Blockchain is the buzzword when it comes to announcing new projects, especially public, government-backed ones, in India in recent months. From a public platform that all other blockchain projects could link up with to a payments interface, from uses cases in pharmaceuticals to automobiles, from deployments planned in banking to education, the distributed ledger technology has been presented as the tamper-proof record of truth.
While the technology’s roots are technically sound and promise a lot, almost all of the public projects in India – some announced with much fanfare – have not seen the light of the day or haven’t progressed beyond proof of concept (PoC) trials, reveals a FactorDaily investigation. In some instances, they remain stuck at the memorandum of understanding (MoU) stage.
What went wrong?
A short introduction to blockchain, which you can skip if you are aware of the technology: think of as blockchain as a large record book – digital, in this instance – shared and updated by many people (across a network of computers, called nodes). The records are distributed among the nodes and no data on the blockchain can be modified without everyone agreeing to the change. This makes blockchain virtually unhackable, secure, and, importantly for government use cases, leakage proof. Cryptocurrencies are but one use case of blockchain technology.
Back to the stillborn blockchain projects in India. Put blockchain, blockchain projects are a lot easier said than implemented, as Indian public officials are finding out. One of the main problems they are faced with is that traditionally many processes have been rendered on legacy trade and database management systems making it a challenge to be migrated or easily integrated onto a blockchain.
“The way things are looking in India, most projects might not move beyond the PoC stage for some time. Moving away from legacy processes is a challenge. For end-to-end traceability of a process, everything has to be done on the blockchain. Getting the entire process onto the blockchain is a challenging process,” says Tanvi Ratna, senior consultant – advisory services at consultancy and audit firm EY (formerly Ernst & Young).
Priorities in government projects
The governments of Andhra Pradesh and Telangana, tech-friendly in the last couple of decades, have been at the forefront of blockchain adoption, too. As early as June 2017, both the state governments had announced plans to adopt the technology for various e-governance projects such as land registry, KYC records, and data protection. The Telangana government was working on some projects in Hyderabad and other areas with a time frame of six to 12 months, according to a news report of the time. The timelines for the Andhra Pradesh government to move some of its departmental data onto a blockchain were also inside of a year.
Based on our reporting where very few of those in charge of originating the public blockchain projects were available for comment, the new state capital Amravati may be ahead in chalking up early successes in blockchain implementations. J A Chowdary, the special chief secretary and IT advisor in Andhra Pradesh, says the state has implemented a blockchain solution architected by Visakhapatnam-based Zebi Data for land records in Amaravati. “This is a small experiment and we are looking at regulations which have to be dealt with before implementing it across the state,” says Chowdary, adding driving licences, and certificates and mark sheets are in the pipeline.
Zebi Data is reported to have added around 83,000 records onto the land record system as of March, 2018.
Still, most of the other projects in the two states are under PoC or may have just completed the PoC, according to people in the know. “Not much has progressed from there and it doesn’t look like it will for some time,” says a senior executive of a company working with a few state governments on blockchain projects. Often, adds the executive, who asked to remain anonymous, the government department concerned doesn’t even get back after a PoC is completed.
For many governments, it seems, blockchain has become a fashionable tag to be used on presentation decks to show how progressive they are when it comes to technology adoption.
“Another challenge is the money for these deployments. We cannot spend from our pockets to do the implementation because you need to hire developers and will have other expenses. With no financial commitments from the government departments after the PoC, carrying on with the development is difficult,” says the executive quoted above without name.
FactorDaily has reached out to government officials in Karnataka for comment and will update the copy if we receive a response.
A technology too nascent?
To be sure, the other big problem is that despite the hype around blockchain technology, a lot of its protocols and systems are still in its development phase. Just like any technology in its early days, blockchain is also taking time to stabilise and be ready for deployment.
Sumukh Shetty, a blockchain developer and cryptocurrency enthusiast, says usability of the technology is a big concern around blockchain in general. “Usability can be divided into many sub-problems, one of which is scalability… Scalability is one of the biggest problems and until that is solved we cannot see a million user dApp (distributed app).”
According to Shetty, there are projects looking into factors like usability, scalability, and UX, but these are very nascent and will take some time before they can attain the finesse or meet the standards required for large-scale deployments. It doesn’t help that most people working on blockchain protocols are technologists, not UX experts or designers.
“Things like metamask (a popular browser plug-in for distributed apps) add additional friction from the users’ side. UX and scalability are some of those key areas that should be looked into to improve the usability of a product,” says Shetty, pointing to projects such as those supported by the Ethereum Foundation.
Take the other instance of Nilesh Trivedi, founder of Indium, an Ethereum-compatible blockchain network with a focus on utility apps and public goods. His work on a token-less smart contract protocol and has hit a road bump. “Some of the APIs from banks are not as robust or developer friendly as we had expected and the implementation is taking time,” he says.
A related issue is the poor state of middleware components for integration with legacy systems, adds Trivedi. “Middleware development in the blockchain space is coming along especially with respect to Ethereum network because they realised the need for tools early on but in the case of legacy technologies that are currently being used, like database systems, integration is still a challenge.”
Regulations, adoption a grey area
Central to any blockchain project is the access of data but regulations of different jurisdictions can get in the way – be it related to vendors, logistics or people. Overcoming these hurdles, whether it is reconciling to the European Union’s GDPR policies or Indian laws promises to be another challenge for blockchain solutions.
“Regulations currently aren’t Blockchain friendly. For instance, a European company wants to collaborate with a company from another country, how do you do that on a blockchain because the database on the blockchain is stored across the nodes irrespective of its geography,” says Shetty. “You might end up violating some of these data regulations.”
Adoption of technology is one of the key factors that will decide its future and in the case of blockchain, it implementations makes much more sense as a consortium, like an industry standard, rather than a few companies trying to implement the tech.
Yet another challenge looming ahead, according to Trivedi, is driving adoption on blockchain. “Building the protocol is not the big challenge but driving its adoption is. It’s easier for a consortium or group to adopt a standard rather than an entity or company pushing for adoption. Challenge will always be coordination,” he predicts.
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Updated at 06:00 pm on August 28, 2018 to correct Tanvi Ratna's designation. The designation has been corrected to advisory services from government advisory.
Disclosure: FactorDaily is owned by SourceCode Media, which counts Accel Partners, Blume Ventures, Vijay Shekhar Sharma, Jay Vijayan and Girish Mathrubootham among its investors. Accel Partners and Blume Ventures are venture capital firms with investments in several companies. Vijay Shekhar Sharma is the founder of Paytm. Jay Vijayan and Girish Mathrubootham are entrepreneurs and angel investors. None of FactorDaily’s investors has any influence on its reporting about India’s technology and startup ecosystem.