Since the launch of bitcoin in 2009, the popularity of the blockchain technology has piggybacked on the hype of cryptocurrencies. It is the technology on which cryptocurrencies run. Over the past few years, it has evolved beyond being synonymous with cryptocurrencies and is now placed on the pedestal of being a revolutionary technology with soaring expectations.
Recognizing its potential, the World Economic Forum predicts that 10 per cent of the global gross domestic product will be stored on blockchain technology by 2027. Governments around the world are chasing possibilities to harness the technology’s potential to advance social good and optimize their activities.
At the heart of the blockchain technology is the universal ledger and the resulting immutability. The universal ledger is a chain of blocks (each block consists of ‘data’, a unique hash and the hash of the previous block) that are linked to each other and are shared with all the parties in the universal ledger network. Every new entry into this ledger is a new block that has to be authenticated by the consensus of all parties on the network (run through a computer-generated algorithm). This consensus-based immutable mechanism of the blockchain technology ensures trust and transparency of the system.
Industries from healthcare to automobiles and from banking to education are already pursuing this technology for its tamper-proof record of data. The trust and transparency that blockchain assures also resonate with the values of Corporate Social Responsibility (CSR). The synergy between blockchain and CSR could open doors for innovation to address financial transparency, reliability, impact measurement and reporting in India. By leveraging this technology, a whole new ecosystem of blockchain-based CSR could be created to ensure funds and benefits reach intended recipients and goals with enhanced visibility.
One such example of a potential synergy could be the use of Smart Contracts (digital contracts based on blockchain technology) for the execution of CSR in India. The terms of the project along with budget estimates and predetermined outcome metrics will be coded into the smart contract. This will allow near-real-time data monitoring (including spending) and a register with data accessibility for all stakeholders of the contract. The infallible traceability of records and notes from the origin to the destination will help create a reliable, measurable and transparent social impact.
However, like any new disruptive technology in its infancy, the blockchain technology is also surrounded by its questionable hype. The technology is still in a nascent phase and is to be understood to its true extent. Much will depend on its adaptability and the legal ecosystem to house the technology. In the 2018 Union Budget, the Indian Government categorically outlawed the use of cryptocurrency as a legal tender, however, signalling strong support for the use of blockchain for other applications.
To foster this technology, it is imperative to have forums for exchanging ideas, debates and collaborations between different stakeholders, including developers, corporations, NGOs, civil society representatives and governments. There is no doubt that the buzzword has hit the mainstream. What is to be known is our ability to harness this technology which will draw a clear demarcation between its hype and reality.
Shunmuga Sundaram Yadav has previously worked for an Italian consulting firm promoting Italian businesses in developing countries and assisting them to participate in projects funded by Multilateral Development Banks. He has also worked on consulting projects for strategizing market entry of Italian brands in India. He has completed a course in Aircraft Maintenance Engineering and a Bachelor’s degree in Commerce.