The unprecedented exuberance around blockchain is due to its promise of a completely new Internet—the Internet of Value. Beyond today’s Internet of information, what if the ownership of digital assets of any type—money, deeds, government records, financial instruments, or art—could be securely stored, tracked and transacted? Blockchain technology is considered revolutionary for its ability to enable the secure movement of assets, without intermediaries, with its economic impact projected to exceed $3 trillion in the next decade.
Globally, we are still in an exciting but nascent stage of blockchain’s evolution as it moves from the protocol stage to infrastructure, before mass consumer interfaces and application layers are dealt with. This is the perfect juncture for a rising power such as India to pay careful attention and capitalize on the enormous opportunities of this new Internet. Sectors such as financial services, agriculture, healthcare, real estate and utilities—all crucial for an emerging economy like India—can see tremendous benefits from the application of blockchain technology.
There are two worlds to blockchain—public chains that create trusted transaction networks between entities that do not know or trust each other, and private networks that are only between known entities. While private distributed ledger implementations may have incremental value, the essence of blockchain is in the power of decentralization. This is because the true value of blockchain is in creating consensus and trust between strangers.
It is extremely important to understand that blockchains without cryptocurrency incentives (tokens) are just data networks, not value networks. Cryptocurrency tokens perform three key functions—maintaining decentralization by providing the necessary economic incentive for network nodes to validate transactions, enabling developers to build decentralized applications on top of blockchain networks, and allowing early-stage projects a new way to crowd-source capital and users.
Public blockchains offer tremendous opportunity for India across four dimensions, jobs, capital, solutions to India’s problems and global strategic positioning. When juxtaposed with the shrinking IT sector of India, slowing tech jobs, and India’s laggard status in emerging technologies, the advantages that blockchain offers cannot be taken lightly by Indian policymakers.
Gains for India: Blockchain is now the fastest-growing skill set demanded on job sites, with job growth rates at 2,000-6,000% and salaries for blockchain developers 50-100% higher than regular developer jobs. The decentralized nature of projects with distributed teams can translate into lacks of high-paying jobs from all over the world being available to Indian developers.
Blockchain-based initial coin offerings (ICOs), when done correctly, open up a whole new channel for startup funding and tap into more than $20 billion raised through the ICO route. With its strong IT ecosystem, India can become a leading blockchain development hub and a major net beneficiary of global capital inflows.
Solving Indian problems: Decentralized applications on public blockchains can solve myriad Indian problems, such as eliminating middlemen, providing data security, reducing corruption and tampering of financial ledgers, and improving the speed of service delivery by governments and corporations.
India’s global positioning as a technology powerhouse: Different emerging technologies such as blockchain, artificial intelligence, and the internet of things will not work in silos but will converge. That is the space where the next Googles and Amazons of the world will get created. Blockchain is a foundational data/transaction layer and missing out on it will hurt India’s overall tech competitiveness.
Regulation in India: The current debate in India has, unfortunately, focused too heavily on trading and speculation, looking at cryptocurrencies as an investment tool, rather than understanding the potential of core blockchain technology and the basic role of cryptocurrencies as an incentive mechanism to secure decentralized transactions.
As core developers/shapers of this technology in India, we are fully cognizant and sympathetic to government concerns of money laundering, tax evasion, investor protection and capital flight. However, the blockchain sector is especially sensitive to regulation. Any regulatory action on cryptocurrencies that misses the nuance of separating speculative activity from core software development inadvertently shuts down core development as well. There are sufficient global examples of countries that have taken nuanced and cautious steps in regulating the technology, and are focusing on stopping illegal activity without hurting innovation.
In the current regulatory environment, Indian developers do not have to ability to develop open blockchain solutions at scale. Serious blockchain professionals are migrating rapidly to countries with more friendly regulations. As a result India’s ability to benefit from jobs, capital, local innovation and positioning is all curtailed without the talent ecosystem in place.
The government has legitimate concerns around money laundering, tax evasion and capital flight using cryptocurrencies. However, regulating the space is not too difficult with a light touch and intelligent policies.