“The government does not consider cryptocurrencies as legal tender or coin and (will) take all measures to eliminate the use of crypto assets," said finance minister Arun Jaitley in his budget 2018 speech. However, he also attached a positive note by adding “will explore blockchain, to add muscle to the digital economy"
A Blockchain is a decentralized public digital ledger that is used to record transactions across many systems so that the data cannot be altered. Simply put, a Blockchain is a growing chain of blocks that are linked using technology (cryptography) to record the information captured and establish the place of origin and ownership of such data. The technology brings in consensus, trust, immutability, provenance and smart contract to any process to which it is applied.
How Does Blockchain Works?
Every block in Blockchain is composed of three important elements:
Hash (consider it like a fingerprint-unique for every block)
Hash of the previous block
Blockchain uses Distributed Ledger Technology (DLT) which means all the participants in a particular Blockchain network can access the data. Every block in the chain is connected to the hash of the previous block. Thus, any involved data cannot be altered retroactively without the alteration of all subsequent blocks. This ensures that every change on the network is authorized and genuine. Also, since all the participants have a copy of the Blockchain, any change in the chain cannot be saved without the consent of all the connections.
To understand the working of Blockchain in simple terms, think of Blockchain like the internet- a platform for various applications to become functional. Alike the internet, in order to use Blockchain, one has to create an application on the platform (in this analogy, Facebook can be taken as an application on the internet). Just the way Facebook has users, Blockchain has participants who are called Nodes.
However, unlike the internet, Blockchain also has a community of developers who verify every data added on the platform (commonly known as solving algorithms or proof of concept) and earn rewards for the same. The reward is different in different types of Blockchain (public or private). In public Blockchain, anyone can solve the algorithm and claim the reward in the form of cryptocurrency. In the case of private Blockchain, the developers get rewarded in legal tender. There are various communities like the Ethereum community which one can join while using a private Blockchain. IBM’s hyperledger is an example of a private Blockchain.
How Blockchain Can Transform Agriculture
Consider a situation where an Individual from the US, say Mr. X, wants to import Mangoes from India to process them into jams. How would Mr. X ensure that there is no adulteration in the Mangoes and he is receiving the grade of mangoes he has paid for? This can be assured by using Blockchain as a tool to track the movement of goods right from the place of origin until they are received by Mr. X. This will assist Mr. X in building his brand and also charge a premium for the quality jams he will sell to his consumers.
Blockchain has the potential to impact the lives of 119 Mn farmers in India in the following ways:
Sale of harvest in the domestic and global market: As explained through the image below, Blockchain has the ability to render trust and reliability to the transactions in agricultural space.
Farm equipment sharing: Unaffordability of farm equipment is the major challenge that stands in the way of Farm Mechanisation and can be resolved by Blockchain. Fractional ownership of tractors through multiple-party financing can be facilitated on Blockchain which may prove to be a blessing for medium landholding farmers.
Farm subsidies: Blockchain can ensure efficient disbursal of subsidies by establishing unique IDs of farmers and tracking the payment status until it is disbursed.
Farm Insurance: Presently, farmers are unable to obtain insurance claims for crop failure due to multiple gaps in the insurance claim process. In many cases, farmers do not even seek redressal. Blockchain by getting all the parties involved on one platform ensures that farmers are served justice and paid in all righteousness.
Rural Electrification: Unlike urban areas where electricity is centrally generated and distributed, electricity in rural areas needs to be generated where it is required. Clean sources of energy such as solar, wind, and biogas can be employed to fulfill the rural requirements through smart microgrids. A microgrid is a small-scale power grid that can operate on itself or in combination with other small power grids. Supported by Blockchain and the Internet of Things, smart microgrids are capable of automatically move the power from a surplus house to a deficit house and the settlement can be made through a smart contract.
Various initiatives below-mentioned initiatives have been taken by the Government to promote the use of Distributed Ledger Technology (DLT) in the Indian economy:
The Telecom Regulatory Authority of India (Trai) notified use of Blockchain technology for curbing spam calls and messages and to control the flow of commercial communication.
RBI introduced a regulatory sandbox for startups to test their products and services.
SEBI and IRDAI also launched a similar initiative to encourage the application of Blockchain.
NITI Aayog is leading a transformational program, IndiaChain to apply Blockchain in agriculture, education, and health in November 2018. The program is aimed to facilitate efficient subsidiary disbursal for farmers, authenticate educational degrees and prevent fraudulent transactions. Plans are in place to link IndiaChain with IndiaStack, a unique identification database for the Aadhar initiative. The system may also be used to reduce tax evasions.
Investment Into Blockchain
Various VCs with foresight realized the potential of clean-air companies and started investing in companies in this space long before air purifying products gained momentum. Today a cumulative investment of USD 25 Tn is projected in energy-efficient and clean air technology by 2030, as per a CNBC article.
Blockchain is expected to follow the suit in terms of market size and investment. The Global Blockchain market size is expected to grow from USD 1.2 billion in 2018 to USD 23.3 billion by 2023, at CAGR (Compound Annual Growth Rate) of 80.2% during 2018-2023. The Blockchain industry has been witnessing an increasing amount of investment since 2017 from both individual investors as well as institutional investors. Globally Blockchain startups have seen investment USD 783 Mn in the first half of 2019 as per a report by Statista.
Funding into this sector can be observed from below trends:
Increasing adulteration in products, rising cases of tampering of data, an increasing number of frauds and inefficiencies in processes have created a huge demand for technology like Blockchain to bring transparency to procedures. With the possibility of application in numerous industries such as banking, agriculture, health-care and education among others, Blockchain is expected to boom in upcoming years in India. Indian Government has shown interest in the usage of this technology by initiating programs such as IndiaChain. The positive policy framework is expected for this technology in the near future.
Given the forming landscape, Blockchain has the potential to achieve the level of expansion the internet has achieved today.