How blockchain technology could change our lives

By Krishna V Iyer How Blockchain Technology Could Change Our Lives — this is the title of a February 2017 report by the European Parliamentary Research Service addressed to the members and staff of the European Parliament. This and similar headlines are resounding across tech conferences, academia, governments and businesses all over the world. Distributed Ledger Technology or Blockchain is currently being touted as the next big invention following the Internet itself. It is expected that Blockchain would facilitate “trust” through transparency that was difficult to secure on the Internet. So what exactly is Blockchain? Blockchain is the underlying ledger used to record transactions in a digital currency, “Bitcoin”. Satoshi Nakamoto invented Bitcoin in 2008 through a clever combination of cryptography, game theory and computer science. It is a shared, public, distributed, nonrepudiable, immutable record of all transactions in the digital currency. It is written and maintained by a network of voluntary nodes that achieve consensus through a difficult Proof of Work. The idea of a public, shared, distributed database of transactions maintained jointly by all participants is a powerful concept that can find application in nearly every sphere of life where transaction records need to be maintained. It is basically the opposite of the current system, which is where every participant privately records transactions and periodically achieves consensus via reconciliation. The current way of private recording is a direct fall out of the Double Entry Book-keeping system that originated around 17th century in Italy. Start-ups, individual companies, industries, financial institutions, industry bodies, governments, regulators are all finding promising and appealing areas for Blockchain application to deliver quick, efficient, cost-effective, transparent and impactful solutions to current sub-optimal systems. Blockchain applications are appearing across a vast range of use-cases from alternative currencies to global payments, remittances, securities clearing, settlements, insurance contracts, land record management, tokenization and sharing of physical and digital assets, document storage, document management, Proof of Existence certificates, KYC, identity management etc. Futuristic players are even inventing online only Decentralized Autonomous Organizations (DAOs) that only exists online which programmatically contract and settle with one another upon specific events happening in the world. The excitement is palpable and there are an estimated 560+ startups that have raised approximately $1.53 billion over the last few years to innovate in this space. In addition, established companies, banks, institutions, governments and regulators have also formed consortia across industries to experiment and discover the benefits of this promising technology paradigm. Blockchain in India India has also had a few startups dabbling in this space. The typical early use case in this is centered on the Bitcoin currency and has taken the form of currency exchanges and wallets. However, the government and regulators have been openly skeptical of the Bitcoin currency and have repeatedly **warned citizens about its pitfalls and dangers** . Companies like Unocoin, Coinsecure and Zebpay operate in this space and are trying to lobby the regulators to accept Bitcoin as a legitimate commodity. So far, RBI the principal regulator seems reluctant. Newer non-Bitcoin Blockchain use cases are emerging, aided by encouragement from regulators and from global experience in the areas of Identity management, KYC, interbank payments, remittances etc. The world of finance has been the key target of blockchain disruptions (though tremendous other use cases abound in industries involving middlemen e.g. supply chain). Institute for Development and Research in Banking Technology (IDRBT) recently conducted a successful Proof of Concept establishing block chain implementations in trade finance settlement bringing together stakeholders from banking (SBI, Axis, ICICI, Citi, Deutsche etc.), Technology (IBM Research, Infosys, TCS etc.) and even start-ups like MonetaGo (NY- based). While bigger entities seek to restructure existing tedious processes, the smaller startups are developing block chain products in myriad genres from digital identity to smart contracts to supply chain to cryptocurrency offerings like bitcoin based exchange, wallet, P2P payments etc. In India over 50 startups are currently involved in Blockchain based applications development. While Bitcoin related start-ups dominate the start-up count, they are struggling for legitimacy. We believe Bitcoin related start-ups would continue to struggle while Blockchain technology solution companies would find an early market for their services. Innovative, “killer” solutions to real world problems are still eluding the Blockchain enthusiasts and start-ups that can fire the imagination of the consumers and the B2B marketplace. India is currently a fast action laboratory in FinTech innovation led by UPI, **India Stack** and massive digital enablement supported by the government. In this environment it is expected that an innovation like Blockchain would fit well and lead to order of magnitude improvements in areas where it is adopted for the larger public good e.g. education records or assets (e.g. motor vehicles) records. However, as in most cases involving money and finance, India is also a cautious market with a regulator intent on risk management and safeguarding against systemic risks. Over the years, we expect Indian Blockchain companies to emerge to solve massive specific local problems like Identity, KYC, land records etc. leading to quantum improvements in accuracy, speed, comprehensive coverage and user satisfaction from current levels. The author is the Fintech Advisor at Bharat Innovations Fund. Bharat Innovations Fund was created to encourage and support bright entrepreneurs with the potential to create disruptive innovations that can solve some of India’s toughest problems. Twitter: @bharat_fund