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Why the EU uses blockchain to create Europe’s citizen-centered Internet

The European Union has secretly set the basis for a citizen-centered, privacy-conserving European Internet and Digital Single Market, though many are not aware of it.

Story Highlights

  • The European Commission's policy makers see blockchain also as key enabler of that dream and are trying to adjust the regulatory and policy environment accordingly.
  • Together with a detailed look at blockchain in Europe today, a comprehensive overview of this emerging field is presented by the recently released Conclusions and Reflections 2018-2020 from the EU Blockchain Observatory and Forum.

Blockchain has been heralded as the decentralization platform since its early days. Others have hoped to use it to combat some of the more alarming evils associated with today’s highly centralized and platform-dominated Webs – such as lack of privacy, false news, or the accumulation of data-wealth in the hands of a few. And we also seem to be waiting for a detailed explanation of how this might possibly happen.

That can improve in Europe. Although rather under the radar, European policymakers have been engaged in building a vision of how blockchain could be applied to the European Digital Single Market. Many who support a more citizen-centric, privacy-conserving Internet approach should consider a decent amount to like in it.

Those interested in a summary of what’s going on may want to read the Conclusions and Reflections 2018-2020 study recently released by the EU Blockchain Observatory and Forum. Not only does the paper contain a compendium of the Observatory’s first two years of research investigating the condition of blockchain in Europe. It also features interviews on the future of the European blockchain regulatory and policy environment with key EU blockchain policymakers – including MEP Eva Kaili, Director-General of DG CONNECT Roberto Viola, and Pēteris Zilgalvis, head of the EC ‘s blockchain unit.

Here are my own top-five takeaways about the blockchain position of the EU:

One: The EU is more concerned with decentralization than you would think

In fact, reading through the interviews, you’ll find clear EC support for decentralization as a concept. To be sure, this is not the all-or-nothing definition of decentralization put forward by Satoshi Nakamoto. It’s all about establishing conditions between centralized and decentralized solutions for a balanced spectrum, depending on what makes sense in a given context.

Nonetheless, it is very clear that the EU wants multi-level systems with a reasonable amount of decentralization for the Digital Single Market; places a strong emphasis on privacy protection; and supports a digital economy that is not dominated by large platforms alone, but provides a level playing field with space for creative protocols, solutions, and business models.

Two: Yes, on the regulatory and political front Europe has been moving slowly – but it is moving

This is true that the EU has not been the fastest mover on blockchain diplomacy compared, for example, with smaller jurisdictions like my home country of Switzerland. Yet momentum has been growing. For example, the EC has just finished a digital asset consultation and has said it strongly favors a harmonized European legal and regulatory system for digital assets and smart contracts, if it is politically feasible. It is now a clear probability.

Over the summer, we should foresee a more detailed European blockchain strategy, with significantly expanded support under the current EU budget for blockchain projects undoubtedly. The EU is looking at its existing system of digital signatures (known as eIDAS) to see how to make it more suitable for a decentralized world. A parallel occurs with the European Data Policy. It might take a while for blockchain and decentralized solutions to develop themselves in the Digital Single Market, but keeping in mind the scale of that industry, it will have a major effect when it does happen.

Three: EBSI, Europe’s homegrown blockchain government-services network, is a significant advancement-although it will take time to feel its impact.

Behind the weighty sounding title of the European Blockchain Services Infrastructure (EBSI) project is a good idea: Eu governments, along with the EC and the Eu Court of Auditors (gathered as part of the European Blockchain Partnership), are developing their own Europe-wide blockchain for cross-border services.

This will take time to bear fruit like any big project. The project is also starting small by design, with four use cases being relatively limited. Small seeds may however grow into large plants. This year, three new use cases are introduced, and the plan is to build it into a robust framework over time.

I consider two things really disturbing about EBSI personally. One is that the provision of a generic capacity for “European self-sovereign identity” is among those four first use cases (more in the next point). The other is that the long-term plan is about rendering EBSI interoperable with other government networks and – crucially – commercial blockchain.

If, say, a banking network that has compliance criteria for KYC / AML wishes to invite the regulator into the blockchain in the future, EBSI will make it fairly easy to do. The same will apply to other use cases, e.g. vat. It will result in substantial improvements in productivity and savings to those concerned.

EBSI also reflects a relatively significant effort on the part of policy-makers to learn about the technology and how to control it by actually using it themselves. That is also commendable.

Four: The EC ‘s vision for digital identity calls for a compromise between centralized and decentralized approaches – but it looks like an incremental compromise

It’s no secret that any large-scale decentralized network must have a decentralized identity as a key feature. I was struck by the degree to which EC policymakers recognize this and try to integrate decentralized identity into the regulatory and policy mix. The EC’s dream for decentralized identity, however, is not to replace all centrally distributed IDs with decentralized or self-sovereign counterparts.

The aim is to make it possible for people themselves to handle a reasonable amount of their identification credentials, and thus have more influence over how that knowledge is used. The EC claims that this citizen-centered approach will be best for individuals but also for society. European policymakers do not want the digital identity to become a tool for state surveillance, but instead an enabler for the security and empowerment of the people.

Five: If you’re a European blockchain startup, take the time to think about EU funding opportunities

Last but not least, acknowledging that a funding gap for start-ups in Europe has previously existed, the EU has expanded support for blockchain and emerging technologies (such as AI). That has been achieved by the Horizon 2020 project and the new Blockchain Development Fund for Artificial Intelligence(AI).

Regarding the above, the EU is making available € 100 million in 2020 to help companies operating in those industries. For the next Budget, we should expect much more. It makes sense for startups to keep tabs on what’s available or coming online and use those resources, if at all possible.

It may seem surprising to some that the leader of the blockchain decentralization vision would be a highly centralized entity like the EC. Maximalists of decentralization may shudder at the thought of a position of the government at all. Yet the precedent lies. At least initially, the first great decentralizing technology was the same Internet that is bringing all of these issues to us today. And as is well known, the decentralized Internet began as a government initiative, and its early creation was primarily financed from the funds of the state.

There is no explanation of why lightning should not be able to strike in Europe again.

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