Version française prochainement disponible
By Sachio Iwamoto
The adoption of web3 technologies today is where the Internet was in the late 1990s. Both excitement for and adoption of web3 are growing rapidly. Monthly active developers in web3 have increased 297% since 20181; a surge mirrored by a significant boost in web3’s mainstream momentum. In fact, Gartner® predicts that “By 2024, 25% of enterprises will use centralized services wrapped around Decentralized Web3 applications."2
Despite the excitement for and movement towards web3, many of our customers are cautious when considering new technologies such as this one. There is, of course, always risk involved when adopting emerging technologies. And businesses cannot afford to lose their customers’ and investors’ trust.
As such, enterprises looking to move into the next generation of the internet must set clear objectives and define a web3 adoption strategy that aligns with priorities from both business and technology perspectives.
What follows are notes from conversations I have with customers to help them begin to identify roadblocks and map out a plan.
Why web3?
The term “Web 3.0” is often meant to be the third stage of the web. Web3 moves us from the static pages of the first generation of the web in the 1990s, and the user-created-content centric second wave of the 2000s, to a decentralized internet. Web3 is owned and run by users without relying on a central governing authority or third-party platforms.
“
The technology behind web3 allows for an agility and speed of decision making that can finally keep up with rapid advancements in technology and fast-evolving customer needs.
So, why web3? The technology behind web3 allows for an agility and speed of decision making that can finally keep up with rapid advancements in technology and fast-evolving customer needs.
Web3 is made possible by key features of blockchain technology. One such feature, Smart Contract (also known as Token Contracts), allows users to own things digitally and control them online. It enables users to exchange digital assets or values in the form of tokens faster, easier, and for low cost.
Because of these features, web3 is poised to change the power balance between internet users and applications. It introduces new economic models and transforms the way organizations and communities are built and run. By unlocking a decentralized online ecosystem where equal access is guaranteed, web3 offers new types of ownership and flexible economic opportunities.
Understanding the core barriers to adopting web3
There are several reasons why permissionless blockchains—blockchains in which anyone can freely participate—have not been broadly adopted by established enterprises prior to now. Since enterprise applications often require very high throughputs and run intensive batch processing, scalability and performance have been concerns.
Most blockchain platforms also do not yet have as many tools, libraries, and APIs available as Web 2.0. For example, there are very few products and tools available to integrate Ethereum Virtual Machine (EVM) compatible networks natively and securely into core enterprise application platforms. (EVM is a platform that lets users create decentralized applications [dApps] on Ethereum.)
The first step in navigating the roadblocks to web3 adoption is therefore to understand what use it may have for your business in the here and now.
“
Web3 introduces new economic models and transforms the way organizations and communities are built and run.
Finding the right blockchain platform
Web3 has a wide range of use cases—from supply chain management and digital ID to healthcare and insurance.
Your particular use case or use cases will inform decisions about the right blockchain platforms—permissioned, permissionless, private, consortium, or public.
Public and permissionless blockchains like EVM-compatible networks, for example, capitalize on DeFi and NFT, and tend to be used for B2C and P2P applications like global payments and remittances, gaming, loyalty reward programs, and provenance (e.g., supply chain tracking and transparency). In these scenarios, users often can consume the services anonymously.
However, permissionless may not be always suit enterprise use cases, because B2B applications often require a greater degree of security and compliance. With use cases such as supply chain management, SSI, and IoT, a private or semi-private (a.k.a. consortium) blockchain platform would be a good choice. While access would be controlled, the applications would still be distributed, decentralized, and immutable, and may leverage other primary blockchain advantages.
A hybrid of more than one blockchain platform (a.k.a. multi-chains) and integration between on- and off-chain systems is also an option for teams moving to web3.
A hybrid approach enables your team to improve UX and achieve new business outcomes, while leveraging existing assets. In fact, the majority of dApps, like DeFi applications that use Smart Contract, rely on external (off-chain) data. Of course, it’s vital to architect strong security and privacy protocols across multi-chains.
Addressing the talent gap
Short supply of talent is another major roadblock to web3 adoption.
For example, Smart Contract development is complex and requires deep skills. The size of the skilled blockchain designer and developer community is growing at a fast pace3 but not quickly enough to meet the job demand. Also, many developers work in silos specialized in specific types of projects or protocols.
Beyond developer recruitment, building an effective web3 team also means recruiting strong portfolio and program management professionals who understand the entire ecosystem of this emerging technology and can orchestrate multi-disciplinary teams efficiently.
If there ever was need to make a case for upskilling or reskilling your teams, this could be it.
“
If there ever was need to make a case to upskill or reskill your teams, this could be it.
Effectively managing the risk
Web3 comes with certain baggage, from recent cryptocurrency turmoil to regulatory uncertainty. Plus, as the web3 open ecosystem gets bigger and the integrated architecture becomes more complex, security risks are sure to increase. There are new vulnerabilities unique to web3 in all layers including network, blockchain protocols, and Smart Contract.
Put simply, risk management must remain central to any discussion about moving to web3.
I tell all my customers to start with use cases that are low risk to the business. For instance: Issuing NFT as loyalty rewards as an experiment to help drive better customer satisfaction and relationships. Once the ball is rolling, and as web3 ecosystems continue to evolve, your team’s adoption strategy can bring new ideas forward and solve more complex business problems, in an iterative and risk-aware way.
Moving forward with confidence
Although some of the roadblocks will take longer to resolve, the groundswell of interest and activity related to web3 only buoys analysts’ growth predictions for the technology.
The sooner your team starts the web3 adoption journey, the more time you will have to gain the experience needed to leverage this new technology effectively and securely.
Sachio Iwamoto is Research Lead of Web3.0/Fintech/Blockchain technologies at Kyndryl.
1 Electric Capital. 2022 Electric Capital Developer Report. 17 January 2023.
2 Gartner. FAQ for NFTs on Blockchains and Web3 Ecosystems. 13 June 2022.
3 McKinsey. McKinsey Technology Trends Outlook 2023. July 2023.
GARTNER is a registered trademark and service mark of Gartner, Inc. and/or its affiliates in the U.S. and internationally and is used herein with permission. All rights reserved.
