Blockchain is an innovative distributed ledger technology which was first introduced in the design and development of cryptocurrency, Bitcoin in 2009. Any tangible or intangible asset of value can be represented and tracked on a Blockchain network which brings transparency, increases processing speed and reduces cost. Globally and nationally, various efforts are being made towards implementing Blockchain based applications by carrying out Proof-of-concepts and pilot deployments. The National Strategy on Blockchain was released in December 2021 by Ministry of Electronics & Information Technology. This strategy document lays out overall vision towards development and implementation strategies for a National Blockchain Platform covering the technology stack, legal and regulatory framework, standards development, collaboration, human resource development and potential use cases.
- They are a new data structure that is secure, cryptography-based, and distributed across a network.The technology supports cryptocurrencies such as Bitcoin, and the transfer of any data or digital asset.
- Spearheaded by Bitcoin, blockchains achieve consensus among distributed nodes, allowing the transfer of digital goods without the need for centralized authorisation of transactions.
How it operates?
- The technology allows transactions to be simultaneously anonymous and secure, peer-to-peer, instant and frictionless.
- It does this by distributing trust from powerful intermediaries to a large global network, which through mass collaboration, clever code and cryptography, enables a tamper-proof public ledger of every transaction that’s ever happened on the network.
- A block is the “current” part of a blockchain which records some or all of the recent transactions, and once completed, goes into the blockchain as permanent database.
- Each time a block gets completed, a new block is generated. Blocks are linked to each other (like a chain) in proper linear, chronological order with every block containing a hash of the previous block.
- Governments around the world have established pilot projects to integrate blockchain technology into their operations. In developed countries, blockchain will help streamline government functions to make them more efficient.
- For example, The Illinois government is conducting five focused pilots for blockchain across multiple government departments. The range of functions envisaged for the technology include record keeping (for properties and births) and an energy credit marketplace to track renewable energy credits.
- In emerging economies, blockchain has the potential to help governments achieve policy goals by leapfrogging intermediate layers of technology.
- For example, it can help in social welfare objectives by eliminating the need for credit cards or bank accounts to disburse funds to those who are unbanked.
- Building Trust with Citizens: According to the Pew Research Centre, Only 18 percent of Americans say they can trust the government to do what is right most of the time. Reasons for this distrust are numerous and complex, but there’s potential for blockchain to contribute to a reversal of this trend.
- Protecting Sensitive Data: Blockchain technologies have the potential to revolutionize the way we manage online identity and access the internet; this R&D project will help bring this potential closer to reality.
- Reducing Costs & Improving Efficiency: Blockchain solutions could reduce redundancy, streamline processes, decrease audit burden, increase security, and ensure data integrity.
- To further illustrate how blockchain solutions could increase efficiency, consider the federal government’s ongoing challenge with reconciling intra-governmental transfers.
- A payment and accounting system that used blockchain could provide a permanent audit trail and facilitate faster reconciliation.
Regulation in India:
The current debate in India has, unfortunately, focused too heavily on trading and speculation, looking at cryptocurrencies as an investment tool, rather than understanding the potential of core blockchain technology and the basic role of cryptocurrencies as an incentive mechanism to secure decentralized transactions.
- Prevailing cyber laws in India touch almost all aspects of transactions and activities involving the internet, www and cyber space (IT Act 2000 and amended in 2008, section 463 of IPC, and section 420). But in today’s techno-savvy environment the world is becoming more and more digitally sophisticated and so are the crimes. India’s cyber laws are lacking in this respect.
- There are sufficient global examples of countries that have taken nuanced and cautious steps in regulating the technology, and are focusing on stopping illegal activity without hurting innovation.
- It is the age of technological revolutionin which every technology is replaced by another better technology. Biotechnology and genetics in the field of medicine, robotics and Artificial Intelligence and e-commerce in economy have dramatically changed conventional ways of working.
- Financial sector has been at the forefront of digitalisation. Blockchain can help in reducing the need of intermediaries and increase more peer to peer contacts in future.
- Steps taken by Government of India like demonetisation, implementation of GST and e-way bill, BHIM app and RuPay cards are aimed at bringing up a cashless society and transparency in governance.