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Daily-current-affairs / 09 Oct 2023

Blockchain Technology: Transforming Data Management and Governance in India : Daily News Analysis


Date : 10/10/2023

Relevance: GS Paper 3- Science & Technology - Application of digital Technology

Keywords: Bitcoin, National Blockchain Platform, National Strategy on Blockchain, IT Act 2000


  • Blockchain, introduced in 2009 with the creation of Bitcoin, is an innovative distributed ledger technology that has transformed the way we perceive data management. This technology offers a secure, cryptography-based, and decentralized structure that supports not only cryptocurrencies but also the transfer of various digital assets.
  • It brings forth transparency, enhances processing speed, and reduces costs in various sectors. Globally and nationally, there is a growing interest in implementing Blockchain-based applications, supported by proof-of-concepts and pilot projects.
  • The Ministry of Electronics & Information Technology released the National Strategy on Blockchain in December 2021, outlining a vision for the development and implementation of a National Blockchain Platform, covering technology, legal and regulatory frameworks, standards development, collaboration, human resource development, and potential use cases.


Blockchains represent a novel data structure characterized by security, cryptography, and distribution across a network. These systems underpin cryptocurrencies like Bitcoin and enable the transfer of data and digital assets without centralized authorization.

How it operates:

Blockchain technology allows for simultaneous, anonymous, secure, peer-to-peer, instant, and frictionless transactions. It achieves this by distributing trust across a global network, using collaboration, code, and cryptography to create a tamper-proof public ledger of all transactions. In a blockchain, a block records recent transactions and becomes a permanent part of the database upon completion. These blocks are linked in chronological order, with each block containing a hash of the previous one.

The benefits of blockchain technology include the following:

  • Decentralization: No entity holds control over the system. All individuals of the Blockchain are similarly liable for implementing and approving all the transactions.
  • Trust: All transactions are recorded transparently on a dispensed ledger, as a result, the belief degrees amongst stakeholders are high.
  • Security: Every transaction in a Blockchain is demonstrated via means of all the individuals of the community which restricts manipulations and improves security.

Potential applications of blockchain technology:

  • Governance: Blockchain technology can help in ensuring good governance. It ensures transparency of public records through the usage of a digital form platform and allows auditing of government documents. Moreover, it allows to maintain of the authenticity of the document and clearly reduces the processing time.
  • Banking: Blockchain can help avoid the risk of payment losses involved in banking transactions by adopting a secure distributed ledger platform. It reduces transaction fees across cross-borders, corporate payments, and remittances.
  • Food & Supply Chain: It creates a tamper-proof record to check the real information about expiration date, and product journey from the farm to the shop. The real information of the product can help in improving the reliability and efficiency of the supply chain system. IBM’s Food Trust blockchain is one of the most successful implementations of blockchain in the food industry.
  • Insurance: Blockchain technology can change the ways insurance documents, claim settlements, and fraud handling are carried out. It allows the creation of a transparent, secure, decentralized, and immutable insurance network.
  • Healthcare: It helps to prioritize patient health at all costs without compromising the quality of the healthcare service. Establishing a secure chain of network blockchain can help in handling patient records, consent forms, billings, and public health monitoring.
  • Automotive: Blockchain can solve the challenges in automotive manufacturing, car deliveries, and billings. It can help in the creation of an after-sales support ecosystem to keep track of the maintenance records of vehicle owners.
  • Cut red-tapism: As government agencies currently store data in autonomous centralized databases, they tend not to interoperate in an optimal way. This results in duplication, overlap, and contradiction in the information held. Blockchain eliminates this lack of interoperability which generates unnecessary red tape in obtaining relevant information from a user, and makes the process for sharing data between agencies clear and inexpensive.
  • Personal Identification: Governments manage vast amounts of personal data from birth and death records to marriage certificates, passports, and census data. Blockchain technology offers a streamlined solution for managing all of it securely.
  • Fight corruption: Registering government transactions in the blockchain helps create a trusted history for any transaction and significantly eases the auditing process. This would contribute to making public procurement more transparent


  • Blockchain technology is expensive to initially put it in place.
  • The massive usage of energy for the functioning of blockchain.
  • Safeguarding the privacy of individuals and companies as blockchains are usually open ledgers for everyone to see.
  • Knowledge of the benefits of distributed ledger technology is still limited.
  • If automated risk management, smart contracts, and similar tools are deployed across a network, cascades of rapid and hard-to-control obligations and liquidity flows could propagate across a network.
  • This interdependence will likely call for creative organizational thinking to address the need for governance and strong risk management

Regulation in India:

  • The current debate in India has primarily focused on cryptocurrency trading and speculation, overlooking the broader potential of blockchain technology. Cryptocurrencies play a crucial role as incentive mechanisms to secure decentralized transactions.
  • India's cyber laws, including the IT Act 2000 and its 2008 amendment, as well as sections of the IPC, address various aspects of internet-related transactions and activities. However, they need to evolve to meet the challenges posed by today's technologically sophisticated environment.
  • India can learn from global examples of nuanced and cautious regulation of blockchain technology, which focuses on combating illegal activities without stifling innovation.


In an era of technological revolution, where one innovation replaces another, blockchain has emerged as a transformative force. Its applications extend beyond cryptocurrencies to various sectors, reducing the need for intermediaries and promoting peer-to-peer interactions. The Indian government's initiatives, such as demonetization, GST implementation, BHIM app, and RuPay cards, are steps toward creating a cashless society and fostering transparency in governance. Embracing blockchain technology can further advance these goals and contribute to India's digital evolution.

Probable Questions for UPSC Mains Exam-

  1. What are the key benefits of blockchain technology, and how does it enhance transparency and security in various sectors, including governance, banking, food supply chain, insurance, healthcare, and automotive industries? (10 Marks,150 Words)
  2. How can India address the challenges associated with blockchain technology adoption, such as initial costs, energy consumption, privacy concerns, and the need for regulatory frameworks, while leveraging its potential for improving governance and reducing red tape? (15 Marks,250 Words)

Source - Sansad TV