The Impact of Digitalization on the Economy
2020 marked the end of a decade, but it also started a trend that will change humanity forever. Global economies became digitalized as the work-from-home culture gained prominence. Beyond the gloves and masks gifted to us by Covid, the pandemic opened a new vista of opportunities.
Digitalization — mass adoption of connected digital services by consumers, brands, and governments has recently emerged as a crucial economic driver capable of accelerating growth, development, and job creation.
The era of walking to a store to pick up new shoes or visiting a “brick and mortar” business to rent a VCD has passed. From the comfort of a couch, a simple “hi Bixby” or “hey Alexa” gets the job done. Digitalization is changing global economic perspectives and social trends, but technology is at the heart of it.
Decentralized Web
Digitalization and technological revolution are inseparable, and there are several supporting examples. With technology central to digitalization, Web 3 and the Blockchain are the pivots on which it rotates.
The utilization of information in the network for digital flow and transmission was the critical characteristic of digitalization in the infant internet. Now, Web 3.0 has attracted a considerable amount of attention due to its unique decentralized features. Global economies are gradually making a sharp diversion from an industrialized economy to a digitalized economy.
Just like the industrial revolution of the 18th century that substituted animal and human power with machines, Web 3.0 is also revolutionizing the old world order with applications and artificial intelligence.
The origin of the new internet started in 2008 with the advent of Bitcoin. Now, the effect transcends crypto assets, significantly impacting global economies across different sectors.
Decentralization — Digitalization’s primary impact tool
Embracing digitalization can improve gender equality, win the war against climate change, and help achieve many of the UN Sustainable Development Goals. As a matter of fact, “Digitalization is the great leveller of opportunities,” according to Benoit Denis, a senior economist on digital projects at the European Investment Bank.
With recourse to the unending potentials of digitalization, here are essential impacts it has had on global economies.
Accelerated Payments
Blockchain has provided financial inclusion for entrepreneurs in developing countries, affording them a seat at the global economic table. It provides a safe, affordable solution to cross-border transactions and remittance payments and significantly impacts transaction costs and speeds.
Trust and transparency
Digitalization has significantly impacted provenance. For instance, tracking and tracing products and services, which became a priority for several supply chains during the COVID-19 pandemic, has greatly benefited from this. With the simple scanning of barcodes, product details such as origin and composition can be quickly determined. This aspect of the decentralized web is still underutilized.
For instance, Blockchain can ensure patient safety in the healthcare sector which is central to the pharmaceutical supply chain. Giving patients confidence in the authenticity and origin of drugs can be achieved. Blockchain applications have supported companies in response to the rise in public and investor scrutiny around sustainable and ethical sourcing.
Digitalization has essentially enabled “computability” of traditional and digital assets. It has made them searchable, auditable and verifiable, facilitating transactions across global economies at a low cost of trust.
Job creation
Digitalization has been a lifeline with global economies still navigating through the economic rubbles of Covid-19. The pandemic accelerated the digital transformation of work and the work culture. Stuck at home, billions of employees across the globe replaced daily commutes, office desks, and parking lot chats with half-dressed virtual meetings and Zoom calls.
The way is also being paved for the next evolution in the digitalized economy — the metaverse. Essentially, this represents an application of spatial computing that will see us using our avatars to meet, work, learn, socialize, and transact in fully immersive virtual environments. Bar the media hype, the metaverse is already here.
Ownership and control
Digitalization has also significantly impacted the globe in terms of economic opportunities. The ability to “assetize” intellectual properties and digital content create a digital ownership and income framework for users. This has already occurred in the art and entertainment sectors, altering the traditional value chains.
Last August, Eminem and Snoop Dogg teamed up to leverage the metaverse for a performance with over 46 million views. This technological breakthrough unleashes a novel value chain in the music industry where creators and fans can connect on different levels to unlock new value in potential across the industry.
Identity management
Blockchain technology provides a groundbreaking way to secure personal identification and information. As a matter of fact, this aspect of digitalization has hugely impacted the refugee identity situation across the world. Refugees and displaced persons flee their country without formal identification making it practically impossible for them to open bank accounts, obtain loans, or vote.
This negatively impacts the economy as millions of potential economic agents are sidelined based on the regulatory procedures of KYC. Although the recent wave of regulations sweeping across nations has mandated KYC for all blockchain users, several decentralized exchanges do not require customer identification before business is conducted.
Although the United Nations is on a mission to ensure everyone has an identity by 2030, the Blockchain provides an all-inclusive option for those currently affected and is critical to achieving the long-term goal.
Finally, digitization is a viable medium policymakers can explore to achieve holistic development in the contemporary ambiance of a sluggish global economy.
Opportunities, money, and value drive the global economy. Digitalization through the Web 3 and the Blockchain has already proved to be a greener pasture for the economic drivers than the traditional approaches. The significant difficulties affecting different climes are often associated with conventional banking, financial systems, unemployment in struggling economies, physical location and infrastructural issues. The decentralization aspect of digitalization has impacted global economies in this regard. It’s no longer a question of how digitalization has impacted the global economy; it is now how to unlock new value in its unending potential.
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