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#IndianDataDollar: A whitepaper (Version 1.0: Tenth/Final Page)

noreply@blogger.com (Sunil Aggarwal) — Wed, 18 Aug 2021 10:14:00 +0000

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9.0 Expected Criticism vis-à-vis next generation reforms

Why is the telecom sector the exclusive beneficiary? Why make the telecom sector into a zero-debt sector? The fact is that it is the only sector with the most efficient pan-India last mile distribution to reach 1 billion Indians. We must enable them to fulfill financial inclusion goals with 1 billion smartphones. It would build them into an antifragile monetary stack of India as well as pre-empt LIBRA-like disruptions. India needs a strong defence by raising the strength of its own telecom players to the global level. The second critique would be over the absence of direct or indirect tax on IDD? Blockchain systems scale up only in a minimum friction scenario which means that the shared ledger networks must have only embedded tax provision but zero off-chain reporting compulsions. Another criticism would be that Indians are not ready for this mass change but this proposal is not to be implemented in a few days or months. It is a transformation needed for generations to follow. Its real scale would be on the lines of first-generation economic reforms made in 1991. IDD is basically the bedrock of the second-generation reforms for Indian economy. Public blockchains are going to be the infrastructure for the 21^st century. If we don’t adapt right now with the dual legal tender shift, we might miss the bus.

10.0 Future scope of research

This is a huge transition for Indian monetary system. First, it will need a public dialogue with wide category of scholars and practitioners. A wholesome IDD discourse needs to be created to make it a mainstream idea. It would require a lot of further work in terms of building deep-dive documents on the technological architecture and workflow of the plan. Which blockchain technology platform/s would be suitable? What would be the details of the validator nodes, sybil resistance methods, wallet features, whitelisting process, privacy guards, consensus protocol, block size, platform choice, TPS, scalability etc. How the micro-details of Telecom Pool distribution regarding equity and debt conversion would be finalized? How would the SEBI be brought on-board on this? What challenges would telecom players face in terms of product pricing and data plans for both prepaid and postpaid users? A proper constitutional amendment proposal would need to be designed for updating legal tender laws, adding new provisions in the articles related with Consolidated Fund of India, basic structure of the Indian constitution, transaction tax and GST-exemption clauses. A full roadmap for public adoption of IDD would be required also. Many more such tasks can be counted. However, the fundamental goal is simple. India needs to get ready for transforming into a network state ready for 21^st century post-territorial world. IDD offers us an opportunity. We must grab it.

Acknowledgements

Shrikar Parashar, Sarath Davala, Harsh Patel, Arshad Ali Sheikh, Devi Prasad Choudhury, Vijay Chugh, Sinclair Davidson, Nilesh Trivedi, Sathya R. Narayana, Vishal Anand Kanvaty, L. Bhargav Gollapudi, Tanvi Ratan, Santanu Paul, Gangireddy Buchupalle, M.V. Rajeshwara Rao, V S N Lata, Venkat Koppula, Sateesh Kr. Gajjala, Kalyani Guddanti, Sunil Bajpai, Anandi Sharan, Nitin Sharma, Gopal Bansal, Azmatullah Muhammad, Vasiraju Chandrasekhar, Dharmen Dhulla, Kashif Raza, Sri Padma Vadveru, Sanjay Shramanjothe, Gaurav Aggarwal, Deepak Bhalla, Gaurav Gupta C.A., Pavan Srinivas Vedantham, Aman Sanduja, Siddiq Ahmed, Balakrishnan Chandrashekhar, Anirban Bandyopadhyay, Sumit Puntambekar, Dilip Singh, Abhishek Mangudkar, Shuchita Ahuja Kaushik, Bishal Goyal, S. Sanjit Rao, Srikanth Harathi, Subbaraju Vastavai, Viswanath Akkula, Ajay Yadav, Ashok M. Raja, Ravikanth Andhravarapu, Asit Kadayan, Shree Sule, Asit Kadayan, Naimish Sanghvi and many more.

#IndianDataDollar: A whitepaper (Version 1.0: Ninth Page)

noreply@blogger.com (Sunil Aggarwal) — Wed, 18 Aug 2021 10:08:00 +0000

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Any Indian company can receive payment in either IDD or any other crypto currency as well as can make global payments without any problem. Banks can easily shift to a separate IDD terminal without many technical challenges. Since every public key in the IDD blockchain network would be seeded with a KYC-based institution, any suspicious transaction can be reported and checked instantly by the validator nodes. To offset any threat from other currency clones, Indian government can ask all the centralized cryptocurrency exchanges to discourage the use of centrally issued stable coins like USDT or USDC and replace them with IDD. When IDD can be directly converted into any cryptocurrency or a foreign currency, the need for stable coins would not be there.

4.0 How to implement IDD on-chain?

........................................................................................................The basic objective here is to have a platform-agnostic approach. There are many public chain options like Ethereum, Cosmos, Solana, Avalanche, Cardano, Polkadot, Polygon etc as well as permissioned chains like Hyperledger, Quorum, Corda, Multichain and so on. A large number of these solutions are both scalable and interoperable. A base capacity of 1000 TPS can be enough to reach one billion IDD transactions per day. The most suitable idea would be to use a blockchain with the largest network effect that is technically compatible with other chains. For example, Cosmos Ethermint, Avalanche and Polygon are compatible with Ethereum. So, all the telecom players can float their security tokens on any of them as well as can interoperate with the IDD chain. They can build decentralised finance (DeFi) solutions using IDD as the native token and for their own governance related issues, they can use their own security token. In this way, the IDD economy can become global by default though the government will need to design a framework for this. .................................................................

5.0 Precautions

There are some precautions to be followed in this transition. First of all, the upgrade of legal tender laws is a must. Without getting the approval of Indian Parliament, this change will not get the validation it deserves. Token distribution framework should be made part of the basic structure of Indian constitution as well as assimilated into the Consolidated Fund of India. A separate regulatory body comprising members from RBI, NPCI, TRAI and telecom players should be instituted. RBI would have to curb the INR issuance and factor the IDD issuance in the money supply. Even large currency denomination notes particularly of INR 2000 value need to be withdrawn from circulation as it does not offer any superior transaction value to majority users. Big hoarders must be discouraged. The amount of current physical cash (M0) in the system must be pre-declared. All other money supply figures of M1, M2 and M3 must be pre-declared. Time-stamped hash of all such figures should be issued by RBI and banks. A provision of transaction tax to be included in tax laws so that IDD-to-INR exchanges can be done seamlessly. 26% UBI token transfer and Zero-debt status of Telecom sector is a must for telecom companies to avail banking license. Full definition of “IDD banks” license is also needed. For that, the commercial banking act should include telecom players into its fold as a new category. Since it would not be a fractional reserve banking model rather it would be a full reserve lending model, we need to build this category carefully. ...................................................................................................

Millennials will be able to sign on early in this kind of transition. As time passes, this purse of 26% tokens will be exhausted over time. Since the current smartphone users in India are in the range of 700 million plus, we shall have to speed up to include those who are mobile users but not data users. .......................................................................................... If the Parliament ever feels that the number of data users can go beyond 1 billion, they can also be added to the UBI beneficiary list. The number of EMIs can also be increased to 12 instead of 10 too. This won’t add much burden as the Reserve Pool will have a lot of space to entertain such provisions. To be liberal on this front, we can even compensate moving from higher to lower age groups to expand this number. 100% transparency is must in terms of issuance and distribution.

#IndianDataDollar: A whitepaper (Version 1.0: Eighth Page)

noreply@blogger.com (Sunil Aggarwal) — Wed, 18 Aug 2021 10:02:00 +0000

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preparation of the telecom sector. In this period, Parliament can upgrade the laws and the executive branch can shift to this new dual legal tender system. As far as the bridge between INR and IDD is concerned, RBI can take over this role and as far as project execution is concerned, a joint custodianship between TRAI and NPCI can pull off this job as they understand both the telecom sector and payments industry. Users can buy these tokens from the custodian with a maximum limit imposed per person so that IDD hoarding does not happen. This distribution of 3.65 trillion IDD tokens can be formalized via a constitutional bill passed by both the houses of the parliament. This will defend against any technological risks. Since the law is encoded, it can be used to do course correction if anything goes wrong.

The next important design feature proposed is to have a minimum friction in the IDD economy. Since this won’t be a hierarchical economy, the traditional tax collection machinery won’t make much sense here. Rather, a uniform transaction tax @2% is proposed in all IDD transactions. It means that anybody making an earning in IDD won’t have to pay any other form of direct and indirect tax. No Indian citizen would need to file Income Tax Return (ITR) and the same will be true of corporations. The blockchain programmability can ensure automatic collection of tax that can be shared with states and centre in 65:35 proportion. As far as the GST is concerned, any professional or a company can claim full input tax credit as it happens in the case of exports under “zero-rated supply” method. The way exports are encouraged despite GST, the IDD transactions can be treated in a similar manner. For those who think that it might be regressive, it must be clarified that just distribution of the UBI pool can generate a GDP push of nearly IDD 100 trillion. It can collect up to IDD 2 trillion. Though it is too early to predict such figures, it is quite predictable that the larger the IDD economy, the larger would be the tax collected by the government.

5.0 IDD proposes a new Political theory of Network State for India

What fundamental transition is happening here? With IDD as the second legal tender, India is shifting its monetary anchor to a dual consensus model; first is the traditional form of political LOLR consensus and the second one is public utility-based blockchain consensus built around data consumed by Indian users. This shift is moving away from semi-transparent monetary issuance to blockchain-based fully transparent monetary issuance, distribution and payment system. Legacy payment systems can continue to work in centralized servers as usual whereas IDD payments would work as parallel one on the decentralized nodes of the IDD blockchain.

..................................................................................................................Current territorial state is run by multiple server states located in different silos like UIDAI, NPCI, Telecom players, State governments IT infrastructure and so on. In the IDD blockchain, both central and state institutions can become the validator nodes to maintain fair control of the network along with telecom players, banks and other payment players. To ensure easy transition from IDD to INR and vice-versa, the governments can upgrade all Indian crypto-currency exchanges into crypto-payment banks and they can work with telecom players to disburse UBI Pool. If users are uncomfortable with public-private key pair, we can ask these exchanges to be custodian of private keys till users are educated enough. These exchanges are already experienced in handling large users who are learning the wallet management with public key infrastructure. The initial rush of the INR-IDD transactions can be managed by them with enough confidence. Even large players like NSE, BSE or banks can establish their own exchanges to manage this INR-IDD bridge. This will be a huge market where 1 billion users can generate huge volumes.

6.0 IDD offers an automatic framework for regulating crypto currencies

.................................................................................................................. Anybody who wants to interact using crypto currencies can move from INR to IDD and do the transactions. In this way, the legacy INR economy would not have to struggle with complications of regulating the crypto economy. IDD would provide default capital account convertibility to Indians. Any Indian company can receive payment in either IDD or any other crypto currency as well as can

#IndianDataDollar: A whitepaper (Version 1.0: Seventh Page)

noreply@blogger.com (Sunil Aggarwal) — Wed, 18 Aug 2021 09:55:00 +0000

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One person’s expenditure is someone’s income. Being digital, this UBI would create a high money velocity that can be even 10x of the initial amount given. With this kind of second legal tender reaching mass adoption in a direct manner, RBI won’t need to do money-printing in traditional manner that is not distributed efficiently.

4.4 Telecom Pool

..................This would also need changes in the billing and product pricing methods of the telecom players. However, the core issue is how the allocation would work. Since the idea is total tokenization of the telecom sector, it also means that equity of telecom companies would also be priced in IDD. That is where 40% of token supply will be made to the telecom company shareholders & debtors. This amount is not fresh money in M0 sense of the term rather it is exchange of their current holdings. Now, once the equity holders convert their equity into the new IDD token, they have two options. They can maintain their liquidity in IDD or they can convert it back to a security token. It means that all telecom companies will be asked to convert themselves into a blockchain-friendly governance system where equities should convert into security tokens issued by the respective companies like Airtel, Reliance JIO, Vodafone-Idea and BSNL/MTNL. This is also applicable to all the debt-holders of these companies. Most of the promoters hold the majority equity and prefer to take debt against equity. This creates a tendency to keep a company under loads of debt. Telecom players hold a massive debt to the tune of nearly INR 5 trillion. This debt is held against some sort of pledged equity. The telecom players would convert themselves into a zero-debt status by offloading their equity.

..................................................... For this, three economic parameters need to be used. First one is the respective user share that should get 50% weightage as this shows the long-term effort of a telecom player. The second parameter should be the market revenue share with 25% weight. The third parameter should be the market cap with 25% weight. Since a company’s equity is being converted into a national legal tender (IDD), it would expect a fair evaluation of its enterprise. How to evaluate it? Let us estimate the total market cap of the telecom sector. In a pessimistic scenario due to pandemic, it can be as low as INR 6-8 trillion. In an optimistic scenario, it can be as high as INR 12-15 trillion. What can be an all-time high value in the next 10 years? As data price would be fixed with a single unit of IDD, the telecom companies cannot increase data prices in next ten years. So, they need to be compensated also. The basic hypothesis is that telecom companies should be healthy & zero-debt. Only such a network can execute its fiduciary responsibilities. 40% Telecom token supply assumes a fair value @ INR 14.6 trillion of the sector. It can be both an under & over-estimate as there is no perfect way to do it. There is no fool-proof way of finding a true value. That is why the Parliament should seal this value. Once the final value is decided, 40% IDD tokens should be distributed to all the players based upon the weighted formula. A phased equity-to-token conversion should happen as per this distribution plan. First priority is to make the telecom sector into a zero-debt sector. Somebody may argue that telecom companies will object to this transition. Yes, it may happen but there is a hidden incentive for all the telecom players. If the telecom companies fulfill two conditions of distributing UBI to the users and converting themselves into zero-debt organizations, the second priority is to rechristen them as “IDD Banks”, a new banking category. .................................................................

4.5 Reserve Pool and Transaction tax

UBI Pool takes 26% and the Telecom Pool takes 40%. What is left is 34% of the IDD tokens. This is called the Reserve Pool. The sole objective of the Reserve Pool is to be the long tail of IDD money supply. It means that the best option is to release it in a gradual fashion by dividing it into 100 tranches across 120 months excluding the first 20 months needed for UBI and preparation of the

#IndianDataDollar: A whitepaper (Version 1.0: Sixth Page)

noreply@blogger.com (Sunil Aggarwal) — Wed, 18 Aug 2021 09:48:00 +0000

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Assume...............................................................................Don’t forget that USD:YUAN peg was used as a great monetary tool by China for building its export-led economy 20 years back. Let us call this pegged token Indian Data Dollar (IDD). It virtually means INR 36.5 trillion worth of new money over next 10 years.

4.2 Three pools of IDD and tokenomics

An amount equivalent to INR 36.5 trillion may create serious prejudices in certain minds. That is why it is important to clarify that this is not easy money created by the Parliament of Indian for reckless spending. Before anybody mistakes this number, we need to remind that the current money supply (M3) in India is nearly INR 195 trillion. In 2010, it was only INR 50 trillion and it was INR 9.9 trillion in 1999. India is a large nation with increasing money supply. India has witnessed nearly 15-17% growth in money supply for the last 30 years or so. It is a developing country with increasing needs. If you add INR 36.5 trillion to INR 28.74 trillion worth of currency supply with public today, it comes down to INR 65.24 trillion. Over a period of ten years, this comes down to CAGR of 8.54% that is lesser than half of CAGR for the same. It is also not very high with respect to consumer price inflation. Secondly, all this new money (IDD 3.65 trillion or INR 36.5 trillion) is neither M0 nor M3 in the traditional sense of the term. RBI does a regular job of issuing fresh currency into the public and bank lending creates a fresh money supply too in the economy. It is the combined impact of these two actions that affect the money circulation. The idea here is to not get caught in the technical definitions of money supply and create three following pools for distribution with dedicated shares for each:

Universal Basic Income (UBI) Pool with an allocation of 26%
Telecom Pool with an allocation of 40% for all the telecom players
Currency Reserve Fund @34% to be used over next 10 years gradually

4.3 Universal Basic Income (UBI) Pool

.......................................................................................................................................................................................................The telecom sector pays GST on telecom services @18% as well as annualized gross revenue (AGR) share of telecoms is 8% in lieu of spectrum fees. This makes 26% net outgo from the fees received by the telecom players from Indians. This is the amount which is collected from the people and paid back to the people in the form of public expenditure by the government. What is proposed here is that 26% of the IDD supply should be distributed as advance income support to 1 billion data users of India and they should not be charged GST on their telecom bills as well as given 8% deduction on the bill in lieu of AGR exemption for the next 10 years. This is public money which is being given to the public and they are being assured that they will not have to pay it to telecom players in any form.

26% of 3.65 trillion tokens comes to the UBI Pool of IDD 949 billion or INR 9.49 trillion. If you calculate this money at a larger scale, it comes down to 4.86% share of GDP at current rates. It can be distributed to 1 billion data users of India in 10 equal monthly instalments of INR 949 each. In a family of four, it comes down to nearly INR 38,000/- in less than a year. If we make IDD payable for telecom billing, e-commerce portals & all PoS terminals pan-India, it will generate a huge uptick in Indian GDP. One..................

#IndianDataDollar: A whitepaper (Version 1.0: Fifth Page)

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Networks dominate today more than nations. The millennials and GenZ that have grown with the internet and smartphones are more acclimatized to networks than a territorial obedient behaviour. Today, a country can be paralyzed without even firing a bullet with cyber weapons, a pandemic or an ecological catastrophe. That is where India needs to stop thinking like a territorial state. The new paradigm is that of a network state. It is a state where every citizen is deeply connected with every other citizen in a virtual manner in all those matters that were once exclusive preserve of the governments. Whether it is communications, education, global business or payments, people are hardly noticing any government presence in their day-to-day lives. This retreat of the government is quite visible over a generation. It does not mean that governments are not needed. .....................................................................................................................................................................Chinese model is not aligned with the federal structure of Indian constitution as well as it is not suitable for the plural structure of Indian society. Still, if India must reincarnate as a network state, what important anchor it must choose to redefine itself?

3.1 A new anchor for future of money

1. India needs to shift monetary definition from LOLR consensus to a public utility-based token floating on blockchain. This means exercising the right of a sovereign network state to choose a new monetary anchor called Indian Data Dollar (IDD) that would be backed by one GB of data. It would shift the logic of money from the political power of a nation to data consumption behaviour of 1 billion citizens.

2. From a constitutional point of view, it means that Indian parliament should legislate a move from single legal tender to a dual legal tender system where IDD would be pegged at INR10:IDD01 for next 10 years. This bridge between INR and IDD shall be safeguarded by RBI but the two worlds should be separate in terms of identification. The INR world should remain as it is while the IDD world should signify a parallel network state where Indians can interact with the rest of world with full capital account convertibility. It is a world that does not require tax collection machinery rather a uniform transaction tax @2% via blockchain protocol can collect a huge amount of revenue for sharing 65:35 among the states and the centre.

4.0 Mechanism design behind Indian Data Dollar

........................................................................................It is also one of the cheapest data countries with a predominantly young population where the expected user base would be at least 1 billion in the next 3-4 years. The data consumption is a mandatory need for every individual who is 15+ and it is only going to increase year after year. If data is the new oil, let us dollarize the data and call the new anchor of money as Indian Data Dollar (IDD). How to do it?

4.1 Tokenize the telecom sector totally

Assume a median base of 1 billion Indian users in the next 10 years with each user consuming 1GB daily. It means a monthly consumption of 30GB & annual consumption of 365GB. Over 10 years, the total data consumption would be 3650 GB per user. For 1 billion users, it comes down to 3,650 GB or 3.65 trillion GB of data. Let us create 3.65 trillion tokens pegging @ INR 10 = 1 GB. Don’t forget......... USD:YUAN peg

#IndianDataDollar: A whitepaper (Version 1.0: Fourth Page)

noreply@blogger.com (Sunil Aggarwal) — Wed, 18 Aug 2021 09:26:00 +0000

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Not just three generations of blockchains have simultaneously grown as a collective wave rather they have also grown laterally with rise of interesting tools and industries like Decentralized Finance (Defi), Non-Fungible Tokens (NFTs) and Layer II scaling solutions like Polygon, Lightning Network, ZK Roll-ups and so on. Though there is no exact proof, it is estimated that there are around 200 million users already on-boarded to this ecosystem and more than 10 million transactions are happening daily as of now (August 2021).

These are largely censorship resistant systems that are nearly impossible to ban by even powerful regulators. Even if they prohibit their use, it will only drive crypto currencies underground but not kill them. The foundational logic behind this is that they are planetary infrastructure used by peer-to-peer actors. They are completely parallel to KYC-led banking networks and other regulated financial activities. In this scenario, how to regulate crypto currencies is a big headache for governments. If their use rises underground, it will result in loss of taxation as well as compliance culture. If they are to be regulated, it will require massive global cooperation of scale as big as creating a new global parliament. It seems a non-possibility looking at the splintering of global opinion in matters of origin of covid-19, eradication of poverty, human migration resulting from global warming or regulating big tech and many such issues. What options does a developing country like India have in this kind of a historical setting? If it does not allow crypto currencies, it kills the huge wave of innovation thriving in the brilliant entrepreneurs of India. If it allows them without restrictions, how to stop the spill over of black money operators using crypto currencies? If it does not build a credible regulatory framework, its large corporate class and citizens will never know how to leapfrog with this new wave of wealth-building.

1.1 The difficult economic outlook for a post-pandemic India

The universal shutdown due to Covid-19 has hit Indian economy harder than many countries. As per Centre for Monitoring Indian Economy (CMIE) report, India lost 114 million jobs in April, 2020. Though the situation improved in the second half of the year, it is still not rosy enough. India’s pre-covid employment number was 404 million workers. In May, 2021, this number had declined to 375.5 million which means loss of 28.5 m jobs. The overall state of Indian economy showed a shrinkage of 7.3% in the year 2020-21 and even the hopeful rebound in 2021-22 was downgraded from 12.5% to 9.5% by the IMF. Though the Indian government has done its bit to control the problem, it is more damage control rather than pulling the economy out of a trap. It seems that these two financial years 20-21 and 21-22 would end up with a GDP that would be lesser than it was in 2019. For a developing economy that was already slowing, this is a double whammy. Though some sectors have bounced back yet the broader economy is having K-shaped recovery. ..........................................Pandemic has paralyzed all territorial units of productivity and income for nation-states, enterprises and individuals. If virus is a singularity attack, political regimes need a singularity defence. Radical monetary imagination alone can stop the second order effects of this pandemic.

3.0 Time to make out-of-the-box choices

............................... Whether the threat comes from outside in the form of Chinese CBDC, Facebook’s monetary network, China-US enmity or crypto currencies or it comes from inside in the form of economic decline, we cannot stick to old methods for facing these challenges. Our statesmanship is stuck with a model of a territorial state for the last seven decades whereas the world today is equally virtual also.

#IndianDataDollar: A whitepaper (Version 1.0: Third Page)

noreply@blogger.com (Sunil Aggarwal) — Wed, 18 Aug 2021 05:44:00 +0000

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The question today is not whether it would happen or not rather when it would happen. If that is so, where does India stand in this currency conflict between two monetary superpowers. Will India allocate an equivalent share of its forex reserves to e-CNY like it does to USD? Will India ever match with China in digital payments infrastructure any time soon? China has over 1.2 billion active users paying via Alipay and over 1 billion using WeChat Pay

.............................................................................................................................................................................................. If India and China are equal in terms of population, why such a big gap in digital capabilities? The answer lies in Chinese state’s focus on mass adoption on both the future of money and the future of technology for decades. India cannot match China by copying the same model rather it needs an out-of-the-box thinking to bridge this gap.

1.1 Facebook’s Libra (now DIEM) and other corporate currencies

.................................................... If we equate Facebook network with a virtual nation, it has nearly as large a population (2.89 billion) as that of China and India combined. There is hardly a corner in the world that does not have Facebook users. The number is not only large but also quite embedded due to its massive network effects. Such a big user base does have the potential of becoming the largest P2P currency network in the world. The plan was scaled back after US regulators restrained Facebook. However, the plan is still alive in somewhat diluted form and with a different name. The issue here is that it may be halted today but the idea of a corporate currency is very seductive for large platforms. What if Google, Amazon or Microsoft start moving in the same direction. It is only a matter of time when it will unravel.......................................................................................................................................................................................................................................... If this happens, corporate currencies will create a new twist in the geopolitics of money. If countering e-CNY is a challenge for India, adding corporate currencies to this would make it too big a threat for the country to manage. Doing nothing on the monetary preparedness front now might become a huge risk for India if such a threat emerges in near future.

1.2 Rise of decentralized & non-sovereign currencies on public blockchains

The invention of Bitcoin in 2009 was a curtain raiser for a radical departure in the matters of money. This offered a new consensus mechanism called proof-of-work to settle transactions in a completely decentralized manner. In monetary history, this was the first time that humanity found an alternative that was completely unlike LOLR consensus. The new consensus was not a top-down hierarchical model rather it was a circular economy managed by global computer nodes. It put peer to peer actors at par with institutional actors with full censorship resistance. It was the beginning of a flat world in the truest sense. It may seem a bit theoretical or idealistic start but over the last 12 years, the course has turned out to be far more radical than expected earlier. Bitcoin attracted a stream of innovators and entrepreneurs who built multiple kinds of decentralized consensus mechanisms. If Bitcoin as Blockchain 1.0 disrupted money-as-cash, the next innovation came in the form of smart contract capable Ethereum as Blockchain 2.0 which disrupted money-as-capital. Anybody could build a decentralized organization over Ethereum virtual machine (EVM) and issue a new token symbolizing a currency, asset, financial product or whatever digital imagination can create. ...........................................................................Not just three generations of blockchains have simultaneously grown as a collective wave rather

#IndianDataDollar: A whitepaper (Version 1.0: Second Page)

noreply@blogger.com (Sunil Aggarwal) — Wed, 18 Aug 2021 05:29:00 +0000

1.0 Introduction

It seems that the 21^st century has delayed its start by twenty years. What happened in the year 2020 is such a categorical shift that it has left territorial borders inadequate constructs for the new world. Whether it is fast-marching virus or internet becoming anchor of global economy; whether it is online education or real-time sharing of genomic data to develop covid vaccines in record time; whether it is the rise of Facebook and Google like corporations capturing the daily data of nearly 3 billion users each or building the privacy framework for all online users, the value shift is simply immense. These problems build a context that is too new to assimilate in a single attempt. However, how to prepare for this is a critical issue. This preparation is both conceptual and institutional. From which point to initiate is the most authentic question for a nation that is serious for its future. There can be many possibilities but our starting point should be the one where we are in control of the choices we can make. That is where the future of money can act as a magnetic discourse that can encompass larger issues involving the future of work, future of territorial borders, future of corporations, future of citizenship and so on. How will the money unfold in coming times is a question that impacts sovereignty as well as a nation’s place in global power architecture. India with a population of over 1.39 billion is in the thick of this paramount challenge. What impact would Indian National Rupee (INR) face if Indians move towards Bitcoin, Ether and thousands of other crypto currencies in a big way? Will INR pivot to a new reserve currency if China wins the currency cold war with the USA? Will Indian currency suffer volatility if Facebook like corporations launch their own corporate stable coins? These are questions too big to ignore. It is high time to treat them with immediate attention.

2.0 Multi-fold challenges before India’s monetary system

India has developed a robust payments infrastructure as it processed 3.24 billion digital transactions in July 2021. However, domestic payment efficiency does not automatically translate into monetary strength at the global level. The prime reason behind this is that all countries use a common consensus mechanism called “lender-of-the-last-resort” (LOLR) to design money. Whether it is USA, China, Japan, India or any nation, this consensus is a standard method for all of them. But, in its purest form, LOLR consensus is nothing but power in the international political economy. If one assumes the planet earth as a default playing field, nations are like dominant actors. Since these actors enter the field with different levels of power, it ends up creating hierarchy in a default anarchy. ..................................................................................................................................................................................................................................................................................................................................................................................................................................................

2.1 Fall-out of Chinese CBDC (e-CNY) launch

This is where the potential aim of Chinese CBDC (e-CNY) is very critical. A CBDC gives a powerful central bank double advantage. It can bypass the BIS (Bank of International Settlements) managed banking channels dominated by dollar accounts. Secondly, it gives access to both domestic and global partners not only at the institutional level but also peer to peer level. What does it mean in strategic terms? China has already signed currency swap agreements with over 40 countries since 2009. To shift these countries to e-CNY won’t be too difficult for China given the size of debt it has given to many nations...........................................................................................................................................................................................................................................................................................................................

#IndianDataDollar: A whitepaper (Version 1.0: First Page)

noreply@blogger.com (Sunil Aggarwal) — Wed, 18 Aug 2021 04:27:00 +0000

Abstract: -

Lack of imagination in bad times is the biggest crisis. This is quite true of monetary management in the context of impending digitization of currencies, decline of dollar, confusing regulatory scenario around crypto currencies like Bitcoin and post-pandemic world. How can a politically and judicially limited entity like a nation-state respond to such an unprecedented global change? How can it regulate an essentially planetary scale of challenges where peer-to-peer actors are equally autonomous? The broader responses are half-baked CBDC designs, outright bans on crypto-currencies and maintaining a jittery status quo. This paper proposes that the primary reason behind this is the inability to look beyond its own monetary anchor that can be called “lender-of-the-last-resort” (LOLR) consensus. It means that a nation designs money-as-credit by creating one entity (like a central bank) as the ultimate monetary authority for its citizens. This money is called the legal tender as it is declared by fiat as the sole means of paying tax and settling debts within the jurisdiction of the national territory. LOLR consensus and legal tender are self-imposed limitations upon national imagination. India is no exception to this. Project #IndianDataDollar proposes a move from single legal tender to a dual legal tender system in the country. Second, it is issuance of a new currency called #IndianDataDollar (IDD) using the transparency features of blockchain technology. Third, it is the upgrading of a territorial sovereign state into a sovereign network state approved by the Parliament of India without putting the legacy monetary system at much risk. Fourth, it introduces a new taxation model via a standard transaction tax @2% in all the IDD transactions which means that it would neither need any manual tax collection machinery nor have any tax leakage. Fifth, it is a lateral mechanism for building a regulatory framework for crypto currencies by making them fully convertible with IDD. Sixth, it offers a Universal Basic Income (UBI) for 1 billion data users of post-pandemic India to the tune of INR9.49 trillion to be distributed in 10 equal monthly instalments. Seventh, it offers transformation of Indian telecom into a zero-debt sector by making them last-mile distributors for IDD. Eight, it makes telecom players major defenders against potential ill-effects of global roll-out of Chinese digital Yuan or Facebook’s Libra (now called DIEM) or currency cold war between US and China.

Crypto-currency is not digital equivalent of a national currency

noreply@blogger.com (Sunil Aggarwal) — Sat, 09 Jan 2016 07:55:00 +0000

The way we use money is based on some fundamental assumptions that are rarely noticed. What we call money is actually a national version (sometimes regional too) of money that is called currency. Dollar, Pound, Rupee, Yen and Yuan are versions of money but only in a national context. In a different geographical territory, they may not fetch any value. For that, they must be exchanged. That is where exchange rates come in. So, what is called money is actually not a global definition. Currency is only a fragmented or a limited understanding of money; it does not signify a flat world. If it has to become money, it will have to jump across the exchange barriers every time it crosses borders. A national currency may go digital but it cannot avoid this barrier of exchange and related costs involved rather it imposes a negative element to the global definition of money.

The digital currency has got a new rival and that is what is called digital money or more truly, a crypto-currency. In July, 2014, there were 400 such crypto-currencies and over half of them were trading currencies too. Around fifteen months after as on December, 2015, the figure has risen to around 670 crypto-currencies and 580 of them are trading currencies. It all started from Jan3, 2009 when Bitcoin was launched by an anonymous coder/s called Satoshi Nakamoto. While it lay dormant for around two years, it quickly surged ahead in 2011 and reached over $1100 in 2014 and is currently staying around $430. Other crypto-currencies followed like Namecoin, Litecoin, Ripple, Dogecoin, Peercoin and many more. The total market cap of all these currencies is over $ 7 billion today. Over 120 of these currencies have a market cap of over $100,000; nearly 30 of them have market cap of over $1,000,000 and six of them have more than $10 million each and three have over $100 million each. This has happened in a very small period of less than five years. Who is investing in them and why the money is shifting to these new currencies? Are they not the true versions of money without any exchange barriers?

A crypto-currency is a Whatsapp like message app. The way you share message with no restrictions and no cost with anybody in the world, you can share digital cash with no restrictions with anybody anywhere in the world. Even message apps were not known in public domain before 2009. Whatsapp has grown from zero to over 700 million active users in just 5 years and over 2 billion smartphones use message apps today. Imagine if message apps give you an option to make digital payments by inserting a crypto-currency like ripple, bitcoin or stellar or ether, what would happen. If people choose to shift from physical cash to digital cash in such a mode, what will happen to physical cash????? A rupee-based payment chunk (or any national currency) would simply vanish from the current value of its GDP. This may seem an imagination but it may be a reality if paper currencies keep devaluing themselves by continuous inflation or meaningless third-party transaction charges and bottlenecks.

On a fundamental level, money is nothing but an instrument that facilitates exchange of utility between two persons. Currently, this is a paper currency but if two people have the freedom to use a better alternative, they will definitely use the one where there is no inflation, no transaction costs, no fear or no conversion hassles. That is where crypto-currencies are turning out to be a huge favourite. A good government is known by sound money and not by high inflation.

The world is seeing the deluge of debt-laden governments and public sector enterprises. Either an economy is suffering from inflation or fear of disinflation. A big country like Brazil is nearing economic disaster and we have already seen the cases of Cyprus and Greece. Their national currencies have not helped their people in choice of a better economic future. Now, the people have found that it is not the government that can be changed rather they need to change themselves by shifting to digital currencies. If the growth rate of bitcoin is divided by a factor of ten and distributed across only 10% of these digital currencies, the entire paper currency system of the world will have an equivalent flow of crypto-currency. Though this is only an imagination and needs political testing yet the fact is that people can have alternatives even if the governments fail. All the governments need to understand this. Their job is to safeguard the value of money and its equal distribution. If they don't understand this, they are going to face a monetary apocalypse.

(This was published on www.economylead.com on 5th January, 2016.

Natural price levels for Bitcoin

noreply@blogger.com (Sunil Aggarwal) — Fri, 11 Dec 2015 11:21:00 +0000

Bitcoin is the strangest form of currency ever developed in the human history. Starting from January 2009, it rose to the levels over $1000 in January 2014. After that, its price crashed drastically and stayed around $250 throughout the first ten months of year 2015 but of late, it has started again rising and volatility is very sharp. It jumped to nearly $476 in a very short period of around a week and then dropped around to nearly $370. This is pretty sharp shift. (See Picture) Those interested in bitcoin tend to ask, “What barometer should be used for predicting bitcoin prices?

There is no definite answer to this question. Some people say that Chinese investors are rushing in to buy Bitcoin as many of them assume it to an excellent method of capital flight. Many rich Chinese who have amassed huge wealth want to shift it abroad and bitcoin enables them to avoid all forms of capital control. This may or may not be true because majority of bitcoin transactions happen in North America and Europe. The share of Asia-Pacific is very small in that. If Chinese elements were really active, the price of bitcoin would not fall rather it would have kept rising on and on. There is one more explanation being offered behind this sudden rise. As the crypto-currency ecosystem is maturing, the institutional support mechanism for bitcoin payments is falling in place. Merchants are adopting bitcoin as a mode of payment, more bitcoin wallets are being downloaded, more exchanges are being opened, more companies are entering crypto-money infrastructure like those in sidechains & altcoins and more banks are turning receptive to test the bitcoin space. This is a better reasoning though it only explains a part of the question. The real question is how far Bitcoin can rise and should rise. There is currently no framework for this answering this question.

If bitcoin is regarded as digital gold that works peer-to-peer

Let us try to answer this question. It is true that dollar is the world’s reserve currency but this is true more for the governments as they need dollars for international trade. For people, the true global store of value is gold. The second half of 19th century and in the 20th century till 1971, gold remained both the defacto and dejure global reserve currency as pound first and then dollar was pegged to it. People still regard gold as the true asset for hard times because it is acceptable to populations in all corners of the world. It is the true form of peer-to-peer money in a traditional sense. Bitcoin is called “digital gold” as its supply is fixed and any fresh incoming of this digital currency is through mining. So, like gold, bitcoin is a scarce unit of money. It is divisible and portable but bitcoin is more than gold in certain terms. It is a tradable gold. It is a technology platform too and a peer-to-peer network too. It can travel to any corner of the world without any chance of getting checked by any intermediary. In a way, it is a complete self-sustainable payment network for the entire world. What gold cannot do in terms of movement, bitcoin can do. It is censorship-resistant payment system that can work for multiple segments of global population. There are 200 million immigrants who send remittances to their native lands regularly. There are global telecom players who want a parallel revenue stream in addition to their sagging profits in voice and data market. If fiat currencies have cash-based network and they are yet to jump on to digital payments, the gap can be filled by mobile networks or message apps-driven systems of social networks like Whatsapp or Snapchat. The global hawala route may also jump on to this. Very few governments can counter the decentralized nature of bitcoin network. This is a great asset in the age of digital money. For a peer-to-peer exchange, bitcoin is a better bet than gold. So, it can be safely assumed that bitcoin would acquire at least the equivalent if not more than value of gold.

Let us assume that true value of bitcoin should have been equivalent to one gram of gold. It comes down to around $40. This is the price that bitcoin crossed in year 2011. It means that in terms of gold, next barrier of 10 gm (1 Tola) should be tried. It comes down to around $400. This is the current market price range of bitcoin but we should not forget that bitcoin had touched over $1100 earlier. It means that an ounce of gold is the price limit that bitcoin has already touched. So, there are three gold-reference price barriers that bitcoin has already breached. That is why to guess a reasonable price level of bitcoin is not an easy task but the trajectory of growth in bitcoin prices does gain weight in terms of gold price references. That is why the popular consciousness assumes that price of bitcoin is expected to rise in direct proportion to its value in terms of gold.

If we assume pound of gold as the next price barrier, this value comes down to around $17600 if current prices remain constant. If we go further to one kilogram of gold as the last price barrier, this would reach to over $38,000 apprx. Of course, this may seem a blatant case of speculation in short run but if people tend to regard bitcoin as digital gold, the long-term bet at these kinds of prices is not misplaced. What do we mean by long-term? It may be any period from 15-25 years from now. It cannot be predicted as to what price would be there in which year but it only reflects what people may think in terms of long-term positions on bitcoin.

If bitcoin market cap is regarded as equivalent to that of gold

There is another method of reaching a probability of price. Let us find what amount of gold is available for international trading. Let us evaluate in terms of market cap of gold. As per Wikipedia, the total gold reserves of the world were around 171,300 tonnes.

Source: Wikipedia

If we exclude gold used in jewellery, central banks and industrial categories and assume only half of gold in the investment and unaccounted categories, that amounts to over 18,000 tonnes. This is a very simplistic method but it can give us a rough market cap of gold that is being traded around the world. We should not forget that bitcoin is going to attract forex traders also where a single percent of investment can touch hundreds of billions but for the time being, let us only consider market cap of gold that flows across the trading platforms. This can become a good reference point as far as the price levels of bitcoin are concerned. At current prices of gold, this amounts to around $700 billion. This seems a figure that is the likely target of bitcoin market cap but when would it happen? If we give at least 25 years to above possibility, the average price would come out to be around 1Kg of gold (assuming constant price of gold) by the year 2040. Nobody knows whether it would happen but this kind of exercise of predicting future rise of bitcoin is an important one.

Utility and scale of Bitcoin wil drive its price

Are we not over-estimating the potential of bitcoin? Is this framework really accurate? The answer is that even $700 billion market cap (if it happens) would make only a small fraction of existing monetary base of the world and further much smaller fraction of the global money supply. It is not to say that bitcoin would replace fiat currencies. The focus is price matrix with respect to gold and it is only to state that it can turn out as a good alternative as global store of value the way gold is. This may be off the mark but we should not forget that same thing could have been said four years back too but the reality is that number of bitcoin transactions have jumped 100 times in the same period. Today, the daily transactions are touching nearly 200,000 and to expect this figure to reach 20 million in next 10-20 years is not an impossible target. This will definitely affect the price too. Nobody can predict bitcoin price in short term and nobody should. This blind game may be counter-productive both to the trader and the bitcoin itself too but long-term price trend is positive. This needs to be understood in the context of some related developments that are going to become major trends in coming years. The internet of things, cloud-based nature of software services, evolution of smart contracts, inherent weaknesses and inflationary nature of fiat currencies, real-time payments, universal adoption of smartphones by 2020 and 4G networks by 2025 are all the emergent features of global life that will make bitcoin a very acceptable solution. Let the critical mass around this technology be fully developed. As number of bitcoin transactions increase and its usefulness is proven beyond doubt, a natural mode of evolution will raise its price. Bitcoin is a true version of a global currency that has emerged from the grass-roots. The decentralized nature of its blockchain technology makes it a sustainable and scalable solution in the digital age. How far it would go is not clear but it would remain the most disrupting monetary phenomenon ever happened in human history.

(This was published on Economylead on 9th December, 2015)

A speech on Bitcoin that never happened

noreply@blogger.com (Sunil Aggarwal) — Fri, 27 Nov 2015 06:05:00 +0000

Recently at FIBAC 2015, Mr. R. Gandhi, RBI Deputy Governor delivered a speech, “Disruptive Innovation and Inclusive Growth – Some Random Thoughts” and two prominent themes in that speech were crypto-currency and crowd-funding. He expressed great possibilities hidden in these unique innovations of 21st century. To him, a “Crypto currency is a digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank” and crowd-funding is “the practice of funding a project or venture by raising monetary contributions from a large number of people, typically via the internet.….it is a form of alternative finance, which has emerged outside of the traditional financial system.” Still, he does not find them desirable because they “both hope to operate in a regulator free environment. In matters financial… unregulated financial system has immense scope for depriving ordinary public of their hard earned money and therefore highly risky to be permitted to grow.…. Secondly, both have the potential to support criminal, anti-social activities like money laundering, terrorist funding and tax evasion.”

Such a speech by a senior RBI functionary seems quite a conventional way of saying both good and yet bad things about a paradigm shift in the world of money and finance. This change is so big that every big financial institution is working on it. British banks are seriously exploring it. London is not just the financial centre of the world but also the new Fintech capital of the world too. Federal Reserve is working on the new framework of real-time payments where members of Ripple team, the crypto-currency giant are also involved. Australian Banks are testing it. IBM, MIT, Santanders and many more are building advanced models of blockchain for use in financial industry. Against such a backdrop, the ideas of RBI deputy governor show less than adequate understanding of institutional changes that RBI may need to accommodate for the crypto-currency world in future. It seems that a lot of hard work is yet to be done on this front by the regulator. A better way of what could have been possible in this regard is to re- imagine the speech the deputy governor might have made.

1. The kind of traction that bitcoin has gained in less than six years is quite a challenging proposition for central banks. To be more precise, this is the challenge from the open source and decentralized nature of money and finance to the centralized regulators of the present world. The world is watching a bottom-up model instead of a top-down model that we have got almost used to. There would be nearly five billion smartphone users in the world in another five years. In a cashless society, the physical hold of a paper currency will need to be replaced by a mobile interface and technology back-end. It is a change that is totally new and disruptive for all of us. It may be a moment of creative destruction but if we remain unmindful, this destruction may not be creative too. It seems to be issuing a wake-up call to all the regulatory authorities as the nature of challenge is much deeper than is visible at present.

2. Bitcoin is the first-ever authentic digital version of a bearer asset. All physical currency notes are also bearer assets of multiple denominations. The natural leadership of a central bank emerges from the fungible nature of this bearer asset. It is the simplest and the safest mode of exchange. Central bank performs its seigneiorage functions with absolute quality and public safety. This public acceptance of RBI in its monetary grammar is a great asset. The challenge is to reproduce this kind of authenticity in the digital domain too. Bitcoin does have the first mover advantage but it is far away from the scale of fiat currencies. The time available should be used to reproduce the digital rupee payment network the way it operates on cash front. Payment banks are one way to take in this direction but to match equivalence of ease, efficiency and security of bitcoin, we need to go a bit further. The best way forward is to erase the friction of payment during transaction and conversion of rupee. We need to develop a core technology group on the lines of something like Ripple, Ethereum or Stellar like crypto-currencies. They provide sufficient variety of management alternatives that a central bank can replicate. With the help of institutions like NIPFP, C-DAC and NIC, RBI can develop in-house technology solutions based on blockchain.

3. Banking on tap for Indian market is already being given a serious push in the form of payment banks and small banks but banking needs to change not in terms of aiding financial inclusion but also in terms of reducing costs through seamless unity of payment platforms. The blockchain technology is the biggest gift of bitcoin. As all banks have similar systems for deposit management, payment systems, databases, credit and debit ledgers, credit card, lending and so on, this creates needless duplication of identical functions across banks and hence unnecessary costs for the banking industry. Blockchain can reduce it by creating industry-level systems of record in such a way that everyone can use them. What may be needed is some sort of “consortium blockchain” which in words of Vitalik Buterin is “a blockchain where the consensus process is controlled by a pre-selected set of nodes; for example, one might imagine a consortium of 15 financial institutions…… The right to read the blockchain may be public, or restricted to the participants, and there are also hybrid routes …… with an API that allows members of the public to make a limited number of queries and get back cryptographic proofs of some parts of the blockchain state.”

4. India has a unique and single register of identities/e-KYC in form of Aadhar. With its support, we can design a model of crowd funding. What is needed is that RBI must innovate on this turf by issuing an open-source software model of crowd-funding. The challenge is that this model has to be technology-centric as well as financially safe. This may be called LINUX of crowd-funding models. Micro-investments for crowd-funding can be modeled on the micro-payments and share issuance can be transparently seen on the blockchain. SEBI can join for this financial innovation. Small-cap companies or start-ups can be allowed to participate in this model. Instead of fighting against crowd-funding, we need to develop our own methods of easy and reliable fund generation. If this kind of public software can be made popular as well as mandatory for crowd-funding in India, this would also be paradigm shift in the role of central banks. From a money issuer to a technology-issuer, this would be a great achievement.

5. The fast rise of crypto-currencies beyond 600 in less than two years is not a happy trend and it is expected to cross 1000 in another couple of years. If even 90% of these currencies die, there would be around 100 such currencies still left and that would be still a great number to tackle. They are already emerging as the favourite medium for hawala transactions as well as banned goods and drugs online. Despite closure of Silk Route, an online market-place for sale of illegal goods with bitcoin, there have emerged dozens of new ones. Tor network and proxy nature of servers make it too difficult to stop them. Defense may not be right strategy for central banks as far as crypto-currencies are concerned. It seems that time has come for all central banks to come together and start working on this challenge. More is the friction between currencies; more is the incentive to shift to alternative crypto-currencies. A user cannot make instant micro-payment across currencies with enough ease and at low cost. This can be corrected by ending the fragmented nature of our monetary systems. We need to remove the multiplicity of standards and protocols and reduce the compliance cost too. The need for cooperation and collaboration is so high that inter-currency payment friction should be eliminated with only one goal of real time payments. The entire world should move towards this goal and there should be no lapse in it. If fiat currencies can do what crypto-currencies are doing, with a much better record of public acceptance, scale and efficiency, the world may not need so many of crypt-currencies.

(This post was published on 26th October, 2015 at the web portal, India Bitcoin, a news portal maintained by Unocoin, a premier Bitcoin Exchange of India)

My published article on Bitcoin

noreply@blogger.com (Sunil Aggarwal) — Wed, 02 Sep 2015 10:27:00 +0000

URL is given below:-
http://swarajyamag.com/economy/bitcoin-and-the-future-of-money/

India as a zone of secular stagnation

noreply@blogger.com (Sunil Aggarwal) — Mon, 18 Aug 2014 11:43:00 +0000

Have we ever bothered to notice one serious trend in India in last couple of decades? Whatever business stream generates profits more than the average return on FD (Fixed Deposit), suddenly finds a deluge of investments even if these investments are not legal. Think of thousands of engineering colleges, business schools, B Ed colleges, Electronics showrooms, Shopping Malls, CBSE Schools, Real Estate business, Gold jewellery, telecom business and many more. The profitable business cycle shrinks so fast that it soon turns into a negative zone where returns are less than interest earned on a FD. It is ironical wherever the money moves, a short stint of profit is followed by a long-term secular stagnation of profits. In last sixty years, the share of industry in the GDP has not drastically improved (not even doubled or increased by double digits even). The fact is that all businesses are dependent on the climate of Indian business that feeds upon the inertia of the past. Private money follows a linear pattern and not a holistic design in India. Improvisation and research are the last priorities in the Indian business. The upper middle class that holds money, is actually sitting with an education system that is non-innovative, a government system that is deeply fragmented and dysfunctional and the institutions that are outdated. Indian money men are the poorest chaps on earth these days. Think of a businessman who invested 2 crores on his Electronics showroom some three years back and today, he is running daily losses because of losing business to e-retail giants. The best of business efforts are ending up in a long-term loss making proposition which one assumes to survive through because the debt burden keeps postponing the immediate shock but keeps increasing the vulnerability. The real reason for this sustained loss of money and effort is the prevailing deluge of herd mentality. Everybody thinks short term and everybody suffers in long term. We need to build business models where human intelligence is more critical than simply the availability of money capital. What is made with earned wisdom will stay with us for years and decades. What makes Germany a world manufacturing nation despite global recession? What makes US entrepreneurial hub of the world? What makes Britain the global financial centre? These are the goals that were decided decades back (if not centuries) and pursued with rigour whatever party may rule the country.

महाभारत आज भी -2

noreply@blogger.com (Sunil Aggarwal) — Thu, 07 Aug 2014 06:28:00 +0000

ध्रितराष्ट्र ने भी तो गीता सुनी थी संजय के मुख से। पर ऐसा क्यूं है कि उसे वो समझ नहीं आती. इतनी ज्ञान ध्यान की बात उसे क्यूँ नहीं समझ आ रही? समझ तो आती होगी पर उसे हजम नहीं होती होगी कि यह क्या बात हुई कि कर्म भी करो और फल की इच्छा भी न करो! उसने शायद विश्वरूप भी देखा होगा पर उसने इस पर भी सवाल उठाया होगा। वो हर चीज़ में बड़ा सोच समझ कर, मोल-भाव कर के चलने वाला इन्सान है। उसे लगा होगा कि क्या यह विश्वरूप गांधारी की तरह मेरे साथ-साथ चल सकता है पक्का आसरा बन कर ? जब भी जरूरत हो, आवाज़ लगाई और लो हाथ में! उसे पता था कि कृष्णा बहुत चतुर है इसलिए उसका निष्पक्ष होना असंभव है? उसके लिए वफादारी किसी की चतुराई से भी बढ़कर है।ईश्वर भी इसी कसौटी पर खरा उतरना चाहिए, तभी तो उसे ईश्वर मान के पूजा करने का फायदा है। (पोलिटिकल इस पर्सनल के अनुसार चतुर और निष्पक्ष साथ साथ हो नहीं सकते ) ऐसे हालातों में उसके लिए गीता मात्र कचरे के सिवा कुछ भी नहीं थी। जीवन एक उपहार है या फिर एक संपत्ति? ध्रितराष्ट्र एक ऐसा व्यक्ति है जो कहता है सीधा साफ कि यह मेरी संपत्ति है। इसे जिंदा रखने और भोगने के लिए मैं सब कुछ कर सकता हूँ। अगर कर्म का फल ज़िन्दां रहना नहीं है तो क्या फायदा कर्म का और भाड़ में जाये ऐसी गीता ! मसला असल में यह है कि गीता की ज़रुरत ही उसे है जो यह मानता हैं कि कुछ ऐसा भी है जो मेरा नहीं है कम के कम अधिकार की दृष्टि से। उसके साथ मेरा रिश्ता संयम और संतुलन का होना चाहिए। यही उसके अन्दर सवाल पैदा करता है और उसी से पैदा होता है वो जो निष्पक्ष है, जिसकी बात सुनी जा सकती है पर अगर फैसला पहले ही हो चुका है कि सब कुछ मेरा है और मुझसे बढ़ कर कुछ भी नहीं है तो फिर गीता पर टाइम ख़राब करना मूर्खता है और कमाल की बात है कि सौ में से निन्यानवे बार ध्रितराष्ट्र ही जीत जाता है पर क्या करें उसे गीता का शोर सुनते रहना पड़ता है! उसके लिए प्रॉब्लम यह है कि यह कृष्ण गीता का बाजा बजाने बार बार आ जाता है, जाता ही नहीं है। उसे यहाँ हर हाल में पता करना है कि उसका कर्मफल उसे मिलेगा कि नहीं और यह साला कृष्ण बीच में अर्जुन को लेकर हर बार बैठ जाता है और कान पकाता रहता है. धृतराष्ट्र के लिए गीता एक पक्की बोरियत है और कभी न साथ छोड़ने वाली बोरियत है.

महाभारत आज भी -1

noreply@blogger.com (Sunil Aggarwal) — Thu, 07 Aug 2014 06:24:00 +0000

क्या हमने कभी सोचा है कि दुर्योधन के जन्म और बचपन का उसके स्वाभाव से कोई रिश्ता है? थोड़ी देर के लिए उसके प्रति एक सहानुभूति पूर्ण रवैया रख कर अगर उसके बारे में सोचा जाये तो शायद उसे समझना आसान होगा. वो एक ऐसा बच्चा है जो एक गहरे तनाव में पैदा होता है. उसकी मां को गुस्सा है कि कुंती के बच्चे पहले हो गए और उसके नहीं. क्यूंकि राजपाट में पहले जन्मे बेटे को ही राजा बनाया जाता है. इस बेतहाशा को न झेलते हुए वो अपने ही गर्भ पर जोर से प्रहार करती है और एक मांस को लोथड़ा बाहर गिर जाता है जिससे बाद में दुर्योधन के साथ साथ बाकी कौरव भी पैदा होते हैं. बात फिलहाल दुर्योधन तक ही. क्या आप को यह कोई ऐसा बच्चा लगता है जिसे मां ने बड़े प्यार से पाला होगा. क्या वाकई उसकी मां ने उसे गोद में भर कर महीनों भर उसे छातियों के साथ लगा कर रखा होगा? क्या उसके बाप ध्रितराष्ट्र ने उसे गोद में बिठा के लम्बी कहानियां और लतीफे सुनाये होंगे? जो मां बाप उसे राजपाट का निश्चित वारिस मानना चाहते थे, वो बेचारा काल का मारा थोडा लेट हो गया और अब उसके मां बाप की असुरक्षा उसका उम्र भर के लिए बोझ बन गयी. जिसे मां की गोद नहीं मिली और बाप से आसमान छूने की कल्पना नहीं मिली, वो मां-बाप से दूर उन्हें खोजता रहा हस्तिनापुर में. मां बाप के लाड में जो अति करने की तृष्णा शांत होनी थी, वो हस्तिनापुर में पहुँच कर गुनाह में बदल गयी. मां बाप से प्यार, गाली और माफ़ी की रोज़ रोज़ सौगात अगर मिली होती तो शायद उसे छीनने की आदत न पड़ती और गुनाह की छूट न मिलती. बचपन में जैसे हम बच्चों को पालते हैं, उसकी परछाईं सदा के लिए रह जाती है. ज़िन्दगी के पहले मास्टर औरत और मर्द अगर फेल हो जायें, तो सारे स्कूल, कालेज और यूनिवर्सिटी मिल कर भी कुछ नहीं कर सकते.

RETHINKING MONEY-9

noreply@blogger.com (Sunil Aggarwal) — Wed, 30 Jul 2014 05:54:00 +0000

Can we imagine something that seems a bit odd today? There is a digital currency called Ripple. There are more than 8 billion ripple coins in the global market. They are worth over $50 million today. They offer transactions in all major currencies of the world as well as the gold. There is no need of any bank or financial institutions involved and hence no transaction cost involved. Its cost is very near what was the worth of Bitcoin in 2009 just after its discovery. Still, every day, over $100,000 worth of Ripples are bought and transacted. Let us assume that some company like Amazon, Facebook, Alibaba, Google, Microsoft or Apple or a group of them decides to make Ripple payment another alternative payment currency sometime in 2016. Suddenly, the network that is limited to some lakh users shall immediately shift to hundreds of millions of users. The credibility stamp of such a big network shall add a big worth to this digital currency. Don't forget that this ripple coin is like electronic version of gold. There is an upper limit to the number of ripple coins that can be issued unlike paper currencies that can have unlimited money supply. It means that possibility of embedding digital currencies in existing social and media networks is huge. That is why the monetary scene in the world is sitting at tenterhooks. Once these are gone, people will change money so fast that no national system can adapt accordingly. This will be like a computer virus that will spread to millions in days if not in hours. That is why the anchoring of paper currencies to actual gold or silver is very important. No keynesian economist would accept such a possibility but that is the biggest fear that is stalking them at present. This may seem odd but for the imminent survival, they would have to anchor the paper money if they want to secure any credibility. An inflation ridden money is always like an uneasy burden. The moment a national citizen gets a credible global alternative, things would change very fast. I am talking of only Ripple coin at present but there are over 200 digital currencies like Ripple in this world. The chances of world currencies hitting a digital black hole is not very remote these days. I am not talking of big business or big banks rather i am talking of retail transactions. That is why no established voice or government agency is actually speaking of this danger because their interests are directly linked to status-quo. But this may not last for long because once people start shifting paper currencies with digital currencies, it would turn into an alternative revolution.

Rethinking Money-8

noreply@blogger.com (Sunil Aggarwal) — Sat, 26 Jul 2014 10:28:00 +0000

What is the value of excess unused cash that lies with you? You will either keep it as it is or you will invest it in some financial instruments depending upon how much you can wait for the expected returns. In most of the cases, you will keep some amount with yourself for your regular or emergency needs and save the rest in some time-determined instruments with some returns. This means that time and cash-in-hand is a very serious factor when you decide the valuation of your future returns. What happens when you think that time is not ripe for longer duration investments? Everything now comes down to the shorter duration. That means that you will turn all your time deposits into demand deposits even if they are in banks. For you, short term is very important if your money is not in your hands. In direct contrast to it, for banks, long term is very important if the money is locked in bank reserves. Short-term is a very dangerous zone for a bank. The bank does not earn from demand deposits rather it earns only from time deposits. In short term, they only incur expenses and don't earn money. The way banks manage their call money rates for very short-term cash-needs, is a story which many people know that it is bank's nightmare many times. Let us assume that there comes a time when people are not sure of the long duration and they turn most of their deposits from time deposits into demand deposits. The moment it happens, the chain starts and runs and will keep running like anything. The bank would simply lose all cash very soon if people don't trust the nature of time. In electronic age, the transfer of wealth from time deposits to demand deposits and from demand deposits to immediate cash is very less rather almost negligible. That is what makes the value of paper currencies very unsustainable. What a government does with money, will determine the future of currency and if government keeps printing money and sustaining inflationary economy, the time factor can kill any monetary system in very short duration. That is what is possible in electronic age if currencies are not pegged with commodities like gold and silver or any other reliable commodity. The moment there is crisis, people will lose trust in the currency and there would be serious backlash in the electronically managed transactional network. The lesson obviously is that time for non-anchored money is gone and we need to get back to Bretton Woods era when dollar was pegged to gold at the rate of $35 to an ounce of gold. If US federal bank could not pay back money, it was liable to pay back in terms of gold. I know that is too difficult at present but think of the catastrophe we can witness once the currency starts collapsing in electronic age. The age of money-throwing welfare state is over.

Rethinking Money-7

noreply@blogger.com (Sunil Aggarwal) — Fri, 18 Jul 2014 08:47:00 +0000

Have you ever thought of bank as a holder of cash? Just try to observe your relationship with bank in the smartphone and online age? Are you noticing that this is a strange age in a special sense? Today, you use cash as currency paper note. You are always in need of this cash and a bank is the provider of that cash. There is monopoly of bank in terms of providing cash flow to the people. But think if that currency note goes digital. This means that in a bank server, this is a digital figure or a bit of information. Similarly, when you use your mobile smartphone, tablet or computer for financial transaction, it means that your money is a just a digital figure or a data. Practically, there is no difference between you and the bank holding digital money. That makes you a digital equivalent of a bank. It also means that the bank does not have the monopoly it used to have. What can happen if instead of banks, you and millions like you stop using any such currency. This will be equivalent of bank run because now, you are the real bank who holds money. Think if ten million people just exchanged a hundred dollar note for an unknown currency. It would be a figure of 1000 million worth of new currency. People will use the new currency but will dump the dollar. The one billion dollar cash would be gone for good. Now, just forget this assumption for some time and read the following.............

Everybody says that dollar will eventually lose this status of reserve currency but nobody challenges the US power to stop the powers that challenge dollar. After all, the one who creates money out of thin air, would remain powerful till the world stops using that money. The people don't have an alternative. They created bitcoin but the too much of dollar cash in the hands of federal powers has already bought a majority of bitcoins and has locked it out of common man's use. The first warrior is dead but don't forget that the world is using at present over 200 digital currencies like ripple coins, dogecoins and many more. The world is like a big bank with dollar deposits in the hands of people and can you imagine how much money, people can exchange in a minute, an hour, a day, a week, a month or so on? When people choose to dump dollars for bitcoin like currencies, there will be change. This will not be bank run but rather, it will be currency run. The toxic inflation-driven cash will simply fly once mob starts doing it. Remember that people use money and by using that money, they make the creator of that money the king of users. No scholar can predict the timing of this change. Just think of the power of over three billion smartphones choosing to start something of this kind! People will change the system; governments won't.

Too much cost, too less of Education: Papa-Beta comparison

noreply@blogger.com (Sunil Aggarwal) — Thu, 10 Jul 2014 08:19:00 +0000

Today afternoon, my son gave me his quarterly fee slip and I was a bit shocked to find the increased fees increase totaling Rs.10,000/- for a quarter. It means Rs.3,333/- for a month. This is not a small cost per month by any Indian standards. The figure irritated me a bit but I had no better option or the option to opt out. Somehow, I managed the discomfort within and remembered the good old days when I was myself a student as my son is. Suddenly, a question surfaced in my mind “What were my fees in the similar class way back some 32 years ago?” A bit of recollection helped me and I found that mine was Rs.30/- per month. My school was one of the top five schools of the city and it enjoyed fairly good reputation among the public. My parents were pretty satisfied with the school teachers and other related activities. In last 32 years, the fees jumped over a hundred times and my kid’s school should be rated not among the top five rather among the top twenty schools of the city. I cannot say that my son is really being trained for skills of the future or his teachers are really great or committed teachers. It means that the cost of my son’s education is over hundred times more than that of mine despite the fact that I consider the important factors of quality on the declining side. In a period of 32 years, the hundred times increase seems huge. I enquired the same from a fellow friend who calculated his similar situation and said that his comparative ratio of father and son was 1:110. In order to be clear, I enquired the same from couple of more acquaintances and this figure turned out to be nearly above 1:105. What does that mean in economic terms? The inflation figures of foodgrains, fuel and electricity may be disturbing but have we ever bothered to think of cost of education and hidden inflation inside it. If calculated properly, this item would turn out to be the most inflation-prone one in last 25-30 years. During 1970s and 1980s, the factors like regular off-campus tuitions, coaching for competitive examinations, capitation fees etc were not very prominent but if these factors are added to the current cost of education, the actual financial burden of education would be really heavy for a middle-class family. The cost of educating two kids can sometimes take even more than one-fifth of a family’s total budget. In America, the student debt burden of the entire country has gone beyond $1 trillion and average debt per student is over $27,000. In India, the average of student debt may not be there because bank loans for education are not a regular practice here but if parents’ debt for kids’ education is calculated, it would not be less in terms of comparison. This is the debt that has to be paid back by skills and competence but are we really gaining in capacity for that? Are we really getting a good education? Are our students really earning hard enough to pay back their parents’ loans? The skills deficiency is increasing day by day. Whatever we invested in our education is being sucked by inflation of degrees. Marks are turning less and less the hall mark of a good and talented student. How to handle this situation of perfect storm? This is a question for all the schools and colleges to answer.

Rethinking Money - 6

noreply@blogger.com (Sunil Aggarwal) — Thu, 19 Jun 2014 08:40:00 +0000

Read reviews of "The Dollar Trap" by Eswar Prasad. He agrees that dollar is losing the credibility of a reserve currrency but it would continue primarily because it does not have an equivalent challenger. This is a particular case of linear imagination reaching nowhere. It can predict for some years but cannot see what can be the disruptive change. I thought that same could have been said of Pound in 1930s. I think that good scholars of money don't go much back into history before reaching their judgements. Why is it so that only two countries India and China controlled 60% of world trade for nearly 2000 years before 1849? There is something hidden in the intrinsic business and monetary models of these two countries that is fundamentally different from the western model of money. I don't know exactly what these models were but they were not definitely what we have today. In order to revisit our ancient business and trading strength, we need to merge three ideas- denationalization of money across the borders, choice of currencies for all the users and commoditization of money. These ideas are not unique but not tried in Indian context. Denationalisation of money means that we need to allow money flows with full transparency in and out of the country. Every year, there is hawala route transferring money in trillions across the nations. All money is national but works in a global reality with international forces of demand and supply. Why it cannot be a transparent exchange instead of being an illegal one? There have been 100 currency crises during last 40 years across the world. Nearly $100 billion of capital has moved out of India in last five years because the businessmen were deeply worried over the weakening and poor value of Indian rupee. Could they use a currency of their choice for whatever investment while sitting within India? If Indian rupee can bend before dollar, pound and euro and fetches a very poor exchange value, we need to create a better choice of investment available to Indian traders and business. Why to limit them to a choice where they will always have a weak exchange ratio? How to do it is a question but first of all, we need to realize the fact that Indian business is not happy with fluctuating and poor exchange value of rupee? Give the choice of currency to one and all beginning with those who can invest. Secondly, let there be more Indian currencies to choose from within India. Why cannot ICICI, HDFC, SBI, Vodafone, Airtel or Reliance issue currency with sound money standards? If they can issue shares, why cannot they issue currency notes? After all, a share is a guarantee of preservation of purchasing power. If govt cannot safeguard our purchasing power, let others take over this function if they can. It will be a minimum government with maximum governance. Third, a money without any anchor is vulnerable to arbitrary fluctuations but this thing can be stopped if there is commodity anchor in form of gold or silver. Some more commodity anchors can be tried. Let there be plural control of money. Today, a city is as large as a world and a world is as large as a village. You are a group both as small as only two and as large as 8 billion. If world can have many currencies, why a city cannot have many currencies? When this can happen without serious backlash or government interference or with popular support? This would be a reality particularly when we lose our fixation with paper currency notes and use electronic money. E-currencies are global and local simultaneously; so, the big change may happen any time after 2016, when global smartphone population crosses 200 crores. This would be ripe time for change-over. Be ready for that.

System as a suicide factory

noreply@blogger.com (Sunil Aggarwal) — Tue, 17 Jun 2014 08:51:00 +0000

Can you move out of an inflation-prone monetary system? That is simply impossible if you want to keep using currency issued by national governments. This is simply a financial suicide. You would be locked out of any transaction business. Either, you would be thrown out of the current system or you would have to develop a new currency for new system of exchange.

Can you move out of an education system where degree is the only parameter of one’s educational achievements? If this system rampantly indulges in grade inflation and refuses to correct itself, can you move out of this system? This is simply a professional suicide. You would be locked out of any job opportunity. Either, you would be thrown out of any employment or you would have to develop your own entrepreneurship.

Can you move out of a political regime where election maths would decide who would rule. This is a system where the entire power is in the hands of the few people sitting in the parliament that cannot change the status quo of traffic jams in your city, garbage dumps in your locality, pollution level of your air and water and so on. This is a system where you need good Mayors and good Sarpanches than good ministers but you get none. Can we shift local politics into our own hands by protest? This would be a political suicide. You would be locked out as an anarchist. Either, you would leave the country or you have to become another political party.

When the system itself goes survivalist, the individual has only one solution- suicide; either a slow one or the instant one. If you want to avoid this, the only option is to change the rules of game. Either get busy dying or get busy living.

Teachers of the future

noreply@blogger.com (Sunil Aggarwal) — Thu, 12 Jun 2014 05:20:00 +0000

A sudden futuristic imagination disturbed me in the morning. In year 2016, some 18 million students in around 100 countries suddenly left their colleges and universities midway because there were better options available online. It may seem absurd to ask but still, it should be asked. What is the difference between a Professor teaching in a university class and Murari Bapu giving discourses on Ramcharitmanas to hundreds of spectators in a Pandal? An 8-day session of Murari Bapu is equivalent to somewhat annual salary of a Professor. In terms of salary and audience, the difference is real but in terms of function done, the difference is not that real. If compulsion of syllabus or examination are done with, the difference comes down to nothing. If courses are taught in open mode in a university or a college or online, the practical difference comes down to who teaches really well and who interacts with students on the widest possible reach. This question has been never asked rather it has been buried deep inside syllabus, time-tables, examinations and top-down management styles of our colleges and universities. When all of this is being challenged by new modes of learning, teaching and interaction, the wall of secrecy is nearly falling. Teaching is a profession borne out of freedom to learn and freedom to teach. The irony is that systems have imprisoned this universal spirit. In another five to ten years, most of the colleges and universities would simply die if they don't overhaul their campus learning culture in a fundamental manner. A teacher needs to be reborn. This can only be the one who can teach and who know how to teach. Degree babus and copycats would face very rough days soon.

Rethinking Money-V

noreply@blogger.com (Sunil Aggarwal) — Sat, 07 Jun 2014 09:00:00 +0000

The actual fact is that money is nothing but transfer of value from one to the other. But when the actual value as well as the supply of money is determined by a centralized monetary regime that controls prices, wages and interest rates, it becomes an absolute power for managing both present and future. We are in democracies but in terms of money, they are dictatorships; they allow only one kind of money definition and that definition is inflationist. Every saver is at loss when he saves money that is going to lose its value. The net beneficiary is the one who consumes and keeps consuming whatever may happen to the ecology and the poor. More cars mean more and more cars and more of petrol and more of traffic jams and so on. This kind of money defintion borrows prosperity from the future and saves the present from getting any lessons in sustainable development. It is like killing our kids who will see a planet with more pollution, less potable water, barren lands, industrial waste, ghost cities and townships and so on. We are all participants in this mindless money expansion that does not have any anchor. Neither dollar, nor gold, Yen nor Yuan or anything else. Everything is topsy-turvy in its core. The day is not far off when some financial virus would create havoc among current monetary orders and devastates it. Roman civilization was devastated by the inflation. Southern America lost to North America during battle of slavery because of the same factor. A strong and sound money is the only way future can be ensured. But the one who has power to print money, has the power to create more power out of thin air. This is the attraction of paper money. But this power is going to meet its nemesis. Currencies will fight currencies and none will win.