4 minute read 14 Mar 2022
Web3 in India

Beyond bored apes and meme coins

By Mahesh Makhija

EY India Technology Consulting Leader

Technology evangelist, a facilitator of customer centricity and innovation

4 minute read 14 Mar 2022

Deep diving to understand the true potential of Web3 in India.

In the modern retelling of web history, we have now fully entered the third generation of the internet. From decentralized protocols (read-only content and email - web1), to centralized monopolistic platforms (user-generated social content - web2), we are now poised to move towards an era of decentralized blockchain based architectures (creator owned, crypto-based - web3). 

With this 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 disproportionate rents levied by large platforms and move us away from the 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 serious questions on the scalability and sustainability of blockchain platforms. Usability by developers is an issue and there is significant confusion on scenarios appropriate for decentralized data and smart contracts. Lastly there is significant 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, 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 venture capital (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.

India: a billion avatars now

So what does this mean for India? Will we play a dominant role in the creation of 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, ecommerce, ride hailing, grocery and social media models all ape western models.

Can we adopt a more active approach to shaping 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. Over the next few years new business models will evolve along with a universe of decentralized apps to meet consumer needs.  A huge amount of effort will need to go into the resolution of 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.

Crosshairs or crossroads?

We navigated a similar scenario with the fintech ecosystem over the last decade. Today, India is considered one of the countries that has a serious digital infrastructure strategy with a vibrant FinTech ecosystem. To reach this point India executed a series of interventions – allowing small value payment transactions with minimum KYC, granting specialized licenses to challenger institutions, establishing a data empowerment framework, regulatory sandboxes, quasi national bodies like NPCI, and amazingly successful platforms like UPI. 

Web3 is like FinTech in the rapid nature of its evolution, its ability to attract young talented 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 side and big tech on the other, each seemingly opposed to web3 goals. Centralized identity databases like Aadhar 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. 

This article was originally published on Mint.

Summary

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

About this article

By Mahesh Makhija

EY India Technology Consulting Leader

Technology evangelist, a facilitator of customer centricity and innovation