Welcome to the blockchain nation

The world’s most advanced digital nation is helping entrepreneurs unleash the potential of blockchain technology.

If you want a glimpse at the future potential of blockchain, visit Estonia.

Ten years ago, our country gained the unenviable title of being the first in the world to experience a nationwide cyber attack. Although no data was compromised, the attackers sent large amounts of web traffic to overwhelm systems in an attempt to take them offline.

This caused temporary disruption to a country that was already investing heavily in digital governance and emerging as a thriving startup hub, particularly for digital services. Skype was born here just five years earlier.

As a result, the attack also served as a wake-up call for how the country’s digital infrastructure could be further secured through radical new technology. The longer term impact of the attack is that it helped Estonia develop into what is now widely considered to be the world’s most advanced digital nation.

Today, almost all public services in Estonia are digitalised and accessed through secure digital identities that are provided to every citizen and resident.

The technology behind this digital infrastructure is incredibly impressive. The Public Key Infrastructure (PKI) and eID system is based on advanced encryption technology and includes 2-factor authentication. Data is decentralised, yet never duplicated and always shared securely thanks to the X-Road. You can find out more in this short video.

One of the innovations that was integrated into several of these services is a distributed ledger that can never be erased or rewritten. This kind of ledger technology is now more commonly known as a blockchain and is more famous for its role in enabling cryptocurrencies like Bitcoin and Ethereum to operate without a central authority.

In Estonia, this distributed ledger gives citizens and residents more control over their own data.

Take the Healthcare Registry as just one example. Few people in the world are able to say exactly where their medical records are located and who has looked at them. Estonians can log into their own records using their digital identities and then see exactly which medical professionals have done the same and when. Any government official who accessed your data without a good reason can be challenged and prosecuted.

As the Economist recently noted, it’s ironic that a technology loved by people who understandably want less government in their lives is increasingly being used by governments too. However, the objective is similar as it means more power being put into the hands of people.

In fact, blockchain has the power to transform almost every aspect of our lives — improving democracy and providing greater opportunities — but it may only be possible to unleash this full potential with the support and co-operation of governments.

How governments can help unleash the full potential of blockchain technology

There are two key components required for the future development of the blockchain industry, which governments can provide.

1. A smart policy framework.

Blockchain is still relatively new technology so entrepreneurs and their customers are often either faced with the uncertainty of operating in legal grey areas or are being constrained by existing legislation.

Far from hampering the development of blockchain technology, a smart policy framework could both encourage entrepreneurial activity and provide greater consumer protections.

For example, we have the technology to monitor who is accessing our data, conduct e-voting or digitally sign documents, but those things are useless without the policy framework to ensure improper access of our data is punished, e-votes are counted and digitally signed agreements are legally binding.

Fortunately, Estonia has the advantage of being able to react fast when new legislation is needed to support emerging industries — like legalising ride sharing apps or letting ‘cute delivery bots’ roam the streets.

Through close co-operation between the public and private sector, Estonia has emerged as a leading startup hub. One of the world’s largest blockchain companies, Guardtime, started here as well as a number of other startups that are using blockchain in increasingly creative ways to disrupt traditional industries.

Clearer policy frameworks around blockchain are now on the way globally too, including regulations that will require stronger KYC (know your customer) procedures to reduce risk and protect the public interest from challenges like money laundering. Unfortunately, this could also increase costs for blockchain startups or limit their products and services to certain markets.

That’s why there is a second key component that the public sector can provide.

2. Verified online identities.

Even without the legal requirement for stronger KYC, blockchain pioneers face high costs to verify who they are dealing with online and also high risks if they get it wrong.

A secure government-backed digital identity would help simplify the KYC process for startups.

We already have this in Estonia, but we also understand that blockchain entrepreneurs are not going to be hugely excited by the size of Estonia’s domestic market, which is 1.3 million people.

Fortunately, those secure government-issued digital identities are now available globally through e-Residency.

http://e-resident.gov.ee

E-Residency is Estonia’s gift to the world and the primary benefit at present is the ability to establish and manage a trusted location-independent company entirely online. However, the programme has also gained considerable interest among blockchain entrepreneurs for how the digital IDs can be integrated into their products and services

E-Residency certainly doesn’t have to be mandatory for customers, but simply integrating it as an option can mean that companies can onboard their customers faster and at lower cost. They can then easily offer their products and services to existing e-residents, and encourage future customers to consider e-Residency for the long term advantages on both sides.

To gain e-Residency, applicants must undergo background checks by the Estonian Police and Border Guard board before they are issued with their e-Residency kit, which contains an ID card, a card reader that plugs into a computer’s USB slot and a set of pin codes for both authenticating themselves online and digitally signing documents.

There are now more than 20,000 e-residents around the world and we know there is already a large cross-over between fans of e-Residency and fans of blockchain solutions.

The programme is still in beta mode yet significant improvements made recently have the potential to grow the community exponentially. Most significantly, Holvi recently became the first company to offer complete EU business banking for e-residents globally without the need to travel to Estonia or have a connection to Estonia.

That means all three components are now fast coming into place to support the development of blockchain globally:

Blockchain companies already benefiting from e-Residency

It’s important to note that nothing in this article is purely theoretical. Blockchain entrepreneurs from around the world are already enabling their customers to access products and services through e-Residency. Some even set up their companies through e-Residency too.

Here are some of the most notable examples:

Nasdaq announced that Estonia’s e-Residency platform will be facilitating a blockchain-based e-voting service to allow shareholders of companies listed on Nasdaq’s Tallinn Stock Exchange to vote in shareholder meetings.

BITNATION announced its partnership with e-Residency to introduce a public notary service for e-residents. BITNATION Founder Susanne Tarkowski Tempelhof said she believes the Estonian government “understands the dynamics of the globalization era far better than any other government”.

Wallet.Services provides simplified tools for software developers to build applications using Blockchain technology. Their SICCAR platform, built with the Scottish Government, provides cybersecure information sharing between citizens and government. Ferry, who is also an e-resident, explained that “E-Residency represents global leadership in Digital Public Services — we can use this strong ID and grow with the programme”.

Oracalize has launched an e-wallet for e-residents to trade Ethereum, as well as a proof-of-identity website for e-residents to connect their digital IDs to an Ethereum address. You can read more thoughts from Oracalize on how they are using e-Residency here.

Taiwan-based WageCan offers a blockchain assets wallet for web and mobile apps, which can be accessed through an e-Residency ID.

Funderbeam uses blockchain to enable people to invest in early stage startups without the large number of intermediaries that are needed by traditional stock markets. They are working to integrate the e-Residency ID for investors, which would then compliment other KYC options.

And finally, in news just announced:

Mothership plans to build a new digital asset exchange based around e-Residency and has now launched a crowdfunding campaign. Their goal is to “make Estonia the best place for blockchain companies”.

Commenting on these recent blockchain developments, former Estonian President Toomas Hendrik Ilves — who was instrumental in establishing Estonia as an advanced digital nation — explained how Estonia is keen to support more blockchain entrepreneurs.

“Estonia is now a blockchain nation,” said President Ilves. “Our digital society is underpinned by blockchain technology and our secure digital identities provide a significant advantage to blockchain companies that need to verify online identities. Through e-Residency, Estonia is ready to support blockchain pioneers from anywhere in the world so they can build the future through our digital infrastructure, even without stepping foot in Estonia.”

As with all companies that choose to startup through e-Residency or invest in products and services for e-residents, the programme wishes them every success and is ready to provide support where we can add value.

You can apply for e-Residency here and then join our blockchain nation so we can build the future together.