Shanmugam Ias Academy

Context

Recently, India has made several efforts to become a digital society by building a large citizen-scale digital public infrastructure with a significant push from the government.

What is Public Digital Infrastructure?

About:

It refers to digital solutions that enable basic functions essential for public and private service delivery, i.e., collaboration, commerce, and governance.

Indian Initiatives:

The Government of India and the Reserve Bank of India (RBI) have been promoting simplification and transparency to increase the speed of interaction between individuals, markets, and the government.
With the commencement of the Digital India mission in 2015, the payments, provident fund, passports, driving licenses, crossing tolls, and checking land records all have been transformed with modular applications built on Aadhaar, Unified Payments Interface(UPI), and the India Stack.

Limitations:

Not Interconnected: The existing different digital infrastructures are not interconnected as a design.
Not Interoperable: There is need for a technical integration is required to make them conversant and interoperable.
Inefficient: Today, information travels across multiple systems, and they mostly rely on limited private databases, which makes it more complex, as more network grows it increases the cost and creates inefficiency.

What are Other Efficient Digital Systems?

Web 3.0:

About:

Web 3.0 is a decentralized internet to be run on blockchain technology, which would be different from the versions in use, Web 1.0 and Web 2.0.
The internet in Web 1.0 was mostly static web pages where users would go to a website and then read and interact with the static information.
In Web 2.0 users can create content - primarily, a social media kind of interaction.
In Web 3.0, users will have ownership stakes in platforms and applications unlike now where tech giants control the platforms.

Significance:

The Web 3.0 architecture establishes a new version of the Internet protocol incorporating token-based economics, transparency, and decentralization.
It is not only the cryptocurrencies but also NFTs or non-fungible tokens, representing physical assets or digital twins.
A user can access all ecosystem benefits using a distributed token where they can show proof of ownership, tax history, and payment instruments.
The blockchain records could be visible, compiled, and audited by the regulators in real time.

Blockchain:

About:

A blockchain is a distributed database or ledger that is shared among the nodes of a computer network.
As a database, a blockchain stores information electronically in digital format.
Blockchains are best known for their crucial role in cryptocurrency systems, such as Bitcoin, for maintaining a secure and decentralized record of transactions.
The innovation of a blockchain is that it guarantees the fidelity and security of a record of data and generates trust without the need for a trusted third party.

Global Adoption:

Estonia, the world’s blockchain capital, is using blockchain infrastructure to verify and process all e-governance services offered to the general public.
China, launched BSN (Blockchain-based Service Network) to deploy blockchain applications in the cloud at a streamlined rate.
In Britain, the Centre for Digital Built Britain is running the National Digital Twin program (NDTp) to foster collaboration between owners and developers of digital twins in the built environment.
The Brazilian government recently launched the Brazilian Blockchain Network to bring participating institutions in governance and the technological system that facilitates blockchain adoption in solutions for the public good.

Applications:

They are well-established decentralized finance (DeFi) platforms that rely on blockchain infrastructure.
These platforms have a multi-country presence and usage and do not come under any particular regulatory ambit.
DeFi allows users to borrow and lend cryptocurrencies on a short-term basis at algorithmically determined rates.
DeFi users are rewarded with tokens that confer governance rights, which are analogous to seats on the protocol’s board.

For example:

The blockchain provider Solana launched a prototype smartphone with hardware and security that can support decentralized apps for people interested in crypto wallets, Web3, and NFTs.

How can India Benefit from Blockchain?

Create Interoperability:

The Indian digital community, including fintech, academia, think tanks, and institutions, should focus on supporting research in standards, interoperability, and efficient handling of current known issues with the distributed technologies,
e.g., scalability and performance, consensus mechanisms, and auto-detection of vulnerabilities.

Regulation:

At the present time, blockchain models are partially permitted or are public like Ethereum which is unregulated and relies on intrinsic standards.

Creating National Ecosystem on Blockchain:

The ideal solution to solving most of the known issues of decentralized technologies lies in the middle path, i.e., a national platform operating at L1(layer-1) that interconnects blockchains (both permissioned and public), application providers (decentralized applications — dApps — and existing), token service providers, and infrastructure managers.
Together they can form a reliable and efficient network for the Indian digital economy.
The ecosystem can further deploy relevant and purpose-specific applications at L2(Layer-2) for very little cost and effort.
Further, all chains on this public infrastructure will communicate with each other, thus replicating the communication (and avoiding the need for complex integrations with each other) on the Internet for existing Indian digital infrastructures.

Current Affairs