A primer on Web3 adoption for enterprise

In the fast-paced, interconnected world of today, nothing stays the same for long. Technologies continually evolve and mature to anticipate the forthcoming needs of society. That is particularly true of the World Wide Web, and its next iteration is already here. Known as Web3¹, it is reconfiguring ownership, data sharing, participation, and self-expression to look radically different for users and participants. For their part, enterprises and corporations should stay apprised of these developments so they can work to help ensure their place in a Web3 world.

The advent and continuous evolution of the internet has transformed the lives of billions of people in a myriad of ways. That includes enhanced connectivity among individuals and increased access to knowledge, as well as a variety of services that may have been unimaginable without a connected world. Nevertheless, with progress often comes unintended consequences and potential dangers. For example, many services and transactions over the internet ask users to trust operators and surrender control over sensitive data. In recent years, what once may have seemed an acceptable trade-off is now, for many consumers, a subject of concern, notably regarding privacy and control of personal data.²

Along with other factors to be discussed on the following pages, the growing unease about data ownership and the need for trust in an anonymous global marketplace have contributed to the next evolution of the internet: Web3. According to Harvard Business Review,³ “Web3 is being touted as the future of the internet. The vision for this new, blockchain-based web includes cryptocurrencies, NFTs, DAOs, decentralized finance, and more. It offers a read/write/own version of the web, in which users have a financial stake in, and more control over, the web communities they belong to. Web3 promises to transform the experience of being online as dramatically as PCs and smartphones did.” By using blockchain technology, Web3 enables secure, transparent, and trustworthy transactions among complete strangers without intermediaries. While it offers this strong value proposition, one survey notes that only 8% of users globally consider themselves very familiar with the concept of Web3.⁴ This statistic is likely symptomatic of the challenges enterprises may need to overcome in Web3 and enterprise blockchain adoption.

Although in its early stages, Web3 adoption is building momentum as enterprises begin establishing a presence in Web3. According to a recent report on Web3 adoption,⁵ “315 brands launched a total of 526 Web3 projects in 2022 and Q1 2023.” The report highlights the continued interest and investment in Web3 technology by top-tier brands, with 40% of projects lasting more than one year. The report also suggests that real-world adoption of Web3 technology will continue to increase, as more brands explore the potential of this new technology.

This paper aims to help enterprises better understand the nature and opportunities of Web3 enabled by blockchain technology, the key challenges in adoption, and how they can begin the process of integrating it into their business’s strategy to stay competitive.

What is Web3?

Figure 1 encapsulates the evolution of the internet or World Wide Web. It began by publishing static information for broad consumption, moved to enable dynamic user interactions, and is currently recasting itself to provide greater user control and options.⁶

Web1 represents the early days of the internet when enterprises were publishing information online for the benefit of their end users. Static websites and digital online forms were the principal vehicles for collecting user information. These early days helped establish key protocols and standards that cleared the way for the next iteration of the internet. Still, there was limited interaction between the user and the applications. Even seemingly interactive digital forms required the manual handling of information on the back end.

Web2 transformed the internet by enabling users to partake in dynamic and complex interactions. They could now create and publish content themselves and share their data with other entities. This sparked such use cases as the purchase of groceries online, video calling friends overseas, ordering a car or taxi from a smartphone, binge watching streamed movies on demand, and more. That progress often required the sharing of data with seemingly anonymous enterprises and may have contributed to the loss of control over one’s information and privacy.

Web3 constitutes the next evolution of the internet. It can offer users the ability to own their experiences, create new ones for customers and counterparties, and enable them and entities to interact without a need for trust. This is because the core constructs of Web3⁷—blockchain-enabled cryptographic securities, digital assets supported by “trustless” representation of information, and smart contracts facilitating complex processing of information—can provide the necessary assurance and trust framework. This paradigm shift could create opportunities for new economies and business models, can reduce intermediaries, and makes existing processes more transparent and efficient while also permitting interactions with customers in new and meaningful ways.

• Some key Web3/blockchain use cases include:
• Peer-to-peer monetary transactions.
• Improved liquidity and speed of settlement for financial assets.
• Digitalization of real-world assets for better recordkeeping.
• Retention of data ownership.
• More transparent and auditable recordkeeping.
• Creation of digital ecosystems where Web3 enterprises and participants can interact without the need for implicit trust.

Web3 offers the possibility of numerous benefits and addresses key concerns of today’s companies and consumers. Companies may no longer be able to afford to sit on the sidelines and should embrace the competitive advantage offered by Web3. Despite these potential benefits, wide skepticism may be slowing enterprise Web3 and blockchain adoption.

Why the skepticism toward Web3?

Innovation typically meets with some skepticism. Whether it’s electricity, the telephone, or the internet, all these innovations faced the headwinds of skepticism before mainstream adoption. Web3 is no different. Some of the reasons for the current skepticism include:

• A lack of understanding of the technology and how it works.
• An absence of regulatory clarity.
• The mistaken equating of blockchain and Web3 with cryptocurrency.
• The multitude of financial scams.

These may be valid concerns. Yet skepticism can create the necessary conditions for pressure-testing the boundaries of new technology and for better identifying incentives that could attract constructive participants to the ecosystem. On the technology front, there are numerous frameworks, libraries, and software development kits (SDKs) that facilitate technical onboarding. It is noteworthy that some of the major cloud providersviii providers⁸ now offer blockchain infrastructure as a service to simplify technical setups.

On the policy front, the March 2022 Executive Order (EO) on Ensuring Responsible Development of Digital Assetsix Assets⁹ directed federal agencies to study and coordinate their response to the Web3 ecosystem and provide legislative recommendations to Congress. Issued by the White House, the EO was the first major US government policy statement in response to the rise of the Web3 ecosystem and digital assets. Given the implications of the EO and other government statements and publications, it could be appropriate for both enterprises and users to investigate Web3 solutions and ecosystems while adopting strong internal controls that are in line with industry industry-recommended leading practices.

What have we learned so far from the market dynamics behind the part of Web3 known as cryptocurrency? One lesson is that we should move ahead in Web3 informed by a robust skepticism while also embracing, and not negating, its positive attributes. Even the most ardent supporters of blockchain technology should be alert to the risks of this space but also open to adopting robust frameworks to minimize those same risks. Many entities¹⁰ and enterprises are making meaningful strides in this area and are putting cryptocurrency within the proper context of blockchain and Web3. Let’s be clear: Crypto may not be the whole picture with regard to Web3.

What are some challenges to Web3 adoption?

It’s important to understand that the transition to Web3 may not be quick and simple. Rather it could take place as a natural evolution meant to integrate the new technology with the existing infrastructure. There are still major challenges, both from the business and the technical perspective, that should be addressed before Web3 adoption at scale can become feasible.

Conclusion

Despite all the challenges and decisions awaiting companies pursuing Web3 solutions and enterprise blockchain adoption, a recent poll³⁵ found that 87% of the surveyed businesses are likely to invest in a blockchain solution in the next 12 months. This finding could indicate a strong interest in the marketplace and a continued interest in and the relevance of blockchain for enterprises. And given the number of financial applications, the growing adoption of digital assets, and the maturing of existing enterprise blockchains, the time may be right for businesses to investigate, evaluate, and determine how they can experiment with blockchain to unlock their next cycle of growth and better reach and serve their consumers.

As explained, the transition to Web3 should not be a decision made in haste. Behind it lie numerous regulatory requirements, barriers to securing the right technical talent, ever-changing operating models, and many technical questions. And for the enterprise itself, there may be additional levels of attention required to evaluate accounting, controls, and tax considerations appropriately. It’s important to understand what is possible today and to take advantage of specific use cases on the blockchain that can create new value and differentiate your business. It’s time to consider exploring Web3 and uncover new competitive advantages while keeping the FUD (fear, uncertainty, and doubt) at bay.

About Blockchain & Digital Assets at Deloitte

At Deloitte, our people work globally with clients, regulators, and policymakers to understand how blockchain and digital assets are changing the face of business and government today. New ecosystems are developing blockchain-based infrastructure and solutions to create innovative business models and disrupt traditional ones. This is occurring in virtually every industry and in most jurisdictions globally. Our deep business acumen and global industry-leading Audit & Assurance, Consulting, Tax, and Risk & Financial Advisory services help organizations across industries achieve their various blockchain aspirations. Learn more at deloitte.com/us/blockchainanddigitalassets.

Endnotes

¹ Ethereum.org, “What is Web3?,” last updated September 7, 2023.
² Linda Pawczuk, Richard Walker, and Claudina Castro Tanco, Deloitte’s 2021 Global Blockchain Survey, Deloitte Insights, 2021. 
³ Thomas Stackpole, “What is Web3?,” Harvard Business Review, May 10, 2022.  ⁴ Consensys and YouGov, Global survey on crypto and Web3, 2023. 
⁵ NFT Technologies Inc., “Latest report uncovers trends in Web3 adoption by top brands of 2022 and Q1 2023,” press release, April 11, 2023. 
⁶ Kevin Roose, “What is Web3?,” from “The latecomer’s guide to crypto,” New York Times, March 18, 2022. 
⁷ Ethereum.org, “What is Web3?” 
⁸ Scott Pletcher, “Blockchain cloud comparison: What is blockchain-as-a-service (BaaS)?,” Pluralsight, June 8, 2023. 
⁹ Joseph R. Biden Jr., “Executive Order on Ensuring Responsible Development of Digital Assets,” The White House, March 9, 2022. 
¹⁰ IBM Blockchain Pulse, “Blockchain beyond cryptocurrency,” IBM Blog, December 9, 2019. 
¹¹ US Securities and Exchange Commission (SEC), “Exercise caution with crypto asset securities: Investor alert,” March 23, 2023. 
¹² Commodity Futures Trading Commission (CFTC), “Digital assets,” accessed September 11, 2023.  
¹³ FinCEN, “Application of FinCEN’s regulations to certain business models involving convertible virtual currencies,” FinCEN Guidance FIN-2019-G001, May 9, 2019. 
¹⁴ Internal Revenue Service (IRS), “Digital assets,” last updated August 31, 2023.  ¹⁵ Neil Chilson, “It’s time for a FTC Blockchain Working Group,” Federal Trade Commission (FTC) Technology Blog, March 16, 2018. 
¹⁶ Office of Foreign Assets Control (OFAC), “Questions on virtual currency,” accessed September 11, 2023. 
¹⁷ Financial Accounting Standards Board (FASB), “Accounting for and Disclosure of Crypto Assets (formerly known as Accounting for and Disclosure of Digital Assets),” last updated March 27, 2023. 
¹⁸ Public Company Accounting Oversight Board (PCAOB), Spotlight: Audits involving cryptoassets, 2020. 
¹⁹ European Securities and Markets Authority (ESMA), “Markets in Crypto-Assets Regulation (MiCA),” accessed September 11, 2023. 
²⁰ Christian Encila, “New data shows over 80,000 crypto related jobs filled in 2022, despite mass layoffs,” Bitcoinist, accessed September 11, 2023. 
²¹ Jeanhee Kim, “Best universities for blockchain 2022,” CoinDesk, updated May 11, 2023. 
²² Christina Brodzik et al., 2023 Global Human Capital Trends Report, Deloitte Insights, 2023. 
²³ Ibid. 
²⁴ Deloitte, “Corporates using NFTs,” June 2022. 
²⁵ Muhammad Nasir Mumtaz Bhutta et al., “A survey on blockchain technology: ^{1 1} Evolution, architecture and security,” IEEE Access, last updated April 28, 2021. 
²⁶ Ezra Reguerra, “Social media ‘major Web3 pain point’ as phishing attacks almost doubles: Report,” Cointelegraph, July 8, 2022. 
²⁷ Anatol Hooper, “Web3 protection tool releases update that improves security against scam tokens and dangerous contracts,” Cointelegraph, June 23, 2023. 
²⁸ John Fáwọlé and Bartosz Barwikowski, “Blockchain Layer 1 vs Layer 2 scalability solutions,” Hacken, last updated June 29, 2023. 
²⁹ Layer 1 “scaling” aims to improve the base layer of the blockchain. That includes modifying the protocol to enable faster speeds and greater scalability.  Layer 2 “scaling” builds on top of the existing blockchain to improve scalability and reduce transaction fees. But it may compromise some security and add complexity. 
³⁰ Alchemy, “What are cross-chain bridges?,” last updated May 10, 2022. 
³¹ Brayden Lindrea, “If good UX is like driving auto, Web3 is ‘driving stick’—UX designers,” Cointelegraph, July 13, 2023. 
³² Mason Marcobello, “What are EIP and ERC and how are they connected?,” CoinDesk, last updated May 11, 2023. 
³³ Alchemy, “Web3 SDKs,” accessed September 11, 2023. 
³⁴ Deloitte, DeFi deciphered: Navigating disruption within financial services, 2022. 
³⁵ Casper Labs, “Casper Labs unveils 2023 enterprise blockchain report revealing widespread interest in blockchain adoption despite persistent knowledge gaps,” press release, January 12, 2023.

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