Is Blockchain the Silver Bullet for the Indian Government to build Contracts?
Contract enforcement is the pillar of the country's economy. It is a mechanism to ensure that both the parties who are indulging in the contract stick to the terms and conditions. At present, the contract enforcement by the government is bound by the regulation and law laid down to supervise these contracts. But now, the government of India is opting to develop efficient smart-contracts using innovative blockchain technology, which stands out for its special features such as transparency, publically accessible ledger, which in turn provides secured transaction.
Now, it is high time for the government procedures to venture into the technical-practices, citing the technology upgradation and the eased workload and most importantly, the assured security. This is where blockchain plays a vital role. This technology can benefit government contract enforcement in India by majorly impacting the project performance and accountability, addressing the breaches and dispute issues. Blockchain also enables transparent contracts. Apart from the regulatory frameworks and arbitration so far, India hasn't implemented the disruptive technologies such as distributed ledger tech (DLT) that could be the main tool of execution such as smart contracts to execute the much needed technical assistance.
The Bitcoin and the other cryptocurrencies are having a stronger control over the disruptive technology of distributed ledgers, particularly blockchain. The blockchain is not just a database technology, but an unproductive database depends on the person's perception. Through blockchain, it is easy to build trust among two parties. It could or couldn't have an aligned interest, and this could be achieved without any mediator. India has shown tremendous development in the World Bank's Ease of Doing Business Index; but, it is still stained as low growth in terms of contract enforcement. As a result, India holds 172nd position among 190 countries. Thus, smart contracts powered by blockchain could be the quick fix not only for India but of several other countries as well.
The blockchain-based smart contracts are the programmed functions that could be executed only after satisfying certain conditions precisely. This works on a decentralized ledger. Hence they eliminate the chances of non-performance of the contracts by either party. Therefore no legal mechanism is needed to enforce the contracts. The automated procedure would also ensure the security of the contracts avoiding any breaches.
Need for Decentralized Ledger?
There could be a question of why the smart-contract cannot work on a centralized platform instead of a decentralized ledger? The decentralized ledger ensures authentication. For example, creating a decentralized ledger for land and property assets and providing access to the community to get engaged with the smart contracts would eventually open the latent of the lands and property market in India. But the efficiency of the blockchain technology and smart contracts would be realized after its function with the other non-blockchain systems. These smart contracts also need governance models to complement the inter-system communications. The innovative blockchain technology's competence is expected to improve the proficiency and transparency of the contracts, but, it would only be noticed if the smart-contract systems could converse with the non-blockchain system such as payment services like UPI, and self-executable the transactions. For instance, through smart-contract, the insurance claims could be transferred to farmers in case of natural calamity, through direct integration with satellite data to confirm the crop damage and transfer the insurance amount directly to the farmer's bank account, thus eliminating human involvements.
These blockchain models could restructure the existing laborious procedures, cutting down the time and energy consumption, and benefiting the public instantly as and when needed.
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