Held on July 18, 2020 @ 11:00 AM
Organizations are trusting Blockchain to solve business inefficiencies in the future. In this webinar, renowned Blockchain expert Sunil Aggarwal, decoded how Blockchain can restore ‘Trust’ in the post-pandemic world.
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Automating Trust in the World of Decentralization. With Blockchain
Let me start. What I am going to share with you today. Seems the theme of today's session is automating trust with blockchain. And to be honest, in my last year, eight years of blockchain practice, the most difficult question for all of the people has been that how we can automate trust. Because, for last
centuries, we have been living in a model of trust, where we never automated things. Because these were human led processes. There were politics, there were social groups, there were communities. There were nation states, all those things were there. So when we saw that trust can be automated, this was literally some sort of But unbelievable miracle. So, since there is a human side to it, and blockchain actually automates trust, so it makes blockchain a difficult technology, a difficult learning system. So that's why I'm going to demystify all those illusions, all those difficulties around understanding blockchain. So let's start. So let me repeat why trust is important in a society because we are not just social beings, we are economic beings. And for executing our economics, we do lots of exchanges and not just exchanges. There is a lot of larger forms of coordination involved there. And that's where we want to create those interactions which are efficient, which are repetitive and which are scalable, but the problem here is that when we want to design large systems, it's not easy to take care of interest of all kinds of people, because people have different interest, to the extent that people you may call everybody is selfish. And everybody is prone to playing a zero sum game where my gain is your loss. And, for example, let's compare it with compared with tax evasion. So if you're evading tax, then it is actually you're taking somebody else here. So in a certain sense, we are all prone to playing the zero sum game. So that's why trust if you want to build a system behind that system, apart from the technology side, that trust factor is very, very important and it remains a very fragile precondition. Okay? And the issue here is How we have handled the issues of trust till date. And that's where not just last few decades last few centuries, I would say that even for last 5000 years, we have handled trust in just one single template and that template is centralization. And it is me it means that there is somebody at the top and the command follows from the top. And if you see most of the things that we have lived with kings, emperors, cabinets, Council of Ministers, bureaucrats, all these are nothing but derivations of this centralized template, not just that even temples are based upon the stem template, even higher education is based on this template to be to be honest if I say our entire life operating system Based upon this template, and if there is any kind of decentralization involved, that is only at the local level. So, at a larger level, if there is any organizational template, then it is only and only centralization. So, the issue here is that if everybody who has been living in this kind of centralized template of trust is told that you can achieve trust with a decentralized at a very, very largely decentralized organizational framework. It is a complete matter of disbelief. People just don't believe it. That's where I want to highlight that centralization is a template which you need to understand before you understand how this is going to be dismantle and transition into a new template okay.
So, at present the dominant model of trust that we are using is called nation state, but the nation state is a very very tricky entity. For example, we are different we say that we are different from Pakistan, we are different from China, we are different from England we are different from USA, okay. No doubt about that, as far as the physical layering of the nation state is concerned, yes, we are different, our borders are different, our topology is different. Our population is different, no doubt about that. But the factor is nation state is not just a physical layer, it is also conceptual layer and institutional layer. And now you will ask me, What do you mean by these conceptual layers and is additional layers. And that's where I say that nation state is like a iceberg where you can see the tip, but the real story is hidden inside the ocean. And that's where conceptual layer and institutional layer is very, very important. And that's where I'm saying that whether we are in India or USA or England or China or Pakistan, the fact here is this centralized template works exactly Similarly, at first as far as conceptual layer and institutional layer is concerned. And when is a conceptual layer it means that we have assumed that money, ledger, law and labor reward would be decided, only and only by a nation state. only and only by government. And when we say institutional layer, we have completely assumed the trust architecture is completely assumed like this that the taxation issues, banking issues, corporations, definitions and political regimes, all these will be handled by the nation state. So if you see what you Sorry, if you see, the trust that you start with just a nation state called India or Pakistan or China ultimately loses its uniqueness in the conceptual layer and the institutional layer because here these elements eight elements money, ledger law and labor reward in terms of concepts and in terms of institutional factors taxation Banking Corporation, political regime, all these eight factors are actually controlled and managed by a centralized organizational framework called nation state. Now, this is something that we are living inside. Now, the issue here is that if we are living inside something, how can we cushion it? And that's where people find it very, very difficult to understand blockchain and particularly the most hyped element of blockchain called cryptocurrencies. People don't understand cryptocurrencies, just because that it actually challenges the idea of money. Because, today when we say money, we are basically saying free money. fiat money is the money which is printed by a central bank of that particular country. And cryptocurrency is not printed by any single agency. It is print, it is actually an ecosystem built by a decentralized community. So, in that sense people find very difficult to understand something which is decentralized and the and the precise reason for that is that this conceptual layer is basically working in a centralization template. And this institution layer is basically making us a practical addicts to the system. So we are like fish in an ocean, who are trying to understand what is water. And if water is comprising centralized template of trust, then how we will understand what is decentralization. That's a predicament. That's a paradox in which we all are living. So I will start unlocking all these elements one by one, just hold on
Now, the factor is when we say, physical layer of nation state, we assume that if nation survives, we survive so that this becomes the bedrock of our trust. And that's why that's why we spend a lot on military and defense expenditure. And the fact is that this is nearly $2 trillion $2 trillion of money every year. And in countries like India, they are spending more than $66 billion a year on defense. Now compare this with our preparation on handling the Coronavirus like pandemic.
We don't have enough infrastructure for
for treating, treating or testing COVID page We have one of the lowest testing rates in the world. Why? Because our trust is misplaced on just the physical layer. Rather, it is over placed on the physical layer because wireless knows no boundaries. So what I'm trying to say here is that when we take certain conservative assumptions for granted, there is a cost attached to it. And that cost is something that we are ourselves paying. And at present just in terms of defense expenditure, this is our endwell defense. And same with Pakistan and other countries. And the issue here is not just physical layer is important more than that the conceptual monopolies over these four concepts is very, very important because money is something thing, which actually very few people understand. Today, very few people understand that today 25 trillion is the money printed by RBA. And roughly 200 trillion is the money which is called money supply or M three. And people don't understand how this works. The fact here is that this is just 10 to 12% of money creation is being done by RBI. The fact is that RBA has delegated the money creation process to commercial banks. So, they are the real money creators of the system. So it means that if a center commercial banks have made sorry, metal loans advances Have 200 trillion and if 10% of that goes into NPA, which means 20 trillion of the money is lost. And it means that if that money is lost, who will? Who will ultimately compensate for that loss? And the answer is RBI. RBA will have to capitalize that money, which means from where that money would come, that money would come from that resources of the public. So, what I'm trying to say here is that people don't understand money. In a fundamental sense, they just think that this cashes money this bank account is money, but that that is not the true fact. Similarly, ledger, when you say ledger, you never say that your ledger is basically a double entry accounting. system because the double entry accounting system is something that you have been using for last 500 years. And you'd really consider the fact that your ledger can be different. And that's where the real the real problem is there because when D monetization happened, why they were able to pull off D monetization successfully, without without facing the wrath of public, dope public was literally very, very uncomfortable, why they were able to pull it off. The fact was that they control the ledger. So 86% of the currency, old notes were taken, and new notes were issued. But in this process, that cash cycle of economy underwent for a toss. So money and ledger are basically conceptual money. All police are controlled by a nation state. And similarly law. And similarly, labor reward. Everything that comes under these four categories is actually controlled by a centralized template. Now, this is something that we have been living Atlas least directly for last hundred years. But the fact is that factor is that that certain portions of these things were not centralized. A few years back, for example, money before 20th century money was completely decentralized. Okay. And even Ledger's
before 500 years, Ledger's were very different. I will come to that that part very soon. But I just want you to understand that conceptual layer of trust is basically working in a sense Realize template and that active memory of last hundred years has actually made us addicted to these conceptual monopolies and not just that based upon these conceptual monopolies, we have built certain institutions and the first institution is taxation institutions, then banking institutions, then all kinds of corporations, whether they are partnership firms or private limited or public limited firms or political regimes, all these things are inside a centralized regime. And this these centralized regimes we feel that we are living with them and there is nothing so, nothing wrong with them. But the issue here is that, if nothing is wrong with them, then why there is corruption, why there is inequality and why we are not being able To pull our economy out of this Coronavirus, lockdown kind of situation when the entire world is moving towards recession rather, I would say the world has already moved into permanent recession. So, if our centralized systems of trust are efficient then why we don't have solutions. And that's where I am proposing something very, very different that we need to think beyond a basic template of trust, which should not be centralized, because a centralized template gives the centralized bodies too much power, okay. Now, if we see these three elements, physical layer, conceptual layer and institution layer, the fact is that these three limits don't exist separately. The reality is that in, in daily life, when a user wants to experience a nation state and user want to experience this trust, then all these nine factors actually work in unison. So there is a complete the singularity of experience and that singularity of experience can be realized in terms of our monetary stack monetary architecture because we live in a world where this kind of pyramid is determining our life. Central banks are the foundational players. Commercial banks are the top players and FinTech players are those players who are actually dependent upon commercial banks for getting the money from an account holder. But the fact here is that if I want to get A single word to this kind of understanding around monetary Stagg then I would call that this is called a lender of last resort consensus. The people of India the people of nation state have shared a concern consensus that in a particular jurisdiction, a central bank has the ultimate power of creating money, rather lending money which means it can create literally infinite money. So, this is the consensus, which is a centralized template, which we are living inside. Okay. Now, just ask yourself that when you all people live inside this kind of a template, and you are told that this template is going to be disrupted Did you will have to change into a new kind of template, then naturally, then naturally, there would emerge problems, there would emerge controversies, because
controversies and innovation are actually two sides of the same coin. And it is not easy to regulate an innovation economy. And that's why things and concepts and practices take time to settle in this kind of old world of transition. That's why the knowledge and knowledge for from reputed mentors is very, very important to settle into this kind of a transitional phase. And that's why I want to want to share the fact is that here that we need to ask how the good Questions can be asked around this kind of a fix. And that's what we want to enable you. Now, the issue here is that if we are living in this kind of a centralized template of trust, is there any cost involved? Of course, there is no free lunch. But the fact here is that, can we calculate the cost of that trust? Because to be honest, we don't have any idea and particularly, when we we living inside a particular model, it is very, very difficult to calculate that cost. And particularly when there are taxes when there is inflation, it becomes almost impossible. And naturally, if you're asking about the cost, the top power would never like to be asked such questions because hierarchy will like to perpetuate itself. But the issue here is That centralized intermediaries were created with a specific purpose because when 20th century started, okay, the 20th century started the lot of world was a decentralized world. And particularly in America, if I give you example of that country, America had literally 800 currencies by the beginning of 20th century and all the banking system was not at par banking check, which means that if you issue somebody a check worth $10,000, that person could end cashed that check. So, in some another bank in some distant location, but not at par, which means he or she would get the money but after after a discount that may be 5% that may be 10% but the issue here is that in that kind of a model, central banks were created, and they offered at par checking facility, which means that your value is constant in place, a constant in place be constant in place, see, so they reduce the transaction cost, but don't forget, we are in 21st century. And there is a new context. And since this is a new context, we have a right to ask what is the cost of trust. And in that particular direction, recently, the first attempt to merge that cost was done by RMIT, University of Australia. And the researchers of that university actually tried to calculate that costs in the context of US economy. What they did They basically calculated the total number of employees of that particular country and assigned different weights to each occupation. And they realized after calculating the end time or cost of trust, they realize that 35% of employment is just involved in maintaining the trustful economic relation, for example, sees, for example, lawyers, for example, compliance experts for examples, my managers, so like this, they realize that 35% of the employment is involved in just maintaining trust, which means if $21 trillion is the GDP of America, then 35% means $7 trillion a year
which is pretty huge, which is nearly Three times that of India. So, we are what we are saying here is that this trust actually carries a cost and that cost is one third of economy. If it is one third in case of a developed economy, it will be far higher in the case of a developing economy. So, in case of India it might be even higher. So, the fact here is that why we are maintaining a system of trust, which is very very costly. This is a fundamental question and just try to compare these two figures in a so called modern sector where management professionals and related occupations are there. You will surprise the cost of trust is 48% and in natural resources and construction and repair and has been an animal husbandry, all these things Cost of trust is only 13%. So what is happening here? It means that, that we can actually reduce this cost of trust drastically. Okay? And that's where we need to understand how we can do it. And that's where the real disruption starts. The issue here is that this disruption when we are going to start here, we will be asking very, very fundamental questions. Now let's assume that somebody among you is playing devil's advocate. He or she says that we don't believe you, whatever you are saying doesn't make sense. Because whether it is centralization, or decentralization trust is actually made up of certain costs. components, and those components are critical across systems. Now, what are those trust components? Number one, your identity management. Number two, how your reputation scores are linked, then how the contracts between people and companies are implemented and whether people are accountable. And if there are disputes how the trust deficit is being managed. So they say this centralization versus decentralization debate is meaningless. The more important thing is how the trust components are managed. So my question my answer to that question is that I completely agree that these are trust components. But if these trust components are a can be managed better in a decentralized system than in a centralized system, then a decentralized system would be better The issue here is that whether it is centralized or decentralized, there is a very critical technological tool that is being used to manage this. And that is called ledger technology. Because in a pre blockchain world we have been using a certain kind of ledger technology. And that has also made us in some sort of a compliance culture. Now, let's understand what we basically use Ledger's for. The factor is that Ledger's basically, manage only three functions, who owns what, who sends to whom and what is sent, and the factor is, all the government bodies are nothing but ledger managers, because they manage trust architecture with the help of a ledger technology. And in those Ledger's the records of ownership, exchange of assets and transactions are kept. So all predominant institutions of governments, whether they are banking institutions, financial institutions are built around Ledger's. If you just remove a ledger from these institutions, those institutions will just collapse. And even all civil disputes particularly, they are nothing but centered around some sort of a ledger anomalies that I own 10 acres of land and you're claimants and no you own only eight acres of land. So like these, these, these are basically ledger centric disputes.
But the issue here is that in this kind of a world where we work Having a very, very specific kind of ledger technology, there happened something which is very, very
disturbing, very, very disruptive for a common man. And that was Bitcoin. Now, about Bitcoin, there are certain facts and I won't go into details of Bitcoin but I will just say that when Bitcoin happened, this was a project which actually saw the double spend problem for the first time in the digital reality of the world. For example, now what is double spend, if I want to send a music file to you, I will keep the copy and I keep the original and send you the copy. Now you can make a copy of a copy and anybody who receives that can make a copy of a copy. So it means that in a digital world, I can create infinite copies, but that is that cannot be applicable to money. It cannot be possible that if I have hundred bucks with me, and if I send you 50 bucks, I will keep on having hundred bucks, then 50 bucks has to be deducted from my account. And that has to be given to somebody else, and credit and debit has to happen. But the problem here is that there is no way of doing that in a decentralized manner. And that's why we created banks. But the issue here is that Bitcoin was the first ever project in human history to solve that problem in a decentralized fashion and because of that, we created first ever borderless conception of peer to peer money. Now, the issue here is that Bitcoin was able to do this because the underlying technology was blockchain technology and blockchain technology is nothing but a new kind of a ledger system. So, the entire game is not Bitcoin the entire game is a new kind of ledger system. And blockchain is one specific kind of a data structure for Earth shared ledger database. The issue here is that why blockchains are so interesting. The reason here is that blockchains are unique, because here the trust doesn't emerge from a hierarchy. Second, it is completely safe from a single point of failure. And here, the user holds the control over his or her funds, assets or The sources. So, in a certain sense it is as good as holding cash and the beauty here is that blockchain is a money issuance mechanism also and money exchange mechanism. So, which means that it can do clearing as well as settlement and as well as payment all these things are done one by one in blockchain friends I will take your questions, but let me complete after that I will take your question and I will spend around 30 minutes and then just hold on to them. Okay. And the beauty here is that when you do a cash transaction, this transaction is considered a subtle transaction. Similarly, on blockchain, every transaction is a settled transaction So, there is no need of a separate audit. Now, the issue here is If this is a new kind of ledger, which is completely different from the existing ledger system, then what is happening in terms of ledger technology. The fact here is that blockchain has a disrupted ledger technology for the third time in human history. The first ever ledger technology that was created by humans was called single entry ledger systems where credit entries were in one box and debit entries were in the other box, but bought the boxes used to lie at King's palace. Then around 500 years back, we created a double entry ledger system. Now in double entry ledger system. On one side, we had credit entries or in the other side, we had debit entries. All those entries used to be calculated at the bottom, and the next page used to start from these entries like this. Now the if the issue here is that double entry ledgers were in those times were far more efficient than single entry ledgers. Because in single entry Ledger's, you would have to match entries. First you read credit entries in one book, then you will go go to the second book in a second entry. But the issue here is double entries made that possible in a single page. And that's where tempering was very, very difficult, literally impossible in those eras. But the issue here is that these boxes were managed by professional accountants, professional auditors, and financial statements were released after all, year or sometimes after a quarter. But the issue here is a triple and religious system is something which is far more advanced than doubling religious system and and it happened with the beginning of Bitcoin. If I send my Bitcoin to you, I'm basically incurring a debit entry at my end and it is becoming a credit entry at your end. But the beauty is that that the transaction is going on to the blockchain, which is the third entry, and neither you nor me can change that transaction one the block once the block is confirmed, which means for the first time, this ledger is now turning into immutable entry, and not just immutable. It is a censorship resistant and peer to peer double entry Ledger's, we're not Peer to Peer but this is peer to peer. And today in Bitcoin network there are 10,000 nodes over which this ledger database is being updated in a continuous fashion. So, the fundamental feature of blockchain technology is that it is offering us a new kind of ledger technology which is far more efficient than double entry ledger system. Okay.
And if I just try to compare these three phases of ledger technology, and what happened with that, I would say when single entry Ledger's happen for the first time, taxation and expense, centralized budget systems emerged. But when W and religious happened, we realized that we can do a lot with this and with this joint stock companies happen now, why joint stock companies happened because on a double entry ledger, somebody could see that this is the expenditure. This is the investment, and this is the profit. And you could see that if the profit is high, then people would like to become part of that kind of enterprise. And people realize that this is a great opportunity to create large organizations scalable organization, and that's where public limited companies or joint stock companies emerged. So you could spread the risk by having a distributed enterprise, and that's where East India Company like multinational corporations emerged. But the fact is, that blockchain is far more radical than that because it creates trust at the industry. Real scale. When I say industrial scale, it means that you can create hundreds of millions of transactions or other hundreds of billions of transactions per day without even human intervention. So in that says, it fundamentally changes the role of intermediaries. And that's game changing proposition. So what I'm saying here is that blockchain offers very, very radical propositions, that triple entry bookkeeping system. And with that, it actually reduces the cost and how this cost is reduced because now the trust is automated. Because these Ledger's are those databases which are auto updating which means no continuous human intervention is needed. And second, It is an immutable truth, which means it cannot be violated, it cannot be corrupted. And you don't need to have a large workforce to manage these kinds of resources. And of course, you don't need to build large organizations for that.
your trust infrastructure would be almost a dashboard like across infrastructure managed by a very few people. So the beauty here is that blockchains are not just shared, Ledger's, they are also programmable and that's the most beautiful aspect of blockchains because when you say they are programmable, you can program any kind of logic, identities, assets, tokens, currencies, everything can be transported to blockchain. So if everything can be transported, then the ease Here it is that whatever was the ledger universe of double entry accounting system, whether they were joint stock companies, whether they are fractional reserve banking systems, whether they are stock exchanges, whether they are identity records or whether they are credentials like rating systems. All of them were managed in double entry accounting system. But if triple entry accounting system offered by blockchain is far better than that, it reduces the cost of trust, and then everything would move to blockchain. It means I'm talking here of a global economy, and I'm talking here of hundreds of trillions of dollars of worth of value. So it means in the new ledger universe, the cost of trust will not be Be 35% the cost of trust will be far far less. So, if as humanity as large organizations as large human societies, we can reduce the cost of trust that makes an excellent and a very, very rational choice. Now, the issue here is that somebody can ask that, are you saying sir, that blockchain is a journal purpose technology as general purpose technology like electricity, like Internet, like steam engine, like roots? Are you saying that? Partly Yes, yes, I am saying blockchain is a general purpose technology. But this is more than that also. But first let's answer that how blockchain is a general purpose technology. See, blockchains can be used To create lots of things first of all digital cash can be created on blockchains your commercial banking can be shifted central banking can be used can create cbdc supply chains can be can shift to a blockchain rather I would say supply chains will have to shift to blockchains because in this Coronavirus, time supply chains have got disrupted and if you want to revitalize trust, you will have to use blockchain because you would like to tell a final consumer that from where the product is coming in, if that kind of a transparent chain is made available to a user, a user can make a quality decision. For example, when you say Othman Mr. Bharath How would you know that somebody something which you are consuming is being produced right in India because there is a long supply chain from me fixture to a consumer. So you need some infrastructure to prove that and that's where blockchains can play a very critical role trade finance, custody of pairs and all those things. If said this is a very, very large value universe, and when that shifts to blockchain, it makes blockchain a general purpose technology. But the fact here is, is it is more than that, because roads, railways, electricity, they took around hundred years to become mass usage. But the factor is, blockchain is not like that. blockchain is actually happening on a pre existing digital infrastructure. So, it is a digital revolution. When you say digital revolution, you're basically saying that in this kind of universe, space and time can be squeezed Which means that here, what you call a journal purpose technology, it will become a journal dimensional technology which means
blockchains will transform the digital networks into markets at a very, very fast speed. So, what I'm trying to say here is that we are moving from a world which was basically built upon a territorial state and we are moving into a world which is a network state. And here, blockchain will be the most important anchor of trust. Here. The centralized models were the anchor of truss now you can ask how that would happen that would happen through bridged zones, we will not move into that world. Instantly we will have to design mechanisms of transitions and bridge zones for money bridge zone for Ledger's bridge zones for law, bridge zones for all kinds of labor rewards now, for example, today you have normally one source of livelihood. If I asked you tomorrow, most of people would be having at an average four sources of livelihood Would you believe me? But the answer is yes. Because in future people would be earning from different resources they might be doing through blogging they might be doing through district labor. They might they might be doing through cryptocurrency they might be doing Through decentralized storage nodes, there would be multiple ways of doing that. So the fact here is that this is a very, very powerful historical transition. And that's where blockchains are going to automate trust. And this is where we are going to see a new language, a new grammar, which we which will be completely new for not only this generation, but also for all kinds of previous generations. Okay. So this is what I wanted to say up till right now. Now, let me take questions one after another. Let me start with first person are pretty early. Go ahead are pretty early.
Please unmute yourself and ask are ya?
Sorry? I didn't have any any question. I don't know how that is happened. But he was coming I'll just asked Okay, you were mentioning about the trade finance, yeah, trade finance, right now, if you see all a lot of institutional banking, they they do transaction with each other and the settlements is happening somewhere in the third, third institutional bank. So, and the blockchain network, this has come up recently. So, but I have seen that the companies are not getting into this blockchain technology, even though they know that this will be very helpful. So, what is happening is that because of numerous institutions are there for as you said, a transaction is when you do the transaction is settled. What is blocking the trade finance and creating the settlement takes after two days or three days and all those things. So, why these big companies? This institutional banks, they have not yet completely adopted this blockchain technology when it is clearly available.
Yeah, got it. Got it. See, this is a pretty good question. And I have faced this question number of times. And the beauty of the challenge here is that blockchain is not just a computer science problem. blockchain is also a Management Science problem and also a social science problem. And we will have to take all these three aspects together to understand why blockchain is not able to move ahead. The reason behind here is that when you say that there is a technology, but the problem here It is that you need to build a management language for that at social science language for that. And particularly, let's assume you are using aetherium blockchain or hyper ledger blockchain framework to build a solution. But the problem here is how to bring dozen different parties together, how to communicate post blockchain opportunities. The issue here is that blockchain technology needs to be complemented with blockchain business modeling, and that's a zone we are we are very, very poor. And because at present in some tech institutions blockchain is being taught, but as far as B schools are concerned, blockchain is not being taught. So, I think this is this makes evident to you that in this kind of a fragmented understanding of blockchain, how can we can create a shared culture Sensors around blockchain solutions. This is a big problem and that's where we need to build a 360 degree view of blockchain solutions and we need to build a steady supply of blockchain professionals who basically understand not only technology side but business modeling side, you'll be surprised to know that in our codes, we are not only going to prepare you for the technology side, we will also give you lab exercises be focused on building business models, you will be given day long exercises to build business models around blockchain, whether they are private blockchains or public blockchains. So we are going to give you a complete hands on kind of experience as you are doing it in a regular industry setup. Okay, now off over to Pooja
please unmute yourself Pooja
I think she's not there. Let me move to radish. radish please unmute yourself. Yeah. Hello.
Yeah, I have a
question regarding identity management. We have seen so many
Okay. Raj, can you stop let me first start with Pooja. Sorry Rajesh. Oh no problem. Pooja Go ahead.
Sorry, sir. I'm sorry. Just wanted to understand about when you're looking into the future. cementation of the like, we've just had a word about the entire system and the management system and the social side system. How are we thinking of taking it forward?
See, the fact here is that already very large progress has already been made at a multiple level. For example, if you see within Telangana there are at least four or five very quality projects which are already moving on blockchain. For example, you will be surprised to know that an entire chit fund industry of Telangana state has already moved on to blockchain entire even land records are moving on to blockchain and not just in in Telangana. It is happening in Karnataka it is happening in Maharashtra Maharashtra. In For example, I know a project in Tamil Nadu where they have already decided in principle to shift all actions MCs certificate issuance processes to blockchain this is these are already done deals
and the government's take on it.
See, there are there are multiple models of doing that. In some cases governments are doing this on their own. And in some cases governments are basically outsourcing these jobs to tech players.
Okay. Over to Rajesh, go ahead, Rajesh.
Alyssa. Yeah, I have a question on identity management systems. Okay. blockchain Yes, it is an immutable object in this blockchain world okay. But hackers can hack the information right how blockchain will help in identity management? No, it is an end all the data is an encrypted but if they have any deep decrypted algorithms, there might be chances of misusing the information is there any chance of reading The information from the blockchain
I mean, what we see
today is the fact here is that when you when you discuss identity infrastructure implemented on blockchain, the fact is that this is a very large universe, okay. The first part of that universe is that nobody wants to share one's own identity database. For example, if there are 10 banks, they would not like to share their identity databases, okay. Yes, but they would like to share the authentication per verification. Are you getting it? Yes. Which means that if you implement zero knowledge proof on blockchains, then it means that I will be sent to questions by credit rating agencies, this person is Sunil Agarwal, has he done vaulted ever on your lawns? These are the just two questions. Okay. And if I'm authenticating these two questions, then my bank can answer these two questions on my behalf without sharing the complete data about me. Okay, okay, so got it. So what I'm trying to say here is that the, these are not honey pots of identity, they are shared identities. We're not all parts of identity are shared only those parts of identity are shared, which are contextual, which is selective. Okay. So, the hacked hacking is a very, very high cost and low return business in blockchain. Okay, don't forget in blockchain, people will think of hacking only if they have going to get thousand BTC with that. Otherwise, in law scale hacking people will not even think of that. And see the factor is that in blockchain, you can introduce some kinds of bugs. If there are some faults left by developers, all these are fail proof systems. They are not single point failures. Yes, I do. Give it given to this fact that there can be tech problems. But I'm not saying that these these are systems which can literally fall down for example, Bitcoin and aetherium are the two biggest block chains of last 10 years. They have not been hacked. Of course, there have been technical problems. No doubt about that.
Yes, I agree. I agree. Okay.
Okay. Okay, so thank you.
Yeah, let me check.
Rohit Rohit Go ahead.
Please unmute yourself.
Go ahead. Go ahead.
Yes. Can you hear me now? Yeah.
Talked about blockchain business model. Yeah.
What exactly do we mean by blockchain business model? Because my understanding is like banks are not ready to accept blockchain because it eliminates them itself. So why would any bank accept blockchain? So blockchain business model that we mean only by mining as No, no, no, no,
no, no, no. See, please don't say that. banks don't want blockchains No, no, no, that's not the issue. Banks may not may have some issues with cryptocurrencies but but banks don't have issues with blockchain technology number one. Second thing is just contextualize this question. For example, if two I want to send money to Australia my minimum cost is $20. This is my minimum cost, whether I want to send just one cent my minimum cost is $20. Why this is $20 because all banks have their Ledger's in centralized silos. So one nation's banks cannot talk to another nation's bank without intermediaries like correspondent banks, and core only large banks can be correspondent banks. And being a chorus of correspondent bank is a very, very risky thing. And today, for example, Bank of International Settlements is managing 11,000 banks across the world. And they have already decided to implement blockchain and they are already saying that we can offer 24 hour transaction settlement and ripple which is a distributed ledger player is saying that we offer a transaction settlement in less than 10 seconds. So the issue here is that at present as far as global banking transactions are concerned, roughly eight to 10 Indian banks have already tied up with ripple. And the fact is, the CEO of a center of excellence at applied to Hyderabad is actually funded by ripple.
So, what I'm trying to say here is that
the fact here is that we are finding two major issues. First of all, we don't find trained blockchain architects and developers that's first major problem. second major problem is that we don't find enough people who can build blockchain business models who are domain experts. So if for example, if you don't understand blog, A global banking then you cannot implement blockchain. So the issue here is when blockchain and domain expertise are merged together, only then credible solutions will emerge. Am I right, right?
Yes, that makes totally sense. But my question was more. I got a fair bit of response on that part that how banks are not really the competitors and they can also get advantage from blockchain. But what exactly do we mean by blockchain business models? So, is it like all the businesses that are in encompassing blockchain as some sort of underneath layer is in some technical way?
Okay. Just hold on just to
see, to be honest, blockchain business models are very, very large universe and I teach 24 hours of content just dedicated to business models, so I can't do the justice in just a few few minutes. So please expect Use that that part. See, for example, it let me contextualize in the case of a bank, do you know that at present most of global banks are looking at stable coins. Stable coins are basically bridge mechanisms. You have a fixed deposit in your bank. And based upon that fixed deposit, you create an equal account account amount of ERC 20 tokens on aetherium blockchain or some other kinds of blockchains. Ok. Now, these stable coins are used to trade with other kinds of crypto assets. Now, those crypto assets may be on public blockchains or some on some kind of a permission blockchains. But stable coin is itself a new business model.
And very few bankers understand this
exam For example, if I just ask you that you are HDFC okay. And you want to transact with Australia, Australian bank, then you can do it with a stable coin. Why can't you do it?
Then I have a counter question of that, like stable coin is some sort of middle way currency. Like we are using INR and Australasia using a d e a stable coin is some sort of metal currency that both will use like RMB USD USD, which is the international standard so far. Is it because the USDA is being encompassed by a central entity in us?
See the fact here is that when you say USDA, you can use USDA no doubt about that. The issue here is when you are staying, creating a stable coin, it is a your desire to peg it to rupee A trillion dollar to US dollar. This is all your choice. It is just a cushion of choice. It is not a question of technological availability. No, not at all. It depends upon the context which particular currency you want to anchor. That's all.
Is that? a fair bit? Yes. And one more questions. Chanel take a little more time. It's fluid for technical and business sort of part. So will businesses be our businesses open to accept it? Because scalability is a major concern as of now. Hmm. So when it's I mean with the blockchain, in its current form, are businesses accepting? See,
sadly, there are some fundamental challenges in us in our social and political universe. First of all, Very few journalists of India or abroad actually understand blockchain. So that's why you don't see very good reporting on blockchain news. For example, in India, already 11 banks have come together to share data of all SME customers, which means could all credentialing lady to SME customers will be on blockchain. This is already a done deal.
Do you know about that?
that's a that's a that's a challenge because the problem here is that there is not even a single journalism school in India, which is teaching blockchain. There is not even a single capacity building executive education program for journal list in India, which is focusing on blockchain. Can you mention even a single program for block in blockchain, for bureaucrats, for politicians for journalists? No. So the issue here is that we need to expand the universe. And that expansion, particularly in new technologies happen in its own way there there happened some booster doses. And this Corona virus pandemic is the high time when people are being forced to embrace digital and within digital, they will have to embrace blockchains because blockchains are going to be sustainable.
Is that fine? Right?
Yeah, that makes sense.
Thank you. nourish has asked
that he would you like to ask?
Please raise your hand. Yeah. Go ahead nourish.
earlier, you explained the concept about the coin, that's fine. So if you still anchor it to a particular currency and report it somewhere and use it for on Sunday, it would still, you know, it's not considered any stable thing because it's a kind of a contradiction in itself if you're pegging it to a particular currency like USD if someone pointed You know, that's what I wanted to highlight that in absolute terms it is never never stable because the Bitcoin value has increased drastically, right? Yeah, yeah. Only thing is you need
wider adoption. Isn't it?
Yeah. Oh, my God, God if God, just just hold on, hold on. See, I didn't mention stable coins in my main presentation and I mentioned stable coins just in the context of blockchain business models when a participant asked that particular question see I'm not saying stable coins are ideal blockchain solution Not at all. I'm not at all saying this. I'm only saying is that At present we are neither interested in sticking with nation states or nor we are fully in network states. So, at present we are in a phase of transition. So we are in a bridge zone, okay. Now in a bridge zone, we have to design solutions which are easily understandable. For example, if I ask you nourish, would you convinced if you are to convince somebody about Bitcoin and a stable coin, which would be easier for you to a common man. Yeah. And then my answer is in that context, you'll be surprised. Till date. I've been doing workshops for many years you'll be surprised. Even good people, intelligent people tell me they don't understand Bitcoin at all. Because they will start asking what is this hashing? What is this proof of work? What is this mining? What is this, blah, blah, blah. The issue here is there are very few people in India who can actually interpret Bitcoin in a common man's language. That's why, at present banks and larger organizations are building bridge zones. For example, even Facebook is coming out with a cryptocurrency called Libra, which is in Fact a stable coin.
Yeah, yeah. But
I'm not saying Libra is the best solution but I'm saying Libra is a great solution
and it is one blockchain
is that fine race?
Yeah. Yeah. Yeah. Got it and in terms of the industry wide adoption, particularly in the banking industry, yes, the transaction any transactions that happen on this blockchain network will be instantly certain like there is a real time setting. So, that would eliminate the need to have proper disken governance controls you say, okay, the trust factor is automatically taken care. So I am not need to do any kind of overseeing or no. So that an auditor is not required, because just because you adopted a blockchain, or you know, an accountant is not required. It does Is it the accounting principles still hold valid, I believe, but it is just that a new technology has come up which the accountant needs to be acquainted with too young with it. Yeah, yeah. It does not change the the way an accountant looks at his job, it just the content needs to get hands on and the new technology right. See, auditing is also important. I believe, even though you have adopted the blockchain industry,
the fact is that block when you say blockchain, you are basically saying accounting transparent accounting, right. So, accounting will always be required in all kinds of work. The only difference would be accountants won't be required. Okay. You will not be you will not have to depend on an accountant to do your job because you're Entire statements would be just visible to you.
Okay, so let me go to
Raja donta. Please go ahead Raja.
Go ahead, Roger.
Okay, you're able to hear me now. Right. Okay. So initial, right. So I'm like I just know at a very high level, but sounds like promising technology, right? So the whole idea behind blockchain is democratization of trust, right? decentralized and all that. So, based on that, right, it sounded like elimination of intermediaries and banks, in the case of finance, right. So like, it sounded like if the intention is elimination, and why would banks be interested? But I think that narrative changed right over the period. And I'm making a statement just just to clarify whether my understanding is Right, right. So, now, I think it has come to a place where banks are saying we can implement the technology to lower the cost. So they are right, it is not elimination of the banks, the banks can use the very technology to reduce the cost and pass on the savings to the customer. So, that is a very legitimate use case for adoption of the technology. So far, okay, right. Having said that, though, right. I'm like, once these guys have figured out a use case, why the adoption is so slow, right? I mean, like, compared to AML, and all that, right. So that is one part of it. Right? That is number one question, why the adoption is so low, relatively, number two, right? Even when it is adopted, right, like once banks figure out a way to use it, the big banks, right, where there are multiple players, there are a use case for solving the trust issue. Right, then is there room for individual entrepreneurs? Have you heard of a successful use case where smaller players have come in and solve a distributed trust problem? Right, these are my two questions.
Okay. See the fact here is that already lots and lots of solutions are emerging in this domain. For example, this is a name of a company which is basically building digital identity protocols okay. And this is first company first startup of India which start which begin offering video based KYC solutions in 2016 when RB was not even allowing such kind of solutions, even in sandbox
and today, they are offering
blockchain based contracts to the clients. So, number one, things are already happening. Now, why they are not visible. The issue here is that at present
So, just to
see, at present, the major problem in India is that people are basically stuck with three things. The first problem is in terms of technology. There are some very key questions to be settled, for example, whether you want to depend upon a public blockchain architecture like aetherium or whether you want to build a permissioned architecture like that of multi chain or hyper ledger or Korda. Even if you are convinced with technology, which technology platform to use, you don't have enough intelligent people who can tell you that. That's question number one. Now, question number two is business modeling. So in terms of business modeling, what is the key question? The key question is that blockchains are by default, global whether you want it or not, the fact is all blockchains are by default global. Now, the issue here is that's where you need to basically bring regulation. The problem here is that the question of regulation has been captured or rather hijacked by the question of cryptocurrencies, which is a pretty idiotic way of stalling all the developments on blockchain based regulation. Now, for example, if you want to build a security token offering, for example, today, our OC Registrar of Companies is issuing you Private Limited and public limited company certificates. Why this thing cannot be shifted to blockchain. It can be done very easily. And to be honest, even NSE and BSE have done some advanced experiments on shifting their operations to blockchains. But certainly problem here is that blockchain is not a straight to check technology. For example, if I have Arielle shirts
This is precisely for you if I have Arielle shear and you have icac shares and both of us can transact with these shares in less than 10 seconds, okay? That's what shifting blockchain to stock exchange stock messages mean that you will be able to exchange these tissues in relatively very very short time when this actually happens. Would you still say RL shear is only a security or you will say it is almost a liquidity instrument yes or no Raja
Now the issue here is when RTL or ICC shear becomes a liquidity instrument simultaneously with the help of blockchain, don't you think it will be this liquidity instrument would be as good as currency? Sure. The problem here is blockchain does not only bring efficiency to the core blockchains also bring another question to the core that we are entering the era of a hyper barter system and that's where people are not able to digest the fact there is nothing wrong with Arielle shear. There is nothing wrong with icac shear but but today if I am to buy Irish shear, I have to go to exchange and do it in INR or if I have to sell ICC share. I have to go to exchange and Do it in Ayana, it means INR is a fundamental funnel system through which it has to pass. So, it is like a
if you see like this it becomes a pyramid
Got it? Yes,
but the issue here is that if RL and icac shares can be exchanged with blockchains then we are entering a hyper barter era, which is turning out to be far more disruptive than cryptocurrencies. You can tokenize land assets, you can tokenize your advertising services you can tokenize your subscription services, you can tokenize them everything.
Now, the issue here is that we are Entering into a hyper barter era era where people can transact at a very, very fast pace in a very, very efficient manner. And that's what I mean by industrialization of crust. And the fact is, people are not realizing that today, if we want to kick start the economy, and we want to pull our economy out of current recession, we will have to give liquidity to the market. And blockchain is the only way of inserting liquidity into the market.
Does that answer your problem?
It does, I think so. Just to elaborate a little bit, right, actually, I don't want to take too much time in the interest of, you know, allowing others to talk better. So again, I think right in the example of Arielle icac thing I'm gonna like it is almost sounding like elimination of the exchange rate again like that is where the exchange people are going to fight back, no
infrastructure. Exchange infrastructure would be there but exchange managers would not be there.
Okay. Okay. Correct. So that means they adopt the technology in turn to optimize. And I think they become the players. Yeah. So then that goes to my second question, right. It almost sounds like there is no room for individual small player entrepreneurs kind of thing right here.
No, no, no.
No, no, no. For example, this chit funds Okay.
Do you not chit funds.
industry that was disrupted by a company called chipmunks launched by one of my friends bonati Purim and his friend. You'll be surprised chipmunks was started on hyper ledger. 1.4 version and they went to Telangana chit fund industry regulators office and regulator expressed his problem and they said we have a solution. And today 500 corrodes of volume per month is it is on that blockchain well, and just recently, they got point $6 million funding a startup which started in October 2018 is already worth millions. I can give you multiple such examples. Science is the earlier example.
Roger, that's, that's very impressive. So that's good. There are use cases then the adoption will be fast and right. So say
for example, let me give you a few examples. Do you know that in peer to peer lending You and peer to peer insurance. There is a huge scope of blockchain. Can you mention even a single existing company which is offering you peer to peer insurance? No. And that's an area Do you know only 3% of India's population is in insurance basket. The scope of building a team of insurance is wide open there. Would you like to ask this question again? The scope or room for micro entrepreneurships or intrapreneurs in blockchain?
No, I think
Thank you for taking time.
Okay, summer, go ahead summer.
Somebody they've not please go ahead
please unmute yourself and then ask. So,
how blockchain can be used in VC MP industry?
See what process of that industry would you like to
those industries are not that much transparent in terms of returns Hmm
So, how can they be revolutionized
so that we can have a
Okay. See, are you a VC or not personally? No, I'm just want to be an angel investor. Okay. Okay. See the factor is vent Ico industry happened. What is An Ico Ico is basically some sort of a decentralized version of venture capital. Because at present when you want funding for a project, you go to a few groups or few individuals who will fund your project and get equity in return. Okay, this is a VC. But Ico was a way of outreaching regular VCs and go going out to the entire citizen of the world, citizens of the world and asking them to invest. So it means if I am running a project called bat, basic attention token, then I can tokenize my offering and I can say that I will give you 6400 bat if you give me one ether. Now, this was something which was already a decentralized, VC kind of a thing. That's not But one now within Ico people realized that there were some compliance problems and then they shifted to IE initial exchange offering and by Nance exchange was very dominant exchange which offered this particular solution. And recently there has emerged a new solution called stos security token offerings, which are basically your existing securities, but they are being offered as tokens on blockchains. So, in that sense, this is already a disrupted industry rather This is the most disrupted industry in terms of blockchain.
Okay, is that fine? Some of
you? Yes. Okay.
So, friends, I think we are already crossed 90 minutes. Do we have any Question and your hand raise.
Okay French. Ah, this is time to conclude I think let me say
Okay French. This is time to say but
I think one is just a minute let me check your why. Okay, why? Please go and
good afternoon sir. Good afternoon,
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Is that fine summer? Yes.
Okay, so let me see. Is there any?
okay friends, let's conclude the session.
Watch the entire interview here https://youtu.be/rV_tCJ9qn18
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