By Jaspreet Bindra, SVP – Digital Transformation, Mahindra Group and Amit Chawla,
Senior Manager – Group Strategy Office, Mahindra Group
Using Blockchain, movable and immovable property registrations and transfers – real estate and vehicles – can be made as simple as transferring money using your mobile app. Blockchain provides features like provenance and smart contracts which simplify title search and paperless registrations respectively. To enable this, the government offices will be part of an ecosystem along with the Buyer, seller, financier, insurer and builder/manufacturer.
Each year Gartner publishes a report called ‘Gartner Hype Cycle’ which lists numerous new technologies and provides a view of when that technology will evolve over a period of time. In 2016, Blockchain topped this Hype Curve along with Internet of Things (IoT) platforms, connected homes and smart robots. The same report also projects that blockchain has the potential to transform many industries and that this transition is only five to ten years away. Around the same time, another report by World Economic Forum stated that Blockchain is the future of financial infrastructure. It is estimated that Blockchain technology can save billions of dollars for the world’s leading financial institutions and consumers alike.
The simplest definition of Blockchain is that it is a database or a ledger that maintains a continuously growing list of data records or transactions shared with multiple entities at the same time. For the same reason, it is also called as Distributed Ledger Technology (DLT). The word ‘Blockchain’ is derived from the way in which data is recorded. Numerous transactions are grouped together forming a ‘block’ and these blocks are linked to each other (with each block also storing the location of previous one and so on) forming a ‘chain’.
Blockchain is widely known as the technology behind bitcoin, world’s leading virtual currency. Bitcoin originated in 2008, and its value has shot up over the past nine years. This form of money is decentralized (not backed by any government or financial institution) and the transactions are verified by a global network of computers (based on a consensus protocol). The participants of this global network are rewarded in bitcoins for running dedicated hardware operations (bitcoin mining). The total value of all bitcoins in circulation hit a record high of USD 15 Bn in Dec 2016 as the bitcoin price to dollar crossed the US$ 900 mark. The recent Demonetization of old Rs 500 and Rs 1000 notes also fueled the demand for bitcoins in India as an alternative asset class.
As bitcoin’s popularity has grown over time, so has the belief that the technology behind it, has numerous applications beyond virtual money. The major use cases are in the financial services industry. Blockchain provides a highly secure (hack-proof), near real-time and immutable transaction recording solution which will eventually replace the legacy systems of the financial sector. Multiple pilots on use cases around instant settlement of securities for stock exchanges, low commission international remittances and paperless export of products have been conducted on a distributed ledger.
At Mahindra Group, we successfully completed a three month pilot to test Blockchain technology as well as evaluate the efficiency with which it can transform the traditional supply chain finance business. It involved multiple participants in the supply chain – manufacturer, suppliers and financier – accessing a common distributed ledger. The results have been very encouraging. During the pilot, the test system demonstrated role based access control, faster conflict resolution and ease of integration with the core systems, in addition to the financial benefits. This was accomplished with IBM as the technology partner.
Another major area of application is government services. Before mentioning the opportunity in India, let us look at a tiny European country, Estonia, that has become a global leader in digital governance. In 2014, Estonia launched the e-Residency program, which allows its citizens access to government services like new business registration, digital signatures, taxation and even allows them to cast votes digitally. Since 2015, the system also allows citizens to e-notarize their documents (like marriages, birth certificates, business contracts) and securely access and transfer their health records. These services have been powered by Blockchain and have been developed in partnership with multiple Blockchain service providers.
India has issued Aadhaar to 1.1 bn residents or 98 percent of India’s adult population. Various services like Aadhaar Enabled Payments System (by NPCI), eKYC (by UIDAI) and DigitalLocker (by NeGD) have already been built on the India Stack (set of open API’s provided by the Government). Around 3 Billion Aadhaar authentications and 150 Mn eKYC in three years have already enabled Aadhaar based instant money transfers, verification for bank accounts and new mobile connections.
Stage set for Blockchain to be the new game changer
The stage is now set for Blockchain technology to be the new game changer. Movable and immovable property registrations and transfers – real estate and vehicles – can be made as simple as transferring money using your mobile app. Blockchain provides features like provenance and smart contracts which simplify title search and paperless registrations respectively. To enable this, the Government offices will be part of an eco-system along with the buyer, seller, financier, insurer and builder/manufacturer.Once the buyer and seller raise a request, these participants can authenticate, achieve consensus and approve new registrations and transfers. Provenance can eliminate fraudulent registrations, payments can be made instantly using regular payment gateways and future taxes can be enforced using smart contracts.
The use case cited above can be easily replicated for other services that involve multiple government departments and reduce corruption and black money menace. Although Blockchain technology provides numerous benefits, two major challenges in its mass adoption are building an ecosystem of diverse participants and absence of common standards for the distributed ledger.