Mains Paper 3: Economy
Prelims level: Blockchain Technology
Mains level: Role of Blockchain Technology on economic upliftment
• Fuelled by the unceasing hype around Bitcoin and cryptocurrency, blockchain has been regarded as the silver bullet solution for everything—hacking, threats to democracy, poverty, and world hunger.
• The moment the COVID outbreak became a pandemic with its ensuing lockdowns, blockchain started to be bandied about as the cure that could miraculously bring the world back up on its feet.
• While it is apparent that no one technology can “solve” a pandemic, blockchain, along with a slew of others, could definitely help manage the post-lockdown situation.
• Taking a clear-eyed view, here are five ways in which it could help mitigate the COVID crisis.
Building more resilient supply chains:
• Perhaps the biggest blow to industry and agriculture has been the abrupt disruption of supply chains, making it hard to get raw material to factories and finished goods to customers.
• Usually, it is not the entire supply chain that is disrupted, but one critical link: say, insufficient drivers, to drive trucks along a certain route in the chain, or a specific warehouse not being accessible.
• While no blockchain can produce drivers for trucks like wine from water, an end-to-end supply chain on blockchain, combined with digitization and Internet of Things, can make the chain transparent and traceable, and tell us quickly where any problem lies.
• That blockchain use could offer transparent, traceable, and cheaper supply chains have been known for a while, but cost, data sharing hesitation, and a lack of incentive have kept managers from setting them up.
• A crisis like COVID can change these mindsets to build supply chains that are far more resilient for the next big crisis of this kind.
Universal basic income and digital currency:
• This is also an idea bandied about for long, and its time has finally come. Universal basic income (UBI) has been discussed by multiple governments, and COVID has made that discussion more urgent.
• UBI would have been a welcome relief for migrants, farmers, and the destitute, whom COVID has disproportionately hit.
• A blockchain-based digital currency (Bitcoin-like, but more stable and backed by the government) is an apt UBI solution for the millions who are unbanked but have some mobile or internet connectivity.
• This has health benefits too, especially now that paper currency is seen as a virus-carrier.
Tokenisation and fractional ownership:
• Blockchains have brought in a great innovation: asset tokenization, which converts rights into an asset and then into a digital token. So, a ₹10 million apartment can be “liquefied” into, say, a million tokens of ₹10 each.
• This can enable fractional ownership and sale. In cash and capital-starved post-covid society, tokenization could enable liquidity and fractional ownership of the real estate, industrial and farm equipment, etc.
• Of course, good laws and a regulatory framework will be needed.
Global health record repository:
• There has rarely been such a pressing need for universal electronic medical records (EMRs) as now.
• Health records on blockchain have been the Holy Grail, with their security, transparency, and privacy benefits, but this has been excruciatingly difficult to do.
• The hope is that a crisis like COVID will create the right incentives for this to happen at a national level (say a health stack or an Aadhaar card for health), and at a global level as well. After all, a pandemic knows no national boundaries.
• The much-reviled initial coin offerings (ICOs) had emerged as an alternate way of raising money, through the blockchain-enabled crowd-sourcing of funds.
• In their first avatar, they became a playground for fraudsters and con artists and died a necessary death.
• However, the concept that underlies the decentralization of venture capital is even more relevant now, and hopefully we will see the emergence of authentic and safe ICOs as an alternate mechanism for startups to raise funds.
• Blockchain, not just as a technology but also as a philosophy, can act as a great decentraliser and distributor—of money, assets, data, records.
• While it is not the mythical silver bullet for all our troubles, it is clearly a technology whose moment has finally come.
Q.1) With reference to the INR-USD (Rupee-Dollar) Futures and Options contracts, consider the following statements:
1. Union Finance Minister has recently launched INR-USD (Rupee-Dollar) Futures and Options contracts on the two International Exchanges, BSE’s India INX, and NSE’s NSE-IFSC, at GIFT International Financial Services Centre in Gandhinagar.
2. This will be available 22 hours across all time zones for all global participants from GIFT IFSC.
Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Q.1) Highlights the five ways in which blockchain technology can aid recovery.