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Business News/ Opinion / Columns/  Beyond bored apes and meme coins; India is now a nation firmly into Web3
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Beyond bored apes and meme coins; India is now a nation firmly into Web3

We now have the largest globally connected digital population

Photo: iStockPremium
Photo: iStock

In the modern retelling of Web history, we have now fully entered the third generation of the internet. We moved from decentralized protocols (read-only content and email—Web 1) to centralized, monopolistic platforms (user-generated social content—Web2) and are now poised to move towards an era of decentralized blockchain-based architectures (creator-owned, crypto-based—Web3).

With this as the current narrative, we will wrest power away from a few dominant Web2 companies and give control back to the proletariat. The large mass of creators and builders will leverage next-generation tools, co-opt themselves into self-governing organizations and participate in this new economy. This will eliminate excessive rents levied by the large platforms and move us away from an obviously flawed business model of ad-based monetization of user-generated data that has become the hallmark of our modern digital economy.

It is easy to be sceptical about this. There is no shortage of jokes about crypto kitties and meme coins. There are also serious questions on the scalability and sustainability of blockchain platforms. Furthermore, usability by developers is an issue, and there is significant confusion on scenarios appropriate for decentralized data and smart contracts. Lastly, there is considerable regulatory uncertainty. In India, while the budget imposed a 30% tax on income from virtual assets and there are plans to launch a central bank digital currency (CBDC), we are still waiting for comprehensive legislation that establishes India’s posture on crypto.

These are very good questions with few answers, highlighting the nascency of the Web3 movement. While the sceptics have a point, it would be foolish to underestimate the generational energy, developer focus and VC funding going into Web3. It seems very likely that this momentum will fuel the Web away from its current avatar into a new paradigm. How fast this will move is anyone’s guess. But for sure, the movement is larger than kids on their parents’ couches trading crypto coins.

A billion avatars now: So what does this mean for India? Will we play a dominant role in creating this next generation of the Web? One could argue that our approach to Web2 was largely passive. We allowed the big tech platforms to dominate our landscape—search, e-commerce, ride-hailing, grocery, and social media all ape western models.

Can we adopt a more active approach to shaping the global Web3? Will this time be different?

With the pullback of China from the crypto universe, we now have the largest globally connected digital population in the world. In the next decade, tens of millions of Indians will come online, and trillions of dollars of business will be transacted on digital platforms. India has the scale to propel any new paradigm to mainstream adoption.

Web3 implies a radical overhaul of legacy digital architecture. New business models will evolve over the next few years, along with a universe of decentralized apps to meet consumer needs. In addition, a massive amount of effort will be needed to resolve the scalability issue. All this represents a massive opportunity for India to move its software industry to a new level as the ‘web3 operating system’ comes to life.

Cross hairs or crossroads? We navigated a similar scenario with the fintech ecosystem over the last decade. Today, India is considered one of the countries that have a serious digital infrastructure strategy with a vibrant fintech ecosystem. India executed a series of interventions to reach this point, including allowing small-value payment transactions with minimum KYC, granting specialized licences to challenger institutions, establishing a data empowerment framework, regulatory sandboxes, and quasi-national bodies such as the National Payments Corporation of India, and amazingly successful platforms such as UPI.

Web3 is similar to fintech in its rapid evolution, its ability to attract talented young entrepreneurs and technologists, and its ability to impact India at scale. Yet Web3 is also very different. There is a natural tension between the state on the side and big tech on the other, each seemingly opposed to web3 goals. Centralized identity databases such as Aadhaar and KYC regulations do not co-exist naturally with pseudonymous accounts on a blockchain.

There is a lot to be done here beyond regulating cryptocurrency. The already envisioned National Blockchain Framework will need to be strengthened and primed with use cases that drive adoption. The newly announced CBDC will have to be situated in the context of our overall Web3 ambition and the IT services and developer ecosystem mobilized. A myriad of tricky issues related to regulatory jurisdiction and taxation issues will need to be resolved.

If we can solve these issues, we have a chance to become serious players as the next frontier of the internet is established.

Mahesh Makhija is India Technology Consulting Leader at EY.

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Published: 03 Feb 2022, 11:10 PM IST
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