Full text of Jaspreet Bindra’s talk titled “How Blockchain can transform India” at TEDxChennai conference.
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The man behind me looking over my shoulder is Anand Mahindra. He also happens to be my boss a couple of years back. He was in New York, in a car, in a cab, actually, probably an Uber and any chanced upon this news item. And as he read it, he saw this new word there called blockchain.
What intrigued him, however, was that blockchain promised to do and to disrupt companies like Uber, the same way companies like Uber was disrupting his company. And so like many things that he doesn’t understand, he passed this on to me to figure out.
I obviously had never heard of the word blockchain before. And as I scrambled to figure out what it means, what is it? Some kind of technology? How is it spared? I chanced upon this particular conference called consensus happens in New York every year. It’s the world’s largest blockchain gathering.
And I ran there and in two days there, I was completely blown away. I realized a few things. One that blockchain was early, like the internet in the 1990s, but it could be aspect to that. It wasn’t a use case of the internet like e-commerce or social networking or email, which are used cases of the internet, but it was something as fundamental and parallel to the internet three that it was, it sounded incredibly simple, but it was very complex to understand four, it had the potential to change our life in the next 20 years. The same way that the internet has changed it in the last 20 and five finally, and most important blockchain was not spelled B I T C O I N.
So therefore, what is blockchain? So most of you, if I was to ask you, or some of you, if I was to ask you, what is blockchain, most of you would say that that’s the technology behind Bitcoin or cryptocurrency or ITO or one of those. It is true, but it’s like defining the internet as the technology behind email, which is also true, but it doesn’t really even begin to describe the internet.
So there are different ways to think about blockchain. And, uh, one way is think of blockchain as this one, big ledger in the cloud. Now, you know, ledgers, despite looking like this are very important when you, everything that you own, including money is nothing but really entries on a ledger.
So for example, if you send money, for example, from the U S to your friend in Zambia, it’s not money flies from here to there. It’s actually a ledger entry, which happens in my ledger. And another parallel entry that happens in your friend’s ledger and money is transferred.
Now, the problem, however, is that between my ledger and her ledger, there are a bunch of other ledgers, okay. There are a bunch of ledgers owned by banks. There are bunches of ledgers owned by, money transferring institutions, other financial institutions, regulators, insurance companies, and each of these ledgers have to be reconciled and changed.
And because you have to change so many of them, it creates friction. And what this friction creates is a time delay and obviously cost. And so the a hundred dollars sent by me to my friend in Zambia, reaches out maybe five days, six days later, and only maybe 94 or $95 reach.
Now imagine instead of this broken system, we actually had one universal ledger and all the participants that I talked about, me, her, the banks, the regulators, everyone else, what actually participants in that ledger, or if I use a slightly different language where nodes in that ledger, and every time an entry had to happen, every single one of them would have to authenticate it.
This is right. And so then you only need one entry real time. Now this concept of a single universal ledger is actually what is the heart of a blockchain. So a block, whenever a new transaction happens, it gets or a set of transactions. It gets added on as one more block in a chain of already existing transactions.
And obviously this transaction, which has been added has been authenticated by everyone. And it’s kind of right. Also this blockchain is protected by amongst the best cryptography algorithms available. So very difficult to hack. The other important thing is that every block added is immutably linked to the last block. And that block is linked to the last block. And so if you have to change one block, if a hacker comes and wants to change one transaction or a block, he or she has to change the entire chain, which is very difficult to do.
And therefore, super security driven by consensus driven by this immutability. The other thing in a blockchain is that again, because this is a chain, so you can actually trace back any event. You know, something happened. You can trace back because you go back by block by block, by block, you can place it back on blockchains.
Also, foster have originated this thing called smart contracts, which is logic built in most blockchains, which is that whenever an event happens, it triggers another event automatically. And this is very useful.
Finally, no one owns the chain. So whom it, it’s not one bank, a single, trusted authority. In fact, it’s the entire bunch of people, but to maintain this chain, you require resources. You require computing power, you require electricity, you required time, you require money. And so when Satoshi Nakamoto in 2008 invented this concept, he did a very brilliant thing.
He created a currency along with it. And that currency was the incentive for all those people maintaining this chain and that currency, because it was the Bitcoin, blockchain was called Bitcoin. And the guys who managed it mind, they became miners. That’s the words that we use today. So that’s at a very high level of what blockchain is, but there’s another way to think about a blockchain, a probably a more friendlier way.
So a blockchain is actually like a kitty party. You’ve heard of a kitty party and it’s a bunch of women usually getting together, having a good time, eating food, playing cards and exchanging some money. And it is this money bit, which is important. So in a ktity party, everyone said that 12 women, they all put a thousand rupees each and then there’s a lucky draw. And the lucky winner gets a 120000 rupees. They put 10,000 rupees again, next time a draw will happen. Again, someone else will get 120000 rupees.
Now, as these women are putting in this money and this lucky draw is happening. If I am one of the women who am I trusting, there’s not one super woman. There, there’s no bank. I’m trusting all of them. I’m also trusting the fact that if they want to defraud me most, if not all of these women will have to be influenced. And therefore I’m changing the concept of trust from centralized trust to distributed trust.
It’s this distributed trust, which is actually the heart and soul of a blockchain. Think of all these women as nodes, think of that money as cryptocurrency. And obviously then there’s distributed trust around it. And so the blockchain really is useful when you have these four things. When you need, when this consensus so distributed, trust the security because of the non hacking possibilities, there’s provenance.
As I said, you can trace an event back. And then obviously there is trust. Now let’s come back a little bit now that hopefully we’ve all understood. And our masters in blockchain, let’s now come to therefore, what do we do with it? That’s where Mr. Jack Lee comes in.
So blockchains and cryptocurrencies are actually, they feed off each other. You don’t, you cannot have a cryptocurrency unless there’s a blockchain behind it. But on the other hand, unless there’s a cryptocurrency built incentive system, there’s going to be no blockchain. But then our leaders and politicians and policymakers sometimes think a little differently and are honorable finance minister, for example, things that one is good. And the other is evil.
Cryptocurrencies are evil while blockchains are good. He’s not the only guy. It seems to be the prevailing notion across the world today and multiple countries, Japan, Canada, Dubai, Estonia, militias. In fact, Mauritius is calling itself a tedium Island. They all want to become blockchain nations. They want to use blockchain to transform their own countries, to transform their own economies and more things beyond that.
So how can you use blockchain to transform a country and a country like India?
Let me start with agriculture agriculture for us to do anything in transforming India. We first have to look at agriculture. Agriculture is 16% of our GDP, 120 million farmers. That’s 12 grower farmers are directly engaged in agriculture.
In fact, India has the second highest amount of land under agriculture in the world, but in all these numbers, there’s this other number, which is the number that leaped out to me. And this number is 23. It is the number of farmers who killed themselves every single day in this country every single day. Why do they do so?
They don’t have farm equipment to make units happen, even if they own land. The land is very small. You can’t do scientific agriculture. You can get output based on the input that you put in. Even if you own that land, most of the times it’s not recorded as theirs. And so you can’t get financing for all the inputs that they want, and they go take loans from other people and they end up killing themselves.
Now, how can blockchain help you actually, funnily, in multiple ways, for example, as Mr Mahindra realized a couple of years back, the blockchain is ideally suited to create a new Uber, to create a new Uber for tractors without actually an Uber being there. And in fact, we are creating that and where, where the costs become much lesser and smart contracts, provenance, not lack of hackability to come makes it much easier.
In fact, you can go a step further and blockchain is the ideal technology to create fractional ownership. And so 11 farmers can own one tractor, which is still easier to do and all the financing bit and all the complications that arise from there can actually be taken care largely by this technology land, the governments all over the country are actually digitizing land or to digitize land.
As you know, the problem is even if you digitize it, you get someone can still go hack it. Someone can still go change the name. Someone can still do whatever they want, where they take ownership. And in fact, if you digitize it, you only know who it belongs to. What you don’t know is who it belonged to. And what was the provenance of that land is that’s also sometimes very important. Again, blockchain can come in and solve these these problems.
In fact, <inaudible> has already started doing so in India, they have started moving their agricultural land records to two blockchains. And finally, what excites me the most frankly, is the fact that you can actually use blockchain better than any other technology to do consolidation of these small lots into one larger plot, larger acreage. And so, you know, you can then do the harvesters on that and attractors on that and inputs on that. And the blockchain can actually take care of whose land, how much input happened, where how much output happened.
Smart contracts can actually, you know, move monies, move inputs, outputs. And so there’s a massive agricultural transformation which can happen through this technology.
Take energy, for example, energy in a rural context. Now today power or electricity for us is a centralized concept. One power plant power distributed from that power plant works in cities very well. It doesn’t work in villages. It doesn’t mean it doesn’t make economic sense. You have to produce power where you need power possible to do, you know, you can use solar, you can use wind, you can use other things.
But then the problem is how do you make it economically viable?
There’ll be certain houses which will be producing more power. They don’t need it. There’ll be certain places which will not be producing power. And so if you again, use blockchain and a little bit of IOT and link all of these houses with solar panels on them, automatically access power can be transferred to deficit power money from the deficit power guy can be transferred to the excess power guy.
Actually, you can use cryptocurrency here. It’s an interesting way to think about it, produce currency. And that currency can actually be used to buy, sell power can actually be used by people like us in cities to donate power.
So creating these micro small grids, which has been a problem so far producing power is not a problem. How you make it economically viable is something that the blockchain can potentially do. It can do many things, but you know, at the top of its hype cycle, it can’t do everything. Okay. Uh, I talked about agriculture. I talked about, uh, electricity, in fact, healthcare, uh, managing subsidies education and PA’s and loans, because usually there’s a lot of fraud in education, voting.
You can actually prevent water fraud. The newer, the heart going forward can actually be on blockchain is the right way to do all of these issues. All these problems that you’re kind of talking about today can go away. But my favorite use case is actually going back to that Katie party. So think of that Kitty party I told you about and expand that a million times and what do you get?
What do you get is a chit fund chit funds operate on the same principal, Kitty parties, distributed trust, trusting of community rather than trusting a central authority or a bank like a Punjab national bank.
For example, it’s actually a parallel banking system which exists in our country. In fact, 10% of India savings going to check funds. The problem is that the amount of fraud in jet farms is actually estimated at $10 billion. Forget the size of the industry. The fraud is $10 billion. The reason is the principle is right. The principle is perfect. It used to work it’s classical peer to peer system.
The problem is that there has been no framework, no technology so far, which could manage it. And here comes blockchain, okay. With its power of consensus, with its power of not hacking. So, you know, one guy can’t fraud it, for example, okay.
With its power of non hackability, with its power of provenance, with smart contract idea. And that is why, in fact, it’s the banks, which are adopting blockchain the first amongst all other industries, because they know that one day, this is going to disrupt them.
So if we just elevate ourselves, my friends, blockchain is not as much a technology as it’s a philosophy. And we talked about how it is similar yet different from the internet, the internet solve many problems for us, many big problems for us, it’s all our information problem with such, it’s all our distribution problem with Amazon and YouTube and, you know, video and music and digital files, etc.
It also solved our communication problem with email messenger chat, everything became so easy, but there were two problems that the internet was supposed to solve, which it did not. One was the trust problem.
How many of your trust stuff on the internet, fake news money, fake profiles, and the second problem which it was supposed to solve. In fact, people were very excited about it was this problem called the intermediation problem, that the big intermediaries will go away, that the small man will come up. Did that there’ll be a level playing field.
And guess what the internet did. It actually created far more powerful intermediaries then even existed before the internet, Amazon, Google Facebook, to an extent too, but Microsoft I’ve worked in a couple of them, but these companies have become super powerful intermediaries. And all of these companies were supposed to be true.
Peer to peer companies, taxi ride sharing was supposed to be peer to peer rider to driver. But now it’s actually not peer to peer it’s peer to peer and vice. And you know, you can take this anywhere. Why people are so excited, including me and Anand about blockchain is the fact that it promises to solve the two problems that the internet could not the trust problem and the intermediation problem and bring back actually a true honest to goodness, peer to peer economy.
Thank you very much.