Rajya Sabha TV: In Depth – Blockchain Technology
Bitcoins and similar cryptocurrencies have gained popularity in recent times. Transactions done by these methods are recorded in a public distributed ledger called a blockchain. This revolutionary invention of modern times connects all information from the first step of a transaction to the very last one. It thus, creates a chain of blocks of information. However, questions have also been raised about how trustworthy cryptocurrency transactions are.
- Digital currency (electronic money) is a type of currencyavailable only in digital form, not in physical (such as banknotes and coins). It allows instantaneous transactions and borderless transfer-of-ownership. These may be used to buy physical goods and services but may be limited to certain communities. It may be centralized or decentralised.
- The medium of exchange has changed a lot with times. It has progressed from barter system, gold coins, paper notes, ATM and debit cards to the digital currencies. The most important function of any medium of exchange is to be widely acceptable and have really stable purchasing power.
- Blockchain technology is a network of computers that all have same history of transactions. The transactions are recorded as blocks of networks and held by multiple people at the same time. The database is thus not centralised.
- Instead of a company in the middle, there is a bunch of software codes to help with the transactions in blockchain.
- Timeline of blockchain is:
- 1991: First work on chain of blocks by Stuart Haber and Scott Stornetta.
- 1992: Bayer, Haber and Stornetta improved efficiency of technology by making several data to be collected in one block.
- 2008: First block of chain was conceptualised by Santoshi Nakamoto.
- 2016: Russia announced pilot project based on the technology for automated voting systems.
- Blockchain has numerous emerging applications- banking and financial services, insurance, electronic governance, cybersecurity, real estate, education, health care sectors, etc. Thus, it has the ability to transform the way nations and individuals work in their day-to-day applications.
- Consider the example of Wikipedia. Information provided by no one contributor is the basis, nor it is controlled by any individual. All users who have a fair information can contribute, but Wikipedia controls the central server database.
- Uses and possibilities of blockchain are:
- Confidential communication of cryptocurrency.
- Safe, cost effective and fast bank transactions.
- Secure legal documents, health data, notaries and personal documents.
- Distribution of land records and government financial assistance.
- Cloudstorage, digital identification, smart communication and digital voting.
- Government of India is preparing for performing research on blockchain. NITI Aayog has said that this technology can be helpful for agricultural sector. Various other sectors like health and education where a chain of events is there, this technology can be useful.
- Blockchain has the ability to provide transparency and trust in a decentralised manner.
- Blockchain itself is not a currency but, an advanced technology that facilitates the use of cryptocurrency. It is not possible to use virtual currency without blockchain.
- In purchase done in real world, a cash is paid for buying goods. But, when a purchase is done online, a mediator has to facilitate the transaction. This is done by a digital wallet like Similarly, the bank acts as a mediator when a transfer of money is done to other bank accounts and maintains a ledger for it.
- A blockchain is a virtual ledger that eliminates the role of banks/ facilitators and allows direct transactions between peer to peer. There is no central server for communication. All the users are at the same level and communicate with each other. It is a very democratic system.
- The information in blockchain remains confidential. Any transaction is confirmed in it only after millions of calculations per second are done to validate it. So, blockchains are considered very safe.
- Digital transactions have increased manifold in India, mainly after the demonetisation step. But, India is still facing issues like cyber security and strict laws on cyber-crime. For this reason, India has second highest number of digital fraud cases in the Asia-Pacific region behind Indonesia.
- Governments of several economies including India are now looking at blockchain as an opportunity and issues related to it both. Paper currencies are printed at specific places and amount that makes its frauds traceable. But the bitcoins used in blockchain can be “mined” anywhere and are so difficult to keep a track on.
- 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.
- Online transactions are prone to fraud and blockchains are seen as a solution to this problem. Every single transaction is written in a block and then chains are built comprising of each transaction. But it’s important to make it legal.
It is the age of technological revolution in 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.