Building capabilities in blockchain and digital currencies

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Authored Article by Mr. Vikram Pandya, Director – Fintech, S P Jain School of Global Managements
Due to heavy rains, a village is facing severe flooding. Crops are destroyed, but the farmers are not worried. There is a sensor in that locality gauging amount of rainfall which gets directly transmitted to the central server. Once the predetermined threshold is crossed, the server triggers crop insurance claim. System checks digital land registry on blockchain, identifies land owner and lodges the claim directly to the insurance agency. Insurance company receives verified claim and settles the amount directly to the land owners account without any delay.
The above scenario may sound futuristic but it is about to become a reality in not so distant future. As you are reading this article, countries like UK and Sweden are working to implement end to end digitization of land records along with associated value chain by using blockchain technology.
Blockchain, a distributed ledger technology used to store and transfer digital records in a secure manner, is reshaping the way businesses of future will operate. It provides robust framework to support entire value chain seamlessly. In the words of Larry Summers (US Former Treasury Secretary) the blockchain will change a great deal of financial practice and exchange.
Blockchain experts are high in demand and identifying right blockchain platform for a given use-case is really important. Before we continue our journey further, we need to understand core features of blockchain. Blockchain is decentralized, there is no central agency who has control over the whole data. It also means that it is more resilient against Distributed Denial of Service (DDoS) attacks. Blockchain should not be considered as replacement of traditional databases. It is not great at handling large volume of real-time transactions because of inherent features like Signature verification, Consensus mechanism and redundancy. It provides an immutable record of all events without need of any middleman or trusted third party. A blockchain can be permissioned, permission-less or hybrid.
Today there are many blockchain platforms in the market. Some of the notable platforms include Ethereum, BigChainDB, ChainCore, Corda, Credits, Hydra, Hyperledger, Multichain, Openchain, Quorum and Stellar. Applications built on such platforms are called Decentralized Applications (DAPPs). Selection of blockchain platform depends on intended end use.
In India Bankchain project has been launched by community of banks for exploring, building and implementing blockchain solutions. Currently there are 22 member banks working on solutions across various domains like Shared KYC, Loan Syndication, Trade Finance, Asset Registry, Secure Documents and Cross border payments. YES Bank implemented a multi-nodal blockchain transaction to fully digitize vendor financing for Bajaj Electricals. ICICI Bank executed transactions in international trade finance and remittances using blockchain technology in partnership with a Dubai based bank Emirates NBD. Kotak Mahindra Bank has enabled end to end trade financing by utilizing the blockchain technology thereby reducing the time taken for a letter of credit (LC) to few hours from 20 to 30 days. Axis Bank has partnered with Ripple to facilitate faster cross border remittances.
Digital currencies like Bitcoin are also based on blockchain technology. With advent of blockchain platforms like Ethereum and Waves, issuing cryptocurrencies (digital tokens) has become a lot easier. Concept of Initial Coin Offerings (ICOs) is a boon to new age entrepreneurs for raising money for their projects through blockchain based digital token sale. There are even platforms like Ambisafe which help you manage end to end digital token issuance and cryptocurrency exchange listing. Websites like ICO Rating help you identify best ICOs in the market. Today there are tokens that can represent your identity across social media platforms, represent share in precious metals, allow you to earn by renting your computing power, reward you for use of clean energy, or help collaborative scientific research. Some of the digital currencies have given multifold returns during last couple of years making them more lucrative than traditional stock market. It is safe to conclude that Blockchain is going to be the next big thing and we should be ready to embrace it.