In a joint conversation Nilesh Sangoi, CIO at Fincare Small Finance Bank & Sumoth C, VP & Head – Digital at Federal Bank, discuss the usage & impact of blockchain-based applications among the customers:
Ravi Lalwani: During the last 12-18 months, what is the one thing about blockchain technology that has improved the most?
Nilesh Sangoi: Several blockchain development trends have emerged in the past 12-18 months. For instance, content streaming services use blockchain’s transaction ledger to offer content directly to consumers, without middlemen such as centralized streaming providers such as YouTube or Netflix. Similarly, federated blockchain is a big trend in the banking sector. It is a semi-private or consortium-based blockchain, suited for building speed, scale, and security in banking transactions.
However, the one area which must seem the most improvement and is likely to make blockchain more mainstream is the development of Blockchain as a Service (BaaS). BaaS is a managed platform that allows buyers to build blockchain applications and digital services on a distributed network while the vendor supplies infrastructure and tools. It is the back-end operation for a blockchain based app or platform that can facilitate higher and quicker adoption of blockchain.
Sumoth C: While technology keeps on evolving, many minor developments are happening all the time. Once these minor upgrades culminate into something ecosystem-wise or big enough to make an impact, it sure makes heads turn. In the blockchain, out of many developments happening recently, some of the most noticeable are:
(i) Layer 2 scaling: Layer 2 scaling provides scaling of the blockchain where the transactions can be executed off the main chain (inheriting the security of the main chain) to ease off the pressure but remain connected with the main chain usually in a form of smart contracts. This allows the main chain to maintain throughput without the extra load.
(ii) Blockchain clubbed with trusted execution environment: This combination can allow multiple entities to share and process the data while maintaining compliance with data usage such as with reusing or storing of the data. This has the potential to become a (relatively) fool proof solution for entities in the BFSI sector. With more research into this field pouring in, we can expect some ground-breaking solutions in the future.
How does that impact development of blockchain-based applications?
Nilesh Sangoi: When an organization signs up for a blockchain as a service contract with a provider, the partner agrees to set up the necessary blockchain technology and infrastructure for the customer for a fee. The provider commits and deploys the resources to set up and maintain blockchain-connected nodes for the customer. Based on the customer’s business requirements, the partner may configure the blockchain network on any distributed ledgers such as Ethereum, Bitcoin, etc. This has implications for the partner who needs to take responsibility for providing an up and running infrastructure and maintaining critical artifacts, providing security surveillance, managing bandwidth, monitoring system health, etc. The BaaS provider ecosystem is evolving, and increased awareness and investment are likely to lead to an acceleration of this service.
Sumoth C: There is now a wide variety of choices in terms of the infrastructure over which applications can be built. In the case of layer 2 scaling tech, one has several low-cost choices – polka dot-based, solan-based, polygon-based platforms can be used. Many of the applications can use a public chain with data being hidden in private DB but with proof in the public chain.
How does that impact usage of blockchain-based applications?
Nilesh Sangoi: The interest and debate around crypto in recent times have sparked curiosity and interest. Cryptocurrency such as bitcoin is the most well-known example of the use of blockchain technology. Blockchain technology is arguably among the greatest developments of the past decade – it holds the promise of changing industries in an unprecedented way. According to research, the blockchain market is expected to grow at a CAGR of over 32% between 2020 and 2025. Given that it is an emerging technology, a lot of research has just begun in this area. at the core, given its distributed nature, blockchain is set to change the nature of transactions and trades across the world. it is also likely to transform several digital services that we presently use.
With BaaS, companies may take advantage of the oft-mentioned benefits of blockchain technology – transparency, accountability, data security and trust – without having to develop their blockchain ecosystem or investing in expensive in-house resources. BaaS may be the catalyst that leads to the widespread adoption of blockchain technology across various industry sectors. Instead of creating and running its blockchains, a business may simply outsource the technical aspects and instead focus on its core.
Sumoth C: More central banks are coming up with their digital currencies (CBDCs). The number of end-users using / familiar with blockchain has grown. The number of financial institutions open to using public blockchain is increasing. The choice of Ethereum style platforms may become more relevant subject to the regulatory scenario.
