Recently, the RBI has formed Cryptocurrency and Blockchain Research Unit
What is Blockchain technology?
“A Blockchain is a digital, immutable, distributed ledger that chronologically records transactions in near real time.” In simple words, it is an interlinked and continuously expanding list of records stored securely across a number of interconnected systems.
How does a Blockchain work?
Advantages of Blockchain technology:
- Data in Blockchain technology is almost open source- other users or developers have the opportunity to modify it as they see fit. However, altering logged data within a Blockchain incredibly difficult. This makes Blockchain a particularly secure technology.
- Cost efficient:
- Blockchain allows peer-to-peer and business-to-business transactions to be completed without the need for a third party, which is often a bank. Since there’s no middleman involvement tied to Blockchain transactions, it is cost-efficient.
- Due to decentralized networks, Blockchain does not have a single point of failure and is better able to withstand malicious attacks.
- High Quality Data:
- Blockchain data is complete, timely, accurate, consistent and widely available
- Empowered users:
- Users are in control of their data and information
- Simplification in data management:
- With all data collected in single public ledger, it reduces the clutter and complications of multiple ledgers
- Nascent technology: Blockchain is still a nascent technology and there are issues such as complex verification process, data limits etc
- Large energy consumption: Blockchain technology uses substantial amount of computer power.
- Security and privacy: Though considered highly secure, there are still cyber security concerns that need to ensured before general public trust Blockchain technology with their personal data
- Cost: High initial capital cost is a deterrent.
Applications of Blockchain technology:
Blockchain technology can enhance public health by creating a secure and flexible ecosystem for exchanging electronic health records (EHRs). This technology could also make the space more transparent by creating provenances for critical drugs, blood, organs, etc. In addition, by putting all medical licenses on a Blockchain, fraudulent doctors can be prevented from practising.
Student records, faculty records and educational certificates can be maintained with the application of Blockchain technology. Blockchain can also simplify certificate attestation and verification. It could even transform the manner in which the policy for educational inclusion is framed by bringing in base uniformity in the tracking of national metrics.
Blockchain technology can be used to increase transparency, reduce complexity and cost in food-based value chains by enabling trustworthy provenance and traceability from farmer to consumer. Other possible applications include the use of blockchain technology to record and manage agricultural land records as well as agriculture insurance
- Civil Registration:
The civil registration process can be simplified through the application of Blockchain technology to create distributed citizen registration platforms and even register vital events such as births and deaths on a blockchain. This can help make citizen records tamper-proof, resilient, secure and private, thus providing wide-ranging benefits for a variety of stakeholders.
Blockchain technology can be used to efficiently maintain and track information regarding defence infrastructure and computer
Blockchain technology can be used to check government corruption, increase efficiency and transparency. Linking file and data movement between departments through a Blockchain would increase visibility into the process and ensure that the data/file moves forward in real time
- Banking and Financial Sector: Blockchain technology can be used in money transfers, record keeping and other back-end functions in the bank.
The white paper on the application of Blockchain technology in the banking and financial sectors in India published by The Institute for Development and Research in Banking Technology (IRDBT), RBI, points out various areas in financial sector where blockchain technology can be used:
- Trade finance
- Cross-border payments
- Supply chain financing
- Custody & Securities Servicing
- Loan Syndication etc
Prominent Global Initiatives:
The National Agency of Public Registry (NAPR) had initiated a pilot project with Bitfury for land title registration on the Blockchain in April 2006. It is aimed at reducing property registration fees in Georgia and guarantees safe transactions, transparency and flexibility.
Dubai has partnered with IBM (strategic partner) and Consensys (city advisor) to implement a solution to enable all government transactions on the Blockchain as a part of the ‘Smart Dubai’ initiative. Dubai has emerged as a pioneer in the global space of Blockchain application and has drastically reduced the economic costs associated with current bureaucratic processes.
Initiatives in India
- Use in financial sector:
- Yes Bank has adopted the technology to fully digitise vendor financing for one of its clients which enables timely processing of vendor payments without physical documents
- In Feb 2018, the SBI announced that it would use blockchain technology in its reconciliation, remittances and trade finance operations in fiscal year 2019
and manual intervention while tracking the status of transactions in real time.
- NITI Aayog is reportedly building a platform called ‘IndiaChain’ — a shared, India-specific Blockchain infrastructure to leverage the trinity of Jan-Dhan-Yojana, Aadhaar and the mobile.
- Andhra Pradesh has become the first state in India to adopt blockchain for governance. It has piloted two key projects: managing land records and streamlining vehicle registrations.
- It has also partnered with private companies to test use cases. For example, it has secured more than 100,000 land records through Indian Blockchain start-up Zebi Data, which is also working with other states including Maharashtra and Telangana.
- Swedish Blockchain start-up, ChromaWay, has also partnered with Andhra Pradesh to provide land registry solutions
- Andhra Pradesh through its Fintech Valley Vizag initiative also plans to to build the largest repository of Blockchain use cases in other key areas such as transport, finance and digital security
- Recently, Telangana announced initiatives to leverage blockchain to mitigate the pervasive corruption and fraudulent activity embedded in the government sector.
Steps to be taken:
- For the adoption of Blockchain technology in the government and public sector, the technology will need to be validated, regulated and adopted.
- To harness the potential of Blockchain technology and reach the stage of large-scale implementation, a structured approach along with adequate financial allocation
- Further issues related to cyber security and privacy should be addressed with robust data protection mechanism