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Techtonic 2019

Is blockchain the ultimate Fort Knox?
India is preparing for the next digital revolution, and everything from your bank account to your next cup of coffee is set to go high-tech. Still think blockchain is just about Bitcoins?

Hari Menon

India is known as a tea country. Everyone wants chai-pani. Ever wondered why? Our GenX population, let alone the millennials, is a bit too young to know the reason. However, Srivatsa Krishna, Secretary, Coffee Board of India explains the history behind our love for tea. The British would distribute it on street corners for free, apparently. For free! And don’t we love free stuff? Besides, it’s only likely competitor — coffee, wasn’t too conveniently available then. Making filter coffee required patience, and instant coffee hadn’t seen the light of the day. Meanwhile, preparing tea was simple — boil the leaves, add milk and sugar, and ta-daa! The legacy lives on. Today, India produces the only shade-grown, hand-picked Arabica coffee in the world. Sadly, 98% of India’s nearly 350,000 coffee growers cultivate it on plantations under 10 hectares. The 350,000 tonne of coffee they produce is heavily dependent on subsidies of 400-500 million per year. However, there’s good news. 

Srivatsa Krishna Secretary, Coffee Board of India

Mister bean

The Coffee Board is currently working with small growers to boost their earnings, by premiumising Indian coffee. Krishna says, although among the best produced globally, Indian coffee fetches the standard 200-300/kg. To illustrate his point, he says, “Japanese importers buy our coffee at 300-1,000/kg, package it beautifully, and sell it at ¥70,000/kg. That’s 45,000/kg.” Further, an average cuppa Joe costs about $2 on the streets of New York. An Indian coffee grower who probably supplied the beans barely makes five cents on the cup. Krishna wants to double that amount and says confidently that by infusing technology, he can convert that five into 15. Here’s how his team plans to get the world’s sixth-largest coffee-producing nation noticed. 

Big names such as Piyush Pandey, Prasoon Joshi, and R Balki have been roped in to create promos for the Coffee Board. McCann has been selected as the ad agency for the two-year-long campaign which will begin soon. On the technology front, the Coffee Board has tied up with Precision Agriculture for Development (PAD), an agri-tech platform based out of Boston. The firm has developed an advisory service called Coffee Krishi Taranga (CKT) for Karnataka’s coffee growers. 

Krishna also wants to boost traceability. That’s where the Board is truly going high-tech with a blockchain-based app. Called Farmer Connect, the app keeps track of a coffee bean’s source of origin, fertiliser used and the moisture content in the soil it’s grown in. Coffee connoisseurs appreciate what goes into producing the top-notch, single-origin, estate beans in their cups and Eka Software Solutions has developed an app to enable traceability of the Board’s coffee producers.

Bidding higher

Two countries, namely France and Ethiopia, beat Indian coffee in the blockchain race. However, while they focus solely on traceability, the Indian Coffee Board has developed the first ever blockchain-enabled marketplace for coffee growers in the world. “My farmer can’t access the market without middlemen, or do price discovery. That’s the problem I’m solving. Yes, traceability is important for the premium-end farmer. But the smaller guy needs to get to the marketplace first,” says Krishna. As with CKT, the blockchain marketplace will remain in pilot phase till it enrolls 15,000 farmers. It’s estimated to take another six months to reach that target. Once the platform is ready, the Coffee Board will introduce a subscription model, wherein the farmer will pay under 200 per transaction (irrespective of volume). The app currently caters to 15 growers and five bidders comprising curers, roasters and exporters.  

The idea is to help coffee growers put their produce on sale on a global marketplace with a few taps on their phone. As per Krishna, here’s the beauty of the technology. Today, a roaster in London or New York knows the Coffee Board, but not the Indian grower. However, once the platform flourishes, any farmer with a certificate of quality from the Board can put his produce for sale, and the roaster can buy from him directly. Middlemen such as exporters and domestic distributors can be done away with. Once a transaction is done, it is recorded as a ‘smart contract’. This enables real-time price-discovery that’s not only transparent, but also traceable, perhaps at the time of payment, or during a subsequent deal.

The Board has decided not to involve itself with logistics. It has even skipped a payment channel as cryptocurrencies are not recognised by the RBI. At present, the Board’s focus is to check the efficacy of the blockchain platform without spreading itself thin on other aspects of the coffee supply chain. That said, the Eka team is working on integrating a payment gateway to the platform.

Since the platform is self-regulated (the Board doesn’t intervene in the bidding process), Eka will also incorporate a rating system for bidders and sellers, a system similar to the Uber app (See: Brewing transparency). But, how does the Board ensure that both parties adhere to the contract? The Coffee Board checks credentials of the applicants and approves their entry on to the platform only if both agree to the contract laws of the country.

Why blockchain

It is not only the Coffee Board that is fascinated by blockchain. Many others are, but why? The answer in three words: Distributed Ledger Technology (DLT). That’s the less fancy, and seldom-heard term that is the basis of blockchain. But, the idea isn’t complicated. Starting with ‘distributed’, the technology is a way to prevent consolidation of information in one location. Classic examples of consolidated or centralised storage are a bank safe or the mainframe server in an office. If these get broken into, or if the power goes down, we have a problem. The ever-elusive Satoshi Nakamoto in his 2008 paper Bitcoin, notes, “What is needed is an electronic payment system based on cryptographic proof instead of trust.” Bitcoin deals with monetary transactions, but the ‘distributed’ concept works just as well for any exchange of information or data. As for a ledger, it is a record of a transaction. It could be monetary, between two people, between a bank and a customer; data transfer, for instance, telecom data exchange; or even record-keeping, be it for a library or an audit firm.

A blockchain platform is built on three tenets. Its transactions are decentralised — no authority keeps hold of the transaction records; distributed — all entities using the platform receive a record of every transaction; and immutability —the original transaction data cannot be tampered with. 

Manav Garg Founder and CEO, Eka Software SolutionsAccording to Manav Garg, founder, Eka Software Solutions, “Any transaction on blockchain can be viewed by anyone on the platform.” He explains, “Say, a garment-maker in Vietnam is contracted by a European bidder for a consignment. Once he packages and ships the consignment, the shipment information is passed on to the producer’s and the buyer’s bank. In the traditional system, the papers get transferred from the seller to the banks and there’s a lot of delay in the producer getting his dues. That’s where blockchain comes in handy, since all stakeholders can view the records on a common, digital repository.” Once a deal is agreed upon, the information on the trade is not editable. 

“Earlier, the paperwork was messy, but not in the case of transactions on blockchain platforms,” notes Garg. Updates on transactions by the stakeholders have to be checked by an ‘ombudsman’, or miner. A miner is a participant (other than the parties involved) who verifies the details of a transaction on the blockchain network. Miners employ powerful, and hence expensive and highly energy-consuming processors to decrypt and validate transactions. As an incentive for validating transactions, the miner is rewarded with cryptocurrency. 

In the case of Farmer Connect, the Coffee Board controls the entry of participants into the coffee production value chain. It also gives limited access to data to other members of the value chain. As an importer, you can view certain elements such as the prices that coffee producers are selling their beans at. But, you can’t see bidding values of other importers. Similarly, the coffee farmers cannot see the rates at which other farmers sell their beans. That’s because the Board wants it to be a private marketplace, and not an open one. If the latter were the case, big players, for instance any high-end coffee chain, would use the coffee growers against each other to procure beans at dirt-cheap rates. It would defeat the Board’s goal of helping farmers fetch a fair price for their produce. For Eka, the challenge with the Coffee Board project isn’t technological; it is how to get farmers to adopt the technology. And when farmers have established relationships with private or local curers and roasters, how do you get them to tie-up with new players on the platform? 

Herding effect

Name an industry worth its salt and it’s probably hopped on to the blockchain bandwagon. Be it banking, telecom, logistics, entertainment or energy. They have all embraced the tech, or are in the process of doing that (See: Imminent revolution). In fact, news of ICICI Bank, Kotak Mahindra Bank and the Reserve Bank of India testing blockchain platforms dates back to 2016-17.

But does the world really need blockchain? Rajesh Dhuddu, global practice leader-blockchain at Tech Mahindra, explains the development of the technology that began in the 1980s when computer scientists realised that governments across the globe had too much centralised power in a country. The scientists wanted to address this and to do that, they had to substitute the one thing governments had control over: currency. Scientists wanted to develop a currency that no one controlled. 

However, beyond its use case in establishing a universal, decentralised currency, blockchain also decentralises information. Ever downloaded movies via torrents? Torrent files are the best example of peer-to-peer sharing, the crux of decentralising information. Your computer pieces together your torrent file from a number of different individual sources, aka peers, instead of downloading one big bulky file. Even if one piece of the file is missing, the download isn’t complete. 

Similarly, a majority of the entities, stakeholders, or nodes in a blockchain that check a transaction need to provide an ‘OK’ for it to be considered valid. This ensures that any random node cannot pass an incorrect transaction as valid or vice-versa. Hence, tampering with information in a blockchain is impossibly tedious, and that ensures data security. This is considering that you correctly entered your information. Else, good luck editing it for countless hours. The flip side is, very few would tamper or attempt to change records maintained on such a system.

Good call, bad call

Now, mobile phones are phenomenal devices. With them, you can make calls, chat with dear ones, book cabs, restaurant tables and flight tickets. But, you also get burdened with spam calls — “Sir, credit card?”; “Madam, do you want a new SIM from Vodafone?” (Ahem, no!). That is where tech giants such as IBM and Tech Mahindra are leveraging blockchain to stop spam calls. The companies are working with the Telecom Regulatory Authority of India (TRAI) and telecom service providers to stop spammers in their tracks. 

When you approach your service provider to stop the spam calls, the user is told to activate the Do Not Disturb (DND) service. Your request is recorded on the National Customer Preference Register (NCPR) maintained by the TRAI, and that’s that. No more spam calls or messages. But, say for instance, you have given your number out to an agency willingly for some information you need, it then has the right to contact you even if you have activated DND. The three nodes in the blockchain — you, your service provider, and the agencies — are in the loop about receiving, approving and sending information respectively.

In case you get spam messages despite activating the DND, the fault can be traced back to the service provider by the TRAI. If it is found guilty, the service provider will be slapped with a fine for allowing spam messages to reach its customers. Blockchain is not just making consumers’ lives easier by eliminating spam calls, but Tech Mahindra is also leveraging the technology to streamline processes in the banking and finance industry, manufacturing, and even maintaining land records. In fact, one of the company’s major projects is taking shape in the state of Telangana. 

Smart contracts 

The idea is to prevent officials in the tehsil office from tampering with legitimate land records. It’s an area which sees a lot of fraud as technology hasn’t been utilized effectively. In places where technology has been implemented, the records are partially present on multiple systems. This makes records vulnerable to manipulation. 

The government of Telangana is also utilising blockchain to regularise the chit fund industry. For this, ChitMonks, a start-up incubated by an accelerator called T-Hub in Hyderabad, is bringing chit funds onto a blockchain network in an attempt to prevent fraudulent transactions.

Vehicle life-cycle management is another application of blockchain that Telangana and Tech Mahindra are working on. Consider a vehicle that has changed hands. In a hit-and-run case, the original owner gets caught due to improper paperwork when the new owner is the culprit. In such cases, a blockchain registry allows you to trace every bit of paperwork, from the time the vehicle leaves the showroom to the time it hits the junkyard. The government has developed a facility called Vahan, which provides the complete history of a vehicle using its registration number.  

However, Dhuddu points out, “If the information about the vehicle itself is incomplete, the database is junk. It’s here that the government wants to change practices about record-keeping when it comes to vehicle registration in the state.” 

Besides spearheading Tech Mahindra’s blockchain operations, Dhuddu is an advisor on blockchain technology at IIM Ahmedabad. He shares how the premier management institute is planning guidelines for peer-to-peer energy trading, an initiative to streamline the state government’s rooftop policies.

The policy incentivises installation of rooftop solar panels at homes. This often leads to generation of excess power, which the government wants you to sell to the state electricity board. Sadly, the electricity board does not buy power from individuals, which leads to energy wastage. But why is there such a bottleneck? Dhuddu explains, “Current government policy mandates that only one megawatt and upwards can be sourced from a marketplace (Open Market Access); in this case, a local community or a residential complex. This is a large quantity of electricity for the residential segment to generate.” 

The new system can do without the state electricity boards. “The Department of Science and Technology and IIM-A’s blockchain wing wants to come up with a framework wherein the excess electricity can be shared in a neighbourhood. This system will bypass the state electricity board using smart grids,” says Dhuddu.

These grids will use electricity meters connected to the internet on a blockchain network, forming an Internet of Things (IoT). Presently, it is illegal to sell electricity to your neighbour. However, such archaic systems are a major impediment to a future where renewable energy can solve issues such as charging infrastructure for electric vehicles. The guidelines are expected to be released by the end of 2020.

Calling film buffs

One fine weekend in 2016, Nitin Narkhede, former vice president at Mphasis, and his wife were flipping through their DVD collection. That’s when Narkhede thought: How do you legally watch a first-day, first-show film without going to the theatre? Mphasis used blockchain tech in banking, financial services and insurance (BFSI) space to help reduce cost of operations, and Narkhede was the one to initiate the company’s Blockchain Centre of Excellence. Because of his love for films, extending the technology to the entertainment industry came naturally to him.

Narkhede realised that blockchain’s inherent security and transparency made it the perfect means to connect film producers directly with their audience. “If we are able to reconcile every transaction that was conducted on a film or artwork, we could be able to solve a real-world problem,” says Narkhede. This was the idea behind MinersINC that Narkhede incorporated in October 2017 with Deepak Jayaram.

There are three prime stakeholders in MinersINC: consumer, producer and the taxman. But what makes the platform any different from Netflix or over-the-top (OTT) service? Instead of relying on readily marketable content, MinersINC makes viewers a stakeholder in promoting content. It currently hosts about 220 films which include critically acclaimed movies such as Becoming Bond, Fish Tank and Glory. None of these had premiered in India.

Narkhede says that the producers he has onboarded from over 22 countries consider his platform a gateway to an erstwhile inaccessible Indian audience. “They know that their content is secured by blockchain, piracy is not possible, and they can monitor every transaction related to their film in India.”

Narkhede is confident that this transparency will lead to more national and international producers exhibiting their content here. It already has the confidence of ace filmmaker Anurag Kashyap; he is MinersINC’s industry mentor and helps the start-up curate films. The platform doesn’t see itself as a competitor to Amazon Prime or Netflix. Instead, it wants to partner with OTT platforms down the line and integrate the entertainment industry into a freer, more transparent ecosystem. The end goal is to promote quality content that isn’t yet mainstream.  

Narkhede is targeting 100,000 users with his app-based video on demand (VOD) service. The movies are initially priced at $1 per view. Once it starts screening, the platform’s artificial intelligence engine measures demand and popularity of every movie, and adjusts the price accordingly. Further, a user even has the option to be a distributor for the movie. Users receive credit points for promoting their viewed content on the app’s community feed which they can accumulate to watch their next film for free, or at a discount. MinersINC is in a pre-revenue, beta-testing phase and has raised an undisclosed amount via an angel funding round from VC Bothra, a Singapore-based investor.  

Building blocks

The stratospheric rise of the internet and the mobile phone has put tech companies into overdrive. They are ‘over-preparing’ for the next big technological paradigm shift — which could very well be blockchain. Unfortunately for them, their associates are playing catch-up.

Vivek Malhotra Co-founder, 4TiGO

Take 4TiGO for example. The Bengaluru-based logistics start-up grabbed the spotlight when it bagged a combined $10 million from Accel and Infosys co-founder, Nandan Nilekani. Since then, co-founders Vivek Malhotra and Anjani Mandal, have steadily made their venture blockchain-ready. However, the start-up is not yet in boast mode. Instead, it calls full truckload (FTL), long-haul logistics its core competence. Malhotra explains the approach, “The level of technology penetration is different across stakeholders. There are some at the lowest level of the pyramid that still contribute to the value chain. When one talks about blockchain in global logistics, you are talking more about large-enterprise stakeholders and sophisticated service providers.” He adds, “In FTL, the access to technology and affordability is very different. It will be a while before these solutions cascade all the way through.”

The company claims to maintain complete transparency and security at every level of its operations and complete traceability for all its contracts. However, when it comes to IoT devices, integrating the sourced goods with the information flow, you need all the actors working at par, technologically. Some of the stakeholders may be tech-savvy and adopt such agile solutions. At times, a transporter may still want a hard copy of the contract. The aim now for Malhotra is to simplify the technology enough for every transporter to participate in an all-digital transaction, and make the information and monetary flow seamless.  

Jitan Chandnani Blockchain engagement leader, IBMAs ambitious as it may sound, Narkhede predicts every major business will migrate to blockchain-based systems. “Back in 2016, most industries were scratching their heads over what blockchain entailed. Was it an application, a network, was the ‘B’ big or small, and so on,” he says. Fast-forward to present day and the technology has been adopted, tinkered with, and even integrated with AI and IoT systems.

Constraints though are plenty in bringing industrial processes on to a blockchain infrastructure. Jitan Chandnani, blockchain offerings and engagement leader, IBM India and South Asia, counts lack of awareness as among the prime bottlenecks with blockchain implementation. He says, “There is a lack of clarity among individuals on the distinction between concepts including public/private blockchains, smart contracts, and cryptocurrency among others. Another misconception is that the regulatory environment in India does not support the use of blockchain.” Regulators have only restricted the use of cryptocurrencies, not of permissioned blockchains for transaction processing and traceability. Case in point, TRAI’s use of the tech to prevent spam calls.

Ready, set, wait

However, these are minor issues compared to some of the challenges of the technology. Remember the concept of mining? The tenet behind that is to allow anonymous, unbiased entities to verify records on a DLT or blockchain platform.

Thus, the transactions cannot be manipulated in favour of, or against any party involved. But why would anyone come on to a DLT platform and verify a transaction? As mentioned earlier, the reward comes in the form of cryptocurrency. If the platform being used is blockchain, you pay the miners in Bitcoins, and if it is another platform such as Ethereum, you pay in Ether.

But, this would lead to several issues when the volume of transactions attains scale. Say, a bank adopts DLT platform to boost the safety of its transactions. Given the volume of transactions in financial institutions, a bank’s mining bills will be a huge expense. 

Subbu Jois Co-founder, Aurigraph.ioThere’s more — latency is another issue that could act as a speedbreaker for blockchain technology. Subbu Jois, co-founder of Aurigraph.io, elaborates with an example,“Let’s assume you transferred 100 to your friend at 4:30 pm on a blockchain platform. The amount gets debited from your account. Now, the first miner verifies your transaction at, suppose 4:50 pm. Subsequently, multiple miners verify your transaction with your friend and the record gets posted on to the public ledger. The catch here is: the ledger recognises the time of transaction as 4:50 pm.” 

The 20-minute lag might probably not be an issue when you’re ordering pizza. However, picture an EMI that’s due for midnight of December 31. You make the transaction just in time, but for some reason, it gets mined 20 minutes post mid-night. As per the ledger, you have delayed your payment, and the bank is going to levy a late payment fee. 

Jois explains, “Around 2017, Ethereum came up with a concept of paying ‘gas’ or an Ether for every transaction you make on its platform. If you put in more gas, the validation happens faster.” Gas here is the cryptocurrency a DLT rewards its miners with.

So, if a bank or any enterprise functioning on Ethereum or blockchain systems wants to cut down the lag-time explained in the preceding paragraphs, it needs to shell out more, over and above the cost of mining. 

There is a way around it. As Jois expounds, “IBM and Linux have come up with the concept of Hyperledger, which the tech giants are championing as their blockchain platform.” It’s centralised, but the original data cannot be tampered with. In a Hyperledger, any of the people on the network can enter or alter data and it is only recorded after a central authority clears it. 

This is counter-intuitive to a blockchain platform, which is the harbinger to the age of decentralised information storage. However, the Hyperledger technology has a strong use case for organisations that want control over their information. The Coffee Board’s marketplace is built in an Ethereum ecosystem. The platform is in a ‘development instance’, wherein the Board doesn’t need to pay for testing the transactions conducted on it. 

Once the platform goes live, Garg says, “The money that you pay miners per transaction is very low. An Ether trades for roughly $250, and as per Eka’s calculations, each transaction will cost to the tune of 10-8 of an Ether (approximately 0.000175).” As a result, Garg isn’t worried about the cost to the Coffee Board. Even if all of the 350,000 coffee growers get on the platform, it would cost the Board under 500,000 a year to maintain it. 

He continues, “The other option is to move to a Hyperledger setup which can be run on an Amazon Web Server. Then, it becomes similar to a market that is regulated and run by the Coffee Board. Once the trial phase is over and the government doesn’t want to get into cryptocurrencies, we have entities across the globe who can maintain the Board’s Ethereum wallet.” That is, the Board could pay Eka’s centres located around the world in Indian Rupee, who will then pay the miners in the cryptocurrency. 

The Board could also run the system on a nominal fee it charges the farmers for use of the technology (for now, 200 per transaction). Garg believes that once the marketplace has hit critical mass, the fee will cover the mining expenses, perhaps even generate profit. 

Garg may have developed the technology. However, he maintains that blockchain isn’t some magic pill that will make all else defunct. “Relational databases (Microsoft SQL Server, Oracle Database, MySQL) aren’t dead, and will remain useful where you need to store large amounts of data such as sales leads.” While Eka is considering Ethereum and even Hyperledger, Tech Mahindra has taken a different approach to the problem. Dhuddu explains, “Tech Mahindra is using Private Permissioned Blockchain protocol (similar to Hyperledger). There is no concept of mining.” In a private blockchain, you need an invite from a central authority to add/alter data.

Tech Mahindra believes the technology will be advantageous to telecom service providers and users alike. “It will help telcos prevent financial crime from being perpetrated by unregistered telemarketers who send spurious messages to subscribers regarding unknown stocks.” It will also help telcos to avoid hefty fines imposed by the TRAI for non-compliance by controlling unsolicited commercial messages and calls. Telcos can look at this as a revenue generation opportunity too. They can offer broad-based ‘consent as a service’ to their subscribers. They can then control who they are sharing their numbers and data with. Since consumers can truly control texts and calls that they receive, they may be willing to pay for this pre-screening service.  

Speculation aside, the truth is that presently, industry professionals are barely beginning to grasp blockchain’s potential and limitation. Blockchain has historically been perceived as the preserve of cryptocurrencies. While Jaspreet Bindra, ex-chief digital officer, Mahindra Group, pointed out at TEDxChennai, “Blockchain is not spelt B-I-T-C-O-I-N, blockchain in its current form cannot be separated from cryptocurrency. That’s because the latter are the incentive for those acting as nodes. And governments clearly won’t give up their status as a monopoly currency supplier. Hence, the question is where will the use of blockchain be allowed and how?

Blockchain claims to be a secure mode of transaction monitoring. However, higher level of security can be achieved using advanced versions of available security software, that too without the hassle of mining. Yes, banks are enthusiastically testing the technology to assess if it helps reduce fraud but consider this. Disintermediation and transparency are central tenets of blockchain. Banking by design is a tightly regulated sector in India. As a result, it will lose big if disintermediation enters the picture. As for transparency, in today’s digital age, it’s hardly a challenge for institutions to chase a paper trail where needed.

The truth is, unless governments adopt blockchain, the technology will remain a buzzword and little else. That is because the loop has to be closed through cryptocurrency which governments are opposed to. It is an oversimplification to say that trust is distributed. In a blockchain or distributed ledgers, the trust is not distributed. It simply gets transferred from established systems to an unfamiliar one.

Crucially, there are no successful use cases to highlight; existing examples are pilots including the Coffee Board experiment. In conclusion, if governments continue to oppose cryptocurrency, blockchain might at best end up as an alternative technology to improve efficient record-keeping, powered by conventional payment systems.

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