Last week, an expert committee set up by the Government of India recommended that cryptocurrencies such as Bitcoin and Ethereum should not be allowed in the country. The main reason being the non-traceability of the source of the money, and hence concerns about money laundering. I do not think the recommendation surprised anyone, but it most certainly will have disappointed many would-be entrepreneurs, who may have had what they thought to be radical and disruptive ideas in various sectors using blockchains and cryptocurrencies.
Paint me cynical. The idea of cryptocurrencies and blockchains right now is running far more on hype about the future, than anything substantial it has already achieved. A fuller extent of this hype is seen in the West. There is now Bitcoen — a cryptocurrency exclusively for Jews. Lotos Network is using blockchains to facilitate Buddhist meditation, apparently. I do not claim to understand how. Wal-Mart is tracking pork in China using blockchains. Dentacoin for dental care. There is a city in Switzerland offering blockchain-based identities to its citizens. There is even a reality TV show coming up about bitcoins. I can go on, but it is easy enough to see how blockchains and cryptocurrencies have played out in the West. They have gone from offering sublime solutions to real-world problems, to becoming little more than a ridiculous fad. And nine out of ten startups based on blockchains, mushrooming today in the West, probably fall squarely on the ridiculous side of things.
Even in circumstances and sectors where blockchains have offered something valuable, or a new and better way of doing things, incumbents in the system have usurped the technology, possibly leaving us worse off than when we started. Jon Stokes, co-founder of Ars Technica and former Wired editor, ranted on Twitter recently about this phenomenon. To quote him, “And in the end, they win, because the incumbents always win. Maybe not specific incumbents, but incumbents as a class. The new thing is a lot like the old thing, except worse, because it’s more powerful and opens new vistas of asymmetry for the incumbents. When you build something powerful, the powerful are always in a better position to bend it toward the end of increasing their power. Always.” Every large bank or financial institution that is today using blockchains — it is essentially the old system usurping the new. It may be scarier still if governments do it. Imagine the chaos if the next ‘demonetisation’ event was a decision to replace currency notes with bitcoins.
The powers-that-be in India may have recommended against blockchains and cryptocurrencies for all the wrong reasons. I mean, paranoia about a new technology getting misused can never be the right reason to ban something. But I think at least this way, the Indian startup eco-system has been spared the trouble of getting caught in a bubble sustained by little more than hype. We have had it in the past; for example, the one that got painted with the broad brush of “food tech”. And I think we will do okay to give this blockchain bubble a miss.
In this weekly column, we discuss the startup workplace. Thejaswi Udupa heads product and technology for an online building materials marketplace
