How India can become a leader in Layer 1 Blockchain technology
By Pratik Gauri
Having recently been upgraded to the position of the fifth largest economy in the world, India can become a leader in the adoption of Layer 1 blockchain technology. Blockchain technology has proven to be a hot topic over the past year, driving value creation and innovation across the globe, particularly in relation to virtual assets. Although the technology has many applications beyond digital currencies, it has become known for its ability to increase trust between two parties – even those who may not know each other. In economies with low counterparty trust, this is a particularly useful feature. The signs of the effort to become a leader in Layer 1 blockchain technology are clearly visible in India’s leadership in the development and implementation of CBDC and its ability to deliver a massive amount of Web3 talent to the global IT market.
According to a report published by industry body NASSCOM in September last year, the crypto-technology industry already employs 50,000 individuals in India and has registered a growth of 39% in the last five years. India’s rapid adoption of new age technologies, its growing startup ecosystem and large-scale digitally skilled talent pool cement the country’s position in the global Web3 landscape. Leadership has an important role to play when it comes to adopting new technologies and dealing with challenges in their adoption. This is crucial for national leadership and support when it comes to adopting new technologies such as Decentralized Ledger Technology (DLT), better known as the blockchain. Both when it comes to supporting the introduction of Blockchain technology and providing resources for the necessary infrastructure, says the Indian government. has played a critical role in providing both impetus and encouragement to the development of the technology across both the academic and commercial sectors.
One of the most critical reasons for blockchain adoption is because of the support it has received from the Indian government. This interest in the technology is likely to be inhibited without the commitment of regulators and other related bodies to explore this new frontier in modern technology. In fact, government finance and regulatory bodies have also made a number of statements about the potential of blockchain and the benefits of adopting it. The Institute for Development and Research in Banking Technology (IDRBT) has also partnered with experts in the field to understand the functionality that distributed ledgers can provide.
Even at the state level, public entities have encouraged entire industries to explore new potential products and their implications. This kind of support is necessary for innovation to flourish. The country has moved rapidly towards a digital economy with initiatives such as Aadhaar, demonetisation and the implementation of the new Goods and Services Tax (GST). However, despite its vibrant tech industry, India has so far struggled to stay at the forefront of blockchain innovation. Overall, across India, over 80% of the population works within what is called an informal economy. The informal economy relies heavily on interpersonal trust rather than formal contracts. However, the lack of documented contracts between the parties makes a large majority of citizens extremely vulnerable to fraud. With the immutability of records and the transparency that blockchain provides, both trust between parties and accountability across financial systems can be improved. This trust vacuum will not only mean an end to the high interest rates charged across India as an indicator of low trust, but will also promote greater inclusion of the public who do not have access to financial services.
Introducing a layer one blockchain platform along with a CBDC, initiatives like Aadhaar and Demonetization will go a long way to bring the informal economy under the folds of a DLT layer and ensure the necessary trust between trading parties. An additional obstacle is preventing faster adoption of blockchain technologies in financial markets. Although the Indian government favors the development of blockchain technologies, it strictly wants financial organizations to stay away from crypto markets. This strict reprimand and suspicion of crypto markets and financial institutions that trade or invest in crypto has hindered efforts to introduce blockchain technology into day-to-day transactions of everyday Indians.
India’s negative opinion of digital or virtual assets can be clearly seen by a recent Supreme Court vote that decided to uphold the Reserve Bank of India’s (RBI) February decision to bar financial institutions from working with digital asset exchanges or related firms. Although blockchain is not entirely dependent on virtual assets, this decision has negatively impacted investment in India for the wider industry. Globally, innovative blockchain projects have financed themselves by issuing digital assets through initial coin offerings, which are analogous to traditional initial public offerings (IPOs), but through the issuance of tokens or coins instead of equity shares. Despite these setbacks, India is one of the hotspots for Blockchain and Web3 developers. Although we don’t have many web3 projects registered in the country, most of the back-end teams are based out of India. Indian Blockchain developers are in demand all over the world and we can see it as a growing trend. This in turn will mean that most resources apart from intellectual and human capital will become commodities. Human capital as a producer of knowledge-based assets and creative industries will become the world’s primary driver of economic growth.
By the founder and CEO of 5ire
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