A lot of us fundamental-types tend to dismiss off crypto as a fad and hence unwittingly form a barrier to our comprehension of the whole subject. Last week, one of India’s best minds in terms of putting technology to the benefit of the economy – Nandan Nilekani, a co-founder and currently the chairman of the Indian IT services company, Infosys, created a furore of sorts for suggesting India should adopt crypto. Given how polarised people’s opinions about crypto are, it naturally evoked a sense of gratification from crypto fans as much as horror from the naysayers. But such extreme reactions are a reflection of the fact that our understanding still lacks the nuances of crypto beyond cryptocurrencies. This is a piece that can correct that. Balaji Srinivasan, formerly, the CTO of Coinbase, a cryptocurrency exchange and a partner at the iconic venture capital firm Andreesson Horowitz, helps us get a better understanding of this world, especially the greater benefits to the economy and the system beyond the thrills of cyrptocurrencies. It is a fairly long read, reflective of the various possibilities that crypto can generate but the following sets the tone for the essay:
“How does an Indian small business owner in the middle of nowhere get a loan from anywhere?
Well, today he is increasingly likely to have a phone, a Reliance Jio connection, and access to IndiaStack: a miraculous collection of national APIs for payment, identity, and more that allows him to easily transact with anyone in India. This software platform is the natural insertion point for the Reserve Bank of India’s recently proposed digital rupee, which will further accelerate commerce within India.
But there’s an important piece that’s still missing, which is comparably easy access to the economy outside India. After all, that small business owner can now use his phone to make not just domestic phone calls, but international ones. So shouldn’t he be able to receive funds from around the world as easily as he can now trade with other Indians?
Crypto makes that possible. As we will show, adding crypto functionality to IndiaStack alongside the digital rupee aids India’s interests in two distinct ways.
First, it helps Indians domestically, by giving them direct access to both Indian and international pools of capital.
Second, it helps India internationally, by developing an open source software stack that any country can use for both domestic and foreign transactions, without dependence on either American or Chinese corporations.
This is a vision of national software stacks and neutral crypto protocols. Put another way, by adding both a digital rupee and cryptocurrency support to IndiaStack, the country would (a) run a permissioned ledger for domestic transactions via the digital rupee and (b) use decentralized ledgers for international affairs.
That would give India the best of both worlds: a domestic digital currency fully controlled by the Reserve Bank of India (RBI), and international payments capability that isn’t controlled by any other country at either the currency or platform levels. The platform for the digital rupee would thus become the same as the platform for digital gold, digital wallets, and decentralized finance. In the argot of our era, it’s blockchain and cryptocurrency, not either/or.
In this piece, we begin by reviewing IndiaStack and crypto, with particular attention to decentralized finance. We then describe the simplest way to add both digital rupee and crypto protocol support to IndiaStack, and illustrate how a Crypto IndiaStack would help India domestically through a series of case studies.”
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