocurrencies are prone to extinction.
A more evenly distributed but very different future
As I pointed out in my first analysis of Web3 development services as a whole, there is a very important idea at the heart of it: Namely, decentralization, which is the idea that rather than large parts of the Internet being owned and controlled by a few large organizations, ownership is spread among the people who build and use the Internet. Web3 is hard to take over, but possible. This is because the rules for radically distributed ownership are built into the design and architecture of the technologies that make up Web3.
But isn’t this the same kind of naive, new-age talk about how technology is becoming more accessible than we’ve heard throughout the medium? Almost every change to the Internet and the Web has been about giving people more power and making it easier for them to participate. Since global tech companies and even bad actors are getting more and more powerful in these areas, the ideas of simple openness and massive sharing by everyone now have a lot of doubters. The Internet, the Web, and the online world have been useful. Not at all. They keep getting taken over by people who better grasp how these new digital markets work and then use that to their advantage.
What is Web3 in the enterprise?
Web3 will become essential to the operation of our IT systems over time. Decentralization is a major industry trend that more tech consumers and businesses will demand. Instead of storing information in our databases and executing code in portions of the cloud that we pay for or otherwise control, companies will need to become accustomed to relying on Web3 resources (data, compute, etc.) and sharing more power. Blockchain and distributed ledgers will increasingly store a substantial portion of the vital information required to operate our businesses in a more secure and private environment. Over time, an increasing proportion of our applications will resemble open-source projects and be powered by smart contracts that all stakeholders can view, verify, and agree to transparently. Even our businesses will have strange new subsidiaries entirely embodied in code and operate autonomously using digital inputs from their stakeholders (the new active shareholders in the Web3 world).
And this is only the start. Web3’s cryptographic systems and immutable transaction ledgers have now withstood enough time to prove themselves and pave the way. Decentralization is increasingly proving to be a fundamental revolution, despite being one of many technologies that will evolve (as the technology universe is large enough to accommodate multiple wheels simultaneously). Web3 speaks directly about shifting the core concepts and technologies that drive our organizations from information technology (IT) to customer experience and our business models and management.
A more straightforward transformation will also occur, such as simply accepting cryptocurrencies as payment or issuing intellectual property in the form of NFTs. However, these are not the profound and consequential changes that will occur over time. As an industry, we’ve learned that digital transformation is a moving target, with the goalposts shifting with each major technological advancement. Web3 is such an advancement that, like Web 2.0 before, will require businesses to consider their motivations and operations significantly different from the past.
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The enterprise opportunity of Web3
If history is any guide, most organizations will need help implementing many of the ideas inherent in Web3, from new forms of finance to decentralization. But that doesn’t mean there aren’t plenty of good targets for businesses to start developing strategies for and experimenting with targeted prototypes and proofs of concept. The second figure above is my most recent map of where organizations can conduct tactical experiments with Web3 technologies and ideas.
The Web3 startup community will produce vast new companies that will dominate the world. Early enterprise adopters can seize a portion of that.
We can see from this that there are at least seven key areas where businesses can start using Web3:
- Metaverse. There has been considerable speculation and investment in virtual worlds based on virtual or mixed reality, with many of these worlds incorporating decentralized concepts. Many of the most valuable internal business use cases (team collaboration, onboarding, learning, and development) and external business use cases (shopping, marketplaces, customer experience) can be realized using a metaverse construct. Metaverses can range from virtual worlds that have existed for decades to Web3-like services such as Decentraland and Voxels.
- Distributed Autonomous Organizations (DAOs). The idea of a DAO is put into a smart contract, and everyone can see the rules. Tokens are given out, and stakeholders have a clear way to make decisions. DAOs are a new type of digital corporation that can be used in business for everything from open innovation and investment to IP-based professional services and industry-scale consortiums.
- Web3 Apps. Naturally, useful applications can be constructed from the Web3 stack’s lower layers, which for enterprises will include internal business apps that operate on decentralized data, customer-facing apps that engage in transactions or provide data services, and decentralized ERP and CRM systems, such as Energy Ledger for industry-specific supply chains, which are just beginning to emerge.
- Creator Economy for Web3. One of the more exciting aspects of Web3 is the ability to create and trade media and other digital assets such as art, music, and NFTs. Many companies are in this business or have assets that can be used in this capacity, particularly in the merchandise, prediction markets, business media, design, and open data industries.
- Crypto and Digital Assets. Businesses are about monetization, and cryptocurrencies offer a bewildering array of opportunities, such as transforming loyalty programs into digital currencies, issuing tokens for corporate social responsibility, and creating asset- and commodity-backed currencies, among many others. Accepting cryptocurrencies as a form of payment is one of the less strategic but progressively more useful adoption strategies.
- Blockchain and Distributed Ledger (DLT). For years, industries have talked about how blockchain could track the supply chain, find fakes, store data, fight cybersecurity threats, and do much more. These use cases are now reaching their full potential, and some effective industry-specific blockchain consortiums are also starting to form.
- Some decentralized approaches are altering human activity and industries. Decentralized science, or DeSci, is likely a leading research and development field. Other areas include decentralized work, government, and finance, the largest of all. These focus areas involve the deliberate Web3 transformation of entire industries, not just organizations.
Most businesses not in the technology sector will feel little pressure to adopt Web3 at this time (though on the tech side, the talent war is already beginning with companies like Google building out their Web3 teams.) And if history has taught us anything, now is the ideal time to acquire new skills, experiment with new methods, and discover what works in a particular field. Due to the depth and complexity of the underlying technologies, adopting new technology will require more time and effort than usual. This is necessary to protect the systems’ integrity, prevent co-optation by a single large entity, and safeguard systems that handle increasing financial transactions (the total market cap of crypto is in the many hundreds of billions of dollars).
Web3 will remain more in the hands of the chief technology officer (CTO) than the chief information officer (CIO), but its long-term potential is promising. If the first version of the Web and Web 2.0 are used as models, the Web3 startup community will spawn enormous new companies that rule the world. This is currently occurring. Early adopters of Web3 in business are eligible for a portion of this market.
However, evaluating opportunities and determining their potential for success will be significantly different than in the past. Web3 is designed to make it easier for businesses to control or direct it. As I’ve previously stated, the first rule of digital systems is that organizations must be willing to cede some control. Web3 is a distributed ecosystem approach to digital, so everyone who desires a seat at the table receives one. This will likely result in one of the strangest and most exciting digital adventures. Now is an ideal time to investigate it.