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Experts Explain: An India Blockchain Platform

There is an old saying: “Building the road is the first step to becoming prosperous”. In recent years, India has made a significant effort to become a digital society by building a large citizen-scale digital public infrastructure. The Government of India and Reserve Bank of India (RBI) have been promoting simplification and transparency to increase the speed of interaction between individuals, markets, and the government. With the commencement of the Digital India mission in 2015, our payments, provident fund, passports, driving licences, crossing tolls, and checking land records all have been transformed with modular applications built on Aadhaar, UPI, and the India Stack.

Limitations of public digital infrastructure

It is well established that digital infrastructure should be designed based on principles of availability, affordability, value, and trust. The invisible rules underlying technology can be made visible using design principles, legislative frameworks, governance frameworks, and public engagement. But when we look at the current digital ecosystem, it’s identified that existing different digital infrastructures are not interconnected as a design; a technical integration is required to make them conversant and interoperable.Today, information has to travel across multiple systems to complete the interaction, and rely on private databases, which makes the validation of data more complex as the network grows, driving up costs and creating inefficiencies.

The Experts

Dilip Asbe is MD & CEO of National Payments Corporation of India (NPCI). NPCI is a not-for-profit organisation established by the Reserve Bank of India (RBI) and the Indian Banks Association to create and operate a robust retail payments and settlement infrastructure in India. NPCI’s services portfolio includes BharatQR, BHIM, IMPS, UPI, and RuPay among others. Ashutosh Dubey is Senior Lead-Innovation Management, NPCI.

Web 3.0 to address challenges

It is becoming increasingly essential for developing nations to iteratively build innovative solutions on top of existing digital infrastructure. We need resilient platforms, which may be based on the Web 3.0 architecture of tomorrow, even when we know it may take some more time to get these platforms capable of scaling and solving the current challenges in a cost-efficient manner.

The Web 3.0 architecture establishes a new version of the Internet protocol incorporating token-based economics, transparency, and decentralisation. It is critical to understand that Web3 is not only the cryptocurrencies, but also NFTs or non-fungible tokens, representing physical assets or digital twins. A user can access all ecosystem benefits using a distributed token where they can show proof of ownership, tax history, and payment instruments.

Since the Web 3.0 ecosystem is less zero-sum, user lock-in is not the primary goal for new companies, and key operations can be encoded in “smart contracts” that are auditable, immutable, and easier for an early adopter to complete. A blockchain-based infrastructure can provide all of these attributes without the need of trusting any particular actor to verify a ledger’s history. The blockchain records could be visible, compiled, and audited by the regulators in real time.

Increasing global adoption of blockchain infrastructure

According to the management consulting company Gartner, by 2023, 35 per cent of enterprise blockchain applications will be integrated with decentralised applications and services. Many countries have already begun establishing their blockchain policies and infrastructure.

Estonia, the world’s blockchain capital, is using blockchain infrastructure to verify and process all e-governance services offered to the general public. China launched a program in 2020 called BSN (Blockchain-based Service Network) to deploy blockchain applications in the cloud at a streamlined rate. In Britain, the Centre for Digital Built Britain, a partnership between the University of Cambridge and the UK government’s Department for Business, Energy, and Business Strategy, is running the National Digital Twin program (NDTp) to foster collaboration between owners and developers of digital twins in the built environment. And the Brazilian government recently launched the Brazilian Blockchain Network to bring participating institutions in governance and the technological system that facilitates blockchain adoption in solutions for the public good.

There are also well-established decentralised finance (DeFi) platforms that rely on blockchain infrastructure like Ethereum, however, pegged to the base cryptocurrencies owned by that platform. As is well known, these platforms have multi-country presence and usage, and do not come under any particular regulatory ambit. DeFi allows users to borrow and lend cryptocurrencies on a short-term basis at algorithmically determined rates. DeFi users are rewarded with tokens that confer governance rights, which are analogous to seats on the protocol’s board.

Recently, blockchain provider Solana launched a prototype smartphone with hardware and security that can support decentralised apps for people interested in crypto wallets, Web3, and NFTs. Many Indian technology firms are building layer 2 chains (L2) on top of the base proven layer 1 chains (L1), while providing value-adds like scale, throughput, etc., mainly through bundling the transactions. These implementations convey the story of blockchain technology driving the future of Web 3.0.

The digital roads that India must build using blockchain

The Indian digital community, including fintechs, academia, think tanks, and institutions, should focus on supporting research in standards, interoperability, and efficient handling of current known issues with the distributed technologies, e.g., scalability and performance, consensus mechanisms, and auto-detection of vulnerabilities. Also, at present, end-user devices such as smartphones do not support blockchain-based technology and, as a result, the last mile is always outside the network. However, the day is not far when smartphone manufacturers will deliver blockchain compliant devices by adding extensions.

The blockchain models today are either permissioned, which suffice for the need of a consortium, or are public like Ethereum which are unregulated and rely on intrinsic standards. The ideal solution to solving most of the known issues of decentralised technologies lies in the middle path, i.e., a national platform operating at L1 that interconnects blockchains (both permissioned and public), application providers (decentralized applications — dApps — and existing), token service providers, and infrastructure managers. Together they can form a reliable and efficient network for the Indian digital economy. The ecosystem can further deploy relevant and purpose-specific applications at L2 for very little cost and effort, while the L1 continues to handle the heavy lifting for all the L2s operating on layer 1. All L2 chains on this public infrastructure L1 will communicate with each other, thus replicating the communication (and avoiding the need for complex integrations with each other) on the Internet for existing Indian digital infrastructures.

The need of the hour is to work on an indigenous solution of the people, for the people, and by the people — an India Blockchain Platform — even if it takes years to design and implement. A digital infrastructure based on blockchain technology will transform the digital ecosystem in India, and will enable the future of digital services, platforms, applications, content, and solutions. Considering the current state of affairs worldwide, one can safely assume that we are at the beginning of the curve, but the days are not far.




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