The blockchain is a tree that we are putting our ventures on to grow and become fruitful and India, as an economy, is developing at a fast pace. You have to be a visionary to understand its importance in the long haul. The blockchain is one such phenomenon, that has a huge potential to transform the entire world.
Each invention filled a gap that was causing a hindrance in the overall development of the society. For example, in the 1400s the printing press was invented to satisfy a knowledge gap as certain manuscripts were not accessible to the masses. In the 1800s, the steam engine was invented, that packed the power gap and we were exposed to a whole lot of potentialities. Then, came the internet in the late 1900s that transformed the entire ecosystem, it permeated the distance gap. Now, interpersonal communications are possible with just one click. To understand what blockchain can do to transform our country, let’s understand how it works.
Blockchain: As Simple As That!
A blockchain is a growing list of records or blocks that are linked using cryptography (encoding the transactions so that it is not accessible to everyone). It is a distributed ledger (accounting system) open for anyone. It operates by allowing information to be distributed but not copied, creating a new type of internet for our anticipated needs. It is meant to enhance the trade and remove the middlemen out of the picture. You would be able to sell and buy peer-to-peer without relying on intermediaries like banks, shops, etc.
By design, blockchain is resistant to modification of data. It works on a network of computers that have the same history of the transaction. No one company holds the information, it is distributed among all the computers and held by people in that network (nodes). It contains a cryptographic hash (unique identity of a block) of the previous block, timestamp (hash of the current block) and traditional data. If you alter a block after calculating its hash, it no longer remains the same block.
Sharing a hash of the previous block creates a chain and makes the data secure. For example, If you tamper with any block (except genesis/ first block), hash changes, making the subsequent chain invalid as it is not storing the hash of the previous block. Hence, the data in any given block cannot be changed retroactively without remodeling of all subsequent blocks, which requires a consensus of the network majority. Consequently, no malicious transactions.
Although tampering and recalculating hashes is not a hassle, thanks to technology. Hence, to mitigate this proof-of-work is used. It slows down the creation and calculation of blocks, making it harder to tamper with the chain as you need to recalculate proof-of-work for each block. Therefore, the security comes from fear of hashing and proof-of-work mechanism.
It follows a decentralised (not owned by a single entity but by everyone) consensus and a blockchain is typically managed by a peer-to-peer network collectively adhering to a protocol for inter-node communication and validating new blocks. After validation, new blocks are added and hence, updating the list actively. It verifies the updates in a way that it is impossible to fraud.
A transaction gets logged and gets verified by third-parties or nodes if verified, the transaction goes through. If you make further transactions, past information is already present in the ledger. You can add more information but you can’t erase or change the previous data easily. No one can force blockchain to accept a particular entry on a blockchain.
Future of blockchain
The blockchain is at a nascent phase, predicting at this point what it might bring is too early. Considering its potential, we can see it evolving soon and fast. Distributed Ledger Technology (DLT) is accepted by Dubai to replace all government systems with DLT- based digital structure by 2020. It provides trust, immutability and much-needed transparency across all platforms. It can also be incorporated in India, making it more transparent and reducing corruption.
You can expect a potential ecosystem of specialised chains, operating security, and utility chains in parallel. The global supply chain can also ease out the world of world trade resulted from inefficiencies, errors, and fraud. For example, fake Louis Vuitton apparel and other brands in Asia, counterfeit auto parts in North America, fake medicines in pharmaceutical industries, etc.
Blockchain technology also has the potential to provide a much faster and cheaper alternative to cross-border payments. Indeed, while typical money remittance cost may be as high as 20% of the amount, blockchain may allow for costs as low as 2%.
Smart Contracts are often seen as a highly powerful application of blockchain technology. They are actually computer programmes that can oversee all aspects of an agreement, from facilitation to execution. They can be self-executing and self-enforcing providing a more secure, automated alternative to traditional contract law, faster and cheaper than traditional methods. For example, if you bought land, all the previous ownership will be stored in a database.
It can provide identity security. There are always some nefarious actors looking to steal and profit off of these digital items. Thanks to the independent verification process it offers a tremendous level of security. It can help in decision-making in business and government to reduce corruption, increase transparency and streamline bureaucracy. It can also provide medical access and efficiency, by allowing patient records to be shared between healthcare providers and doctors to bring all the information together and improve the diagnoses and develop more holistic treatment plans.
Agriculture is 15% of our GDP and India has 120 million farmers with the second largest area under agriculture. To look into India’s growth, agriculture is the base. Still, 23 farmers kill themselves every single day, why? No farm equipment, small land, low-yield, loans, etc. How can blockchain help here? It can enable fractional ownership (11 farmers can own one tractor), land can be digitised through smart contracts (Andhra Pradesh is already using blockchain powered smart contracts for land ownership) leading to massive agriculture transformation. In rural areas, houses can be linked together that can provide power in the deficit areas. Manage loans and education due to the high risk of fraud. Voter fraud and chit-fund fraud can be prevented with blockchain’s power of consensus and security.
There’s still time for blockchain to achieve its true potential. And we’ll only get there if policymakers embrace it wholeheartedly across the board, rather than piecemeal. As the learnings from the pilot programmes come in, we would do well to learn from them and encourage the wider use of blockchain to reduce corruption and improve government efficiency.
Will Blockchain Transform India? was originally published in Data Driven Investor on Medium, where people are continuing the conversation by highlighting and responding to this story.