Blockchain, one of the names that have been associated with Bitcoin is now on the verge of becoming the backbone of the Indian economy. India has already started taking steps towards the virtual currency, and recently the ban on certain currency notes by the Indian Prime Minister Mr. Narendra Modi was appreciated by several economists across the globe.
Mr. Narendra Modi visualizes a digitized and advanced India that would be run effectively with the help of virtual currency. So, many economic experts are wondering that what’s the fate of Block Chain in India.
To find out what would be the effect of blockchain in Indian economy lets first find out what blockchain is and how this technology functions.
What is Blockchain Technology?
The blockchain is a decentralized and public ledger for recording all the cryptocurrency transactions. Primarily developed for Bitcoin, the blockchain is undoubted, an ingenious invention which is now finding many other potential uses.
The blockchain is an incorruptible and highly robust digital ledger used for recording the financial digital transactions. But, blockchain can easily be programmed to record any transaction or virtually everything that has a value.
The information carried by blockchain is copied on several computers across the globe, so even if one of them corrupts, the information stays intact. Also, the blockchain is updated regularly to ensure that not even a single transaction is missed. As it stores the blocks of information, it is named as “Blockchain”. The factors that make blockchain the best digital ledger include:
- It has no single point of failure
- It cannot be controlled by a single entity
- It is incorruptible and transparent
How Does Blockchain Technology Works?
Principally, there are three key technologies which are amalgamated to create a blockchain. While none of these technologies are new, but, their orchestration is inimitable and this is what, that makes blockchain completely secure as well as robust.
These technologies include:
- Distributed network with a shared ledger
- Private key cryptography
- An incentive for servicing the network’s security, recordkeeping and transactions
Here is an example of how the blockchain works. Say, if two people want to transact online, each of them needs two keys – private key and public key. These keys help in creating a secure digital identity reference. This identity is based on the unique combination of public and private cryptographic keys.
The keys create a strong control of ownership and sort out the authentication issue, but, it is combined with some mechanism for authorization to approve the permissions and transactions.
Moreover, the blockchain uses a distributed network and thus, there is no single point of failure in the blockchain.
The Current Situation of Indian Economy?
India has the 7th-largest economy in the world and has approx 18% of the world’s population. Other than China, the India remains the fastest growing large economies in the world.
As per the “World Economic Forum”, India’s economy will become the second-largest economy in the world by 2050, while China will reach the top position. Considering the pace with which Indian economy is growing, this seems to be completely true.
One of the Indian leaders who has worked a lot to strengthen the Indian economy is Mr. Narendra Modi. Whether it is his ban on the higher denomination currency notes or the implementation of the GST, every move by this outstanding leader is to eradicate the propagation of the black money while encouraging the digital transactions. The primary reason to encourage the digital transactions is that they can be recorded and tracked with greater ease as compared to th regular monetary transactions which involve hard cash.
In fact, the “World economic Forum” has recently published a report the number of digital transactions increased dramatically in India post demonetization. It’s certainly an achievement for the country, because the government is now equipped with better ability to track the flow of money. Also, the increase in digital transaction can pave the way for cryptocurrency and blockchain and investing in blockchain technology in India can prove quite useful for citizens as well as the government.
Blockchain In India
Though Blockchain is not popular among the Indian people and many, only relate it to bitcoin, but gradually it will become one of the most talked about terms. One of the shocking facts is that, out of 1.24 billion Indians, only .5% are aware of Bitcoin, the cryptocurrency which popularized the unmatched “Blockchain” technology.
But, there are some top-notch financial institutions, organizations and banks, which are working to integrate the “Block chain” technology in the diverse sectors of the country’s economy such as health and financial sectors.
In 2016, the ICICI, one of the highly known banks in India announced that it completed a cross border transaction successfully using the blockchain technology. The RBI (Reserve Bank of India) is also quite keen to launch a blockhain platform in the country for the digital transactions. Considering the fact that the current Indian government wants to develop a cashless economy, the blockchain in Indian economy has a bright future.
How Blockchain Can Support The Indian Cashless Economy?
As the Indian government wants to boost the cashless economy, it requires a robust and error-proof system to address the challenges posed by the deployment of this type of economy.
Making the entire economy in India can be quite challenging because in India, a bigger segment of the population still completely relies on cash-based transactions. The other challenges which may come in the way of achieving cashless economy include high transactions and setup costs, financial inclusion and the transaction times.
Blockchain Eliminates The Need For Belonging To Traditional Financial System
If we analyze the current situation, the people need to have a bank account in order to carry out the transactions in the cashless economy. But, Blockchain is different. This outstanding technology eliminates the need for the bank account or the requirement to belong one of the traditional financial systems.
Blockchain Can Significantly Improve The Transaction Times
For a cashless economy to function effectively, it needs to cater to all the needs of the people while delivering all the benefits of the traditional cash-based economy. Furthermore, the cashless economy should support a real-time feature so that people carrying out transactions can instantly be updated about its success/failure.
Blockchain can provide the solution to all these issues whilst significantly improving the transaction times.
The recent surge in the digital transactions and digitized payments in India has resulted in the adoption of various Blockchain projects, such as BitIndia. These projects have been designed to support the proliferation of the digital payments in India.
The BitIndia is a sort of digital wallet that can hold an array of cryptocurrencies including Bitcoin, Ethereum, Litecoin etc. The prime objective of this project is to enable Indians to spend and exchange cryptocurrencies, while significantly improving the transaction times.
As Indian government is encouraging the people to embrace digital payments and digital transactions, the blockchain as well cryptocurrencies certainly have the potential to become the backbone of the Indian economy. Since these eliminate the need to first have a bank account and make all the digital payments from that account, cryptocurrencies can be well accepted by Indians as a way of carrying out financial transactions. Furthermore, as blockchain is capable of keeping track of every transaction, it will help the government track the flow of money while eliminating the black money from Indian markets.