On Web3, India Needs To Chart Its Own Course
The hype curve over blockchains and cryptocurrencies over the past few years has dovetailed the financial boom and bust cycles these virtual currencies have seen with a few new fads coming along the way. Most recently, non-fungible tokens have seen a replay of this all too familiar hype cycle. All of these buzzwords now have an all-encompassing umbrella catchphrase called Web3, being touted by notable voices from the early days of the internet such as Marc Andreessen of Mosaic/Netscape fame. Such has been the noise around Web3 and the family of technologies within its fold that we were also treated to an analytical column comparing the well-established and fast-growing Unified Payments Interface digital payments platform in India with the still-nascent world of Web3.
How real is the promise of Web 3 and how seriously should policymakers in India look at this family of emerging technologies to get ahead of the hype curve?
Web3, amongst the latest in a series of idealistic, utopian ideas to emerge from internet-based digital innovation over the past few decades has inspired a wide range of products and applications, including one very imaginative mind to even propose creating a virtual country based on Web3 concepts. The allure of distributed, autonomous information processing is such that it has inspired a new breed of believers distrustful of anything centralized or governed. In fact, the founding principle of Web3 seems to be rooted in how to solve the problem of trust across the internet. This however seems to be Web3’s greatest failing right now going by the series of incidents where ‘distributed’ and ‘autonomous’ have come to mean a license for fraud at its extreme and a more innocuous ‘nobody is responsible’ when things go bad with speculative products.
From cryptocurrencies to NFTs, the early mishaps leading to loss of faith and intervention by law enforcement points to a deeper problem that Web3 protagonists will have to address.
After all, who would want to bet on a distributed and autonomous technology architecture that can easily be gamed by speculators, money launderers and criminal elements/terrorist outfits?
Echoes Of The Early Days Of Digital Disaggregation
In some ways, Web3’s woes are reminiscent of an early move to democratise the content distribution world through peer-to-peer content sharing applications like Napster. The regulatory backlash due to copyright issues on Napster and its many peer-to-peer content sharing clones in the early 2000s brought to an abrupt end the world of distributed and autonomous content sharing. The impact of Napster on the music industry was however life-changing hastening the death of physical media and fast-tracking the shift to online streaming. It is rather paradoxical that Napster’s afterlife in its most recent avatar is as a blockchain and crypto investment firm. It makes one wonder if blockchain-based smart licensing had been coupled with MP3 file sharing back in the 2000s by Napster, would the history of peer-to-peer content sharing have turned out differently. In a seminal paper published in 2003 by the University of Chicago Law Review on the Economics of Digital Technology, Raymond Shih Ray Ku argues how distributed digital technologies had the potential to disintermediate the middlemen, in the case of Napster, the copyright-holding content distributors. The paper was perhaps ahead of its time by more than a decade in its radical arguments in favour of disintermediating content distribution over the Internet bringing us back to the case for Web3.
Yet another example that is often cited by Web3 enthusiasts is the case of Free Open Source Software or FOSS and the success of Linux. Here too it would be instructive to note that while Linux’s initial success was limited to the nerdy world of developers and tech junkies, its mainstream impact was only felt after the emergence of RedHat as a corporate ready to standby and support serious enterprise-grade Linux implementations. The open source community based on GNU and the GPL licensing model that has sustained Linux and other such popular free software tools is the precursor to the Decentralised Autonomous Organisations, DAOs being touted by Web3 proponents.
It is this pecuniary motive behind most DAOs that has seen early cases of fraud and exploitation of security vulnerabilities raising doubts on the legal sanctity and protections offered by DAOs.
A Hybrid Architecture For India
In stark contrast to the Web3 world’s challenges of gaming, speculation, fraud and vulnerability, has been the recent approach of India to build mass scale, open application programming interface-based platforms which have seen the shift away from cash towards digital transactions and micropayments. The UPI over Web3 argument is a compelling one on the benefits of centralisation and scale when married with the legal protections offered by the state and the open API model allowing for an ecosystem of apps and service providers to evolve around the same.
However, there is a case for both models to exist and perhaps even find common cause in a hybrid architecture that benefits from the distributed and autonomous characteristics of blockchains as well as being protected and guaranteed by the centralised mass-scale platforms of the state.
Three use cases come to mind which can benefit immensely from a distributed and autonomous blockchain-like architecture where a centralised approach is either impractical or inefficient. The first example is the case of land records in India which has spawned a corrupt nexus of middlemen and bureaucracy imposing significant costs and barriers to transactions on ordinary citizens while contributing to all forms of fraud. The next two cases have to do with the content and media industry, from rights management to checking fake news and disinformation. With the explosive growth of peer-to-peer messaging apps and the exponential spread of fake news and disinformation, perhaps a blockchain-based media management architecture could help greatly in establishing trust in authenticated and authoritative news and media.
Prime Minister Narendra Modi’s Digital India programme has seen the trickle-down benefits of digitalisation through mass-scale platforms such as Aadhaar and UPI. Creatively leveraging decentralised and autonomous aspects of Web3—that can not only help alleviate legacy issues in India but also help prepare for future challenges through a hybrid architecture—should be the way forward steering away from the speculative and self-defeating hype around cryptocurrencies and other dubious forms of digital commerce being touted by Web3 proponents.
Shashi Shekhar Vempati is a veteran information technology and media executive.
The views expressed here are those of the author’s and do not necessarily represent the views of BQ Prime or its editorial team.