Context and background

Blockchain is being considered a revolutionary technology for the economy of the future, but not much information is available regarding the origin of this technology. It is believed that this blockchain technology was discovered to support this cryptocurrency after the invention of bitcoin in 2008. It is such a modern technology without which it is impossible to transact with bitcoin or any other type of cryptocurrency.

What is Blockchain?

• Just as the Internet was invented by connecting thousands and millions of computers, similarly long chains of data blocks (data) have been given the name of Blockchain.
• Blockchain technology is an amalgamation of three different technologies, including the Internet, personal 'key' (private key) cryptography, i.e. keeping information secret and controlling protocols.
• Secure chain cryptography was first discussed in 1991 by Stuart Haber and W. Scott Stornetta did the job. The following year, i.e. 1992, Bayer also joined hands with these two and improved its design, due to which assembling the blocks became easier.
• Blockchain is a technology by which bitcoin and other cryptocurrencies operate. In simple words, it is a digital 'public ledger', in which every transaction is recorded.
• Once a transaction is recorded in the blockchain, it can neither be deleted nor changed.
• Because of the blockchain, transactions do not require a trusted third party such as a bank.
• It records the details of each transaction in a ledger after it is verified by network-connected devices (mainly a series of computers, called nodes).

My Input

• Indeed, blockchain can also be compared to the state of the Internet in the 1990s. It is noteworthy that in the last two decades 'Internet of Information' has changed our society.
• We are now entering an era where blockchain will also be able to do the same thing through the Internet of Trust, and the Internet of Value.
• According to a report published in the American newspaper 'New York Times', blockchain technology has the potential to affect the entire world ecosystem and almost all the major central banks of the world are researching it.

What is the global situation?

• Today, many large global financial companies are considering incorporating it into their operations in view of its implications and opportunities.
• Governments in many developed countries are planning to use blockchain technology for better governance.
• A pilot project based on a blockchain platform was launched in Russia in 2016, in which work is underway to use this technology for an automated voting system.
• According to a study conducted by the World Economic Forum, more than 90 central banks around the world are involved in the blockchain discussion.
• 2500 patents have been registered for this in the last three years.

Blockchain in India

Of course, bitcoin is just one application of this technology, the use of which is being investigated in many industries. There is a lot of attraction towards it in the banking and insurance sector of India. In fact, many people in these areas are forming associations to make the world aware of the benefits of blockchain technology at the industry level.

• Keeping pace with the global world, some Indian companies have started providing financial services through blockchain technology.
• Bajaj Finserv, the NBFC, a insurance company of the Bajaj Group, is using this technology to settle claims even before the information is filed by the concerned customers in travel insurance.
• The company is using blockchain technology to improve customer service. This technique is closely monitored.
• Bajaj Electrical Limited is also using blockchain technology to eliminate human intervention in the bill discounting process.
• There is a consortium called 'Bancchain' in India which includes about 27 banks in India (including State Bank of India and ICICI) and Middle-East nations as its members. The consortium is widely disseminating the benefits of blockchain technology to make businesses safer and faster.
• In addition, the Institute for Development and Research in Banking Technology, a branch of the Reserve Bank of India, is developing a state-of-the-art platform for blockchain technology.
• It has been started in India as a pilot project in Telangana and Andhra Pradesh, where it can be used as a safe repository of data. What is the global situation?

How does Blockchain technology work?

• Blockchain is believed to have the potential to revolutionize the way many industries operate. This can make the process more democratic, secure, transparent, and efficient.
• Blockchain is a technology that creates a decentralized database of transactions over a secure and easily accessible network.
• This shared record of transactions in this virtual ledger can be viewed by anyone using the blockchain located on the network.
• Blockchain is a series of data blocks (data) who's each block contains a set of transactions.
• These blocks are electronically linked to each other and are kept secure through encryption.
• This technology is secure and it is difficult to hack. That is why this technology is safe to prevent cyber crime and hacking.
• Under this, the details of each transaction are recorded in the ledger after it is verified by a series of computers (called nodes) connected to the network.

Key Features of Blockchain

• Decentralization and transparency is the most important mechanism of blockchain technology, due to which it is proving to be increasingly popular and effective.
• Blockchain is a technology that has been designed as a program to record financial transactions.
• It is a digital system in which Internet technology is very tightly embedded.
• It can store blocks of similar information on its network.
• Blockchain has the capability of distributed database i.e. it acts like a distributed network.
• All the records in the database are not stored in a single computer but are distributed over thousands or millions of computers.
• Each computer on the blockchain can describe the entire history of each record. This database is encrypted.
• In the blockchain system, even if a computer fails, this system continues to work.
• Whenever new records are to be entered in it, it requires the approval of many computers.
• Blockchain can be easily controlled by a group of users who have permission to add information and change the record of the information itself.
• In this technique, the role of intermediaries like banks, etc. is eliminated and direct person-to-person (P-to-P) contact is established.
• This not only reduces the time taken for transactions, but also minimizes the chances of mistakes.

Where can it be used?

Apart from cryptocurrencies, blockchain technology can be used in the following areas:

1. Information Technology and Data Management
2. Government Schemes Accounting
3. subsidy distribution
4. keeping legal papers
5. Banking and Insurance
6. land records regulation
7. Digital identity and authentication
8. health statistics
9. Cybersecurity
10. cloud storage
11. E-governance
12. smart-contract
13. academic information
14. E-voting

The benefits of using blockchain will vary for all transactions. According to the website Deloitte and Assocham, blockchain will prove to be more beneficial when the data is more, and they have to be shared among many people and there is no sense of trust among them.

The technology will be useful for industries that focus on decentralized data storage, data immutability, and the distributed proprietary features of blockchain.

Blockchain in Economy and Governance

The Government of India is trying its best to move towards a cashless economy by promoting digital transactions in the economy. The Internet has changed the landscape of financial transactions to a great extent, and the use of new technology has reduced the practice of cash transactions much less than before. Transferring money from one account to another, paying a bill, paying at a grocery or drug store, etc. has become extremely easy through a card or any other digital medium. It may be possible to strengthen all this using blockchain technology in the future, but for this, it will be necessary to take the right steps in the right direction at the right time.

There are also security concerns attached

• The combination of the internet and digital technology has completely changed the way of transactions and information exchange. Blockchain technology is playing an important role in this.
• This has given rise to many types of apprehensions and questions, such as when was the digital payment or information transaction done?...how did it happen?...to whom?...even if it happened or not?
• Apart from this, the question of checking the security of the transfer, the validity of the transfer is no less big.
• Blockchain technology is not used with keeping personal information secure and where there is a risk of information or information being leaked.
• The speed of digital transactions in India is much lower than that of developed countries, but cases of fraud due to this are reported almost daily.
• Hacking of debit/credit cards and bank accounts also happens, and there is no strong legal system in the country to prevent it.
• Incidents of theft of civilian information, cyber harassment, fraud payments, illegal transactions, and industrial espionage also happen in India.
• From this point of view also Blockchain technology will not be beneficial unless a strong technical deterrence system is put in place for it.
• There is no clear policy and no clear regulatory framework regarding blockchain in India.
• Finance Minister Arun Jaitley in his budget speech this year has talked about setting up a committee to look into blockchain technology.

Need for regulation

The best and biggest example of blockchain technology is the bitcoin network. But a virtual currency like bitcoin that uses blockchain technology can be vulnerable to ransomware attacks. Hence, it needs to be regulated very carefully. No initiative is currently being taken to regulate it in India and the Finance Minister in this year's budget declared cryptocurrencies like bitcoin illegal, in which anyone who invests will be responsible for it. Be aware that bitcoin is a purely electronic currency, which is used in exchange, but it is not recognized by any country except a few. Of course bitcoin has not gained global recognition, but in recent years the demand for bitcoin has increased globally as well as in India.

Conclusion

It is expected that Blockchain technology will improve the efficiency of many transactions by removing middlemen, and this will also reduce the cost of all transactions. It will also increase transparency and get rid of fraudulent transactions, as under this, every transaction will be recorded and allocated in a public ledger. Today, as concerns are emerging in cybersecurity, banking and insurance globally, there is increasing acceptance of the use of blockchain technology to make them secure. Experts believe that blockchain can prove to be a significant change in the current context, provided its importance and potential are recognized in time.