What are Blockchains?
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 authorization of transactions.
How does it operate?
- 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.
Prospects:
- Bitcoin is just one of the applications for the technology, whose use is being tested across industries.
- Healthcare, banking, education, agriculture, electricity distribution and land records are sectors that could benefit.
- Blockchain-powered smart contracts, where every piece of information is recorded can enhance ease of doing business.
- It will augment the credibility, accuracy and efficiency of a contract while reducing the risk of frauds, substantially.
- Blockchain could play a crucial part in health insurance claims management by reducing the risk of insurance claim frauds.
- The technology can also be used to prevent the sale of spurious drugs in the country by tracking every step of the supply chain network.
- Artificial Intelligence and Internet of Things (IoT) can gain immensely from blockchain applications.
- In an IoT world, thousands of devices would need to rapidly and seamlessly transact with each other in real time.
- The adoption of blockchain by India’s banks could help avert frauds such as the one at Punjab National Bank as the technology updates information across all users simultaneously.
- It could be used to further strengthen our national institutions, including the judiciary and the Election Commission.
- Critical citizen information like land records, census data, birth and death records, business licenses, criminal records, intellectual property registry, electoral rolls could all be maintained as blockchain-powered, tamper-proof public ledgers.
Challenges:
- Blockchain technology is expensive to initially put it in place.
- The massive usage of energy for the functioning of blockchain.
- Safeguarding the privacy of individuals and companies as blockchains are usually open ledgers for everyone to see.
- Knowledge of the benefits of distributed ledger technology is still limited.
- If automated risk management, smart contracts, and similar tools are deployed across a network, cascades of rapid and hard-to-control obligations and liquidity flows could propagate across a network.
- This interdependence will likely call for creative organizational thinking to address the need for governance and strong risk management
Blockchain in Social sectors:
- Personal Identification: Governments manage vast amounts of personal data from birth and death records to marriage certificates, passports and census data. Blockchain technology offers a streamlined solution for managing all of it securely.
- Fight corruption: Registering government transactions in the blockchain helps create a trusted history for any transaction and significantly eases the auditing process. This would contribute to making public procurement more transparent
- Cut red tapism: As government agencies currently store data in autonomous centralized databases, they tend not to interoperate in an optimal way. This results in duplication, overlap and contradiction in the information held. Blockchain eliminates this lack of interoperability which generates unnecessary red tape in obtaining relevant information from a user, and makes the process for sharing data between agencies clear and inexpensive.
- Identity and Land rights: The World Identity Network and Humanized Internet project can store identifiers such as birth certificates and university degrees on a blockchain, in the form of distributed digital lockboxes. Users can keep their information private and secure, but also give permission for anyone to access it anywhere in the world. Several governments, including those in Dubai, Estonia, Georgia, and Sweden are making early forays into blockchain-based approaches to securing property rights.
- Agriculture: First of all, it can reduce contamination and food fraud. This can happen with the help of blockchain efficiency and transparency. Blockchain’s role is to improve the third party involvement by ensuring that they are tracking, collecting and managing data in the best possible way. With blockchain, farmers and distributors are going to get their payments faster than ever-improving their ability to work on their next set of projects faster.
- Health: The health sector is one of those sectors that have tons of initiatives by both for-profit and nonprofit organizations. With blockchain, healthcare can improve digital healthcare records. It also improves pharmaceutical supply chain management. As usual, blockchain offers a decentralized, efficient and secure solution.
- Governance and democracy: Government and civil society can also leverage blockchain technology to strengthen democratic processes and participation. Blockchain systems such as Ballot Chain can manage online elections with secure and anonymous voting that participants can verify at any time.
- Environmental protection: In the environmental arena, new blockchain-supported supply chain management systems, which are transparent but cannot be tampered with, can track products from the farm to the table, and show whether or not a food product is organic or Fair Trade.
- Philanthropy and Aid: Billions of dollars are invested in helping the needy. However, these aids are mostly misused due to a lack of transparency. In fact, most of the aid never reaches the intended people. This has also led people to not contribute to these non-profit organizations. Blockchain can solve all of these problems and help elevate the confidence in non-profit in utilizing the funds.
- Crowdfunding: As with traditional crowdfunding, a blockchain powered crowdfunding campaign seeks to secure investment for a new project from an interested community. But in this instance, funding is most likely to come in the form of bitcoin or other cryptocurrencies.
Way Forward:
- Blockchain, with all its possibilities, needs a serious look at its vulnerabilities and commerciality.
- Before introducing blockchain into the public sector data-handling system, we need a robust and informative data repository.
- Linking IndiaChain with Aadhar, thus creating a secure personal identity for all Indians.
- Proper regulations for the use of blockchain technology in the country.
- Identifying and resolving key issues and challenges in implementing this technology, the prime amongst those being data privacy.
- India should effectively channel its technical human capital surplus to position itself as one of the pioneers during this upcoming wave of innovation.
