Public Blockchains can be India’s ticket to empowering innovators

In August last year, a little-known startup pulled off something significant: it uploaded diploma certificates of 1 lakh students on the blockchain. The students could have their skill sets verified for prospective employers within seconds now, as opposed to nearly a month. The process was automated. LegitDoc, the startup, deployed this solution on Polygon, a public blockchain. The project has since become the world’s largest blockchain implementation for educational credentialing and issued over a million verifiable diploma certificates.

Soon after, the team worked with the Gadchiroli district administration in Maharashtra to issue 65,000 caste certificates for the tribals in the hamlet of Etapalli. The tribals could have their credentials verified to avail social support benefits within a minute. The process was as simple as scanning a QR code, and was based on public blockchain.   

Across the world, startups like LegitDoc are harnessing the power of public blockchains to automate large-scale systems and processes. Files that trudged from desk to desk as their beneficiaries awaited, are now being digitalised—they are being made accessible, verifiable, and trustable.  

To groundbreaking innovators like Neil Martis, the founder of LegitDoc, a public blockchain is a natural choice for building large population-scale solutions. But doubts abound outside of this circle of early adopters. Is a public blockchain needed at all to build these solutions? Can this be made without utilising crypto?  

In this article, I will attempt to answer these questions. But firstly, what is a public blockchain, and how does it differ from a private blockchain?

A blockchain is a database for transactional information. It is distributed across a network of computers and structured such that data are stored in blocks, and each block holds an imprint of the previous. Once stored, altering data is thus all but impossible.

In a public blockchain, this network of computers is open, distributed, and permissionless. Which is to say, anyone can join this network and run the program that maintains the database. Examples of public blockchains are Ethereum, Polygon, and Cardano. No single organisation runs these blockchains, instead developers from across the world help maintain it by running a specialised program.

In contrast, in a private blockchain the network of computers that maintain the database are pre-selected by an organisation or a consortium. Which is to say, they are closed and federated. Examples include HyperLedger Fabric, R3 Corda, and Quorum.

As you can see, in a private blockchain, an organisation or consortium is the decision making body. In a public blockchain like Ethereum, there is no such central authority. How does a public blockchain function, then? The answer is crypto.

Crypto tokens are the incentive that ensures a rules-based participation and maintenance of the blockchain. In other words, developers are rewarded in crypto by the algorithm for efficient and honest work in maintaining the network. With the incentive mechanism in place, a diverse and distributed network of computers work in sync—a clocklike efficiency that is truly a feat of technological marvel.

So then, why do startups such as LegitDoc choose a public blockchain to store and verify documents? Three reasons are perhaps obvious: Public blockchains, by their very nature, are accessible, easy to use and maintain, and flexible. As the program that runs them is open-source, a startup could easily build a custom solution or application atop a public blockchain.

You do not have to negotiate with an organisation and do the tedious work of decrypting the terms and conditions. Your product can be up and running in no time, and you could continuously iterate without the risk of having to renegotiate a third-party agreement. Your startup has no counterparty risk, as would be the case with a private blockchain controlled and run by a third-party technology company.

But this is not all. There are two other less understood benefits of building on public blockchains: Security and cost.

Consider security. In a public blockchain, there is no single point of failure. Each and every computer in the network, called as nodes, is responsible for its maintenance. Today’s major public blockchains are secured by thousands of such nodes. These validators are incentivized to secure the network through rewards they earn in crypto tokens. This is a well-oiled, market-driven open security mechanism.

As a result, destabilising a network would incur a huge cost. Take the case of Ethereum, where developers have locked in, or “staked” over 29.5 million ETH to earn the right to function as a validator. 29.5mm ETH, at today’s price, is worth over $68 billion, making Ethereum incredibly costly to attack.

Then there is the matter of cost efficiency of building on a public blockchain. Consider LegitDoc’s solution of storing diploma certificates on a blockchain. The cost to issue and provide verification for 10 Lakh certifications for 5 years on Polygon—a public blockchain—would be around Rs. 4.4 lakh. This estimate takes into account the initial cost of deploying the solution as well as the transaction cost on Polygon. In contrast, the cost of deploying the same solution on a private blockchain such as HyperLedger could be as high as Rs 29 lakh.

The cost estimate is as follows:

In a country as large as India, with a population of over 1.2 billion, it is then a no-brainer to build on public blockchains. It is accessible, flexible, easy to use and maintain, secure, and cost-efficient.

And public blockchains are made possible by incentive mechanisms offered by crypto. Removing this rules-based incentive mechanism would break the chain holding these distributed node operators together.

So to answer the rhetorical question of whether a public blockchain is needed at all to build such solutions, and if there is an alternative that does not utilise crypto? Yes, there is. But it is exorbitantly expensive, and yet you get less control and flexibility to iterate.

The choice is India’s to make. We can opt for a costlier and straitjacketed solution, and carry on business as usual—which is to say, forever dependent on Big Tech. Or we can empower our innovators and startups with forward-thinking policies and build homegrown technology stars.

Disclaimer: The views expressed in this article are those of the author and do not necessarily reflect the views of ET Edge Insights, its management, or its members