India is rapidly moving towards becoming a digital society, backed by the government’s strong emphasis on constructing large-scale public digital infrastructures. As part of this process, India has adopted several mechanisms to facilitate interaction between individuals, markets, and the government, thereby enhancing service delivery, collaboration, and commerce.
The Role and Significance of Public Digital Infrastructure
Public digital infrastructure refers to digital solutions that enable basic functions essential for public and private service delivery. Both the Government of India and the Reserve Bank of India (RBI) have been pushing initiatives aimed at increasing the speed of interactions by promoting simplification and transparency. Initiatives like the Digital India mission, launched in 2015, have transformed payment systems, provident fund management, passport services, driving license acquisition, toll crossing processes, and land record checks. These changes have been enabled through various modular applications built on Aadhaar, Unified Payments Interface (UPI), and the India Stack.
Existing Limitations and Challenges
Despite these efforts, India’s digital infrastructure still faces challenges such as a lack of interconnection between different digital infrastructures, the need for technical integration to make systems interoperable, and inefficiencies due to reliance on multiple systems and limited private databases. These shortcomings often result in complexities and increased costs as the network expands.
Web 3.0: The Next-Gen Digital System
Web 3.0, defined as a decentralized internet powered by blockchain technology, offers an alternative to current internet versions, Web 1.0 and Web 2.0. While the earlier versions were based on static interactions or user-generated content, Web 3.0 provides users with stakes in platforms and applications. This means that instead of tech giants controlling platforms, users will have a say. Web 3.0 also encompasses token-based economics, transparency, and decentralization, and extends to other entities like non-fungible tokens (NFTs).
Blockchain Technology: A Key Player in the Digital Era
Blockchain is a distributed database that maintains a secure and decentralized record of transactions while generating trust without the need for a trusted third party. Not only does it play a crucial role in cryptocurrency systems, but it also facilitates verification and processing of all e-governance services offered to the public. Several countries, including Estonia and China, have been pioneering the use of blockchain technology for various applications.
Decentralized Finance (DeFi)
Decentralized Finance (DeFi) platforms, which rely on blockchain infrastructure, are emerging as effective financial tools available across multiple countries. DeFi allows users to borrow and lend cryptocurrencies on a short-term basis at algorithmically determined rates, with users often rewarded with governance rights similar to board seats on the protocol.
How India Can Leverage Blockchain Technology
India has much to gain from blockchain technology. It can be used to create interoperability among digital systems, regulate partially permitted or unregulated blockchain models, and build a national ecosystem on blockchain. The latter could be achieved by operating a national platform that interconnects permissioned and public blockchains, application providers, token service providers, and infrastructure managers. This would create an efficient communication network for the Indian digital economy, reducing complex integrations and costs.
