The latest Indian budget was remarkable for quite a few things—for the first time, artificial intelligence (AI) and blockchain got explicit mention. However, while it was all good for AI, blockchain got a mixed bag. “The government does not consider cryptocurrencies as legal tender or coin and (will) take all measures to eliminate the use of crypto assets," finance minister Arun Jaitley had said in his budget speech. He did add, though, that the government “will explore blockchain, to add muscle to the digital economy".

Regardless, let us explore how blockchain could potentially transform India. The simplest way to explain a blockchain is that it is “one big ledger in the cloud".

Ledgers are important. All money and assets around the world are mere entries in a ledger. When you send money from London to someone in India, the physical money does not somehow fly there, but the entries in your and her ledgers change. Unfortunately, the way the system is structured now, there are a bunch of intermediaries between you and her, who also have ledgers, and these ledgers should also be reconciled. This causes friction and friction causes time delays and costs.

Imagine if there was one universal ledger—a ledger in the cloud—which was shared by all these parties. An entry, when made in this ledger, would be authenticated by all the parties, and everyone would see this simultaneously.

This universal ledger is the heart of a blockchain; every time an entry or a set of entries get made and authenticated by consensus, a “block" gets added. This block is immutably linked to the block before that, forming a chain of blocks, and if you want to hack or change this block, the entire chain must be changed through consensus.

The fundamental attributes of blockchain—consensus, trust, immutability, provenance and smart contracts—can give us transformational use cases.

Take agriculture, for example. With 119 million farmers, 16% of the country’s gross domestic product and close to 8,000 farmer suicides a year, farming is in distress.

Photo: iStock
Photo: iStock

Case in point—the farmers’ long march in Maharashtra recently. The reasons for this crisis are well known—ineffective subsidy management, lack of insurance and loans, small land holdings, lack of mechanization, and lack of information. The blockchain is best suited to solve such problems.

For one, tractor and farm equipment sharing, through an Uber-like model, can be powered by the blockchain. You can take it one step further and have fractional ownership of tractors, with multiple-party financing, to solve the mechanization problem.

Farm subsidies can be much more effectively managed through blockchain-based mechanisms. The best technology to digitize land records, and therefore accord immutable ownership and provenance, is probably the blockchain. Going a little further, one can also use the Digital Autonomous Organization capability of a blockchain to actually consolidate land holdings in a fair and equitable manner.

The other big transformational problem in India is energy, especially in rural areas. One of the big reasons for lack of electrification is the current centralized model of electricity—one central power plant, with wide distribution.

This is good for dense, urban areas but fails in sparse, rural ones, with cost and leakage problems. For rural areas, electricity needs to be generated where it is required, and largely through clean sources like solar, wind and biogas.

While this is possible, many times the economics do not work—there are surpluses and deficits and no infrastructure or technology to manage them. Through smart microgrids, powered by blockchain and the Internet of Things, power from a surplus house can automatically be moved to a deficit house, and a smart contract can settle the payments.

There are transformational use cases in education and health as well. One of the problems in higher education is lack of financing, as banks are wary of frauds and bad debts. The NITI Aayog-led Indiachain initiative is trying to solve this by using blockchain to store and authenticate educational degrees.

Farm subsidies can be more effectively managed through blockchain-based mechanisms-

India is the most under-vaccinated country on earth, in spite of huge subsidies, primarily because it is difficult to trace who got vaccinated, and where the subsidy went. Blockchain can be used to address this too.

One of my favourite transformational use cases, in fact, is to have chit funds on a blockchain, eliminating chit fund fraud and creating a parallel, decentralized banking system—which has the potential to bank the unbanked and eliminate bank fraud at the same time.

The possibilities are limitless. However, we must understand that the technology itself is in its infancy and has multiple problems. Some of these use cases may bear out, while some might not.

Many countries, however, have started experimenting: Estonia is putting everything on a blockchain, creating “a country as a service"; Dubai, Canada and Japan are joining the race; Mauritius is dubbing itself “Ethereum Island"!

While the mention of blockchain by the finance minister and initiatives like Indiachain are encouraging, a lot more needs to be done to truly transform India—and make it a “blockchain nation".

Jaspreet Bindra is senior vice president of digital transformation at Mahindra Group.

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