We are living in an era of the digital economy, where most of our daily data is connected through networks.
In this era, where individuals, individuals and things, and things and things all communicate in digital language online, we call this trend Digital Transformation or Digital Economy. As this trend accelerates, the speed at which data is generated increases exponentially, and expectations for the speed at which data is processed and analyzed to return results are also rising. In this post, we will explore what the digital economy is, what its technical elements are, and how it affects business and daily life.
What is Digital Economy?
The digital economy is the economic value created in daily life through online connections between people, businesses, things, data, and processes. The digital economy is strengthened through the interaction of technological elements within an ecosystem composed of IoT (Internet of Things), 5G networks, cloud computing, big data, artificial intelligence, blockchain, and computing resources. The reason businesses need to pay attention to and proactively respond to the digital economy is that this ecosystem is changing business models by providing products, services, and information to consumers, checking their reactions, and offering better value to them.
Technical Elements of Digital Economy
On November 30th, 2022, OpenAI, an AI research company partnered with Microsoft, launched the AI-powered chatbot ChatGPT. ChatGPT is simple: you ask a question, and it answers. When asked, "What is the digital economy?", ChatGPT succinctly provides a definition, examples, and characteristics. This shows how much the level of artificial intelligence has advanced, and how the scope of AI, which was previously limited to areas like home appliances and customer service, is now expanding into daily life. Including the AI used in ChatGPT, the ecosystem that makes the digital economy possible consists of the following technical elements:
Internet of Things (IoT)
The Internet of Things (IoT) is a technology that connects objects through a network, allowing them to exchange and accumulate data. In high-risk industries like energy and shipping, IoT is used to manage the life cycles of key equipment parts through sensor data. In the healthcare industry, IoT is used to measure and transmit health information through smartwatches.
5G Networks
For autonomous driving in the automotive industry, ultra-low latency communication is essential. Without guarantees for real-time exchange of pedestrian recognition from visual sensors, traffic signals, and information, autonomous driving would be impossible. The 5G network enables ultra-low latency communication through superior data transmission speeds, volume, and virtual communication network functions tailored to applications compared to 4G. If 5G and communication via low-orbit satellites like Starlink (SpaceX's satellite network) become commercialized, the arrival of autonomous driving may come sooner.
Cloud Computing
Cloud computing is a technology that virtualizes computing resources, making them immediately available where and when needed. It eliminates the limitations of physically expanding computing resources, enabling the timely operation and scaling of technical elements within the digital ecosystem.
Big Data
Big data refers to data collections through IoT and other sources. AI requires a massive scale of data to learn and improve decision-making processes. Big Data is extremely large, complex, and fast-growing and leverages AI for better data analysis.
Artificial Intelligence (AI)
Artificial Intelligence is a simulation tool trained based on big data. This learning process is also referred to as machine learning. AI uses this advanced simulation to make decision. AI is being commercialized in daily life by developing algorithms tailored to specific situations that meet the objectives of the simulation. For example, in autonomous driving, AI is used for prediction and probability, while in commerce, AI is used for specialized analysis such as product recommendations.
Block Chain
Blockchain is a technology that authenticates applications as digital assets and prevents tampering. It records every modification history in blocks, which are connected to all points in the network, ensuring secure certification. Beyond Bitcoin, any industry requiring certification and traceability, such as agriculture, manufacturing, and healthcare, is becoming a candidate for blockchain commercialization.
Computing Resources
Computing resources form the infrastructure upon which the listed technical elements operate and interact to create synergies. The statistical methods used in AI have existed for a long time, but previously, the massive amounts of data required substantial computing, storage, and network resources. In the past, due to low performance and efficiency, the cost of investment were relatively high, making commercialization difficult. In other words, the improvement in the performance and efficiency of computing resources is the driving force behind the digital economy.
Changes in Business
The digital economy is transforming our daily lives and business models.
We have experienced the expansion of interconnectedness through networks—between people and people, people and things, and things and things through the pandemic. Video conferences, video lectures, contactless ordering, and payments have become routine. The new method of information exploration introduced by AI chatbots like ChatGPT may bring long-term changes to the digital marketing strategies of search-engine-centric.
South Korea has a higher digital infrastructure than any other country. With an internet usage rate exceeding 96%, it far surpasses the United States (91%) and Japan (90%). In terms of digital infrastructure level, South Korea is ranked second globally, following Japan. As the digital economy evolves rapidly, we will explore in the next post what changes are occurring in IT infrastructure to maintain business competitiveness in this fast-changing era.
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References
1. Share of the population using the Internet, Our World in Data, 2020
2. These Countries Have the Most Well-Developed Digital Infrastructure, US News, 2021
