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2015
Atul Khekade
Atul Khekade is Regional
Director at Monetago Inc. , a
digital currency exchange
headquartered in the US with
presence in over 40 countries.
How the technology behind
digital currencies can help
resolve farmer distress in India
ATUL KHEKADE, 2015
How the technology behind digital currencies can resolve farmer distress in India.
This article discusses about basics of currency and debt related to
agricultural production. The global financial system has evolved the
human race ; however it has not been successful in certain situations
which include “act of god”. This paper presents how the blockchain
technology behind peer to peer digital currencies can possibly solve the
problem of farmer distress in India.
Author : Atul Khekade
Atul Khekade is Regional Director at Monetago Inc. a b2b digital currency
exchange headquartered in US with presence in over 40 countries.
Email : atul at monetago dot com
Visit Linkedin profile of author :
https://in.linkedin.com/pub/atul-khekade/6/6b3/907
ATUL KHEKADE, 2015
How the technology behind digital currencies can resolve farmer distress in India.
Table of Contents
1. Introduction
2. The Origin of Money
3. The evolution of Money
a. The Barter Age
b. Precious Metals as currency
c. Paper Money
d. Central Banks
e. Debt
4. Dealing with Uncertainty of nature
5. Digital Currency
6. The New age of Peer to Peer digital currency
7. Blockchain, the technology that enables decentralized digital currencies.
8. How P2P Digital Currency can provide solutions for act of god
a. Enabling direct buying from farmers
b. Crowd-funding or P2P bailout
c. Meeting basic needs
d. Government Bailout
e. Debt Free start
9. The Challenges
10. Summary
ATUL KHEKADE, 2015
How the technology behind digital currencies can resolve farmer distress in India.
Introduction
Recently a farmer committed public suicide at one of the political rallies in Delhi.
Farmer distress and suicide has become a harsh reality that even the best minds in India
haven’t yet been able to find a solution for. Honorable Prime Minister of India, Shri
Narendra Modi recently invited proposals and ideas for the Government to help find
solutions to this problem that is hurting the most important class of grass-root
producers of India, farmers.
Causes that lead to farmer distress have been identified at many levels from lack of
irrigation to lack of training and knowledge e.g. usage of fertilizers. This article
addresses two primary factors towards this distress, uncertainty of nature and debt.
Although uncertainty of nature is a factor that is out of control of humans, how our
current financial system deals with it definitely has a lot to improve. After 2008 financial
crisis, peer to peer digital currencies like bitcoin have taken the world by storm.
“Blockchain”, the technology that enables Digital Currencies is considered the future of
technology as it enables managing currency, finance, assets, and contracts in a
decentralized way without compromising on the security. Although various factors
related to the technology of digital currencies, such as their security, stability and
governance remains a topic of debate, it definitely provides solutions for the many
economic problems including that of farmer distress in India. The reach of digital data
and technology has potential to help at the grassroot level.
The Origin of Money
We are at large a capitalistic society and the way we look at money might be an
in-box attitude. This might be a good time to take a look at the origin of money in the
time when the agricultural produce upon which the system of money was built is getting
costlier day by day. Inflation remains a major challenge in front of the Governments
worldwide. Even worse, the farmers which produce it are facing the toughest time to
even survive. Terms like “return on investment” are making agriculture a not so sought
after activity. Farmland is decreasing and the future shows even more woes of inflation.
Consider a small village where there are 4 families.
ATUL KHEKADE, 2015
How the technology behind digital currencies can resolve farmer distress in India.
Family A - poultry farmer, produces eggs
Family B – producers wheat/bread
Family C – produces cereals
Family D – produces oil
Family Production Needs Excess
A 40 Units 7 Units 33 Units
B 45 Units 8 Units 37 Units
C 50 Units 10 Units 40 Units
D 45 Units 9 Units 36 Units
The table above is the very reason the concept of money was born in the first place.
Family A produces 40 units but needs 7 units.
Family B produces 45 units but needs 8 units.
Family C produces 50 units but needs 10 units.
Family D produces 45 units but needs 9 units.
Hence,
Family A has excess production of 33 eggs units.
Family B has excess production of 37 wheat/bread units.
Family C has excess production of 40 cereal units.
Family D has excess production of 36 oil units.
33 Units of egg
37 Units of wheat 40 Units of Cereals
36 Units of Oil
Money
ATUL KHEKADE, 2015
How the technology behind digital currencies can resolve farmer distress in India.
How your excess production can be traded for your needs became the foundation of
money and hence the financial system.
The Evolution of Money
a. The Barter Age
Barter age was the first step towards concept of trade. One could simply trade his
excess production for the one he needed.
i.e. Family A could go to Family B and trade eggs for bread/wheat
Family C could go to family D and trade cereals for oil.
Barter was the simplest peer to peer trade mechanism and was very successful when
the network of producers was limited in size. It however became difficult to manage
when the network increased in size.
b. Precious Metals
Barter age was self sufficient, but it failed to provide a common unit for trade,
exchange, storage and investment.
e.g. agricultural produce could not be stored because it had a limited usable lifespan.
So Family B had to exchange all of it’s wheat/bread before it could no longer be used by
themselves or anyone else.
Hence precious metals like silver, gold and copper were discovered as a common unit of
exchange. They could be stored and had lifespan of tens of years.
c. The Paper Money
The precious metals like copper, silver and gold did provide a promising unit of
exchange however they had their own limitations.
ATUL KHEKADE, 2015
How the technology behind digital currencies can resolve farmer distress in India.
With large economy, mining equivalent units of precious metals was vulnerable to
problems like shortage of production. The traders also found it very difficult to carry
precious metals while traveling for trade as they could be looted to wipe out their entire
fortune.
Paper became easier to produce and could be issued in almost unlimited quantities. The
cost of paper money production was negligible as compared to mining of precious
metals.
d. Central Banks
Producing, supplying and regulating the flow of paper money into the economic system
became a responsible task and hence central banks were formed specific to the country
for this purpose.
e. Debt
Producing a resource sometimes needs setting up infrastructure upfront. It also needs
raw materials and manpower. Debt system was introduced to arrange for the
infrastructure, raw materials or manpower upfront and then pay from the future
receivables of the production.
e.g. a farmer borrows to purchase tractor, fertilizers , setting up irrigation, buying seeds
before the harvesting season.
Uncertainty of Nature/Acts of God
The concept of debt works just fine in a normal economic scenario. The debtor is
responsible for the future cashflows of his produce and hence takes the burden of debt.
However the debt system fails to respond to the scenarios beyond human reach, such as
uncertainty of nature and act of god.
In a farmer’s scenario, his agricultural produce is primarily dependent on timely and
regular rainfall. The period of harvesting needs perfect timing of rains.
ATUL KHEKADE, 2015
How the technology behind digital currencies can resolve farmer distress in India.
However, there has been dramatic change in the cycles of nature and farmer has been
the most affected by them. Some regions experience back to back 2 to 3 years of
irregular rains, draught or wet draught.
Lets consider a following scenario where a farmer borrows debt for harvesting.
In a country like India, normal rate for borrowing of debt amounts from 15% to even
50% in certain Sahukari lending systems. The farmers rely on Sahukari lending systems
because they do not have access to cheaper capital.
Lets assume that a farmer borrows Rs. 1000 as debt for harvesting. He has to raise this
amount by mortgaging his land of equivalent value.
Rs. 1000 @15% Rs. 1000 @50%
Repayment at the end of the year
Rs. 1150 Rs. 1500
Now, if there is a draught or uncertain natural scenario affecting the harvesting season
and hence production, the farmer may not be able to repay his loans. Then at the end of
1 year, the refinanced debt grows by mortgaging even more share of his land.
Hence, at the end of second year,
Rs. 1332 becomes the repayable amount Rs. 2250 becomes the repayable amount
Effective rate of interest is 33.2% Effective rate of interest is 225%
If another year goes by like this, then at the end of 3rd
year
Rs. 1552 becomes the repayable amount Rs. 3375 becomes the repayable amount
Effective rate of interest is 55.2% Effective rate of interest is 337.5%
With limited profit margins, there is almost no possibility of getting out of such
astronomical interest rates even when the full production is restored and regular rains
are received.
Imagine a time when every morning when you wake up, you know that you cannot ever
get out of the burden of debt no matter what. What would you do then?
There comes the distress and depression leading to the unfortunate..
ATUL KHEKADE, 2015
How the technology behind digital currencies can resolve farmer distress in India.
Digital Currency
The world has experienced a revolution in technology and internet. The cost of
producing and storing data has dramatically reduced. The Moore’s law which predicted
that the number of transistor on every square inch will double every year has held it’s
virtue. Internet, technology and software have reached not just the urban population
but even the grass-root level in rural areas. The penetration of mobile apps and
messengers has reached almost population on earth. People are beginning to accept
technology as a medium for shopping, booking travel and even banking.
As the cost of storing and accessing data has dramatically reduced, the
technology like Blockchain has made it feasible to produce, circulate and regulate
currency through digits. I.e. digital currency.
Peer to Peer digital currencies and the rise of Bitcoin
Technology is an enabler in creating a global village or a flat world. We are
able to experience global brands such as Mcdonalds, Starbucks, KFC, Dominos, Hyatt,
Marriot, Marks & Spencer, Zara in almost every city almost in every country globally.
Over the internet, we are able to communicate, watch content as if we are on a flat
world without any boundaries. Fuel efficient planes have enabled direct flights between
any two destinations of the world in 14-15 hours.
The internet has been a revolution to make the world flat. It’s cheaper or almost
free to communicate with anyone in the world. All this has happened without the
boundaries of cities, countries and continents.
The idea of peer to peer digital currency has been in discussion for a while but it
has taken the world by storm after the 2008 financial crisis when the panic in specific
markets brought the world to a standstill creating severe liquidity crunch in fiat
currencies. Was it an act of god or a natural disaster? No. It was an account error that
led to liquidity crunch in the financial markets.
How the technology behind digital currencies can resolve farmer distress in India.
Peer to peer digital currencies are aimed at creating a global digital nervous
system for the financial world.
Here are some of the benefits of a global peer to peer digital currency system.
• Added medium of liquidity
• Bridge for fiat currencies
• Potential to reach grass
• Ability to act quickly and provide for basic necessities of the affected
without waiting for centralized approvals.
• Enabler to the internet commerce
Blockchain, the technology that enables
To explain in the simplest way, Blockchain is a technology that handles decentralized
public ledger in a way where trust is not compromised. T
and security makes it the technology for creating peer to peer digital currencies.
ATUL KHEKADE, 2015
How the technology behind digital currencies can resolve farmer distress in India.
Peer to peer digital currencies are aimed at creating a global digital nervous
system for the financial world.
Here are some of the benefits of a global peer to peer digital currency system.
Added medium of liquidity
Bridge for fiat currencies
Potential to reach grass-root level with minimum cost.
Ability to act quickly and provide for basic necessities of the affected
without waiting for centralized approvals.
Enabler to the internet commerce
Blockchain, the technology that enables decentralized Digital Currencies
To explain in the simplest way, Blockchain is a technology that handles decentralized
public ledger in a way where trust is not compromised. The fact that it maintains trust
and security makes it the technology for creating peer to peer digital currencies.
ATUL KHEKADE, 2015
How the technology behind digital currencies can resolve farmer distress in India.
Peer to peer digital currencies are aimed at creating a global digital nervous
Here are some of the benefits of a global peer to peer digital currency system.
Ability to act quickly and provide for basic necessities of the affected
Digital Currencies
To explain in the simplest way, Blockchain is a technology that handles decentralized
he fact that it maintains trust
and security makes it the technology for creating peer to peer digital currencies.
ATUL KHEKADE, 2015
How the technology behind digital currencies can resolve farmer distress in India.
How the the technology behind digital currencies can solve various
economic hurdles and even provide a definitive solution to farmer
distress in India
On 25th April 2015, people of Nepal woke up with a devastating earthquake that killed
over 8,000 people. Hundreds and thousands of families were left devastated. Billions of
dollars of property was lost and damaged. And the world came together to support
Nepal. Millions of dollars were sent to Nepal for relief efforts and helping those
affected. People across the world contributed for making Nepal stand on it’s feet again.
Such is the power of the people. When something beyond human control happens,
people stand for each other, support each other, no central authorities have to be asked
for.
Decentralized digital currencies can harness human potential that gets locked because
of lack of approval and lack of platform. The biggest benefit of decentralized digital
currencies is that they can free flow through the system and reach the needy and
distressed population with instantly. Reacting to act of god, accidents of uncertain
nature scenarios needs quick decision making. The most important need of someone in
distress is getting access to basic necessities of life like food, clothing, shelter and
medical help.
In country like India, Peer to Peer digital currencies has many ways of enabling farmers
with resources that can help them better their lives.
a. Enabling direct buying from farmers
Internet commerce and logistics infrastructure has experienced phenomenal growth in
last several years. Many layers in logistics chain have hampered margins on agricultural
produce that a farmer can get. However with internet profiling, ecommerce backbone
and digital currency wallets on smartphones that can cause as little as Rs. 1000, a farmer
can enjoy higher margin on his produce.
How the technology behind digital currencies can resolve farmer distress in India.
b. Crowd-Funding or Peer to Peer bailout
When a severe draught hits the
over the globe can send help to direct farmers
day. The farmer can then either utilize the digital currency for purchase of
necessities or directly trade them for fiat currency .e.g Indian rupees and pay off the
loan.
ATUL KHEKADE, 2015
How the technology behind digital currencies can resolve farmer distress in India.
eer to Peer bailout
When a severe draught hits the farmers, well wishers from all over the country or all
over the globe can send help to direct farmers’ digital currency wallet and save their
. The farmer can then either utilize the digital currency for purchase of
them for fiat currency .e.g Indian rupees and pay off the
ATUL KHEKADE, 2015
How the technology behind digital currencies can resolve farmer distress in India.
farmers, well wishers from all over the country or all
and save their
. The farmer can then either utilize the digital currency for purchase of basic
them for fiat currency .e.g Indian rupees and pay off the
ATUL KHEKADE, 2015
How the technology behind digital currencies can resolve farmer distress in India.
c. Meeting Basic Needs
Liquidity crunch and reeling under heavy debt gives zero buying power even to meet
basic necessities of life for the farmers. This becomes the reason for major distress.
Having a digital currency wallet with every farmer gives them buying power to use
basic necessities using internet based systems.
� E.g. Each class in the school has capacity for seating 50 students. However there
are only 35 students. Schools can accept fees in digital currency to provide
schooling for farmer kids based on the resources of excess student seats in every
class.
� Online travel sites can provide travel e.g. bus tickets, train tickets or even flight
tickets.
� E-commerce sites can provide basic necessities like home accessories .e.g. tv,
fridge, bed etc.
� Transport and farm equipment manufacturers can accept digital currency and
supply scooter, or even tractors.
ATUL KHEKADE, 2015
How the technology behind digital currencies can resolve farmer distress in India.
d. Speedy Government bailout
Loan waivers or bailouts are an impossible task even for the governments due
to centralized accounting and can take months or years to pass resolution or vote for.
Governments also find it difficult to issue loan waivers because most Governments
already have debt. However, peer to peer bailout enables direct bailout without any
centralized approvals & delays without causing any accounting adjustments to Central
or State Government balance sheets.
A Government can raise digital currency against Sovereign guarantee or even
issue it’s own digital currency to quickly bail out the farmers in distress. The digital
currency issued by the Government can be utilized by the farmers to purchase various
resources or even basic needs. Merchants all over the country or globe can accept the
digital currency issued by the government.
e.g. US Government financed critical expenses during 1860s by issuing Demand
notes or Greenback currency.
ATUL KHEKADE, 2015
How the technology behind digital currencies can resolve farmer distress in India.
Debt free Start
In peer to peer crypto currencies, debt is a non-
existent concept.
I.e. When A sends digital currency to B, the
repayment does not include astronomical interest
rates. Hence when a harvesting season is lost, a
farmer can take a new start to the year by being debt
free and staying free from distress.
The Challenges
The technology behind digital currencies
has infinite applications and scalability and
can reach grass root level.
However there are various factors that
need to be addressed:
� Governance and supply
� Price Stability
� Online wallet security
� Supplying e-wallet enabled phones to farmers
Summary
Peer to Peer digital currencies can provide a bridge mechanism to fiat currencies
of the world and compliment on many fronts that fiat currencies fail to address.
Governments and Central banks should have a open policy and guidelines towards peer
to peer digital currencies as they enable a digital nervous system to the economy
reaching grass root level people and handle situations that need immediate relief
without a centralized approval.