'Crypto's a freedom tool...India's caught in an analysis paralysis on crypto & Al…It needs to fund research in both', Sandeep Nailwal

Crypto enthusiast Sandeep Nailwal, co-founder of Polygon Labs that builds open source blockchain infra, and on whose platform new crypto convert Trump’s NFTs were sold, tells Amin Ali that India should shed its inhibitions about cryptocurrency & treat them as any other financial asset. As reported earlier, 20mn Indians including in small towns are already invested in cryptocurrency. On AI, the ‘cypherpunk’ believes it’s blockchain that can protect from AI overreach. Edited excerpts:

The crypto community backed Trump, who now acknowledges crypto.

Limited edition Trump NFTs (non-fungible tokens are assets – mostly art, digital content, or video – tokenised via blockchain) were released on Polygon. It was an important event, since a company with Indian founders facilitated Trump’s entry into the space. These collections showcased blockchain’s power for mainstream adoption, garnering attention from both Trump supporters and the broader crypto community. There were 3mn registered US voters who were also crypto users. Since Trump gave multiple interviews discussing his NFTs and crypto, this community backed him.

With Trump and Musk, crypto’s the buzzword, currency’s rallying.

There’s no stopping crypto. Musk has named his department DOGE after a coin. Crypto is a freedom tool. And freedom tools can never be stopped. When people were told kingdoms will end and much of the world will be of democracies, no one may have believed it. But here we are. No one would have predicted crypto would be a poll issue in US elections -- that a presidential candidate would raise funds on blockchain and champion it. People want their money safe that no govt can take from them. Crypto gives them that freedom.

What should be the way forward for India?

India missed some important opportunities. We should observe and follow what US will be doing. We’re caught in an analysis paralysis. We have to acknowledge crypto as the new financial system. India has a lot of cryptocurrency owners. Just as India has emerged as a digital payments leader, it can do the same with crypto.

One estimate even suggests India has 30mn-40mn crypto users. Indians would have made billions of dollars had we been proactive. Imagine the tax potential on that income. But dogma and fear took over. It’s painful to think so many Indians sold crypto in panic. Many of our young engineers could not work for crypto firms or accept esops or payments in crypto. Many sold their tokens for 1/5th the price. Market makers were charged on every transaction rather than final earnings thus killing liquidity.

Crypto, unregulated, is seen as an avenue for money laundering, gambling or used by non-state actors.

People should look at 1990s videos and see what was said about the internet – that it would be used for gambling and porn. Crypto stands for cryptography but everyone only talks about cryptocurrency. That’s like saying Internet is only email.

When I was getting married, my would-be in-laws asked if what I did was legal. The mindset needs to change as it did with Musk joining the Trump campaign. As Musk said, intention is to prevent flight of capital, but in doing so good actors shouldn’t be penalised or deprived of this opportunity. US needed someone from outside of the system to bring about this change. There’s resistance to big bang reforms from within.

AI is the buzz, but you champion blockchain.

AI is a powerful and centralising force. If one company or country gets a powerful AI, it’ll control everything. Blockchain is essentially built for decentralisation and it can protect from AI overreach. If AI were ever to become a ‘being’, probably blockchain could control it, with provenance tracking and data integrity. What needs to be built is AI loyalty, a set of principles and values, set by a group of human beings that AI is loyal to.

How should India approach this?

Many countries are focusing on AI as a state policy. No state can be caught napping. AI is like nuclear power. Only way the world was protected was because deterrence was created by multiple nations building their own nuclear capabilities. GOI needs a department developing AI on war footing. It’ll be harmful if one nation gets very powerful AI – many countries must have it.

What’s your block-for-impact project in India?

India needs to fund research. Edge in tech is created when states spend well on research. In US, VCs stay in touch with professors and join their students’ startups. We fund biomedical research and innovation through Blockchain for Impact (BFI) Biome Virtual Network Program. We’re collaborating with 25 institutes in India. All research will land at a ‘virtual university’ -- a single website, in virology that’s nimble and a source of all information that advises govt on protocols during pandemics. It has to be open source and cannot be patented.