In a country possessing as vast a landscape and populace as India, blockchain has the potential to completely transform and revolutionize governance, provided it is implemented cautiously
Although its origins can be traced to as far back as 1979, blockchain technology first came into the limelight with the launch of cryptocurrency in 2009, as it formed the backbone of Bitcoin. Having been treated with some initial trepidation, it has since garnered interest from the government and private sector alike, which are now both investing heavily in it, thanks to the wide range of advantages the technology has come to offer. Of particular interest is the growing application of blockchain to governance, where it promises to offer an unprecedented level of transparency, accuracy, and security.
Blockchain essentially refers to a distributed digital ledger or database. The term “distributed” here emerges from the fact that the ledger is not stored on a central database, rather each computer or node on the network stores a copy of it, which are in turn connected by a peer-to-peer (P2P) network.
Blockchain essentially refers to a distributed digital ledger or database. The term “distributed” here emerges from the fact that the ledger is not stored on a central database, rather each computer or node on the network stores a copy of it, which are in turn connected by a peer-to-peer (P2P) network. When two nodes conduct a transaction (which is encrypted), a record of it is stored in the ledger, which subsequently constitutes what is called a “block” of data. Each block is assigned a unique alphanumeric string called a “hash” based on its timestamp, and all such blocks are sequentially connected via their hash, forming a chain. The most important property of blockchains, however, is the fact that each new block of data requires consensus among all nodes of the network for it to be integrated with the preceding block in the chain. This feature is what ensures the transparency and uniformity of the ledger while ensuring that it remains free of tampering. To ensure the efficiency of the setup, the nodes are usually provided with an economic incentive to legitimise a transaction, with a reward being offered to the first node to do so, in a process known as “mining.”
While blockchain technology was almost exclusively being used for implementing cryptocurrency at the onset, the situation took a sharp turn in 2014 with the launch of a decentralised platform known as “Ethereum,” which promulgated its applications to other domains. It introduced the idea of “smart contracts,” which are self-executing digital contracts that are automatically completed upon the completion of the requisite terms, thereby eliminating the need for third parties to verify them.
The growing use of cryptocurrencies has given rise to the idea of Decentralised Finance (DeFi), which refers to a set of blockchain-based applications that are designed to supersede the current financial structure. The use of smart contracts eliminates the need for third-party institutions like banks, while the decentralised nature of the platform gives users direct control over their finances.
Another significant development has been the rise of Nonfungible Tokens (NFTs). These are unique digital assets like paintings or videos, which cannot be exchanged on a one-to-one basis. Since NFTs are based on blockchains, their unique identities and ownership can be immediately traced on the digital ledger. This has also led to their application in processing the ownership of real-life assets like deeds to real estate or vehicles.
The Government of India has been taking a keen interest in blockchain technology and its application to the public domain, as is evident from the release of the “National Strategy on Blockchain” by MeitY in December 2021, which elucidated its vision to adopt blockchain in various sectors like healthcare, agriculture, finance, voting and e-governance, while laying the groundwork for establishing a “National Blockchain Framework,” under which it will work towards building a national-level infrastructure for blockchain. It hopes to enable “Made in India” blockchain technology for global use by 2027 while achieving convergence across blockchain, Internet of Things, cloud and Artificial Intelligence, collectively called the “BICA Stack.”
While the Reserve Bank of India has been hostile towards cryptocurrencies in the past, it has been working on its own Central Bank Digital Currency (CBDC), the digital rupee, which it is set to launch in the near future. The introduction of CBDC will reduce the dependence on physical cash while enhancing the efficiency of payment systems, and shielding the public from the risks associated with private virtual currencies.
The government is currently in the process of deploying blockchain technology for land registration, issuing digital certificates and customs duty payment. Organisations like the Telecom Regulatory Authority of India (TRAI) and the Securities and Exchange Board of India (SEBI) are also playing an active role in the adoption of blockchain in their respective sectors.
Local and state governments have embraced the adoption of blockchain technology as well, and are in the process of incorporating it into their governance structures. Almost half the states in the country are currently working on blockchain-related initiatives. One of the most remarkable cases is the adoption of NFTs for land mutation by the New Town Kolkata Development Authority in West Bengal. Covering an area of 27,000 acres, a total of 50,000 NFTs have been implemented, representing one million property records. The NFTs provide proof of land ownership and all documents embedded with them are free from tampering, thereby making the land mutation process transparent while eliminating the need for manual paperwork and record-keeping. The municipal corporations of Durgapur and Bankura districts in West Bengal have also built a blockchain-based platform to issue legal documents like birth certificates.
The “Tamil Nadu Blockchain Backbone” or “Nambikkai Inaiyam” aims to provide every citizen of Tamil Nadu with a unique state ID that would consolidate all their essential documents like e-sevai, academic and birth certificates into a single digital wallet. This will be accompanied by the launch of the e-Pettagam App which will allow users to safely share these documents with employers, government entities, educational institutions, banks, etc. The Karnataka Government has undertaken a similar initiative called the “Unified Land Management System.”
The Uttar Pradesh Government, in partnership with Polygon, has launched the “Firozabad Public Grievance Management System,” an online portal based on blockchain technology, which can be used to file and track complaints. The use of blockchain ensures that the process will remain completely transparent and the records cannot be tampered with by potentially corrupt officials.
While the aforementioned initiatives may seem exhaustive, they just serve as the tip of the iceberg. Despite the myriad of applications that blockchain already has to offer, the technology is still in its infancy. The unprecedented level of transparency and efficiency it promises is a perfect fit for what has now become the most populous country in the world. Its deployment in sectors like agriculture, banking, law and order, and healthcare will spur the country’s long-sought-out the goal of financial and social inclusion by eliminating intermediaries, thereby, drastically diminishing the time and effort spent by the general populace in procuring these essential services.
This, however, is accompanied by a word of caution. Firstly, as groundbreaking as the technology may seem, sceptics don’t see it that way, with a prominent economist calling it “no better than an Excel spreadsheet.” Secondly, despite its vaunted claims of imperviousness, blockchain is not as unfettered from cyberattacks as it is made out to be. For instance, it is susceptible to the “51 percent attack,” with cryptocurrency wallets constituting a popular target in particular. In 2022, nearly 200 cryptocurrency or blockchain hacks were identified, resulting in losses of over US$3.8 billion. The technology requires further evolution before its implementation into mass governance platforms like those in India.
India has the opportunity to learn from success stories like Estonia, which has completely integrated blockchain into its governance through its Keyless Signature Infrastructure initiative.
That being said, India has the opportunity to learn from success stories like Estonia, which has completely integrated blockchain into its governance through its Keyless Signature Infrastructure initiative. In a country possessing as vast a landscape and populace as India, blockchain has the potential to completely transform and revolutionize governance, provided it is implemented cautiously.
Prateek Tripathi is a Research Assistant Centre For Security Strategy and Technology at Observer Research Foundation
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Prateek Tripathi is a Research Assistant Centre For Security Strategy and Technology at ORF. He was given a prize for outstanding physics achievement at the ...
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