The Internet has been "incredibly liberating and empowering for all of us," Hayden added. But it has also empowered cybercriminals and terrorists who wouldn't have raised concerned for national security officials a couple of decades ago, he said.

Hayden and Eric Schmidt, executive chairman of Google, also said they expect a growing reliance on cyberwarfare. The creation of the Stuxnet malware, which attacked devices used by the Iranian nuclear program, was the first shot in a new era of cyberwarfare, Hayden said. Many security experts believe the U.S. or Israeli governments created Stuxnet.

The Internet will not only transform the way governments wage war, but also the way government does other business, said Vivek Kundra, former CIO in President Barack Obama's administration. Kundra predicted "algorithmic regulations" that replace some traditional lawmaking by congressional bodies.

Smartphone users can already petition the government in a "digital public square," said Kundra, now executive vice president for emerging markets at Salesforce.com. In the future, algorithmic regulations will move faster than traditional law-making efforts, he said.

Under the current system, "a set of people get together, they have hearings, they come up with statutes and they assume that the world is going to get fixed," he said. "Imagine a world where you could have algorithmic regulations, where regulations could change based on what's happening on the ground, what's happening in the world."