Experts Explain: An India Blockchain Platform
There is an old saying: “Building the road is the first step to becoming wealthy”. In recent years, India has made significant efforts to become a digital society by building a large digital public infrastructure at citizen scale. The Government of India and the Reserve Bank of India (RBI) have promoted simplification and transparency to speed up the interaction between individuals, markets and the government. With the launch of the Digital India mission in 2015, all our payments, provident funds, passports, driving licences, toll crossings and land registry checks have been transformed with modular applications built on Aadhaar, UPI and India Stack.
Limitations on public digital infrastructure
It is well established that digital infrastructure should be designed based on principles of availability, affordability, value and trust. The invisible rules that underlie technology can be made visible with the help of design principles, legislative frameworks, governance frameworks and public engagement. However, looking at today’s digital ecosystem, it has been identified that existing diverse digital infrastructures are not interconnected as a design; a technical integration is required to make them familiar and interoperable. Today, information must travel across multiple systems to complete the interaction, relying on private databases, making the validation of data more complex as the network grows, increasing costs and creating inefficiencies.
Dilip Asbe is the Managing Director and CEO of National Payments Corporation of India (NPCI). NPCI is a non-profit organization established by the Reserve Bank of India (RBI) and the Indian Banks Association to create and operate a robust retail payment and settlement infrastructure in India. NPCI’s service portfolio includes BharatQR, BHIM, IMPS, UPI and RuPay among others. Ashutosh Dubey is Senior Lead-Innovation Management, NPCI.
Web 3.0 to meet challenges
It is becoming increasingly important for developing countries to iteratively build innovative solutions on top of existing digital infrastructure. We need resilient platforms, which can be based on tomorrow’s Web 3.0 architecture, even when we know that it may take a little more time to make these platforms able to scale and solve today’s challenges in a cost-effective way.
The Web 3.0 architecture establishes a new version of the Internet protocol that includes token-based economics, transparency, and decentralization. It is important to understand that Web3 is not only the cryptocurrencies, but also NFTs or non-fungible tokens, which represent physical assets or digital twins. A user can access all ecosystem benefits by using a distributed token where they can show proof of ownership, tax history and payment instruments.
Since the Web 3.0 ecosystem is less zero-sum, user lock-in is not the primary goal for new companies, and key operations can be coded into “smart contracts” that are auditable, immutable, and easier for an early adopter to complete. A blockchain-based infrastructure can provide all of these attributes without the need to rely on any particular actor to verify a ledger’s history. The blockchain records can be viewed, compiled and audited by the regulators in real time.
Increasing global use of blockchain infrastructure
According to management consulting firm Gartner, by 2023, 35 percent of enterprise blockchain applications will be integrated with decentralized applications and services. Many countries have already begun to establish blockchain policies and infrastructure.
Estonia, the blockchain capital of the world, uses blockchain infrastructure to verify and process all e-governance services offered to the general public. China launched a program in 2020 called BSN (Blockchain-based Service Network) to deploy blockchain applications in the cloud at a streamlined speed. In the UK, the Center for Digital Built Britain, a partnership between the University of Cambridge and the UK Government’s Department for Business, Energy and Business Strategy, runs the National Digital Twin Program (NDTp) to promote collaboration between owners and developers of digital twins in the built environment the environment. And the Brazilian government recently launched the Brazilian Blockchain Network to bring participating institutions in governance and the technological system that facilitates blockchain adoption into solutions for the general public.
There are also well-established decentralized finance (DeFi) platforms that rely on blockchain infrastructure like Ethereum, but tied to the underlying cryptocurrencies owned by that platform. As is known, these platforms have a presence and use in several countries, and do not come under any special regulatory scope. DeFi allows users to borrow and lend cryptocurrencies on a short-term basis at algorithmically determined prices. DeFi users are rewarded with tokens that grant governance rights, which are analogous to seats on the protocol’s board of directors.
Recently, blockchain provider Solana launched a prototype smartphone with hardware and security that can support decentralized apps for people interested in crypto wallets, Web3 and NFTs. Many Indian tech firms are building layer 2 (L2) chains on top of the proven base layer 1 (L1) chains, while providing value additions like scale, throughput, etc., mainly through aggregating the transactions. These implementations convey the story of blockchain technology driving the future of Web 3.0.
The digital roads that India needs to build with the help of blockchain
The Indian digital community, including fintechs, academia, think tanks and institutions, should focus on supporting research in standards, interoperability and effective management of current known issues with the distributed technologies, e.g. scalability and performance, consensus mechanisms and auto-detection of vulnerabilities. Currently, end-user devices such as smartphones also do not support blockchain-based technology, and as a result, the last mile is always outside the network. However, the day is not far when smartphone manufacturers will deliver blockchain compatible devices by adding extensions.
Blockchain models today are either permissioned, which is sufficient for the needs of a consortium, or are public like Ethereum which are unregulated and rely on inherent standards. The ideal solution to solve most of the known problems with decentralized technologies lies in the middle ground, i.e. a national platform operating at L1 that connects blockchains (both permissioned and public), application providers (decentralized applications – dApps – and existing), token service providers and infrastructure managers. Together, they can form a reliable and efficient network for the Indian digital economy. The ecosystem can further deploy relevant and purpose-specific applications on L2 for very little cost and effort, while L1 continues to handle the heavy lifting for all the L2s operating at Layer 1. All L2 chains on this public infrastructure L1 will communicate with each other , thereby replicating the communications (and avoiding the need for complex integrations with each other) on the Internet for existing Indian digital infrastructures.
The need of the hour is to work on an indigenous solution of the people, for the people and by the people – an India Blockchain platform – even if it takes years to design and implement. A digital infrastructure based on blockchain technology will transform the digital ecosystem in India and will enable the future of digital services, platforms, applications, content and solutions. Considering the current situation around the world, one can safely assume that we are at the beginning of the curve, but the days are not far.
