Blockchain Technology and its Applications
Karthik Rajangam, MBA Student, SIES College of Management Studies, Nerul
Siddarth Reddy, MBA Student, SIES College of Management Studies, Nerul
Ezilarsan PKP, Founder and Editor, MarketExpress – India’s First Global Insights & Analysis Sharing Platform
Along with AI (Artificial Intelligence), IoT (Internet of Things), Blockchain Technology has also found its applications in a variety of sectors. The same underlying technology of Bitcoins supports many other applications including other cryptocurrencies like Ethereum, Ripple, etc. Not limiting itself to just Finance sector, applications of blockchain technology can be found in various other sectors like Legal, Healthcare, etc. In an age of Big Data, where heavy volumes of data are generated continuously, Blockchain technology helps in achieving a secure and cost-efficient method for storage and transmission of such digital data. Also, Smart contracts wherein the terms and conditions are already written in the code and according to which it self-executes on any pre-defined event, is one of the major benefits of blockchain technology in the digital world. In this paper, the application of this same technology in a government initiative like Aadhar card shall be discussed.
The exponential rise in digital technology over the last few years has caused the evolution of financial services industry at a much rapid rate. It has become the need of the hour for the BFSI sector to keep up with this development in digital technology to face the continuous competition from the emerging FinTech companies. With the expanding usage of blockchain technology, it has threatened to be one of the major digital disruptions. The manner in which companies are doing business is rapidly changing as customers are also aware of the evolving technological advancements and expect similar kind of services from the companies as well.
In a country with huge population like India, the organisation of such huge data can be quite cumbersome. A million terabytes of data get generated every second, so there is high risk involved as well in handling such huge chunks of data. Thus, various applications of blockchain technology can be explored owing to its primary features like immutability and security.
What is Blockchain?
A blockchain is a digital, decentralized and distributed public ledger. As the name suggests, it is a series of ‘blocks’ linked virtually on a peer-to-peer network. Since it uses the distributed ledger technology, any change in one system reflects changes in all other systems.
The growing popularity of bitcoins —runs on blockchain technology —and its exponentially rising price is redefining currency exchange. People prefer buying and selling through such virtual currencies as it eliminates the need of an intermediary such as government or bank and also the processing rate is much lower than what banks impose on credit card transactions, etc. This decentralized power of blockchain coordinates a massive network of individuals and institutions that keep a track of all the transactions in a globally distributed ledger. All parties can make changes and everyone can review those changes. So, any transaction through this medium is recorded in this ledger and all the co-owners of it are notified of the same. Thus, the level of transparency is much higher than centralized authorities like banks, etc.
The increasing usage of bitcoins has increased the awareness among the regulatory bodies about the potential of its underlying technology. According to World Economic Forum report, by 2025, blockchains or blockchain-related technology would comprise of 10% of GDP. This gained interest has to be taken to the next level by exploring the applications of blockchain technology beyond bitcoins.
Some of the major advantages of blockchain are –
Quick Transaction Time – Any transaction is carried out in almost real-time, thus, reducing the scope for any manipulation.
Elimination of Intermediary – It avoids the need of an intermediary like bank, etc. during the transfer of value between two parties, as all the shared information is maintained in all the computers within the distributed network.
Immutability – It offers a high level of security as it is encrypted through cryptography. Any change in one system is reflected in all other systems within the distributed network, thus, ensuring protection against any fraud activity.
Types of blockchain –
Public Blockchain – This type of blockchain does not require any permission and anyone can participate in the transaction process. Since the transactions are transparent, they are visible to everyone on the public block explorer but anonymously.
Examples – Bitcoin, Ethereum, Litecoin, etc.
Private Blockchain –In this type, write permission is restricted to one organization, whereas, read permission may be public. This aids in internal verification of transactions and eventually, results in reduced costs.
Example – Multichain, etc.
At a time when the Government of India is making Aadhar card mandatory for all digital transactions and many other things, it is important that the Aadhar details are not compromised. With the recent news of millions of users’ Aadhar card details getting hacked, there is a need for a more secure system to store these details. Access of these details into unwanted hands can cause huge financial problems to the citizens as almost every financial account is being linked with Aadhar now.
In a country with huge population and diversity like India, unique identity can be vital for governance and security. Thus, blockchain technology can be of huge help to build a highly secure and immutable network to protect the Aadhaar card details. This unique identity can ensure there is no duplication of user details in government documents like driving licenses, etc. Thus, it helps in reduction of fake licenses, PAN cards, etc. and eventually helps in reducing the criminal cases associated with the misuse of these documents.
Despite claims of Unique Identification Authority of India (UIDAI) database being highly secure, there have been a few attempts of hacking it. Blockchain technology can help in averting such situations. Building Aadhaar database on blockchain means that there would be a universal ledger containing digital records of all the members shared between various stakeholders. These details would be saved on cryptographically-protected servers, wherein, multiple servers need to be hacked in case of any malicious attack. So, at least 51% of these highly-protected servers need to be penetrated in order to try hacking the whole system.
In order to carry out this storage process in the most secure manner, a private blockchain network could be set up where the authority to validate transactions could be given to some government or regulatory body. This would keep the ultimate power with the government. Such customisations can be useful in case of storing confidential information, as it gives respective authority over the security of the information. Countries like Estonia have already put their assets and identities on a blockchain network. In an age of Information Technology increasing rapidly, equal growth in such digital applications is important.
Digital disruptions like blockchain, AI, etc. are rapidly developing and expanding, and the question is, who in the financial services industry will lead the revolution? Blockchain technology is beyond Bitcoins as it is just a technology based on which Bitcoins were established. Its applications can range from Capital Markets, Banking, to Insurance industry within the financial sector itself. These financial services firms need to take steps to prepare for a changing future as the rise in technology give rise to more competitors. Firms need to review their current process and technology and upgrade themselves and their people accordingly for the future.
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