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TABLE OF CONTENTS

01 02 03 04
Introduction Blockchain - Some Growing risk and the Bitcoin and the
FAQs need for blockchain blockchain

05 06 07 08
Ethereum: The new The birth of Enterprise blockchain Global trends in
generation platform enterprise blockchain applications - a closer government and
to catalyse and spur look enterprise application
innovation globally for blockchain

09 10 11 12
Global activity in Blockchain incubation Blockchain business Limitations and
blockchain technology - global scenario incubation in India - risks of blockchain
paradigm shift needed ecosystem

13 14 15
Blockchain triggered Recommendations ANNEXURE 1:
opportunity for India Prominent Indian
blockchain startups

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 INTRODUCTION
The birth of Bitcoin on January 3, 2009, marked a
landmark event for a world reeling under the global
financial crisis following the collapse of Lehman
Brothers in September 2008.
US-based financial services firm Lehman Brothers
filed for bankruptcy on September 15, 2008, drawing
attention to the reckless lending by US banking
executives. The subprime mortgage crisis threatened
the global financial system, and had governments
across the world indulging in massive bailouts and
fiscal stimuli to support the global financial system.
Governments lost credibility, currencies became
volatile, and the banking system was in turmoil.
Distrust for the banking system among citizens was at
its peak when a whitepaper - ‘Bitcoin: A Peer-to-Peer
Electronic Cash System’ (https://bitcoin.org/bitcoin.
pdf ) - supposedly written by the hitherto unknown
Satoshi Nakamoto was published in October 2009
in a cryptography mailing list. Nakamoto outlined a
consensus network that enabled a new form of digital
money, and a complete payments system.
Bitcoin offered a proof of concept with a solution
to the ‘Double Spending’ problem, also known as
the Byzantine Generals’ Problem, which meant one
could create and spend a unit of a digital asset on the
internet, without the fear of duplication, in a
fool-proof manner.
Bitcoin remarkably combined programming,
mathematics, cryptography and economics to offer
a secure and versatile system that can create a digital
asset and transfer its ownership in an irrefutable
manner between peers. Impressed by this invention,
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Eric Schmidt, then CEO of Google, had famously
said, “Bitcoin is a remarkable cryptographic
achievement, and the ability to create something that
is not duplicable in the digital world has enormous
value.”
The framework of this system is called blockchain,
and ‘Bitcoin’ came to be known as its first application
in the form of a cryptocurrency that represents a
value, which can be transferred from one entity to
another in the form of money, without the need of
any trusted central party such as the Reserve Bank of
India (RBI), or any government.
Bitcoin offered a safe and secure system that allowed
users to transfer assets in a way that everyone
knows a transaction has taken place by employing a
distributed ledger system with transferable ownership
of slots.
By mining digital currency units through a
programmatic process, and limiting its supply with
a pre-determined mathematical calculation, Bitcoin
addressed the issue of ‘inflation that was recklessly
fuelled by the central banks and governments’.
Valued of $0.00001 per unit 10 years ago, a Bitcoin
today is worth more than $6500, and its total market
capitalisation is around $120 billion. There are over
1.7 million Bitcoins in circulation, and several other
blockchain technology-based cryptocurrencies like
Ethereum, Litecoin, Dash, Zcash, and Monero, with
varying properties, are in circulation offering fast and
low-cost money transfer and payment systems, free
from centralised regulations. Merchants and leading
companies across the world have started settling
 invoices in Bitcoin, and the Blockchain technology
Bitcoin represents, is considered the biggest invention
after the internet itself.
Today, bitcoins worth over $100 billion are in
circulation, and those worth billions of dollars are
exchanged between persons and organisations
without any centralised organisation. Satoshi
Nakamoto, whose identity is still unknown, owns
over 9 lakh bitcoins mined during the early stages,
which are valued at over $6 billion as of end July
2018. There has been a lot of speculation regarding
the true identity of Satoshi Nakamoto. The birth of
bitcoin on January 3, a day that coincided with the
date of incorporation of Apple Computer Inc in 1977,
gave rise to speculation that Steve Jobs may be a
likely suspect behind the launch of this path-breaking
technology.
A deeper analysis regarding the identity of Satoshi
Blockchain can drive over $500 billion in business value and $50 billion - $ 100 billion in total
addressable market for technology by 2026
Business value created due to blockchain
Nakamoto has been attempted in the book Blockchain
- The Untold Story.
The lack of regulation of these cryptocurrencies
opened up its usage to people with criminal
intentions for wrongful purposes, clouding the
credibility of bitcoin. Dark web companies like Silk
Road reportedly conducted millions of dollars’ worth
of transactions for underground activities like money
laundering and narcotics until its founder Ulbricht
was arrested in 2013, and over 144,000 bitcoins were
seized.
Like an ‘electric bulb’ is an instance of ‘electricity’,
‘cryptocurrency’, like bitcoin, is one of the instances
of Blockchain. At its core, Blockchain represented
an open decentralised ledger recording transactions
between participants transacting peer-to-peer
without the need of a central authority in a trusted
and transparent manner. This results in a dramatic
Total addressable market for technology
5
 reduction in the cost of conducting transactions due
to elimination of middlemen.
The launch of Ethereum by Vitalik Buterin in
2015 brought in the possibility of leveraging this
technology for a number of real-life applications by
automatically processing transactions through ‘smart
contracts’. Unlike Bitcoin, which recorded currency
transactions, Ethereum can record other assets such
as loans, agreements and contracts. This opened up
the potential of Blockchain technology to impact
almost any industry, leading to a surge in investments
by large global companies and funds, exploring its
applications in finance, supply chain, insurance,
political elections, contract management, real estate,
health care, and social media, to name a few.
The success of Ethereum in creating decentralised
autonomous organisations (DAOs) along with
token-enabled speedy crowdfunding by creating
autonomously run versions of real life centralised
applications has resulted in the launch of similar
public Blockchain platforms like EOS, NEO, NEM,
IOTA, Lisk, Ark etc, that power many versatile
applications.
Enterprise applications powered by Blockchain
applications without the involvement of any platform
specific cryptoassets enabled organisations to
drastically improve efficiencies, automate processes
and eliminate non-value adding middlemen.
This enabled programme-powered trust, security,
accountability and authenticity. IBM, Linux and a
number of leading organisations collaborated to
launch the Hyperledger Framework and offered
platforms like Fabric, Sawtooth, Iroha etc, to power
enterprise applications. R3 Corda, JP Mogan’s
Quorum, Hydrachain, and Auxledger offer versatile
options to governments and organisations to adapt
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Blockchain technology for various sectors.
With a wide variety of cryptoassets and Blockchains
coming up for various requirements, the need for
interoperability of Blockchains is gaining momentum,
and platforms like Cosmos, Polkadot and Microsoft’s
COCO framework are working to allow different
Blockchain protocols to integrate and collaborate,
enabling enterprises across segments to leverage the
power of distributed ledger technologies.
Governments across the world, and leading
technology companies are collaborating to leverage
the power of Blockchain to improve transparency and
efficiencies, and increase speed of transactions and
productivity.
Globally, Blockchain is gaining significant traction,
and the economic gains that are projected from
the adoption of Blockchain technology are deemed
enormous as per Keynote Strategy Research.
In India, even though the government’s attitude
towards cryptocurrencies is lukewarm at best,
the same definitely doesn’t extend to Blockchain
technology. In fact, the transparency that Blockchain
provides would be well received in a country
like India where over 80 percent of the working
population operates within an informal economy.
Andhra Pradesh (AP) announced several steps to
promote the use of Blockchain across governmental
departments for secured storage of information and
immutable recording of transactions across domains
like land records, vehicle registrations, driving
license records, educational certificates, electronic
health records, etc. by digitising and placing them
online to prevent tampering. The AP government
also announced a programme to boost support to
blockchain startups at the Fintech Valley Vizag, and
has created the largest repository of used cases for
global startups to test their solutions.
Similar steps are being undertaken by various state
governments as blockchain technology is being
leveraged to improve transparency, eliminate
corruption, and increase efficiencies.
Indian private sector enterprises and the government
are preparing for disruption ahead, by embracing
cutting-edge technologies and challenging the status
quo. A more active stance with a concrete action plan
has to be undertaken by the government to leverage
the technology, and keep pace with the rest of the
world.
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 Blockchain - some FAQs
What is Blockchain?
A blockchain is a growing list of records, called
blocks, that are linked using cryptography.
Blockchains that are readable by the public are widely
used by cryptocurrencies, and private blockchains
have been proposed for business use.
Bitcoin Blockchain
Cryptocurrency-based blockchains like Bitcoin
define blockchain as a linked list of blocks containing
a full copy of the Bitcoin ledger, giving the UTXOs
(Unspent Transaction Output) in the form of a crypto
currency unit named Bitcoin or its fraction
(1 Bitcoin = 1 million Satoshis) of each of the
addresses mapped in groups to respective wallets.
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Each address has a public key and a password
protected private key. The public key is used to check
the details of a transaction, and private keys allow a
holder to spend the UTXO units associated with the
respective public key.
The Blockchain is thus a store of, and a means to,
transfer immense value, underlining the importance
of keeping the password (pass phrase of wallet and the
private key for every address) a closely guarded secret.
i) Bitcoin and Ethereum are examples of Public
Blockchains
In a public Blockchain, anyone can read, send
transactions, and participate in the consensus process.
It is considered fully decentralised and transparent,
without the intervention of a central authority.
A Blockchain with Turing complete state machine
(Smart contract + Cryptocurrency), Ethereum, unlike
Bitcoin core is known as ‘World Computer’ and is
capable of processing a wide range of applications. It
not only stores the transactions, but also the updated
values of each address.
Ethereum has made it possible for any type of
business to be transacted peer-to-peer, and in
a sustainable manner through the concept of
‘smart contracts’ and decentralised autonomous
organisations where decisions are taken with little
human intervention.
ii) Enterprise Blockchains (Private and
Permissioned)
In the case of enterprise applications like Hyperledger,
Multichain, Quorum, and Corda etc, Blockchain is
defined by IBM as ‘A Peer to Peer Distributed Ledger
Technology’ for a new generation of transactional
applications that vastly improve the security,
transparency and accountability while streamlining
organisational processes. Here, the ledger is shared
between identified, transacting participants to
provide transparency, accountability and security of
transactions.
In a permissioned Blockchain, selected and
authorised participants take part in the consensus
process, and identified participants with valid
identities can read and send transactions.
In a private Blockchain, a centralised and trusted
authority is in charge of granting approvals and
allowing access to the ledger for authorised
participants.
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 What are the building blocks of a Bitcoin
Blockchain?
I) Hash function:
A hash function produces a unique output for a
given input, which cannot be replicated. Hash of any
information is treated as the unique and indisputable
representation of the information. Hashes form the
heart of Blockchain as the blocks are represented by
the hash of the information, and are chained together
as a linked list of chronologically mined and validated
blocks.
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II) Merkle root (Root of roots):
While a hash is a unique number derived out of the
base number, the Merkle root is derived from hashing
pairs of transactions together until only one element
is left. Since the hash was unique, a change in any
transaction would result in a change in the Merkle
root, which would be easily caught.
III) Private key and Public Key:
The Private Key and Public Key are used to encrypt
information using mathematical algorithms,
rendering decryption virtually impossible without
these keys. Computationally, it is similar to the
factoring of prime numbers, which is a simple,
mathematical procedure. However, decomposing
the result is difficult without prior knowledge of its
factors.
IV) Digital Signatures:
Digital signatures are a unique aspect of Blockchain
transactions, and provide a layer of security to carry
out and validate genuine transactions. A digital
signature is a mathematical scheme to present the
authenticity of digital messages or documents. A valid
digital signature gives the recipient reason to believe
that the message was created by a known sender
(authentication), and the sender cannot deny having
sent the message (non-repudiation), or that the
message was not altered in transit.
V) Consensus Mechanisms (POW, POS, DPOS,
PBFT etc.):
The mechanism by which members come to an
agreement about the authenticity of a transaction is
referred to as the ‘Consensus Mechanism’. Consensus
formation ensures the involvement of multiple
validators in a systematic and predetermined manner,
ensuring decentralisation and objectivity of decision-
making. It ensures implementation of the key features
of the Blockchain platform like increased trust,
immutability of the transactions, and maintenance of
integrity of the platform.
The consensus mechanism is the soul of the
Blockchain platform, and has to help members in
reaching the right decision all the time. The sanctity
of the Blockchain application depends on the strength
and reliability of the consensus mechanism. The
consensus mechanism followed by Bitcoin, and the
earlier version of the public Ethereum client is known
as ‘Proof of Work (POW)’ where miners or validators
compete with each other, and burn valuable resources
like computing power and enormous amounts of
electricity to guess the right Nonce (number used
only once) and create a targeted hash to win the race
to create a block.
How do you represent a simple Bitcoin Blockchain?
Bitcoin Blockchain consists of a series of hash-
linked, time-stamped blocks embedding details of
transactions in a unique manner. These blocks are
available to everyone, which creates a distributed
ledger.
Who are the participants of the Blockchain?
In Bitcoin and Ethereum, transactions take place
between peers, identified through their public keys/
addresses, or pseudonyms, which are difficult to trace
to real-world entities unless an enormous effort is
made on tracking the IP address.
In Ethereum, the founders are part of a foundation
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 that has a small role in the functioning of the
network, transacted through pseudonymous parties.
In the case of enterprise Blockchain, transactions are
conducted between untrusting peers with established
identity and credentials, validated through a member
identification methodology.
Bitcoin and Ethereum public Blockchain-based
businesses rely on a cryptoasset-based mechanism to
incentivise economic and value creation activity. In
the case of enterprise Blockchain, promoted and run
by an established member, or member consortiums,
the incentive arises from the various benefits
derived from a Blockchain-based approach that
vastly increases the accountability, transparency and
efficiency of operations while streamlining business
processes.
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What does a Bitcoin Blockchain’s Block contain?
Who owns Bitcoin Blockchain? What is the
ownership structure in other Blockchains and
applications?
Bitcoin Blockchain is a publicly-owned blockchain,
and is open for anyone to transact, download, store
and mine. It works like a decentralised autonomous
organisation without an owner group. Any decisions
regarding the upgradation of the software etc, are
uploaded in the form of suggestions in public portals
like GitHub, and voted upon by the community.
Major proposals need to be adopted by over 95
percent votes for inclusion.
While upgradations in the core network are called
‘Soft fork’, new blockchains arising out of the core
blockchain following disagreements in the proposed
implementation leading to breaking away of a set
of miners to start a new blockchain with different
features is called ‘Hard fork’.
Bitcoin cash and Bitcoin Gold are new
cryptocurrencies formed out of such hard forks.
In case of Ethereum, while the public blockchain
operates like a decentralised application, or DAPP,
which is overseen from a distance by the Ethereum
foundation, for the private blockchain version, as
in the case of Hyperledger Fabric, Corda, Quorum,
and Multichain etc, the governance is done by
an identified promoter in case of a single-party-
promoted blockchain, and by a quorum represented
by a promoter group in case of consortium
blockchains.
In decentralised autonomous organisations, or DAOs,
created with public blockchains as the backend, the
decision making is driven programmatically, while
the promoters oversee the governance through a
pre-declared code of conduct as per a consensus
mechanism.
How are public blockchains like Bitcoin and
Ethereum planning to scale up in view of the rapid
increase in usage?
Bitcoin and Ethereum platforms are supported by
the Bitcoin improvement proposal and Ethereum
improvement proposal, respectively. All other public
platforms are actively supported by a number of
improvement projects that are generally incentivised
by using a mechanism involving native currencies
and tokens. For Bitcoin, the proposals are listed on
GitHub, and are brought to the notice of informal
leadership bodies overseeing bitcoin.org. They are
then put to the notice of mining members to vote
on and adopt. In case of other blockchains, the
foundation or the governing body consisting of the
founders and associates oversees the implementation
of the improvement proposals.
Some of the strategies being discussed and
implemented by leading platforms to manage scale
are as follows:
• Changing the consensus algorithm. Proof of
Work - followed by Bitcoin blockchain and some
versions of Ethereum blockchain - consume huge
amount of resources to arrive at a deterministic
consensus. The Ethereum platform will soon
shift to a ‘Proof of Stake’-based consensus, which
involves negligible energy consumption.
Some new-generation public platforms use
variations of ‘POW’- and ‘POS’-based consensus
algorithms like PoET (Proof of Elapsed Time)
and DPOS (Delegated Proof of Stake) to
minimise resource utilisation and wastage.
Enterprise blockchains use energy efficient
algorithms like ‘Proof of Authority’ (POA),
Practical Byzantine Fault tolerant’ (PBFT), ‘Node
to Node’ (N2N) and their variations to arrive at a
deterministic consensus.
• To prevent blockchain bloating, external
databases linked through the InterPlanetary File
System, or IPFS, or Swarm, giant-scale databases
like BigChainDB and FlureeDB, cloud databases
like Interplanetary Database, or IPDB, as well as
decentralised storage systems like Storj, SIA etc,
are used.
• Sharding, Segwit, Sidechains etc, are some of the
concepts being used to improve the processing
power of public blockchains.
Sharding
A database shard is a horizontal partition of data
in a database or search engine. Each individual
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 partition is referred to as a shard or database
shard. Each shard is held on a separate database
server to spread the load.
Segwit (Segregated Witness consensus layer)
Bitcoin Improvement Proposal number BIP141
aimed to solve the transaction malleability
that allowed a possibility to double the spend
by changing the transaction code before
confirmation, while being mined. It was also
intended to mitigate the size-limitation problem
that reduces the Bitcoin transaction speed. It
does this by splitting the transaction into two
segments - removing the unlocking signature
What are the prominent use cases of Blockchain across the world?
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(‘witness’ data) from the original portion, and
appending it as a separate structure at the end.
Sidechains
Sidechains allow organisations to leverage
the power of the main blockchain platform
like Bitcoin by creating a pegged chain with
much more versatile features, and having
interoperability of their assets with the assets on
the main chain (bitcoins). However, sidechains
are still considered vulnerable to double spend,
and are awaiting confirmation of results from
approaches like NiPoPoW (Non-Interactive
Proofs of Proofs of Work) that could address this
issue.
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 Growing risks and the need for blockchain
Following massive data leaks through apps
running on its platform like ‘Thisismydigitallife’,
‘myPersonality’, etc. and the backlash owing to the
Cambridge Analytica case, Facebook, on May 14,
2018, announced it had suspended around 200 apps
as part of its investigation on applications that had
access to large amounts of user information.
This exposed potential privacy threats by large
centralised data aggregators that billions of global
citizens used for financial transactions and to engage
in social media.
The World Economic Forum’s Global Risks Report
2018 cited cyber-attack and data fraud as two of the
top five threats to global stability in coming years.
In fact, leading global companies including Google,
Yahoo, Facebook, and many transnational banks,
which are supposed to maintain high standards
of internet security have fallen prey to audacious
assaults.
The world is still reeling from the October 2016
attack on the DDOS (Distributed Denial of Service),
where a mere 1 lakh IoT endpoints compromised
by a botnet brought down many top internet portals
through a flood of malicious traffic. How do we avoid
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such attacks now, when the world has over 20 billion
internet connected devices, as per an IHS Survey.
Aramco, once the world’s largest company by market
capitalisation, was crippled by an attack on its
computers and network systems that tried to cripple
its oil production output. We are besieged by many
single points of failure in the form of centralised apps
that hold data on us.
While, in many cases, the motives behind cyber
warfare and attacks are economical (for example,
ransomware attacks), in many cases, the motives and
the identity of the attackers is unknown.
Ransomware was the top variety of malicious
software of 2018, found in 39 percent of malware-
related data breaches. — Verizon, 2018
The increasing risk due to ‘Single Points of Failure’
at centralised organisations, the growing threat of
cyber terrorism, and the increasing mistrust between
organiations warrants drastic solutions.
The recent instances of large scale fraudulent bank
transactions to the tune of over Rs 11,000 crore,
probably with the involvement of corrupt bank
officials in collusion customers brought to light
the urgent need to overhaul banking operations by
leveraging cutting edge technologies to eliminate
human-related errors and frauds.
We are witnessing three major trends that are coming
together to spur the development and adoption of the
latest technologies in tandem. They are:
1. Increasing tendency for decentralisation:
Decentralisation has three dimensions, namely
i) Political, ii) Administrative and iii) Logical.
Increasing scepticism about centralised control
and its potential to become the single point of
failure is a strong catalyst for subjects asserting
self-expression. Ironically, the need to trust a
central organisation has led to the proliferation
of ecommerce, and the very lack of trust in
centralised organisations, and their vulnerability
to act as single points of failure, is accelerating
the trend towards political and administrative
decentralisation. It may still be acceptable to
be logically centralised to add method to the
process.
2. Increasing availability of open source
technologies: The trend towards open source
technologies like Linux, Android operating
systems, and programming languages like Java,
PHP has spread across technological paradigms,
putting immense power in the hands of
developers to rapidly develop programmes and
applications at minimal cost.
3. Availability of cloud computing-enabled ‘pay
as you use’ services: During the early days of
the internet, for an organisation to develop any
applications, it had to invest heavily in hardware.
Now, environments such as PAAS (Platform as
a Service), IAAS (Infrastructure as a Service)
and SAAS (Software as a Service) have enabled
a large number of entrepreneurs with limited
resources to undertake application development,
and thus implement Proof of Concepts (POCs)
and launch new products and services with a low
investments.
These are catalysing the growth and adoption of new
age technologies like Blockchain at a rapid rate.
Blockchain offers a solution to manage growing risks
through a variety of features that promote security
and privacy of transactions, and personal data.
The WFP (World Food Programme) saved millions of
dollars by distributing aid to Syrian refugees directly
and cutting the middlemen. It also increased the
speed of disbursements. By leveraging Blockchain
technology, WFP saved over 98 percent of its bank
and financial charges.
Estonia, a country of around 1.3 million people,
is best known as the birth place of Skype. One of
the most digitally advanced countries in the world,
Estonia is a part of the D5 Nations - UK, South Korea,
Israel, New Zealand. Its Digital Citizen Identity card is
known to be the most advanced in the world, and the
health records of the entire population are secured by
Blockchain technology. Estonia is one of the biggest
exponents of ‘Internet of Things’ (IoT) technology,
and Estonians are securing and empowering their IoT
devices with Blockchain technology to fight malware
attacks.
With 100 percent of its population on the blockchain,
Estonia is a role model for many countries to take
advantage of this revolutionary technology.
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 Bitcoin and the blockchain
Any currency we use must have some desirable
characteristics:
1. Scarcity: There should be limited supply of
units that are represented by a common symbol
(Example - $)
2. Fungibility: Interchange ability of the unit is
represented by the same symbol.
3. Divisibility: Ability to be divided into fractional
units for varying transaction sizes.
4. Durability: The representative single unit should
be available across time periods.
5. Transferability: The units should be transferrable
from person to person into respective accounts.
In the real world, gold and the US dollar are seen as
the standard for value transfer, representing precious
metal and fiat currency, respectively.
Bitcoin successfully implemented the concept of
cryptocurrency, implying a unit of money that had
been created on the internet, and could be distributed
without the fear of double spending.
To own a bitcoin, all one needed was a computer with
an operating system and fiat currency to convert into
‘bitcoins’.
Bill Gates, the co-founder of Microsoft had once
famously said, ‘Bitcoin is better than money’.
It can be observed that Bitcoin, though it has some
limitations as against a fiat currency like the US
dollar, scores better across a range of desirable
characteristics of a currency.
No wonder then that Bill Gates went on to remark
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that ‘Bitcoin is exciting because it shows how cheap
it can be. Bitcoin is better than currency in that you
don’t have to be physically in the same place and of
course, for large transactions, currency can get pretty
inconvenient.’
Bitcoin is the first implementation of Blockchain
technology, and consists of six primary elements:
• An updated distributed ledger replicated across
peers undertaking transactions through a
platform consisting Unspent Outputs (UTXO)
in chronological order
• A network of nodes verifying and propagating
transactions generated by participants
• A group of miners dispersed across the world to
mine transactions to ensure their authenticity,
and maintain the integrity of the Blockchain
using automated execution of the protocol
defined by the consensus algorithm called ‘Proof
of Work’. ‘Proof of Work’ represents the amount
of work that miners undertake utilising their
computing power and electricity spent, to be
eligible for block rewards in the form of newly-
mined coins as per a predefined formula
• Blockchain wallets used by participants to initiate
transactions, and store value in the form of
UTXOs or unspent transaction outputs measured
in the number of bitcoins
• The value that is exchanged across the platform
- ‘bitcoin’ or its fraction - which is treated as a
 cryptocurrency with all the properties associated
with a fiat currency, except the unitised physical
representation and regulatory approvals
• Exchanges that facilitate buying and selling of
cryptocurrencies and derived products known
as tokens among themselves using wallets, and
conversion of the same into fiat currencies in a
dynamic manner
Bitcoin has proved that billions of dollars’ worth of
value can be exchanged across the world from one
person to another without the need of a trusted
central party - a bank or a government. As on August
7, 2009, there are over 17 million bitcoins with an
approximate total value of over $120 billion at a unit
price of over $7000.
The success of Bitcoin led to the launch of a number
of variations of alternate blockchains for a variety of
purposes. A majority of them are cryptocurrencies,
with different properties in terms of privacy,
speed of execution, and consensus mechanism for
transaction validation. The most prominent variation
19
 was proposed in the form of Ethereum Blockchain
platform by Vitalik Buterin and his team at Ethereum
foundation.
Properties of Blockchain:
• Peer to peer:
Blockchain enables peer-to-peer transactions
across parties that are unknown to each other.
Unlike in current methods, where trusted
intermediaries or central authorities help
alleviate third-party risk, peers in the Blockchain
can transact through an automated programme
that guarantees correct transactions. This is the
decentralised approach to executing transactions.
• Secure transactions:
Transactions on the Blockchain take place
between parties verified and authenticated
through cryptographically-secured keys, and
digital signatures. Further, transactions are
approved and authorised by a tested democratic
process known as ‘Consensus Mechanism’.
• Trust between transacting parties without
intermediaries:
Role of non-value adding middlemen is
minimised as their role is automated to a large
extent with programmed intervention through
smart contracts/ chaincode, as the case may
be, increasing execution speed and reducing
transaction costs.
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• Immutable data:
The blockchain contains replicated transactional
data appended to the existing database in the
form of serially numbered and timestamped
blocks after being approved by the constituents
of the blockchain as per a standardised and
fool-proof protocol. Hence, to change the data
recorded in the system, one has to get approval
from all parties, and even after that, the new
data is recorded through approval of updating
transactions. Once a transaction is approved
and data recorded, it is considered immutable.
All changes thus become identifiable in the
form of updating transactions along with their
corresponding track record. This is how data in
the Blockchain is considered tamper proof.
• Auditability:
The data in blockchain is stored in the form of
hashes and Merkle roots of sets of data. In case
any data is changed, the hash of the data, and
that of the overall set of data (stored in the form
of a Merkle root or combined hash of hashes)
changes. Hence, blockchain can be used to audit
data to throw out any unapproved tampering.
• Paperless:
Blockchain deals with digital identities of assets,
their owners, and the transactions that result in
their respective state, like change of ownership
etc. All these are programmatically carried out
through automatised processes resulting in
paperless transactions.
ETHEREUM: the new generation
platformto catalyse innovation and spur
enterptreneurship globally
The next major development in the history of
blockchain was the launch of public blockchain
Ethereum, which allowed Turing complete
programmes to be run on its blockchain, in
addition to having the salient features of the Bitcoin
Blockchain. Ethereum was proposed in late 2013
by Vitalik Buterin, a cryptocurrency researcher and
programmer. Its development was funded by an
online crowd sale between July and August 2014. The
system went live on July 30, 2015, with 11.9 million
coins ‘pre-mined’ for the crowd sale.
Ethereum facilitated the launch of many P2P
organisations that can conduct operations over
the internet without the fear of counterparty trust
issues through the use of applications named ‘Smart
Contracts’.
Ethereum revolutionised the concept of blockchain
by allowing the use of high-level programming
languages like Solidity to create an application that
automated business processes, and recorded them on
the blockchain. This allowed large-scale innovation
to be triggered, where all centralised organisations
conducting businesses, and offering a variety of
services to consumers, could be modelled without a
centralised control structure and aggregation, through
applications called smart contracts. End users could
conduct business amongst themselves without any
additional human intervention.
When a smart contract is triggered through an
external account, the business logic embedded in the
contract automatically gets executed; along with the
ledger, all corresponding accounts get updated, and
written on all nodes of the blockchain. While reading
any date from the blockchain, the data can be read
only from the nearest node, but while writing, the
data is written onto all nodes.
It thus takes more effort and resources to write and
update information on the Ethereum blockchain.
To incentivise this, Ethereum blockchain uses the
concept of ‘gas’, which is used to pay for the effort
undertaken to execute any type of transaction on the
blockchain. Gas is expressed as a proportion of the
21
 Ethereum blockchain’s native currency - ether - and
keeps varying to adjust for the variation in the price of
ether, thus keeping transaction execution costs stable.
There was a time when one would engage in business
with an organisation only if they were confident of the
management. Ecommerce companies with credible
22
ownership could flourish, while those who could not
earn consumers’ trust would burn out.
With the success of Bitcoin and Ethereum, it has
been proven that organisations that run with
automated smart contracts, and are not controlled by
a centralised owner group, are more trusted, leading The tokens are launched through a process called
to the current wave of ‘Decentralised Autonomous ICO (initial coin offering) to fund the decentralised
Organisations’ gaining ground. autonomous organisations developed using DAPPs,
which are created by cryptopreneurs. The tokens are
The concept of DAOs has led to the launch of a means of incentivising promoters, contractors, and
organisations that are completely out of the purview those working to further the viability of the platform,
of regulators, and are governed by computer and are also used by those conducting transactions.
applications named, DAPPS which are made up of This, in turn, leads to demand for tokens, and
smart contracts. increases their value when traded on cryptocurrency
exchanges across the world.
These organisations are incentivised with their own
community-based cryptoassets, namely tokens, issued
through ‘initial coin offerings’. Any organisation
can build communities by creating decentralised
applications using smart contracts that leverage
Ethereum Blockchain to verify transactions, and
‘offer’ trust in an automated manner.
To do this, companies running smart contracts
can use their own currency, reward their partners
and shareholders with it, and have customers using
it. Ethereum facilitated this process by allowing
standardised protocols in the form of ERC-20, ERC-
223 and ERC-721 to launch smart contracts that
implement token through Ethereum Blockchain.

The facility to raise money quickly by issuing

tokens has resulted in the setting up of thousands
of enterprises, which has led to the development
of a huge ecosystem of miners, exchanges, traders,
consultants, market-makers and the like.

In 2017, ICOs issuing tokens raised over $4.8 billion,

mostly to build cryptocurrency and blockchain
infrastructure for future businesses and opportunities.
Against this, in the first seven months of 2018, over
$6.3 billion worth of capital has been raised through
ICOs.

23
 Ethereum has been the most popular platform
to develop consumer-oriented peer-to-peer
decentralised autonomous organisations. There are
a number of options available to entrepreneurs to
develop their platforms, depending on the scope and
area of operation, and the use cases.
The total market capitalisation of all cryptoassets
issued through ICOs, and cryptocurrencies as on
24
August 18, 2018, is given in the following graph.
Cryptoassets - currencies and coins issued on
various platforms like Ethereum, EOS, NEO, NEM,
Lisk etc - are traded on cryptoexchanges, allowing
their conversion across the assets, and also into fiat
currencies like the US dollar. This has brought in
liquidity to investors, as well as allowing them to
transfer money globally through the internet without
going through the regulated monetary system.
The top 10 cryptoassets trading across all exchanges are given in the following graph:

With the global cryptoasset market capitalisation exceeding $300 billion, it is a matter of concern that India is
nowhere in the picture as far as the blockchain ecosystem goes.

25
 The birth of enterprise blockchain
The disruption in the currency space caused by
bitcoin led to the launch of a number of altcoins
arising out of the hard fork (with a substantial
upgradation of platform functionality), while
Ethereum’s functionality threatened to disturb
every business that catered to customers through a
centralised model. The evolution of the blockchain
paradigm further evolved with the launch of a
number of platforms that focussed on enterprise
26
applications. These applications do not involve any
internal currencies, but can facilitate the launch of
internal assets that can be tracked through a pre-
determined governance mechanism.
The Hyperledger Project is a prominent platform to
develop enterprise applications.
Hyperledger Project is promoted by a consortium of
organisations led by IBM and the Linux Foundation.
It comprises of many sub-projects contributed by
leading global organisations. Hyperledger is an
attempt at open source cross-industry collaboration
that promotes the adoption of blockchain across
different industries.
Blockchain is described by IBM as ‘peer-to-
peer’ distributed ledger technology for a new
generation of transactional applications that vastly
improves dependability, security, accountability
and transparency, while streamlining business
processes. In enterprises, there is higher emphasis on
accountability, identity, scalability and economy of
operations, as companies are keen about their return
on investments. Hence, consensus mechanisms like
that of cryptocurrencies are not relevant.
With new developments, the blockchain landscape is
poised to enter into a high-growth phase across the
world, eliminating corruption and non-value adding
middlemen, and more importantly, enabling citizens
to monetise their own data, which was hitherto being
monetised by third parties.
27
 Enterprise apllication for blockchain and
opportunity in India
It is clear that blockchain has wide-spread
implications for every major industry across the
world, and India is no exception.
Blockchain is helping companies overcome challenges
with trust and transparency – IBM.
Though blockchain has widespread implications, it is
important to know that it is not the solution for every
problem we face, and hence we need to be selective
28
in choosing and applying blockchain-based solutions
appropriately. This is where organisations and startups
working in the blockchain business need to exercise
care and judgement.
A flowchart developed by Bloqcube (https://bloqcube.
com/) founder Rama Rao gives an appropriate list
of questions to be asked before zeroing in on any
blockchain-based solution for an application.
 Blockchain in Financial services:
One of the major applications of blockchain is effecting faster international financial transactions. An example of
a transaction with and without blockchain can be depicted as follows (Source: Infosys external document 2016)

Normal International Payment transaction:

• Company A (US) needs to make a payment to Company

B (Japan) – Company A requests its bank (Bank A – US)
to send a US dollar payment to Company B
• Bank A does not belong to the corresponding clearing
house – it has to request its correspondent bank (Bank
B), which is a member of CHIPS, to facilitate the
transfer; SWIFT message from Bank A to Bank B
• Bank B, a member of the clearing house, sends the funds
transfer command to the clearing house
• The clearing house executes the fund transfer by
crediting the account of another US clearing house
member (Bank C)
• Bank D in Japan is Bank C’s correspondent bank and
receives payment from Bank C; SWIFT message from
Bank C to Bank D
• Company B has an account with Bank D and receives
the funds

International Payment Transaction through Blockchain.

Banks are verified partners within a peer network that uses a

private blockchain solution with private keys.
Each member of this blockchain platform can send funds
and information directly to other members, an open market
principle guarantees lowest exchange rate fees.
Information and back-office data is saved and integrated into
each block of transaction.
Ripple transaction protocol (RTXP) can serve as a central
protocol, which allows members to conduct cross-currency
transactions in 3 to 10 seconds

• Company A (US) needs to make a payment to Company

B (Japan) – Company A requests its bank (Bank A - US)
to send a dollar payment to Company B
• Bank A directly executes the fund transfer to Bank D
via the blockchain protocol (information and back office
data is stored in the blockchain)
• Company B has an account with Bank D and receives
the funds

29
 Individual transactions and cross border payments for
large transactions can be effected through a private
blockchain where counterparty banks are members,
drastically reducing costs and improving efficiencies.
Globally, several banks are forming a consortia to
take advantage of blockchain technology for efficient
cross-border money transfers. Ripple Labs and R3
Corda have led these consortia globally, and SBI-led
Bankchain, among Indian banks, is exploring its
use case actively. In India, organisations like Bajaj
Electricals with the help of YES Bank, and Mahindra
and Mahindra group, through its group company
Mahindra Finance, are exploring trade financing
through blockchain technology.
For Blockchain to have a wider impact in the finance
domain, it is important that a large number of parties
transacting with each other come on board on a
common blockchain platform. This is still a long way
off, and several organisations are still working on
their proof of concepts.
The below figure gives us an idea of the same:
30
Blockchain in Manufacturing:
A lot of activity in blockchain technology is centred
around financial applications, asset tracking, and
supply chain. Application of a framework to identify
various aspects in the manufacturing sector gives
us an idea of the segments that are amenable to the
application of blockchain technology. As per an
assessment, at least four out of six aspects governing
the relationship between the parties must be met, as
given in the following table.
Source: Application of Blockchain technology in the
manufacturing Industry
Authors: Vincent Dieterich, Marko Ivanovic, Thomas
Meier, Sebastian Zäpfel (Technische Universität
München), Manuel Utz (StromDAO), Philipp
Sandner (Frankfurt School Blockchain Centre),
published by Philip Sanders, Frankfurt School
Blockchain Centre, November 2017.
An overview of the use cases across various segments of manufacturing, along with the current use cases, is given
in the following table:

The activities that may see strong benefits from blockchain technology are mostly in the proof of concept stage,
and their real economic impact can be felt in three to five years.

31
 Source: Luca Mary, 17 April 2018, Blockchainitaly.org
Blockchain in supply chain:
Recently, IBM and Maersk announced a joint
venture to explore the application of blockchain in
the supply chain industry, which consists of several
non-trusting parties interacting with each other,
exchanging a humongous amount of information
through documents. The application of blockchain
to the supply chain industry promises a huge benefit
in terms of streamlining of operations, speedy and
efficient processes, and elimination of time-, effort-
and money-consuming paper work.
The process of supply chain among various parties
can be described in the following diagram:
32
Blockchain can enable direct interaction among
various parties in a supply chain, establishing
programme-driven trust and eliminating
intermediaries. One example could be the tracking
of refrigerated goods by recording the temperature
across the value chain with the help of IoT devices.
Further, the movement of goods from the
manufacturer to the end consumer, along with the
various parameters associated with the goods, can be
tracked on a live basis with IoT sensors and devices
tagged to the goods. This will further help in the
elimination of fake products as their ownership can
be traced. An example use case is depicted below:
In the pharmaceutical industry, it would be possible
to track the movement of a medicine strip across
the value chain - from the manufacturer to the
last distribution point - proving the source, and
differentiating it from a fake.
Similarly, in agriculture, produce can be tracked
from farm to fork, and IoT technology can be used to
monitor storage conditions like temperature to ensure
it is not spoilt along the way.
33
 The movement of the produce along the supply Background verification and identity management
chain can be mapped, automated and tracked by can also be integrated into the blockchain platform
leveraging IoT and blockchain technologies to ensure for educational resources and interactions.
spoilage and wastage is minimised, contamination
is controlled, and can be traced to the farm that
produces the crop, if required.

Blockchain to track ownership of assets and

property rights:
Blockchain tracks the movement of goods, and the
change in ownership in a trustworthy manner. It
enables proof of authenticity of the goods across
fields such as art, music, pharmaceuticals, assets, and
original certificates, etc.

Blockchain in education:
Blockchain has extensive application in the education
sector. Every year, millions of certificates are issued
by various institutions to students across the world,
which are used as credentials for various purposes. It
Blockchain in HR:
is imperative to have a fool-proof process to confirm
Blockchain has extensive application in the human
the authenticity and originality of these documents.
resource industry. Extensive dependence of the HR
Blockchain now offers a platform for organisations
industry on third-party portals to source resumes and
to confirm the authenticity of these documents
employees, dependence on manpower for large scale
electronically. For this, organisations who give out the
outsourcing, extensive documentation across every
certificates record them in a blockchain. Any party
aspect of the human resource function that needs to
looking to confirm the authenticity of a certificate
be recorded, tracked and its authenticity ascertained,
can verify the same by comparing it with the original.
offer excellent use cases for blockchain technology.
For this, the property of ‘Hashing’, which generates
a unique hash for a unique digital document, is
World Food Programme’s aid disbursements to
used, and hashes of the original and presented
Syrian refugees:
documents in conjunction with the digital signature
The World Food Programme created a private
are compared, and the originality ascertained if the
blockchain fork of Ethereum with the help of
hashes are identical.
engineering firm Parity, and is transferring aid to
Syrian refugees directly.
Apart from this, teachers and students can discover
Before:
each other and offer peer-to-peer training and
World Food Programme earlier provided vouchers
educational services as well.

34
as aid to refugees, which they used to encash in retail
outlets and supermarkets against their purchases.
This amounted to huge leakages on account of wrong
voucher submissions, bank charges and time delays.
Now:
With the help of blockchain, refugees are provided
accounts on the blockchain, identified by the scanned
images of their irises. Upon purchasing any item
at a supermarket, the refugees are identified by iris
scanners and the due amount is charged to the World
Food Programme.
This has saved the WFP over 98 percent in bank and
other financial charges, and now, it plans to spread
the same to refugees across regions for a variety of
services.
Trade finance on blockchain:
Now:
Companies seek credit from banks and finance
companies for
• Working capital
• Manufacturing costs
• Temporary spurts in demand
For this, they have to provide extensive
documentation to banks, leading to high costs,
and also payments to intermediaries to facilitate
documentation, relationships, contacts and other
logistical issues.
With the help of blockchain, companies can directly
transact with banks securely, with limited paperwork
in a high-trust environment.
Future:
The use of blockchain technology helps in the
following aspects:
• Reduction in transaction costs due to elimination
of middlemen.
• Trust through the system as all transactions are
recorded on a distributed ledger with established
identities and are time stamped.
• Transparency and elimination of duplicity or
mistakes in invoices as all records are managed
through a streamlined process and verified
formats that are encoded into the system.
• All parties can operate in a safe and efficient
environment, devoid of human dependency.
35
 Supply chain transactions between manufacturers
and distributors:
Manufacturers of consumer products undertake
large-scale distribution through a vast network of
distributors and resellers. Most often, it becomes
difficult to coordinate the billing and cash collection
cycle due to skewed demand and supply patterns, and
limited manpower availability.
Problems with the current system:
• Lack of trust between manufacturers and
distributors resulting in delayed invoicing and
payment cycles
• High level of paperwork leading to unnecessary
time delays and expenses
• Huge pressure on sales persons to reach targets,
resulting in excessive dumping at times and
inordinate delays in payment
• Distributors rotating their money among various
manufacturers, leading to lower working capital
in the business to fund other interests
Blockchain-based distribution management system
offers the following:
• Smart contracts to automate the process of
invoicing, despatch, and recording transactions
• Smart contracts to interact with other
applications like production planning, ERP,
CRM, analytics and other systems to enable
fine tuning of demand planning and product
36
procurement/ manufacturing cycle to streamline
operations
• Reduced dependency on manual intervention,
leading to faster payment cycles
• Tamper-evident and timestamped records to help
monitor the trends of order-supply-despatch-
delivery-payment cycle and reduce order-to-cash
cycle through streamlined operations
• Reduction in friction due to automation-led
management of issues like invoicing and money
collection
Cross-border remittance:
Cross-border remittance is often a time-consuming
process as it involves multiple countries, banks and
regulatory and non-regulatory agencies. This results
in
• Delays and a lot of documentation
• High transaction charges across the various
parties
A blockchain connecting interested parties as nodes
on either side of the border, and also regulatory
agencies as participants, can speed up the process
significantly. However, the financial organisation
serving as the intermediary has to be in tune with the
regulatory environment to avoid any legal issues.
A R3 Cords-based system with a trusted-third party
notary offers the best solution for a blockchain-based
solution. The solution offers the following benefits:
• Details of the customer transferring the
money, and the one receiving money can be
cryptographically encoded to ensure their details
are confidential and known only to relevant
parties on a must/ already know basis
• Instantaneous transfer of money through smart
contract operation
• Reduced transaction fees by cutting down on
irrelevant intermediaries
Bill discounting:
Invoice discounting is often undertaken by medium
and small-scale industries dealing with large
creditworthy organisations. The process involves a lot
of documentation, and time-consuming procedures.
Here, blockchain can offer a solution by offering trust
through a smart contract, and by cutting down a
number of mediators between parties.

R3 Corda offers an appropriate solution with a node-

to-node secured and verifiable transaction.

The solution involves a trusted notary operated by Medical records:

a regulated and accredited entity that can ensure
transaction sanctity without intruding into the
confidentiality of transactions.
Estonia has digitised the medical records of its
entire population, which have been uploaded
onto the blockchain. This enables doctors to have
verifiable, tamper-evident medical records with the
entire history of diagnostic tests to offer the right
prescription.

For more information on, and detailed working

of medical record blockchain, please refer, https://
medicalchain.com/en/whitepaper/
A patient can use his mobile device to access
information, and also to provide permission to a
healthcare provider to access the health data.

37
 Health insurance:
The Government of Singapore has implemented
blockchain-based medical insurance for a segment
of its population on a pilot basis. An Ethereum-
based private blockchain is implemented to connect
health insurance providers, hospitals and banks.
When a patient in a given risk category signs up for
an insurance plan, the details are recorded on the
blockchain.
In case a patient undergoes a procedure and needs to
avail insurance, the smart contract gets triggered and
the money is transferred from the insurance company
to the hospital within 24 hours to clear the bills.
This has substantially eased the pain point of patients
who are often unsure about the settlement of claims.
The following are some use cases emerging in the
insurance domain.
38
• Automated comprehensive background and
authenticity verification of all things insured
• Automated claim handling and settlement
• Elimination of insurance fraud due to
transparent recording and immutable data sets
on the blockchain that removes the propensity to
defraud insurance companies with inflated and
multiple claims
• Automated insurance settlement through smart
contracts that get triggered on impacting events
Energy Trading:
Energy trading is another opportunity that is
increasingly being evaluated for blockchain adoption.
Smart contracts help trade any excess energy from
producers, and can provide for listing, discovery,
trading, and settlement of all transactions pertaining
to energy trading among the generators and users.
Global trends in government and enterprise
applications for blockchain
It will be interesting to see the activities of
governments and public sector organisations in
embracing blockchain across the world.
United Kingdom:
UK was among the early ones to recognise
the importance of blockchain technology. UK
government’s chief scientific advisor Sir Mark
Walport, in a report, highlighted how blockchain
could help in areas such as reducing benefit
fraud, protecting critical infrastructure, and
registering assets. The following are some of the
recommendations considered for implementation by
the UK.
• Government data service should actively use
the technology as an expert customer, thus
supporting and influencing economic activity in
the sector.
• UK should actively invest in research to ensure
distributed ledger technologies are scalable,
secure and accurate. Cryptography, cybersecurity
and development of new algorithms have been
considered priority research areas for investment
through the newly-created Alan Turing Institute
to create commercial applications for blockchain.
• Government should create a regulatory
framework to safeguard interests of participants
in the blockchain industry while encouraging
39
 innovation
• Government should set standards for integrity,
security and privacy of blockchain data reflecting
in both software code and regulatory issues
• Government should work at creating powerful
identity management tools for individuals and
organisations to provide authentication while
protecting privacy. Further, there must be
interoperability across ledgers to maximise the
power of distributed ledger technologies
The Government of the UK has also formed a
Cryptoassets Task Force, comprising of the Treasury,
Bank of England, and the Financial Conduct
Authority to understand and exploit the benefits of
cryptoassets, and bring them into the fold of effective
regulation.
Blockchain as a service has been made available
for purchase through the government’s digital
marketplace allowing all government departments
to experiment and deploy the distributed ledger
technology. In 2016, UK’s Department of Work
and Pensions successfully conducted a PoC for
distributing benefit payments to subscribers using
blockchain technology using an app called Govcoin,
with the properties of a cryptocurrency.
The UK is home to top blockchain technology
companies like Blockchain, a cryptocurrency wallet
and money services platform, and SETL, a capital
markets and financial services blockchain company
that has received significant funding from marquee
investors. Recently, a UK-based crypto mining
company became the first to raise $32 million through
an IPO on the London Stock Exchange.
Singapore: Singapore boasts of a conducive
40
environment for blockchain technology companies
with a supportive policy. Under Project Ubin, using
the concept of Digitised Singapore Dollar, the
Monetary Authority of Singapore has successfully
conducted a pilot for interbank payments. It is now
testing blockchain technology for cross-border
payments, bonds trading, and insurance settlements.
Singapore has over 15 blockchain startups that have
together raised over $500 million in the last two years
to invest in blockchain platforms and projects.
Japan: In April 2017, Japan passed a low recognising
bitcoin as legal tender, and permitted 11 companies
to operate cryptocurrency exchanges. The Financial
Services Agency of Japan, along with three leading
financial institutions - Bank of Tokyo-Mitsubishi
UFJ, Sumitomo Mitsui and Mizuho - are creating a
blockchain-based digital ID for all Japanese citizens.
These digital IDs will be used to create a national
property registry including the sale prices, and to
award government contracts.
A consortium of Japanese banks has joined hands to
launch a new national digital currency, J coin, to wean
away citizens from excessive cash usage.
China: In late 2016, capital markets and financial
services company Juzhen Financials closed on a $23
million Series A, in which Fenbushi Capital, a China-
based blockchain-focused VC firm participated. In
early 2018, the Chinese government banned the use
and trade of cryptocurrency in the country. China
has, however, announced its strong appreciation
and support for blockchain technology. It has filed
more than 225 blockchain-related patents last year
and the country is home to over 4,000 companies
with blockchain in their name, at least five times
more than its nearest competitor, the US. China’s
state-backed Bank of China and financial services
corporation China Union Pay have announced plans
to jointly explore blockchain applications to develop a
payment system. There are also talks that China plans
to release its own digital currency as a play against
bitcoin with a motto of ‘disintermediarisation’ instead
of ‘decentralisation’. China is also home to one of the
most popular public blockchain platforms, NEO.
Dubai: As part of its plan to adopt latest technologies
and innovative practices at the global level, Dubai
Future Foundation announced the establishment of
Global Blockchain Council consisting of 46 members
who are potential key players in the blockchain
industry. The objective of the council is to explore and
discuss current and future applications, and organise
transactions through the Blockchain platform.
The Crown Prince of Dubai has announced plans to
secure all government documentation on blockchain
by 2020 as part of the Smart Dubai initiative. The
Dubai government has partnered with IBM to
implement paperless smart contract-based supply
chain solutions, and has launched proof-of-concepts
for blockchain projects across departments covering
health records, diamond trade, title transfer, business
registrations, digital wills, tourism engagement,
shipping, and the court system.
Dubai International Finance Centre (DIFC) courts,
in partnership with the government’s Smart Dubai
initiative, announced plans to disrupt the legal and
judicial system by creating the world’s first “Court of
the Blockchain”. A joint task force will be formed to
explore verification of court judgements, and share
documents in real time for efficient cross-border law
enforcement through paperless operations.
Dubai has also launched its own cryptocurrency,
emCash based on blockchain technology. This may
result in a giant leap for the city to harness game-
changing innovations to improve ease of doing
business, and quality of life.
Estonia: Considered to be a leader in the adoption
of blockchain technology, Estonia’s citizens and
e-residents are issued a cryptographically secure
digital ID card powered by blockchain infrastructure
on the backend. This allows access to various public
services like health, judiciary, security, legislative and
commercial code systems. On a blockchain platform,
citizens can verify the integrity of records held in
government databases, and control who has access to
them.
Estonia is also adopting blockchain technology to
secure the country’s 1 million health records. Every
update and access to healthcare records is registered
on the blockchain, preventing medical fraud and
making it impossible for hackers to hide their trail.
It also provides real-time alerts to attacks, enabling
the government to respond to incidents immediately
before any large-scale damage. Estonia is also
planning to launch its own cryptocurrency, ESTcoin.
It has an e-Residency programme that allows persons
across the world to become digital citizens, and
register their companies in the country.
Sweden: The land registry authority Lantmäteriet, is
working with startup ChromaWay and consultancy
Kairos Future, and SBAB and Landshypotek banks to
test whether private blockchains can serve as a means
to carry out property transactions. Also, financial
services group SEB, along with Nasdaq, are planning a
joint venture to revamp the $431 billion mutual fund
industry by implementing blockchain technology to
41
 improve efficiency in fund order management, and
payments and settlement, accelerate the transaction
cycle, increase transparency, and ensure asset safety
and security as well as reduce costs.
This calls for cooperation and coordination from
multiple parties like fund companies, service
providers, banks, distributors and auditors.
South Korea: South Korea has identified blockchain
as one of the prominent growth areas along with
AI and Big Data for the future, and has earmarked
investments of $918 million for the year 2019, up over
80 percent from 2018. The South Korean government
is actively promoting blockchain education among
its youth and is considering a proposal from one its
provinces, Jeju island, to become a special zone for
blockchain and cryptocurrencies from where startups
can issue their ICOs despite a ban on them in the
country.
Switzerland: Switzerland is ranked among the most
blockchain and cryptoasset friendly companies in the
world. Four of the 10 largest ICOs last year are were
launched from Switzerland and many companies and
traders in Switzerland accept payments in bitcoins.
The town Zug, where Ethereum was originally
incorporated is rated as the epicentre of crypto
activity in Switzerland, with the first bitcoin ATM in
the country set up there.
US: In March 2018, a report submitted by the
Joint Economic Committee of the US Congress
made several recommendations for policymakers,
regulators, and entrepreneurs regarding applications
of blockchain technology. The committee recognised
the potential of blockchain technology to conduct
secured transactions, and protect technology
infrastructure against malware attacks.
42
While a number of states are still adopting a wait-
and-watch approach towards cryptocurrencies and
blockchain technologies, states like Delaware, Illinois,
Arizona Colorado (government record keeping),
West Virginia (mobile voting) have taken an active
approach to promoting blockchain based applications.
Delaware announced the Delaware Blockchain
Initiative in 2016, to spur adoption and development
of blockchain and smart contract technologies in
both private and public sectors. Illinois announced
the Illinois Blockchain Initiative, aimed at utilising
blockchain and distributed ledger technologies to
“transform the delivery of public and private services,
redefine the relationship between government and
the citizen in terms of data sharing, transparency
and trust, and make a leading contribution to digital
transformation.”
Arizona has introduced regulations making
signatures, transactions, and contracts on a
blockchain legally valid, and also allow residents to
pay income tax in cryptocurrencies. US Government
departments have started realising the importance of
blockchain technology and are seen incorporating the
same into their plans.
The Department of Homeland Security awarded a
blockchain contract to “Prove Integrity of Captured
Data From Border Devices.”
The US Food and Drug Administration issued a
“sources sought” notice late in 2017 for an application
of blockchain for portable interactive devices “to
enable exchange of patient-level data within the
United States Critical Illness and Injury Trails Group
network.”
The US Department of Defense Transportation
Command has also showed interest in blockchain.
US Army Medical Research and Materiel Command
(USAMRMC), in coordination with the Medical
Technology Enterprise Consortium (MTEC), is
evaluating the application of blockchain to streamline
its supply chain operations.
A number of other countries like Israel, Tunisia,
Senegal, and Ecuador, as well as multinational
banks and finance companies like Citibank, Bank
of America, Goldman Sachs and JP Morgan
have announced plans to launch their own
cryptocurrencies based on blockchain technology.
India: In India, the Andhra Pradesh Government
was one of the first to see the potential of blockchain
technology, and has kickstarted incubation focussed
on this area. Companies supported by it are now
able to not only develop competency to execute
government orders, but also expand their offerings
across segments, and aim to go global.
The Indian government does not recognise
cryptoassets as a legal tender. Hence, most Indian
startups planning to launch ICOs and DAPPs have
set up offices in cryptoasset friendly countries like
Singapore, Switzerland and Estonia.
Some blockchain applications currently under testing
are:
• In October 2016, ICICI Bank executed India’s
first international trade transaction using
blockchain on Steller’s platform in partnership
with Emirates NBD. Since then, other banks like
SBI, YES Bank, Kotak Mahindra Bank, IndusInd
Bank, and Axis Bank have started exploring this
technology
• South Indian Bank completed a PoC for foreign
currency remittance from the UAE in partnership
with a Gulf-based currency exchange house
• In September 2017, the Institute for Development
and Research in Banking Technology (IDRBT),
the research arm of Reserve Bank of India,
released a white paper on the ‘Applications of
Blockchain Technology to Banking and Financial
Sector in India.’ It also announced plans to
launch a blockchain platform for different
applications relevant to banking. The RBI, in
association with technology partner MonetaGo,
a New York-based cryptocurrency firm, has also
successfully tested blockchain technology for
trade applications
• The IDRBT also announced India could use
blockchain to digitise the rupee
• The Andhra Pradesh Government is planning to
use blockchain to record land titles and resolve
disputes. (Source http://economyria.com/
blockchain-india/)
• In August 2018, a Hyderabad-based blockchain
startup announced it would launch blockchain to
digitise educational certificates, with IIIT Basar
as its first customer
• The Union Government has mandated CDAC
to develop a pilot for a blockchain-based land
registration system
• Eleven01 Foundation announced it plans to
develop an India-specific blockchain protocol
defining the standards for its usage in India
• Niti Aayog is working on launching Indiachain,
one of the largest blockchain platforms in the
world for governance. It plans to link Indiachain
to IndiaStack and other governmental databases
built around the India’s unique identity project,
Aadhaar, that will enable the development of
products and services on the country’s digital
infrastructure
• Mahindra & Mahindra group and IBM have
43
 developed a blockchain solution to reinvent
supply chain finance across the country. This will
help suppliers access instantaneous credit due
to enhanced trust. Live information available to
finance companies allows them to design and
offer innovative products and solutions quickly
• In light of the various scams that have hit Indian
banks, the Securities and Exchange Board
of India is examining the use of blockchain
for e-KYC. The e-KYC details of all citizens
and banking system users could be stored
in a centralised server linked to different
nodes operated by participants, resulting in
simplification and transparency
• A number of state governments are evaluating
blockchain technology for various real estate
applications like land registration, land pooling,
and property management, etc.
• In February 2018, Nasscom tied up with
Blockchain Research Institute, Canada, to
undertake training and skill upgradation
44
programmes for Indian professionals
Leveraging blockchain could help governments
become trusted partners for citizens to provide
speedy and efficient services transparently, avoid
corruption, eliminate non-value adding middlemen,
and unplanned delays. The resultant benefits, once
ploughed back into the economy, could lead to all
round prosperity. K.S. Viswanathan, Vice President
(Industry initiative) of IT industry at Nasscom
observed that blockchain technology can add $5
billion to the Indian economy in the coming five
years.
The Indian government has taken a positive stance
towards blockchain technology, but has maintained a
cautious approach towards cryptocurrencies. Prime
Minister Narendra Modi had tweeted on February 18,
‘disruptive technologies like Blockchain and Internet
of Things will have a profound impact on the way we
live. They will require rapid adaptation in our work
places.’
Global activity in blockchain technology

It is interesting to see country-wise concentration of

global Blockchain activity.

Most valuable companies in the blockchain ecosystem

are concentrated in the US and Europe. India can
boast of a handful of companies engaged in providing
services for some global companies, and to public
enterprises and the government. India has kept off
from the cryptoasset-related emerging ecosystem.
The enterprise and government sectors are yet
to contribute substantially to blockchain-related
applications.

The table gives a glimpse of the views of various
nations with respect to the cryptoassets as exhibited
in the recent summit of G20 nations.
As the debate on cryptocurrencies and their
validity rages on, it is important to analyse the
positives and negatives associated with the usage
of cryptocurrencies and blockchain technologies
to arrive at a reasonable framework that not only
preserves the integrity and sanctity of interactions
within the regulations, but also provides ammunition
for entrepreneurs to take advantage of the
revolution that is being unleashed by these advanced
technologies.

45
 Limitation and risks of blockchain
echosystem
Crypto-controversies
Cryptos for dark web activities on Silk Road:
Silk Road was an online black market, and the first
modern darknet market, best known as a platform
to sell illegal drugs. In October 2013, the US Federal
Bureau of Investigation (FBI) shut down the website,
and arrested Ross Ulbricht on charges of being the
site’s pseudonymous founder “Dread Pirate Roberts”,
and recovered 1.44 lakh bitcoins that were allegedly
used to conduct transactions on the website. This
exposed the utility of unregulated cryptocurrencies
for criminal activities.
Fall of the largest crypto exchange Mount Gox:
In February 2014, Mt Gox, the then largest exchange
trading bitcoins, filed for bankruptcy, claiming that
over $450 million worth of bitcoins were lost from
its servers. Though around $100 million worth of
bitcoins were later found, the rest have not been
traced and have been either stolen or are lost forever.
NEM Coincheck exchange hack:
In January 2018, one of the largest cryptocurrency
exchanges, Vancouver-based Coincheck, reported that
over $534 million worth of NEM coins were stolen.
Though a part of the stolen NEM was later traced to
trades conducted in Canada and Japan, the company
declared there is little hope of tracking most of the
coins.
Parity wallet freeze:
On November 8, 2017, UK-based Parity Technologies
Ltd, a leading provider of blockchain technology
platforms and applications announced a user had
46
exploited a software vulnerability in its multi-sig
wallets, resulting in a freeze of over 500 multi-sig
wallets containing over $150 million worth of ether,
some of it belonging to startups that had raised funds
through ICOs. This led to the $150 million worth
of ether being indefinitely suspended. On July 19,
hackers exploited another software bug in the Parity
wallet to steal over $30 million in ether.
The DAO Smart contract bug:
The DAO was the first decentralised autonomous
organisation created over the Ethereum platform
through a smart contract. It was meant to be an
investor-directed venture capital fund and raised over
$150 million worth of ether through a crowdfunding
campaign in May 2016 from over 11,000 investors.
Being a decentralised autonomous organisation, it
had no employees or board of directors. Decisions
to invest the funds were taken by voting among
token holders. On June 17, 2016, the DAO was
subjected to an attack that exploited a combination
of vulnerabilities, including the one concerning
recursive calls, and the user gained control of 3.6
million ether, around a third of the 11.5 million ether
that had been committed to the DAO. The 3.6 million
ether had a value of about $50 million at the time
of the attack. The lost ether were later recovered by
hard forking the Ethereum platform, which split the
Ethereum community into two, and by moving the
diverted ether to a recovery address. This, however,
exposed the vulnerability of smart contracts to
programming bugs.
The above cases expose the various shortcomings of
unregulated cryptoasset markets like:
• Utility of cryptocurrencies for criminal activities
• Inability to take a legal recourse in case of loss of
cryptoassets
• Vulnerability of cryptoasset accounts to hacking
of exchanges and wallets
• Vulnerability of cryptocurrencies in case
accounts are rendered unusable due to a freeze
caused by a software bug or loss of the private key
There are many cases where cryptocurrency
owners have lost huge amounts of
cryptocurrencies when their private keys were
forgotten, stolen, or lost, or the computers in
which they were stored were rendered unusable.
A lot of precautions have to thus be taken while
launching smart contracts to ensure they are free
of bugs, and also by holders of cryptocurrencies
to safeguard their private key.
Some of the challenges that the Blockchain
ecosystem faces in scaling up
Regulatory framework:
• Negative connotations associated with Bitcoin,
branded by most governments as an anti-
establishment and unregulated currency,
overshadows the perception of blockchain. This
needs to be overcome for authorities to have a
favourable disposition to blockchain applications
• In certain countries and areas, data secrecy and
protection-related regulations need to be taken
care of
• Anti-money laundering and know your
customer-related regulatory concerns need to be
aligned in most countries for blockchain to come
into the mainstream
Legal framework and compliance:
• As blockchain involves trade of digital assets of
significant value, there needs to be a common
position with respect to the title of assets, and
also a legal framework across peers spread
globally
• There is no centralised owner of a blockchain
platform and thus there is a lot of confusion as
to who is responsible for the functioning of the
blockchain and the compliance thereof
Co-operation and scale-related challenges:
• As a number of parties are involved in
transacting across the blockchain, there needs
to be co-operation and understanding among
participants to comply with the technological
and application parameters. Further, a lot of
integration with backend systems is required.
• There will be an investment in creating a
blockchain platform, and hence it is critical
with respect to the number of parties and the
transaction volume for a profitable operation.
This needs to be addressed clearly for any project
to be sustainable
Validity and usage of tokens in various countries:
• There are a number of transactions taking place
among parties, sometimes present in different
countries, and there needs to be an appropriate
system to settle transactions in a mutually
agreeable currency. Platform and application-
specific tokens may not be acceptable in some
countries, which recognise only fiat currencies.
Hence, appropriate interfaces need to be built for
smooth transaction across the parties
All these limitations pose a number of challenges
for adoption of blockchain technology in India
and globally.
47
 Blockchain venture incubators - global
scenario
Globally, there are a number of blockchain focused entities that aim to nurture, support and promote the
development and deployment of DLT-based solutions across industries. Some of the leading incubators /
accelerators are listed below.

48
Startup scenario in India
Before we look at the startup scenario in India, let us
take a look at what the most important things that
affect the performance of startups are.
It is pertinent to note that the most critical things a
startup needs are:
• Ability to create an appropriate product in the
right time. Most times, the product ends up
much ahead of its time and there is cash burn in
concept selling, or till such time that the market
matures
• Clarity about the exact market requirement, and
the ‘why’ behind its proposition
• Capital availability for sustenance
• Appropriate marketing and business
development efforts
• Availability of seasoned marketers in the team
• Adequate and appropriate mentoring support
• Ability of the founders to ‘think and adapt
globally’ for successful expansion
• Right marketing mix including appropriate
pricing and distribution of products and services.
• Execution excellence
Most of the time, in India, we see a majority of
startups failing as they fall short on many of the above
counts.
49
 Blockchain business incubation in India -
paradigm shift needed
Incubation of blockchain-based companies is not
the same as incubation of other IT, ITES and Fintech
companies as the technology is still in the nascent
stage, with no clear business models and proven use
cases.
During the first quarter of 2018, over $6.3 billion
was raised through Initial Coin Offerings (ICOs)
globally, with India getting none of it. Closer home,
Indian blockchain companies seem to be shifting base
overseas. In the first seven months of 2018, close to
$1.8 billion has been invested by venture capitalists in
blockchain and blockchain-adjacent startups globally.
(https://www.bitcoinisle.com/2018/08/08/blockchain-
startups-have-raised-us1-8b-in-vc-funding-so-far-
this-year/markets to raise funds through ICOs.
Indian companies, in comparison, have raised a mere
$4 million to $5 million.
With inordinate delays in the government’s regulatory
framework on blockchain, there has been huge
despair and discontent in the blockchain expert pool
in India. Consequently, many Indian startups are in
the process of registering overseas, and it is expected
that more than 80 percent of Indian blockchain
50
developers may move out of India in coming years.
Needless to say, India stands the risk of losing out
in the global blockchain ecosystem despite being
home to pioneering organisations like the Auxledger
Foundation, which is in the process of creating the
world’s leading blockchain platform with versatile
features to compete with the likes of Ethereum and
IBM-supported Hyperledger.
It is observed that the growth of the Blockchain
ecosystem is linked to a region/country’s approach
to cryptoassets, namely cryptocurrencies and
tokens, as they are able to quickly provide the
necessary economic support and clear incentives
through crowd-sales for businesses suffering from
unclear business logic, and operating in unchartered
territories.
It is especially important to tackle this problem
as the explosive growth of Internet-connected
devices, which communicate better commercially
through cryptoassets for financial transactions need
a solution in India for secure transactions and data
monetisation. If not, India stands to lose out in a big
way as Indian entrepreneurs will be forced to look
outside for migrating to other permissive countries.

Dave Levine, the founder of blockchain startup
Applied Philosophy Labs, says centralised permission-
less blockchains require a token or cryptocurrency to
operate. “To say you like bitcoin blockchain, but not
the bitcoin is an absurd statement. The two cannot be
separated. Banks may set up blockchains that don’t
use tokens to operate, and those systems may add
great value to the bank and its customers, but without
a token or cryptocurrency coin, that blockchain is not
decentralised”.
No wonder then, that some big conventional banks
have seriously started working on experiments with
their own cryptocurrencies. In India, Niti Aayog
and a few state governments are actively driving the
application and use of blockchain technology to create
a repository of citizens’ information like land records,
driving licenses, vehicle registration, academic
certificates, skills and certifications, personal identity
information, and medical records, etc.
This will enable citizens to securely store and share
relevant information with parties looking for that
information, with a possibility of monetising the
information.
A digital fiduciary that contains trusted and verified
information is being created by the government, and
will act as an intermediary between citizens and user
groups like telecom companies, employment agencies,
insurance companies, banks and NBFCs etc.
In case of enterprises, a number of PoCs are being
planned in the domains of NBFCs, trade financing,
cross border remittances, and supply chain tracking
etc, but the lack of proven business models is acting as
a speed breaker in the flow of investments into these
sectors.
It is imperative that the government facilitates a
vibrant investment climate for funding of blockchain
projects, either as a customer or as an investor. If
not, it must make it easier and faster for blockchain
startups to raise resources.
Blockchain startups are in a disadvantaged position
as compared with startups in fields like ecommerce,
mobile applications, AR/VR, AI/ML as proven
business models are yet to emerge, and most potential
customers and blockchain partners are in a wait-and-
watch mode, even to undertake PoCs.
Across the globe, accelerators and incubators
working in the blockchain domain pack much more
support for entrepreneurs with wide-ranging support
involving extensive training, mentoring, seed capital,
subsidised amenities, and extended support.
51
 Blockchain triggered opportunity for India
It is important for India to join the race in supporting
the blockchain ecosystem along with the rest of the
world, or stand the risk of losing out.
India is a country with over 1.3 billion citizens, and a
huge concentration of smartphones.
With 1.21 billion mobile connections, 1.19 billion
Aadhaar enrollments, 462 million Internet users, 582
million bank accounts and 375 million social media
users, India is one of the largest generators of online
data globally.
Apart from existing connections, the increase in the
number of IoT devices will lead to a huge deluge of
data. Unlocking the value of the data in the hands of
citizens in a secure manner could give a big boost to
citizens’ disposable incomes.
This implies an urgent need to set up a trusted and
52
centralised data repository, and a mechanism to
enable citizens and organisations to monetise the data
in a secure and credible manner.
Currently, a lot of organisations like ecommerce
companies, banks, NBFCs, telecom companies,
employment exchanges etc, are sitting on a vast
amount of data which they mine using advanced
analytics to increase the life time value of their
customers. To enable them to target a greater number
of customers effectively, and increase their business,
they need to exchange and procure data from other
sources and organisations. This calls for a mechanism
to exchange curated data among holders of the data
across organisations and from individuals. This can
be made possible with blockchain. For this, we need
a normalising means for commercial exchange,
which can be made possible with a data token on a
blockchain.
This will have implications for all sectors of the
economy as a trusted data source at a nominal cost
will be available for sectors like education, healthcare,
telecom, NBFCs and banks.
Interestingly, across the world, there are a number
of companies leveraging blockchain technologies
to forge commercial interactions between data
generating and data seeking organisations. One such
company is explained below. (Source: DATABROKER
ICO Whitepaper)

In another bright example, let’s suppose there are farmers, wanting to buy snesor data to have a look at the weather forecast
for a particular region. Farmers can make the most such information to help them plan a fuitful harvest. This eventually can
bring higher revenue into a particular market. Little do you know that 9 billion IoT sensors are cuttently active worldwide.
Out of this number, mostly are under full-swing utilisation and they are worht $600 billion across the world market.

53
 Recommendations
It imperative for India and Indian organisations to
formulate an urgent plan to support innovation and
incubate startups in a pragmatic manner to support
this nascent industry and take early lead by leveraging
its vast talented pool and captive data-led wealth of its
population.
This can be achieved through:
1. Launching its own public blockchain platform
with an associated cryptocurrency. Indian origin
platforms like Auxledger (https://auxesisgroup.
com/technology.html ) can be looked at for this
purpose.
2. Supporting Indian startups launch their
blockchain-based businesses and fund them
through the sale of cryptoassets convertible
through the India’s cryptoasset-backed platform
and create a market place for cryptoassets
through a supportive policy.
3. Create a programme to provide trained and
experienced mentors across all aspects of
organisational building including strong
marketing for the industry to assist the growth of
the ecosystem and success of entrepreneurs.
4. Put in place an appropriate organisation (like
Ethereum foundation) to oversee and guide the
development of the platform, and also unlock the
54
value of the cryptoassets owned by it. Learn from
the best practices of other countries like Estonia,
Dubai, Japan and the UK.
5. Support startups by employing their services
for numerous government and public projects
to overhaul their way of working across
departments, thus increasing transparency and
improving speed and efficiency of governance.
6. Empower citizens to access services across the
country in a secure manner made possible by a
blockchain-led ecosystem.
7. Provide a trustworthy platform for citizens across
the world and global organisations to securely
trade in India, and help in unlocking the value of
data we have and will generate in future.
8. Provide an environment suitable for blockchain-
based businesses to survive and thrive.
9. Engage with the global economy in an inclusive
manner, and adopt the best practices followed by
other countries.
10. Improve coordination among various
participants in the incubation system and
extensively communicate investor- and
entrepreneur-friendly policies and opportunities
to citizens.
Annexure 1

55
 Except for a few organisations like Auxledger, which are building global-scale blockchain infrastructure, most
organisations are working in the area of application support, cryptocurrency infrastructure for global markets,
and in many cases, with registered offices outside India.

56
57