National Strategy on Blockchain

WHY IN NEWS:

• In January 2021, the Ministry of Electronics and Information Technology released a draft National Strategy on Blockchain.

WHAT IS BLOCKCHAIN TECHNOLOGY?

• Blockchain technology is a distributed ledger technology suitable for decentralized and transactional data shared across a large network of untrusted entities.
• This technology allows new type of distributed software architecture capable of finding concurrence on their shared states without need to establish online trust with any central entity/participant.
• All the transactions shared across entities, along with the timestamp are maintained as records and placed in blocks.
• These blocks are further linked as Blockchain and stored in a distributed manner across various nodes of the network.
• Copy of each transaction along with its hash is stored in the ledger shared across all participants of the network.

SALIENT PROPERTIES OF THE BLOCKCHAIN TECHNOLOGY

• Pseudonymity
• Cryptographic guarantees
• Immutability
• Shared read and write
• Accountability
• Transparency
• Distributed ownership

IMPORTANCE OF BLOCKCHAIN TECHNOLOGY

• Blockchain can bring value addition in e-Governance:
  • Improves Transparency & Accountability, Building Trust with Citizens, speed up transactions, Protecting Sensitive Data and Reducing Costs & Improving Efficiency.
• No middlemen in transaction:
  • In blockchain technology, there is no chance for any kind of mediators or intermediaries in any transactions such as for digital payments.
• Protect businesses from fraud:
  • Blockchain is open-source ledger which is why it is very easy to identify if a fraud has taken place since every transaction is recorded on them.
• Blockchain business value:
  • The World Economic Forum (WEF) anticipates that 10% of the global GDP will be stored on blockchain by 2025 and lists blockchain as one of 7 technologies that are anticipated to revolutionize various aspects of our lives.

STATISTICS:

• According to ‘National Strategy on Blockchain’ by MEITY:
  • By 2030, Blockchain would be used as a foundational technology for 30% of the global customer base
  • By 2025, Blockchain would add a business value that will grow to over $176 billion

POTENTIAL BLOCKCHAIN APPLICATIONS OF NATIONAL INTEREST:

• Transfer of Land Records (Property Record Management)
• Digital Certificates Management (Education, Death, Birth, agreements, sale deeds …)
• Pharmaceutical supply chain
• e-Notary Service (Blockchain enabled e-Sign Solution)
• Farm Insurance
• Identity management
• Power distribution
• Duty payments
• Agriculture and other supply chains
• eVoting
• Electronic Health Record Management
• Digital Evidence Management System
• Public Service Delivery
• IoT Device Management and Security
• Vehicle lifecycle management
• Chit fund operations administration
• Microfinance for Self-Help Groups (SHG)

GLOBAL EFFORTS:

• Blockchain-based Service Network (BSN) initiative of China
  • It aims at helping companies and individuals deploy Blockchain applications faster and cheaper.
• European Blockchain Partnership (EBP):
  • It aims to use blockchain and distributed ledger technologies and develop a trusted, secure and resilient European Blockchain Services Infrastructure (EBSI) which will meet the highest standards in terms of privacy, cybersecurity, interoperability, regulation in applying policies etc
• ‘Smart Dubai’ initiative of United Arab Emirates:
  • Which aims to become the first city fully powered by Blockchain by 2021

PRIVATE SECTOR EFFORTS:

• LG Blockchain
  • It is specialized for digital authentication, community token and supply chain management for the enterprise
• Samsung Blockchain Wallet
  • It has developed CosmeeDApp for purchasing of contents using cryptocurrency

INDIA’S INITIATIVES:

• Efforts from MEITY:
  • Ministry of Electronics and Information Technology (MeitY) has identified Blockchain Technology as one of the important research areas having application potential in different domains such as Governance, Banking & Finance, Cyber Security and so on.
  • MeitY has supported a multi institutional project titled Distributed Centre of Excellence in Blockchain Technology
  • As part of this initiative, agencies have carried out research on the use of Blockchain Technology in identified domains
• Centre of Excellence (CoE) in Blockchain technology
  • It was established by NIC in association with NICSI.
  • The objectives of CoE are to accelerate adoption & deployment of Blockchain technology in Government, execute projects focussing on different use cases
• Efforts from NITI Aayog:
  • NITI Aayog has executed various use cases in Blockchain Technology and piloted them in association with various Government departments and Private agencies
• Banking:
  • Reserve Bank of India (RBI) is exploring on applying Blockchain Technology in banking domain
  • SBI has associated with commercial banks and financial institutions for Blockchain based application pilot.
  • Yes Bank, Axis Bank and ICICI Bank are also adopting Blockchain in their banking business.
• C-DAC’s mission in Blockchain Technology:
  • The mission aims to build a Unified Blockchain Platform for cross domain applications addressing the performance, scalability, interoperability, security and privacy challenges

CHALLENGES TO THE ADOPTION OF BLOCKCHAIN TECHNOLOGY

• Technological challenges:
  • Performance challenges:
    • Unlike traditional centralized systems, the decentralized architecture of Blockchain means it will be slower than traditional systems
    • In Blockchain data is replicated on each node and this may lead to performance issues many a times. Further, the performance also is affected due to calculations associated with encryption- decryption and hashing at every node
  • Scalability challenges:
    • Scalability aspects of Blockchain systems are affected by the factors such as architecture, configuration of the Blockchain platform, variable requirements for processing power, network bandwidth, block size, consensus, transaction validation mechanisms, privacy requirements
  • Storage challenges:
    • Blockchain is considered to be an append only data storage mechanism.
    • As data stored in the Blockchain cannot be modified, it becomes perpetual and also is replicated at all the nodes in the network.
    • This demands a heavy resources in terms of storage and may become an issue as the chain of blocks grow.
  • Transaction details and interoperability
    • In order to get the benefit of interoperability across similar applications >> transaction standardization for certain class of applications has to be evolved.
• Skillset and awareness related challenges:
  • Lack of awareness with regard to nature of Blockchain platforms is a major challenge
  • There a number of open source Blockchain platforms, but it requires skilled manpower in multiple technologies to understand and tweak their functionality to specific requirements.
  • A successful large scale execution of PoC (Proof of Concept) requires the users to hire blockchain experts or data scientists which is a costly affair as compared to hiring software developers
• Privacy challenges
  • Decentralized storage on every node creates privacy challenges.
  • The state of regulations and compliance for Blockchain applications is still ambiguous.
  • Right to be Forgotten is a prevailing feature of the Draft Personal Data Protection Bill, 2019.
  • Blockchain where data cannot be deleted, and history of data is always accessible contradicts this principle
• Regulatory challenges:
  • Digital Signatures is a core part of Blockchain networks and application.
  • Currently there exist no details in the Information Technology Act, 2000 on transactions involving immovable property, wills and negotiable instruments.
  • Thus, this provision excludes the applicability of the technology for such activities.
• Localization:
  • Data redundancies are stored across all nodes on a blockchain network.
  • Thus, the technology may hit a hurdle with data localization requirements.
• Legal challenges:
  • The Reserve Bank of India (RBI) has put forth restriction with respect to virtual currencies based on Blockchain technology and there is circular to halt the usage of crypto-currency transactions in India

WAY FORWARD:

• Need for National Level Blockchain Framework (NLBF):
  • As a country, a National Level Blockchain Framework can aid in scaling deployments for developed applications, emerge shared infrastructure and also enable cross domain application development
  • Multi-institutional model need to be created for architecting the NLBF and organizations have to be identified along with their roles & responsibilities
• Integration of the following National Level Services to Blockchain:
  • eSign
    • It is a Public Key Infrastructure (PKI) based on-line service.
    • This service helps the citizens for instant signing of their documents, enabling non-repudiation and in a legally acceptable form.
    • eSign service is being leveraged in various applications by government and private agencies are leveraging eSign service. 
  • ePramaan
    • It is a standards based e-Authentication framework. It facilitates authentication and security of citizens while accessing different government applications. 
  • DigiLocker
    • It is an online service delivered under Digital India Initiative by MeitY
    • It provides every citizen with an account in cloud to access documents or certificates such as vehicle registration, academic certificates & mark sheets, driving license and so on.
• Focus on advanced research:
  • As the Blockchain technology is still evolving and it has the potential for Government to adopt, it is recommended to focus on advanced research in the domain of Blockchain Technology and contribute in addressing various challenges in adopting the technology towards building a trusted public digital platform
• Evolve an indigenous technology:
  • Evolve an indigenous technology stack with open APIs, so that various use cases addressing the nation’s requirements, can be built on top of it and also integration with existing applications can be carried out efficiently
• Consultancy services
  • Consultancy services can be offered in architecting the Blockchain based applications as different ministries or  departments are showing interest in adopting Blockchain Technology
• Capacity building in Blockchain Technology
  • Capacity building need to be promoted by conducting short term courses or bootcamps.
  • Create sandbox environments for development & testing of applications and for offering virtual training.

PRACTICE QUESTION:

Q. “As Blockchain Technology is an emerging area, there are various challenges to be addressed in order to adopt it”. Comment