Let's Understand Blockchain
Anand Mahindra happens to be my boss, couple of
years back he was in New-york
in a cab like Uber and he was reading a
newspaper. In this newspaper he read this word called ‘BLOCKCHAIN’. What
in treat them that however was that blockchain promise to do and to
disrupt companies like uber the same way companies like uber were disrupting
his company and so like many things he doesn’t understand he passed on to me to
figure out. I
Obviously had never heard of the word ‘BLOCKCHAIN’
before.
As I scramble to figure out that What it means?,
What is it some kind of technology?, How is it spelt? So I went a some
conference named ‘consensus’ happens in New-york every year. It is the world’s
largest blockchain gathering, after 2 days there I was completely blown
away and I realised few things,
- Blockchain was early like the internet in the 1990s but it could be aspect.
- It wasn’t a huge case of internet like e-commerce, social networking , email etc. which are huge cases of internet. But it was something as fundamental and parallel to the internet.
- It sounded very simple but was very complex to understand.
- It had a potential to change our life in the next 20 years the same ways that the internet has changed in the last 20 years.
- It was very important that blockchain was not spelt ‘BITCOIN’.
Now , the important question is that
WHAT IS BLOCKCHAIN? (in higher language)
-Most of you would say that It was the technology behind bitcoin or cryptocurrency. It is true but it’s like defining the internet as the technology behind email which is also true but it doesn’t even begin to describe the internet. There are different ways to think about blockchain.
WHAT IS BLOCKCHAIN? (in higher language)
-Most of you would say that It was the technology behind bitcoin or cryptocurrency. It is true but it’s like defining the internet as the technology behind email which is also true but it doesn’t even begin to describe the internet. There are different ways to think about blockchain.
One
way is think of blockchain as this one big ledger in the cloud, now
ledger is spite looking like this ‘are very important’, everything that you own
including money is nothing but really entries on a ledger. If you send money
for example from the US your friend in Zambia it's not money which flies from
here to there it's actually a ledger entry which happens in my ledger and other
parallel entry that happens in your friends ledger and money is transfer. Now
the problem however is that between my ledger and her ledger there are bunch of
other ledgers there are bunch of ledgers owned by bank, there are bunches of
ledger owned by money transferring institution other Financial
Institutions , regulators insurance companies and each of these ledgers have to
be reconcile and changed and because you have to change so many of them it
creates friction and what is friction create is a time delay and obviously cost
and so the $100 sent by me to my friend in Zambia reaches maybe in 5-6 days
later and only $94/$95 were reached.
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 were actually participants in that ledger or if I use a slightly different
language we are nodes in that ledger and every time every time an entry had to
happen every single one of them would have to authenticated this is right, this
is right, 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 whenever a new
transaction happens it gets or a set of Transaction ID gets added on as one
more block in a chain of already existing transaction and obviously this
transaction which has 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 another important thing is
that every block added is immutably link to the last block and that block is
linked to the last block and so if you have to change one block or if hacker
comes and goes to change one transaction or a block he or she has to change the
entire changed, it's very difficult to do.therefore super security driven by
consensus driven by this immutability.
The other thing in a blockchain
is that there is a chain so you can actually trace back any event or you can
go back to block by block by block, you can trace it back. blockchain also
faster or have a originated this thing called smart contracts which is logic
building most blockchain. which is that whenever an event happens it Trigger
another event automatically in this is very useful. finally no one owns the
chain so who maintains it? it's not one bank, a single trusted authority infect
is the entire bunch of people but to maintain this chain, you require
resources, you required computing power, you require electricity, required
time, you require money.
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 instant pay for all those people
maintaining this change and the currency because it was the Bitcoin
blockchain was called Bitcoin.
WHAT IS BLOCKCHAIN? (in simple language)
There is another way to
think about a blockchain. A probably a more friendly way. So a blockchain is
actually like a kitty party. You might be heard about kitty party there are
bunch of women usually getting together, having a good time, eating food, playing
cards and exchanging some money and it is “money” bit which is important. so in
a kitty party everyone says that 12 women they all put a 1000 rupees each and
the lucky draw happens and the lucky winner gets 12000 rupees.They put in 1000
rupees again next time a draw will happen again someone else will get 12000
rupees.
As this women are putting in this funny and
this lucky draw is happening if I am one of the women who am I trusting?..
There is not one Superwoman there, there is no bank ,I am trusting all of them,
I'm also trusting the fact that if they want to defraud me, all of these women
will have to be influenced and therefore I am changing the concept of trust
from centralised trust to distributed trust. If this is distributed trust which
is actually the heart and soul of a blockchain. Think of all these women
as nodes, think of that money is
cryptocurrency and obviously then there
is distributed trust around it. So the blockchain really is useful when
you have these 4 things. when there is consensus so distributed
trust, there is security because of the non
hacking possibilities, there is provenance and I said you can trace even back
and then obviously there is trust. now let’s come back that hopefully we all
understood and are Masters in blockchain let’s now come to therefore
what do we do with it. that's why Mr Jaitley comes in. so blockchain and
cryptocurrency are actually defide of each other you don't you cannot have
a cryptocurrency on this is a blockchain behind from the other hand and
unless there is a cryptocurrency built incentive system there gonna be
no blockchain. but then our leaders and politicians and policy makers
sometimes think a little differently and our honorable finance minister for
example things that one is good and the
other is evil. cryptocurrencies
are Evil while blockchain are good and it is not the only guy it seems
to be the prevailing notion across the world today and multiple countries
Japan, Canada, Dubai, Estonia, Mauritius. Infect Mauritius is calling it self
epithelium Island. they often want to become blockchain Nations. They
want to use blockchain to transform their own countries to transform the own
economies and more things
Beyond that.
So how can you use blockchain
to transform a country or 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 12 crore 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 is other number which is the number that
left out to me this number is 23. 23 is the number of farmers who kill
themselves every single day in this country. Now why do they do so? they don't
have farm equipment to make evils happen. even if they own land then the land
is very small you can't do scientific agriculture you can get output based on
the input that you put in. And even if you own that land then most of the times
it’s not recorded as theirs and so you can’t get financing for all the inputs
that they won't. they go take loan from other people and they under killing
themselves.
Now how can blockchain help here?
actually funnily in multiple ways, for example as Mr Mahindra realise a couple
years back the blockchain is ideally suited to create a new Uber for
tractors without actually an Uber being there and infect we are creating that
and where the cost become much lesser and smart contracts prominence not lack
of hackability makes it much easier infect you can go step further and blockchain
is the ideal technology to create fractional ownership and so 11 farmers can
own tractor. which is till 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 government for the country actually digitising land of
trying to digitise land as you know the problem is given to digitise it someone
can I still go and hack it, someone can I still go and change the name, someone
can still do whatever they want that take ownership and infect if you digitise
it, you only know who belongs to what you don't know who belonged to and what
were the provenance of that land with that was something very important. Again blockchain
can come in and solve this problem infect Andhra Pradesh already started doing
so in India. They started moving their agricultural land records to blockchain.
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 the small plots into one larger acre and so you know you
can then do the harvester on that the tractor that inputs on that. The
blockchain can actually take care of whose land how much input happened
where how much output happened. smart contacts can actually in a move moneyes,
move input output. So there is 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 centralised concept. one
power plant, power distributed from That Power Plant works in cities very well
but doesn't work in villages it doesn’t make an economic sense. you have
to produce power where you need power. possible to do you can use solar, you
can use wind, you can use other things but then the problem is how do you make
it economic leviable? There will be certain houses which will be
producing more power when they don't need and there will certain places which
will not producing power. if you again use blockchain and little bit of IOT
and link all of these houses with solar panels on them automatically access
power can be transferred to defccess power, money from the defccess power guy can
be transferred to the access power guy and actually you can use cryptocurrency
here, produce currency and that currency can actually be use to buy sell power
can actually use by people like us in cities to donate power.
Blockchain is not as much Technology as it's a philosophy.
The internet solved many big problem for us.
it's all are information problem with search, it's all are distribution problem
with Amazon and YouTube video and music and digital files etc. it also solved the
communication problem with email, messenger, chat everything became so easy.
But there were 2 problems that internet was supposed to solve.
1)Trust problem, how many of you trust stuff on
the internet fake news, money, fake profiles etc.
2) the intermediation problem, there is a big
intermediaries will go away the small men will come up with that will be a
level playing field that’s what the internet did. it actually created
far more powerful intermediates then
even existed before the internet. Amazon, Google, Facebook, Uber
Microsoft. but these companies has become super powerful intermediate and
all of these companies was 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 uber to peer and you can take this
anywhere.
Why people are so
excited including me about blockchain is the fact that it promise to
solve the two problems that internet could not trust problem and the intermediation
problem and bring back actually true honest to goodness peer-to-peer economy.
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