Web3 will go mainstream —

when to expect it and how

to prepare

JUNE 2022

David Cushman, Practice Leader

Joel Martin, Research Leader
 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.

© 2022, HFS Research 2

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
Exhibit 1: Plans for adopting quantum are a low IT leadership priority
Rank the following emerging technologies based on your current investments?
Filters: IT leadership (CIO, VP, Director)
22.8% 22.3%
14.9%
13.4%
Process Artificial Process Hybrid-
mining intelligence automation cloud
and (AI) or multi-
discovery (including cloud
Ml, NL etc.)
Sample: 202 executives across Global 2000 Enterprises
Source: HFS OneOffice Pulse Study, H2 2021
© 2022, HFS Research
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.
10.4%
6.9%
5.0%
3.0%
1.5% 1.0%
Cybersecurity Blockchain Internet of Augmented 5G Quantum
things (IoT) or virtual computing
reality
3
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.
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.

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

Web1
1990-2005
• Basic web pages,
ecommerce, dial-up,
mostly read-only,
• Web forms
• Directories
• Data acquisition an
afterthought
• Britannica Online
Web3
Web2 Next
2005--present
• Virtualized interactions,
• Social media, user live streams/waves
generated content (read- (metaverse), ubiquitous
write), mobile and access
broadband access • Smart (Ai) apps
• Web apps • User behavior
• Tagging • Decentralized, personally
• Centrally owned and owned and monetized
monetized data data
• Wikipedia • Universal information

Source: HFS Research, 2022

© 2022, HFS Research 4

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.
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

More hype than value Interesting thought
experiments
Invest if you want a high- Potentially game-
risk high-reward but they changing but more
don’t do much philosophical as of now
Pilot and prove Ready for primetime
Technology exists but Already proven to drive
needs a robust business business outcomes and
strategy new sources of value

• Ecosystem play
• CBDC • Asset tokenization
• Cryptocurrencies • DeFi
• Web 3.0 • Multiparty financial
• Stablecoins • NFTs transactions
• Metaverse
• Supply chain track
& trace

Least Current value creation potential for enterprises Most

Source: HFS Research, 2022

© 2022, HFS Research 5

 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.

© 2022, HFS Research 6

HFS Research authors

David Cushman Joel Martin

Practice Leader Research Leader

David leads our Emerging Technology Joel Martin is Research Lead for Cloud
Practice – tracking OneOffice enablers and SaaS Strategies at HFS. Joel’s role is
from automation and AI, to data and to aid organizations in making crucial
design thinking, integration, process decisions on designing, adopting,
orchestration, workflow and intelligence. managing, and governing their growing
He is deeply engaged in research into portfolio of cloud solutions. Executives
business value delivered by SaaS, and and business leaders will benefit from
also leads our HFS Hot Vendors concise research on harnessing cloud-
program. based solutions to support the
workplace’s rapid, fundamental changes.
Experienced in start-up, scale-up and
large-scale digital transformation
programs, he has led digital
development at the UK’s fastest-growing
media company, founded and grown
digital consultancies across Europe and
worked with world-class companies as a
director in digital strategy advisory at a
tier-1 services provider.

© 2022, HFS Research 7

 About HFS
Insight. Inspiration. Impact.
HFS is a unique analyst organization that combines deep visionary
expertise with rapid demand side analysis of the Global 2000. Its
outlook for the future is admired across the global technology
and business operations industries. Its analysts are respected for
their no-nonsense insights based on demand side data and
engagements with industry practitioners.

HFS Research introduced the world to terms such as “RPA”

(Robotic Process Automation) in 2012 and more recently, the HFS
OneOfficeTM. The HFS mission is to provide visionary insight into
the major innovations impacting business operations such as
Automation, Artificial Intelligence, Blockchain, Internet of Things,
Digital Business Models and Smart Analytics.

Read more about HFS and our initiatives on:

www.hfsresearch.com or follow
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