In early October 2016, the Government of Dubai announced its radical decision to become completely paperless strong all of its documents online by the year 2020. Dubai will be executing all its transactions on the blockchain, as a part of a new programme called the “Dubai Blockchain Strategy.” Under the new initiative, people in Dubai will only need to enter personal data or business credentials once onto the blockchain, before it becomes an immutable record.
On the European continent, only Estonia can boast such ambitions and achievements, leading the way in the digital transformation of public administration. The tiny Baltic state successfully implements its eGovernment strategy and the e-Residency scheme offered to anyone in the world who would like to use Estonia as a digital platform. As part of this forward-looking strategy, the European digital pioneer will use the blockchain for a number of applications – ranging from storing over 1 million patient healthcare records on the distributed ledger to allowing shareholder e-voting with Nasdaq’s blockchain technology.
What is the blockchain? There has been a lot of talk recently about the so-called cryptocurrencies, or digital currencies. The most famous digital currency by far is bitcoin, an online payment system introduced as open-source software in 2009. Bitcoin is gaining its popularity as payment platforms begin to accept this cryptocurrency widely. What makes this currency system revolutionary is that it operates entirely without any state control by a central bank and does not require central offices such as commercial banks.
We do not know whether these currencies will be widely used. However, it is without doubt that the blockchain technology behind the cryptocurrency is set to fundamentally change many economic sectors. Similar to the World Wide Web, the blockchain protocol is a distributed database that does not have any trusted central authority and payments work peer-to-peer without a central repository. In other words, the blockchain is a low-cost technology based on open-source software to record transactions without a single database. Regardless of bitcoin’s future, blockchain technology looks likely to evolve in its own right.
If regulated correctly, the application of the blockchain protocol to a wider spectrum of financial operations and online payments will dramatically increase the speed of payment, enable 24/7 operations for everyone, add more confidence and lead to substantial cost savings. In the long run, it may even challenge the centralised financial transaction clearing system used presently, becoming a new standard for financial institutions worldwide to send and receive information about financial transactions in a secure, standardised and reliable environment. Besides, blockchain technologies are also beginning to be used for other purposes, such as domain names registries, distributed records of ownership and smart contract enforcement. For the Internet of Things, the blockchain is the network required to enable devices to exchange payments and services through smart contracts. For instance, in the insurance industry, smart contracts can become very popular – as blockchains could define terms of insurance and rules that would be executed automatically when certain conditions are met. Ethereum is an example of blockchain technologies. It is a decentralised Web 3.0 publishing platform featuring user-created digital contracts. These open-ended contracts can be used to securely execute a wide variety of services including voting systems, domain name registries, financial exchanges, crowdfunding platforms, company governance, self-enforcing contracts and agreements, intellectual property, smart property and distributed autonomous organisations.
The opportunities for the use of the blockchain protocol, particularly in the financial markets and public administration, are endless. And it is the moment now to embrace this revolutionary change. One and a half years ago, the Juncker Commission has embarked on a flagship policy initiative – the Digital Single Market Strategy. The Commission’s plan remains silent on the blockchain as t is intended to be technology-neutral. Yet, the blockchain entails a paradigm shift in the way records are stored, going far beyond a specific technical solution. It is vital that the blockchain find its due place in the Digital Single Market policy, with common standards and solutions deployed across the continent to promote interoperability and connectivity.