How blockchain technology is digitising trust in Europe
There is untapped potential for using the technology to provide citizens with new services
As blockchain technology gains acceptance, entrepreneurs, industries and even some governments in Europe are embracing a potential digital revolution, one closely related to crypto-currencies, banking and other highly secure applications that could affect many aspects of daily life.
A study by Osservatorio Start Up Intelligence in Milan found that 32 per cent of European start-ups are using blockchain, a complex and fast-moving technology. The European Union is currently building a blockchain-based gateway designed to share information on listed companies and also follow challenges and opportunities for European industry and governments.
"I am not surprised, since there is untapped potential for using the technology to provide citizens with new services while improving regulation and markets are monitored," says Christian Catalini, professor at MIT.
Catalini defines blockchains as "really a suite of technologies". He thinks the technology will change our lives within the next five to 10 years - we will see many different, new types of digital platforms that will rely on a crypto-token for their operations. "At a high level, a blockchain allows a network of devices to agree, at regular intervals, about the true state of shared data," says Catalini. "What that shared data represents can be many things: currency, equity in a start-up, intellectual property, attributes tied to identity or provenance of goods. This is why the benefits from it will affect multiple industries."
The first distributed blockchain was conceptualised in 2008 by an anonymous person in Japan known as Satoshi Nakamoto and formed the core of bitcoin, the first digital currency. Like so many computing revolutions, wider implementation began in the US.
Yet the centre of gravity of blockchain use could move toward Europe.
"I think the verdict is still out on whether the US or Europe will lead in the blockchain race," says Lasse Birk Olesen, co-founder of Coinify, a blockchain payment provider, and Bitcoin Nordic, a bitcoin brokers in Europe.
"The US has vastly greater risk-taking venture capital funds and the largest share of big tech corporations willing to adopt blockchain technology," says Olesen. "However, what many think is overly strict financial regulation of blockchain companies, as seen in New York, has been making EU jurisdictions more attractive."
He points to "the so-called crypto valley of Zug, Switzerland, where the government is accepting bitcoin payments". Moreover, "many Initial Coin Offerings have been in Switzerland, which counterbalances the advantage of the US as the start-up capital", says Olesen.
Before blockchains, a fintech entrepreneur had to get permission from banks to access the existing financial infrastructure, says Olesen. "For many entrepreneurs, that meant asking competitors for permission to launch their products. Blockchains are democratising finance by allowing anyone to access a global financial infrastructure, enabling any entrepreneur to do the same as the biggest banks of yesterday could. Blockchains are the internet of value. That's incredibly powerful, and I can't wait to see what people are building."
The Danish entrepreneur says "blockchains are digitising trust or even making trust obsolete in many cases".
"For instance, blockchains can be used to issue election tokens to people during political elections. So even though it is digital, it can be issued in such a way that it is cryptographically guaranteed for people to remain anonymous when they vote. And when the election result is published, voters can cryptographically verify that their specific vote was counted as part of the election result. This can be beneficial particularly in countries that face problems with election fraud. Blockchains, in such cases, can remove the need to trust humans counting the votes. Every day people are discovering new ways to use blockchains to digitise trust or make trust obsolete," he says. But that seems to be a far cry from today. For now, the German Central Bank says consumers won't yet accept crypto-currencies.
Ferdinando M. Ametrano, professor of Bitcoin and Blockchain Technology at Politecnico University of Milan, notes "any form of innovation has inherent risks and dangers, but to cast a bad light over bitcoins is short-sighted. For the first time in digital realm we have a scarce asset that can be transferred but not duplicated: the bitcoin aims to be the digital equivalent of physical gold." Though still complex to use "as the technology evolves, it will become user-friendly and integrated with existing currencies".
With a long history of ideological revolution, Europe might be the centre of yet another, this time in the digital world.
Mariella Radaelli and Jon Van Housen are editors at the Luminosity Italia news agency in Milan