According to a Nasscom Blockchain Report 2019, startups are involved in over 50% of the blockchain projects in India across different industries. While venture capital investments in blockchain startups have reached $5.6 billion globally, India has so far been able to attract only a small fraction (0.2%) of those investments, the report said. But the trend is picking up.
Draconis Capital Future Fund (DCFF) is investing $100 million in the next one year in startups related to blockchain and other emerging areas. Recently, DCFF has invested ₹3.5 million in Aayaan Smart Systems, a blockchain-based B2B property management solution provider that is expected to roll out its product by March 2020.
Startups seem to be gaining ground gradually. For instance, blockchain startup Param Network started signing up trial customers since Q1 2019. “Currently we have four top multinationals converted into real use environments," said Vaideeswaran Sethuraman, founder, Param Network.
As long as you use blockchain as a distributed ledger technology (DLT) platform, the regulatory challenges are almost next to none, Sethuraman said. “We have managed to bring down the cost of an invoice by roughly half from around $11 to $15 per invoice to around $6. This can be significant for companies, as globally around 430 billion invoices are processed manually."
However, experts feel blockchain as a technology is network-based and for any such technology to gain competence, industry stakeholders should cooperate with each other to realise its full potential. “Though world over, a lot of consortiums have emerged, the cooperation has to extend to the next level, where regulators, compliance keepers, banks and financial institutions collaborate along with technology firms," said Rajashekara V Maiya, head of Business Consulting, Cloud & Blockchain Business, at Infosys Finacle.
In India, the much required collaboration is beginning to play out. “Major banks in India have joined forces to launch the country’s first blockchain-linked funding for small and medium enterprises (SMEs). The 11 big lenders participating in the initiative include ICICI, AXIS, HDFC, Kotak Mahindra, YES Bank, Standard Chartered, RBL, South Indian Bank, IndusInd Bank, State Bank of India and Bank of Baroda," Maiya said.
Interestingly, the most popular cryptocurrency bitcoins, which use blockchain as its underlying technology, failed to take off in India after then finance minister Arun Jaitley stated in the Union Budget 2018, that the government does not recognise cryptocurrencies as legal tender. It was however made clear that the government would explore the use of blockchain for ushering in a digital economy.
Since then, the government has been playing an important role not only as a regulator but also as a consumer of blockchain solutions in India. According to the Nasscom report cited above, currently, 40+ blockchain initiatives are being executed by the public sector in India, with about 92% in pilot/proof of concept phase and about 8% projects in the production phase.
The government of Telangana and the government of Andhra Pradesh are two of the leading states in terms of blockchain adoption in India, the Nasscom report stated. In 2017, government of Andhra Pradesh launched the Amravati Blockchain Asset Management System with the help of startup Zebi Data. In May this year, the government of Telangana announced setting up of the country’s first ‘blockchain district’ to create an ecosystem for startups and institutes working in that area.
Blockchain is also expected to create about 30,000 jobs in India in the next one year, said Rituparna Chakraborty, president, Indian Staffing Federation. However, she notes that we are nowhere near meeting the demand. “Currently there are only about 6,500 qualified blockchain developers. Due to the shortage of skilled talent, blockchain experts are in big demand with companies willing to shell out annual salaries of ₹3.5-25 lakh depending on the qualification and experience. Clearly, we need to produce more skilled and certified blockchain developers to exploit the growing demand for this technology".
Indicating the need for more favourable regulations on cryptocurrency, Garrick Hileman, research head at Blockchain.com said, “The cryptocurrency space is where new blockchain technologies are first developed and tested…Countries that embrace public cryptocurrencies will attract talent and generate domestic technology advantages that will help them win the blockchain race."
Amid signs of growth, analysts caution that it may still take few more years for blockchain to realise its full potential. “Contrary to the initial market hype, blockchain is not yet enabling a digital business revolution across business ecosystems, and may not until at least 2028 when we expect blockchain to become fully scalable technically and operationally. At the moment, blockchain remains immature for enterprise deployments due to a range of technical issues including poor scalability and interoperability," said DD Mishra, senior director analyst, Gartner.