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Significance of Digital Economy, Its Promises and Dangers: Critical Essay
The digital economy in world creates efficiency and is beneficial to connect the whole world within a single framework. It is also termed a new economy. The digital economy was first coined by a Japanese professor at the end of 1990. The digital economy is termed because digital technologies help the economy by providing several inclusive opportunities. The broad scope of the digital economy includes sustainable growth for economics and it provides several facilities like e-commerce platforms, industry procurement, implementation of new software, and digital services and enhances excellent international cooperation among countries.
The digital economy is a term that emphasizes using digital technologies, which are generally based on computing technologies. It is essential for covering all types of business, industries, and economic and social aspects of an economy. Support from the Web and digital technologies accelerates the pace of the interconnection of global networks. Various countries define the digital economy in different terms. Australian economy termed it as a global network, whereas defines it as a connection that ensures electronic transactions are easy. OECD countries termed it the web economy, and it states that the digital economy assures efficient trading of goods and services.
This work aims to understand the significance of the digital economy as well as its promises and perils.
Promises of the Digital Economy
Firstly, the digital economy has helped to simplify payment and make transactions easy. It has made cash transactions rare and has reduced the complexity of cash counting and carrying safely. It also reduces the amount of black money and enhances anti-corruption policies. It ensures a transparent economy, acts as a powerful catalyst to simplify huge business transactions, and ensures 90% of more market capitalization. Most developed countries are willing to adopt the digital economy. From the period of 2005 to 2019, it has experienced an increase in adoption in the digital economy all over the world. Through a digital approach, it reduces the cost of sending and receiving money. It also increases the safekeeping of money and fast speed for money transfer. It has been reported 53% of the users believe in digital assistance and money security (Avazov and Maxmudov, 2021). An increase in cryptocurrency regulation and financial literacy has been encouraged through the digital economy.
But the most promising feature of the digital economy is that it can be applied in every industry. It directly connects to developing computer technologies and enhances the digital revolution. Internet banking, electronic payments, e-commerce, rise in business outsourcing are the promising sides of the digital economy. It can be applied in every field of life, whether in sports or aviation, telecommunication, or other manufacturing industries. Smart cities are created, and it has been noticed that the implementation of smart cities raises the sphere of information security by 36% (Avazov, 2021).
Dangers of the Digital Economy in the Age of Network Intelligence
The dark side of the digital economy is digital insecurity and cyber insecurity. The rising pace of the digital economy has increased the need for digital security. However, it is not able to maintain the pace, and the rapid growth is creating a legacy and complications in financial and other business services, making the digital economy vulnerable to data breaches and network ad password hacking. Large industries, including aviation, military, banking, manufacturing, and other services, are digitized, and technology inefficiency increases the country to cyber-attacks because of digital insecurity.
Moreover, the digital economy undergoes heavy investment, which is sometimes difficult for developing countries. The digital economy can be implemented with a strong infrastructural framework and high-functioning potential for networks and telecommunications. It requires huge investment to engage different shareholders and strong market capitalization. Thus, the implementation of the digital economy in developing and underdeveloped countries remains a dream.
Reasons for the Unprecedented Growth of the Digital Economy
The major three components of digital economies are the core aspects of the digital world, digital and information technology, and wider aspects of digitalized sectors. These components are used in different sections of an economy, and among them, the core aspects of the digital world focus on investments and financing for the economy. Facilities incorporated with the digital economy improve personal skills and infrastructure, which encourages sustainable economic growth. According to a UNCTAD report, digital skills, and capital include 23% of the world’s overall GDP (Unctad.org, 2019). The reasons behind the unprecedented growth of digital economies are the usage of blockchain technologies, three-dimensional printing facilities, digital transactions, high-speed Internet facilities, the Internet of Things, automation, cloud computing, and robotics, as well as data trafficking. The features of the digital economy like blockchain technology ensure many parties engage in secure and trusted transactions. Three-dimensional printing features are beneficial for developing countries to boost local markets and international trading. IoT is another growing advantage of the digital economy and it has been forecast to grow by 17% by the end of 2024. Sensors and chips for identifying radio frequencies are some gadgets that help in the easy facilitation of sending and receiving data.
Mitigating Strategies to Overcome the Dangers
Countries should focus on reinventing the Internet facility to provide a secure and safe digital economy. Internet communication is growing fragile due to huge malicious activities, data insecurity, hacking, and theft. It needs to be removed by implementing a trusted digital economic sphere, and this could boost up additional 2.8% growth for large organizations in an economy. To make the digital economy secure, the Internet of Things needs to be changed. 74% of business leaders around the world acknowledge solving the Internet of Things, and removing problems from blockchain technology will lead to the digital economy secure.
Before implementing the digital economy, countries should focus on removing gaps within it. Gaps within income, education, and urban-rural division are the barriers to implementing the digital economy. This causes a shortage of investment and problems occur while implementing digital technologies. On the other hand, problems with digital insecurity can be resolved by ICT tools, botnet mitigation, and basic standard rules for IT security. This could engage secure electronic identity and more code encryption to handle these connections with more efficacy. Greater use of network architecture can be used to mitigate the threats. Confidence in Internet security can rise then only and quantum computing could be applied to detect frauds in digital financing.
Conclusion and Recommendations
This work has revealed the significance of the digital economy, including its promises and disadvantageous features. Reviewing the recent trends of the digital economy signifies that digital technologies connect with all aspects of digital infrastructure. There are different promising characteristics of the digital economy, and among them, digital transactions and their potential to be applicable in all industries are the most important. The black side of the digital economy is that it requires huge investment as well as digital insecurity. Digital confidence among people is very low, although dependence on the Internet and digital finance is more than 90%. This work frames some recommendations so that the perils of the digital economy can be resolved and those are as follows:
- Digital insecurity can be resolved by maintaining strong protocols of Internet security and removing the complexity of the Internet of Things.
- Digital security can be ensured by implementing necessary software in every aspect of digital technologies.
- The digital economy needs huge investment, and thus proper international collaboration is recommended within countries.
- Engaging shareholders and stakeholders are suggested in the digital economies to assuring investment and funding.
- Economies are recommended to resolve the gap between education, region, and income so that investment and literacy about the digital economy both are ensured.
- Coded encryption and quantum connectivity should be ensured to remove digital insecurity and frame a robust digital economy.
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