Blockchain: Digitizing trust in Europe

MARIELLA RADAELLI and JON VAN HOUSEN

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 percent of European startups are using the 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 how markets are monitored,” says Christian Catalini, professor of Technological Innovation at MIT.
EU blockchain
“The verdict is still out on whether the US or Europe will lead in the blockchain race.”

He 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 startup, 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 conceptualized 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 U.S.

Yet the blockchain center of gravity could moving 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, one of the first European bitcoin brokers.

“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 for instance 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”. As well, “many Initial Coin Offerings have been in Switzerland, counterbalancing the advantage of the US in startup capital”, says Olesen.

Olesen sees blockchains as “a democratization wave in finance as the internet was in media and communication.”

“As a fintech entrepreneur before blockchains you had to get permission from banks to access the existing financial infrastructure,” he says. “For many entrepreneurs, that meant asking your competitors for permission to launch your product — a very tough situation. Blockchains are democratizing finance by allowing anyone to access a global financial infrastructure, enabling any entrepreneur to do the same as only the biggest banks of yesterday could. As the World Wide Web is the internet of information, 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 that “blockchains are digitizing trust or even making trust obsolete in many cases”.

“To give an example, using blockchains you can issue election tokens that people can use to vote in political elections. So even though it is digital, they 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. So in countries with problems with election fraud, blockchains can remove the need to trust humans counting the votes. Every day people are discovering new ways to use blockchains to digitize trust or make trust obsolete,” he says.

But those times are yet to come. 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 that “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,” Ametrano says. Though still complex to use “as the technology evolves, it will become more user friendly and integrated with existing currencies”.

The dark side is that the anonymity of bitcoins could be used by criminals. Yet Ametrano says a “bitcoin is already very transparent, with every transaction being available to public inspection”.

“Not all bitcoins are made equal as each bitcoin has its own history and pedigree. This is not true for an ounce of gold, which might have been involved in bloody crimes centuries ago, without the gold atoms remembering that,” he says.

With a long history of ideological revolution, Europe might be the center of yet another — this time in the digital world.

A version of this story appeared in the Khaleej Times of Dubai.