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Beckn: Rise of India’s Decentralized Open Protocol
The importance of moving from platform-centric marketplaces to an open digital infrastructure
On 24 July, Sam Altman, the CEO of ChatGPT-maker OpenAI, made a splash by announcing the launch of Worldcoin--a cryptocurrency project that uses a special device called an “orb” to scan people’s eyeballs. The idea is to generate a unique digital identity for each person, known as a “World ID”. With around 2.23 million sign-ups to date, the World ID serves as proof that the person is a real individual, giving them the status of “proof of personhood” in the Worldcoin system. In other words, it confirms that they are a genuine and unique person in the digital world.
Picture courtesy of Worldcoin website
“If successful, Worldcoin could considerably increase economic opportunity, scale a reliable solution for distinguishing humans from AI (artificial intelligence) online while preserving privacy, enable global democratic processes, and show a potential path to AI-funded UBI (universal basic income),” reads the Worldcoin whitepaper. Cointelegraph aptly describes Worldcoin as an “ambitious” project that combines cryptocurrencies, blockchain and AI technologies to build a biometric global identity and financial system.
Likeness to the India Stack
While the aim of the Worldcoin project and Worldcoin protocol is noteworthy and laudable, it’s hard not to see its similarity to India’s Aadhaar and the set of digital identity products centred around the country’s national identity programme that falls under the umbrella of the Digital Public Infrastructure (DPI). Earlier known as the India Stack, DPI is a set of application programming interfaces (APIs) that governments, businesses, startups and developers can use to develop digital public goods (DPGs) with the help of protocols (standardized set of rules to format and process data across a network).
More than 1.31 billion (about 95%) Indians already have an Aadhaar number, which also uses biometrics to authenticate users and is an ID for the residents of the country. Other than Aadhaar, India’s DPI includes the highly-successful Unified Payments Interface (UPI) network, Digi Locker, Aadhaar-Enabled Payment Service (AEPS), Account Aggregator (AA), and the Open Network Digital Commerce (ONDC), which is a protocol and not a platform as many erroneously refer to it.
In FY23, the UPI platform (launched by the National Payments Corp. of India (NPCI) in 2016) processed a total of 83.76 billion transactions aggregating to Rs.139 trillion, compared with 45.97 billion transactions worth Rs.84 trillion in FY22. This July alone, the value of total UPI transactions touched Rs.15.34 trillion. Currently, more than 4.6 billion documents have been issued directly into Digilocker by authorities. Similarly, the AA network, which went live in September 2021 and is still in the nascent stages, has been widely adopted by the banking sector. Touted to be the UPI of data, AA has about 15.35 million accounts to date.
The AA framework was designed by the Reserve Bank Information Technology Pvt. Ltd (ReBIT)—a wholly owned unit of RBI. It is based on the Data Empowerment and Protection Architecture (DEPA) frame, which is also known as the ‘Consent Layer of India Stack’. With an AA, people can securely and easily share their financial data with authorized entities, such as banks, to obtain loans without using assets as collateral.
ONDC: Democratizing e-commerce
Nandan Nilekani, co-founder and non-executive chairman of Infosys and former chairman of the Unique Identification Authority of India (UIDAI), is a leading advocate of the AA framework. He underscores that AA democratizes credit so that millions of consumers without any credit history and millions of small businesses that could not get a loan earlier now have access to credit. The AA architecture is also being used in the health stack, which is being led by the National Health Authority. According to Nilekani, they are looking at applying the same principles--interoperability, etc., in the health sector. Technically, this architecture can be used for any data.
Likewise, ONDC democratizes e-commerce by allowing any supplier to list its products on the ONDC protocol, thus enabling any consumer to buy, and anyone can deliver it. ONDC has about 150,000 merchants on its networks to date and is live in seven cities (beta stage) and 273 cities (alpha stage). In comparison, Walmart-owned Flipkart and Amazon India have more than a million sellers each on their platforms.
Picture courtesy of ONDC website
To be sure, Flipkart was launched in the country in 2007, while Amazon India, with about 1.2 million sellers, has been in the country since 2013. But herein lies a big differentiator -- ONDC is not a platform like Flipkart or Amazon India. It’s a network protocol that allows anyone (including Amazon, Flipkart, Myntra, etc.) to create an e-commerce marketplace and get products displayed and delivered without worrying about logistics. For instance, ONDC merchants include 90,000 taxi and auto drivers, according to its managing director and chief executive officer T. Koshy. This spells good news for India’s e-commerce market which is around $60 billion and expected to touch $350 billion by 2030, according to the India Brand Equity Foundation (IBEF).
Beckn Protocol shows the way
ONDC is built using an open-source, decentralized protocol called Beckn, which is used for location-aware, local commerce. It’s an application layer protocol that is compatible with any transport layer protocols like TCP/IP (transfer control protocol/internet protocol) and UDP (user datagram protocol), both of which are used for communication on the internet. You may liken Beckn for digital commerce to what HTTP (hypertext transfer protocol) means for the World Wide Web or SMTP (simple mail transfer protocol) for emails.
Put simply, the Beckn protocol allows computers online to understand what phrases like ‘select an item from menu’ or ‘place an order’ mean with the help of open, standardized, machine-readable information. It enables services and sales offers to be discovered across industries and fetched by any consumer application. Beckn leverages 5G and high-speed network technologies to implement e-commerce capability in the network and/or the transport layer.
Photo courtesy of Mint
Nilekani, Pramod Varma (chief architect and technology adviser for Aadhaar, and also the architect of UPI, digital locker and eSign—as part of the India Stack), and Sujith Nair (conceptualized and helped set up the world’s first decentralized open mobility network using the Beckn Protocol in Kochi—the Kochi Open Mobility Network, and also co-conceptualized the idea of ONDC) are the co-founders of the Beckn Foundation, now known as the Foundation for Interoperability in Digital Economy.
Other than ONDC, Beckn also currently powers Bengaluru’s Namma Yatri autorickshaw-ride-hailing mobile app, but this will eventually be extended to taxis and public transport. And there will be many more applications. The reason is that Beckn specifications are open under the Creative Commons license, whereby the copyright owner permits anyone in the world to use the copyrighted work in a manner consistent with that license. Beckn provides a generic set of APIs and Core Schema (data structure) that can be applied to categories like Mobility, Final Mile Delivery, Restaurants and even Healthcare businesses.
In sum, as opposed to platform-centric marketplaces, Beckn’s open digital infrastructure allows for the creation of an unbundled and decentralized digital market, akin to an open playground that allows everyone to have a fair playing ground. The Beckn protocol may not share the hype of Worldcoin, but it can certainly show the world how to democratize digital commerce.
IN NUMBERS
Estimates of the value DPI can create
3–13%
Digital ID alone can unlock economic value equivalent to 3–13% of GDP with an average 6% improvement for emerging economies.
51%
Of 166 governments that launched cash-transfer programs through the pandemic, those with some stage of DPI reached an average of 51%, while those without reached only 16% of their populations.
820 years
DPI frees time and enhances productivity: Estonia’s X-Road, a secure data exchange infrastructure that streamlines citizen-government engagement through a single portal shared across different government functions, saves Estonians an estimated 820 years of working time every year and approximately 2% of GDP.
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