About 10 years ago, in January 2009, Satoshi Nakamoto, a computer programmer that has to still reveal his true identity, had invented a peer-to-peer electronic cash system, something that was soon going to be popularly known as ‘Bitcoin’. This happened in the wake of the 2007-2008 financial crisis, an economic event that shed multi-trillion dollars from the global economy, and had a singular objective – to do away with the instability caused by transactional-reserve banking.
Nakamoto based his P2P electronic cash system on blockchain technology whose genesis block read “The Times 03/Jan/2009 Chancellor on brink of the second bailout for banks”, a clear message to the traditional banking system. After transferring the crucial development work to other lead developers, he later disappeared with more than 1 million bitcoins in the accounts associated with him (earned by mining individual blocks). Had Nakamoto sold his mined coins at the peak of Bitcoin revolution, he would have easily become the 44th richest person of that time, apart from being considered as a programming genius amongst the global community.
Clearly, money and fame haven’t been the cup of tea for Nakamoto. The transformation has been. And thankfully, both cryptocurrency and blockchain technology has been very transformational in nature. So, let us have a look at how technology can thoroughly transform the Indian startup ecosystem.
Cryptocurrencies, Blockchain, and Startups: Our Move Towards a More Efficient Future
Today, blockchain technology has proven itself effective globally and is being adopted for wide-ranging use cases including logistics, cybersecurity, policy enforcement (smart contracts), and so on. But what are the advantages that blockchain technology transfers to such use cases? The blockchain is a record-keeping technique that is based on a distributed ledger system, wherein information is stored in a verifiable and permanent format and protected using Proof of Work (PoW), Proof Of Stake (PoS) etc. The technology records every transaction in the forms of a long chain of blocks in which such transactions are only recorded in successive blocks. By design, none of these blocks can be retroactively overwritten or modified.
The very nature of blockchain and the efficiency transferred by it has been pivotal in increasing its adoption. According to a NASSCOM report, blockchain has the potential to add $5 billion to the Indian economy within five years, simply by increasing productivity and reducing costs. This is despite only 20 to 30 credible blockchain startups currently being operational in India. NITI Aayog itself is working towards the development of IndiaChain, India’s largest blockchain network and possibly world’s largest government-sponsored blockchain project.
However, implementation of blockchain technology isn’t as easy as it seems to be, especially amongst other industries. The format adopted by cryptocurrencies such as bitcoin depends on a global network of miners, who’re rewarded for their PoW (Proof of Work) that secures and verifies crypto transactions. The overall cost incurred in infrastructural maintenance and verification is shared by this network. But there’s no clarity about who will share such costs in other applications.
How Indian Blockchain Industry is Bearing the Brunt of the Absence of Regulation?
For the uninitiated, cryptocurrencies do not yet have a dedicated framework in India. But this is true in many countries around the world. Cryptocurrency is a new phenomenon and completely different from anything we’ve seen until now. Coming up with the right regulations is not an easy task for any country. However, the way a country forms these laws is very important. Many of the large economies such as US, UK, Japan, South Korea etc. have initiated dialogues with the cryptocurrency exchanges in their respective countries and are formulating laws that will foster these exchanges and other cryptocurrency startups while at the same time protect investors from any sort of fraud in this space.
In India however, the RBI initiated a banking restriction on all crypto businesses and this came into effect on 6th of July, 2018. But since there is no law in India against cryptocurrency, we have cryptocurrency exchanges operational in India. They do not have access to banking but that problem has been solved by way of P2P trading where INR transfers happen between two users without the intervention of the cryptocurrency exchange.
Blockchain Skills Globally and in India
Blockchain skills are a prized asset on a global level and the demand for blockchain developers is at an all-time high (given the technology’s wide-ranging applications). But in the absence of the desired framework, Indian blockchain developers are finding it unviable to operate within the country. A report indicated that 80per cent of India’s blockchain developers will move abroad if a robust regulatory framework is not adopted in the near future. This will seriously affect the progress of blockchain development and hence, blockchain projects in India.
Now, cryptocurrencies, apart from serving as a payment mechanism, also prove themselves effective in executing PoW & PoS. They’re also used as an asset class by the young online generation which sees cryptos as a better and fast-moving asset compared to traditional asset classes such as gold, stocks or bonds.
ICOs, on the other hand, also help in funding blockchain startups and promote the blockchain ecosystem. It is not possible to execute blockchain projects initiated by startups efficiently if the regulatory body in India continues to turn a blind eye towards cryptocurrencies and ICOs. Coming up with favourable cryptocurrency regulation in the country will create an additional avenue for India and its learned citizens to trade in cryptocurrencies, much like they do in the stock market. Blockchain courses also have to be timely introduced within our curriculum so that we do not merely fill the national skill gap, but also cater to the burgeoning global demand.
It is very delighting to see that the vision with which Satoshi Nakamoto developed cryptocurrencies and the blockchain technology has remained intact even after a decade. Today, some of the cryptocurrency players are actively collaborating with global banks and are enabling real-time, cross-border settlements, which is a time-consuming task otherwise.
Bringing our own regulation will enable us to experience similar benefits, while simultaneously creating the perfect technological ecosystem for our budding startups. Doing so will help in preventing the imminent brain drain from our nation, transpire the blockchain technology to other industrial applications via startups and, ultimately, make India a global leader in Blockchain technology with indigenous development – rather than sourcing the very same technological solutions from overseas later.