India and Blockchain Technology

Contents

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.

• 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.

About BlockChain Technology

• Blockchain takes its name from the digital databases or ledgers where information is stored as ‘blocks’ which are linked together to form ‘chains’.
• It offers a unique combination of permanent and tamper-proof record keeping, real-time transaction transparency and auditability.
• An exact copy of the blockchain is available to each of the multiple computers or users connected in a network.
• All new information that is added or changed via a new block must be checked and approved by more than half of the total number of users.
• According to predictions, blockchain technology is poised to become a huge $176 billion business by 2050.

The Importance of Blockchain

• Blockchain technology can facilitate innovations across a range of processes and applications that require the management, storage, retrieval and security of extensive and important information.
• These include handling information related to financial transactions (as in the case of cryptocurrencies), electoral votes, medical records, academic lessons, property records and professional certificates.
• A decentralized framework such as blockchain makes the system and the information stored in it fraud-proof, transparent and trustworthy.
• Blockchain technology provides an excellent technological framework for the preservation of classified and unclassified data in a reduced-risk environment. Therefore, it is suitable for devices that require such capability.
• Blockchain technology provides an opportunity for transparent transaction processing in any domain as it supports tracking and tracing.
• With the Blockchain-as-a-Service paradigm, monetization models can be developed to provide various services (G2C, G2G, B2B, etc.)

India and Blockchain Technology

• The telecom sector – Telecom Regulatory Authority of India (TRAI) has instructed all telecom companies to start incorporating blockchain technology. This will be helpful in tackling the problem of spam calls and will enable the authorities to track down the unregistered telemarketing companies.
• The Tea Board of India – The Tea Board of India plans to adopt blockchain technology to increase traceability across the supply chain. The board has faced a deterioration in the quality of tea produced, due to adulteration. Adoption of blockchain technology throughout the supply chain will help keep track of each step.
• Blockchain for secure voting – Three students from the Malla Reddy Engineering College for Women have developed a new concept that shows how blockchain technology can be used to secure the voting process in our country.
  • A pilot project conducted by these students in gated communities and housing estates had shown that the implementation of the concept in real life will be highly beneficial.
• Securities and Exchange Board of India (SEBI) – SEBI has instructed all depositories to use blockchain technology to maintain records.
  • This will provide more transparency in the process of record keeping, as well as in the process of monitoring the creation of securities and agreements for non-convertible securities.
• The banking sector-Reserve Bank of India (RBI) is exploring the use of blockchain technology in the banking domain. Mahindra and IBM are jointly working on solutions for supply chain management.
  • State Bank of India (SBI) has tied up with commercial banks and financial institutions for Blockchain-based application pilot. Ja Bank, Axis Bank and ICICI Bank are also adopting Blockchain in their banking operations.
• Agriculture– NITI Aayog in collaboration with Gujarat Narmada Valley Fertilizers & Chemicals Limited (GNFC) has developed a blockchain-based system for fertilizer subsidy.
  • In a significant development that would revolutionize agriculture in the country, the Directorate of Agriculture, Jharkhand and global blockchain technology company, SettleMint, India jointly announced the successful launch of seed distribution to farmers based on blockchain technology. This will enable timely availability of seeds to distributors, retailers and most importantly, the farmers.
• management system– IIT Kanpur works with Blockchain technology with a focus on developing e-governance solutions.
• Tourism– Blockchain can reduce the delay time for handling passenger documents, creates a decentralized hotel booking ecosystem at the smallest transaction fee and also keeps passengers’ private information safe.

Government initiatives to promote blockchain technology

• The Ministry of Electronics and Information Technology (MeitY) has prepared a draft framework for the use of blockchain technology in public services and intends to use it in the areas of property record keeping, digital certificates, power distribution, health records and supply chain management.
• The state think-tank NITI Aayog had also, through a discussion paper, proposed the use of distributed ledger technology for the delivery of government services such as payment of fertilizer subsidy and educational certificates among others.
• MeitY has supported a multi-institutional project entitled “Distributed Center of Excellence in Blockchain Technology” with C-DAC.
• Together with NICSI, NIC has established a Center of Excellence (CoE) in blockchain technology

Advantages of Blockchain technology

• Blockchain technology provides a decentralized, vigilant, time-stamped, immutable and consensus-based data storage for stakeholders.
• Ensures the integrity of the entire process – It means that any block or even a transaction that adds to the chain cannot be edited, which ultimately provides a very high security spectrum.
  • The block encryption in the chain makes it more difficult for any hacker to disrupt the traditional setup of the chain.
• The Blockchain ledger, every time an exchange of goods is recorded on a Blockchain, an audit trail is present to track where the goods came from. This improves security and prevents fraud in stock exchange-related businesses
• After the blockchain technology, the speed of the banking transaction increased to a very high extent
• Depending on the need of the application domain, permissioned or permissioned blockchain environments can be set up.
• Blockchain-as-a-Service enables seamless integration for the use of Blockchain functions in various application domains

Problems with Blockchain technology

• Scalability: The current transaction processing speed of Blockchain platforms varies from 7 tps (transactions per second) to 3500 tps depending on individual platform’s applicability to a particular domain, architectural considerations, consensus approach, number of nodes in deployment, etc.
  • The generic architectural platforms such as HyperLedger Fabric, although apparently suitable for the requirements of various domains, still have scalability as a major concern, and researchers are striving to get better results
• Indian developers do not have the ability to develop open blockchain solutions at scale.
• Once any data is entered, it cannot be changed or deleted.
  • It poses a challenge as it eliminates the possibility of changing student records for legitimate purposes.
• Blockchains are vulnerable to network attacks as they were not originally designed for network protocols
• Interoperability across different Blockchain platforms is still in its infancy and a lot of work is required to solve this problem. Interoperability is mainly required in the following situations:
• Setting up a blockchain network can be an expensive investment initially
• A high surge of energy is required for this technology to work
• Disposal of records- The right to be forgotten is one of the requirements of the proposed law on privacy.
  • Since records stored on Blockchain are immutable, to enforce this requirement, appropriate measures must be taken while implementing Blockchain technology

The way forward

• To promote entrepreneurial development and involve leading research institutions, Blockchain technology stack can be developed collaboratively by involving various stakeholders from government, leading research institutes, startups and industry
• Currently, blockchain models that rely on inherent standards and are uncontrolled are either fully public, like Ethereum, or partially permissioned. Government regulations are therefore necessary.
• Creating national ecosystem on Blockchain: This public infrastructure will help solve existing problems with decentralized technologies.
• It is necessary to support research into standards, interoperability and effective management of currently recognized problems with distributed technology.
• Security audit and assessment processes / guidelines can be developed considering the smart contract and other specific constructs of Blockchain
• Advanced research can be focused on in blockchain technology, and various challenges in adopting the technology to build a reliable public digital platform can be solved.
• Standardization across the various layers of the Blockchain technological stack and applications should be considered one of the important activities in the framework development.