Wipro helps Thailand move towards fully digital economy via blockchain

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Wipro Ltd said it has helped deploy a new information technology system to kick off the digitization of the currency in Thailand.

The achievement marks a small, but crucial step in what many consider the inevitable evolution of money into a more convenient digital format.

DIGITAL PAYMENT vs BLOCKCHAIN

At present, digital money is handled using traditional technology, including databases, encyrption and a physical backup.

However, blockchain — the technology that lies behind cryptocurrencies such as bitcoin and etherium — can be used to completely digitize existing currencies such as the dollar, the rupee and do away with physical cash altogether.

In this particular case, for example, Wipro is helping banks in Thailand carry out interbank transactions using blockchain technology.

The move, besides helping ease the banks’ pain, is seen as a real-life demonstration of the powers and limitations of blockchain technology.

The key difference between current technology and the blockchain is that unlike in the current technology, where a bank has to keep ‘real cash’ to ‘back up’ digital cash, blockchain technology does not need physical cash ‘as proof’ of ownership.

For example, when an ICICI Bank customer today sees that he has Rs 10,000 lakh in his account that can be spent ‘digitally’, he or she is also sure that the bank has a that much cash in a physical form, which can be collected by going to the bank branch or an ATM.

If the bank were to lose the physical cash in an accident or a natural calamity, it would also affect the digital cash that the person has in his account.

But in a blockchain-based scenario, the existence of the digital cash can be made independent of the physical cash, and in some countries, the physical cash is even destroyed when an equivalent blockchain currency is issued.

In other words, there is no ‘physical settlement’ of transactions in the blockchain world, unlike in case of today’s digital transactions.

The convenience is similar to what was achieved with the movement of shares from the physical format to the dematerialized form.

THAILAND

The Thailand system developed by Wipro and R3 is not, at present, meant for individuals, but for interbank transfers and transactions.

It comprises the first phase of the ambitious “Project lnthanon”, and currently involves a consortium consisting of the Thai central bank and eight commercial banks.

“The solution will enable de-centralized interbank real-time gross settlement (RTGS) using wholesale Central Bank Digital Currency (CBDC) to prove that the technology can perform key functionalities of payment and enhance efficiency,” Wipro said.

The first phase used blockchain technology to build a proof-of-concept prototype which will enable domestic fund transfers within the country’s interbanking system, the Bangalore-based company said.

The ‘currency’ used will be CBDC or Central Bank Digital Currency tokens.

Unlike in case of bitcoin and etherium, there will be no possibility of ‘mining’ new coins in case of CBDC. Instead, the only authority that can issue these coins will be the central bank, much like in case of regular currency.

Moreover, CBDC is issued in lieu of regular currency and not given ‘free’.

Launched in August 2018, the first phase of the Project Inthanon focused on building the fundamental payment infrastructure, Wipro said. The application of blockchain technology for other functionalities will be explored in the subsequent phases, it added.

Wipro and R3 developed the solution prototype on Corda, R3’s open source blockchain platform.

CONVENIENCE

The companies said the new platform will make banking transactions extremely efficient and fast.

This is due to the ‘unhackableness’, trust and the distributed nature of the technology.

For example, if Bank A says that it has x thousand crores of rupees in its reserves, the central bank does not have to physically carry out a verification of the bank’s vaults to check if it really has that much money.

It just needs to check the blockchain — which is a sort of digital ledger that has thousands of identical copies on thousands of machines. Each and every transaction is instantly copied and replicated to all the copies of the blockchain and stored on it as a permanent record that can be checked any time.

As a result, Bank A cannot ‘bluff’ or ‘hack’ the ledger system, since there are thousands of copies of the same on systems belonging to thousands of different entities.

By dispensing with the need for actual exchange of cash or physical settlement, the blockchain system makes financial transactions quick.

“The solution automates the banks’ liquidity provision for resolving payment deadlocks through Liquidity Saving Mechanisms (LSM),” Wipro said.

It said the prototype has already successfully demonstrated that distributed ledger technology can significantly enhance payment efficiency by enabling 24/7 interbank settlements.

It is believed that eventually, it will be possible for citizens to exchange their physical money for central bank issued digital coins that can be used like cash to make payments and transfers.

“Blockchain development is in a truly exciting phase given how more and more financial institutions are recognizing its potential to enable national digital currencies or CBDCs,” said R3 CEO David E. Rutter.

“R3’s Corda was conceptualised to support CBDCs, which made it a perfect fit for Project lnthanon.”

Wipro’s role centered around implementing the solution in Thailand.

Krishnakumar N Menon, Vice President and Blockchain Theme Leader, Wipro, said the distributed ledger technology prototype has “demonstrated the merits of blockchain technology adoption for making interbank payments more efficient.”

“Building a blockchain prototype for issuing digital currency aligns with our vision of driving industry transformation through real-world applications of blockchain,” he added.

Wipro said it is building expertise across multiple leading blockchain platforms such as Corda, Ethereum, Fabric, Indy, Multichain, Quorum and Sawtooth.

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