“Governments are finally starting to try to compete for citizens on the virtual level.”– Tim Draper
Maya Middlemiss: "A couple of years back, I would have recommended paying attention to a small Baltic nation of Estonia on our global map, and I believe, I am not the only one to think this way. Estonia has a total population of 1.3 million people, and they earned their independence second time in 1991 from the Soviet Union. Later, enrolled in the European Union in the year 2003.
Estonia’s tale is an enticing one, as they have had perplexing relationships with Russia in the past. This has helped Estonia to emerge as the leading digital country in the present time. After being the flag-bearer of global e-residency policies and improvised e-governance protocols, Estonia has become one of the prominent and most-talked about nations among the EDGI (United Nation’s E-Government Department Index).
Two years back, when I was on my way to Estonia Embassy in Madrid to get my e-resident’s digital ID card, the entire scene of Russian cyberattacks wasn’t on my mind at all. Hardly a week ago, I applied online to get permission to run a global limited company permitting me to work with start-up businesses. I wanted to run this business as a Brat staying in Spain so that I can work with anyone around the globe.
While I was researching and writing about emerging technologies and Blockchain, I got to learn about the ‘digital Estonia.’ To me, it was an ideal virtual work to develop and run a trading institute. During digging more into this concept, I got to know about Estonia’s close relationships with digital identity dates which exploded as a discovery for me."
The Digital Natives
Once Taavi Rõivas, the Prime Minister of Estonia (2014-2016) said- “Estonia was basically rebooting the country from 50 years of Soviet occupation, and that needed to be done as effectively as possible. And, of course, 20 years ago, it was logical to start digitizing things, rather than relying on paper files or paper documents. So that’s where it initially started.”
With this, Estonia was capable of choosing a no-paperwork approach. There are several country’s governments who have been and are still practicing a paperwork approach. Eliminating paperwork from every government operation was much secured and transparent outlook that changed the working perception of many bureaucracies. This working attitude was ahead of many Africa bounded nations involving commerce and mobile communication as their primary medium of operation.
Be it a national or an e-resident, every Estonia resident interacts with the local or national administration system using digital ID cards or signatures.
Ott Vatter, the Managing Director of the e-Residency Scheme, illustrated the importance of involving digital ID cards incorporated with a chip in his words. He said-
“We kind of can’t imagine our lives without it. We talk to the government using this card, and we talk to the banks and tax officer; basically, everything happens through the card, then if we lost it, we’re kind of helpless, like we’d lost our key to our house.”
In Estonia’s law, an approved electronic signature is no lesser than a hand-written signature, seal, or stamp. All the businesses, financial institutes, etc. have been instructed to accept e-signatures. As the hand-drawn scrawls are referred to as underhand in Estonia, anyone requesting for written signature is seen with suspicious eyes.
Estonia is about to see yet another digital-native generation that expects to have advanced user-experience from the public sector’s end as they have been receiving from the commercial entities, so far. e of the eKool (e-school) system. Through this, the parents, teachers, and the students’ get access to marks and attendance as all of them to follow a tech-oriented curriculum. This makes Estonia one of the digitally developing nations on the Earth.
Estonia is about to see yet another digital-native generation which expects to have advanced user-experience from the public sector’s end as they have been receiving from the commercial entities, so far.
Right from Pipedrive to Transferwise, Estonia has been establishing successful businesses. To keep a check on each business’s progress and profit rate, they use Start-up Estonia.
The impressive business infrastructure and climate do not illustrate these well-established businesses in Estonia as homegrown. Why? It’s because one of the significant aspects of the digital-first approach is to abide by the global e-residence scheme of the nation.
Estonia’s Global Citizens
This scheme was introduced in December 2014. As per this, Edward Lucas (British Senior Editor at the Economist), was the first-ever e-resident with electronic ID number 1.
After Edward, Tim Draper (Venture Capitalist and Bitcoin-Community Specialist) was the next one to be registered as the e-resident. Later, Ben Horowitz and Guy Kawaski joined the league soon. Seeing the impact, Germany’s Angela Merkel, Japan’s Shinzo Abe, Trevor Noah (Former Director-General of the European Space Agency Jean-Jacques Dordian) and now more than 68,000 others showed their interest to be an e-resident of Estonia.
Amid all, Draper has been one of those who relished several leverages like- traded in the EU, opened a bank account, etc. As per him, he does this after being inspired by the authorities one gets after being an authorized e-resident of Estonia.
“The idea that countries could provide government services across borders to anyone. The idea that the government could be fairer and more efficient. The idea that governments would have to provide better services for the taxes they charge, or they might be eclipsed by a better government service coming from another geographic location.”
Draper has been capable of seeing a robust parallel amid cryptocurrency and the digital identity. “Globalization unites the two concepts. Digital identity allows people to operate wherever they may be. Digital currencies allow people to share in a common value vehicle so that business is frictionless. If countries can identify each of us and compete cross-border for us, we will get better government service. When people use global currency, they have less friction in doing business.”
Most of the people who apply for e-residence in Estonia do it with a clear purpose of running a business out there. On the other hand, others do so keeping a novelty factor in mind to cross all limitations of running a successful venture online.
Similarly, people are more inclined towards cryptocurrency or neo-banks as compared to the well-established ordinary clearing banks. No wonder, there will be a specific sector of adopters willing to trade with minor risk, no matter at low friction or cost.
Whether it is about getting access to the social or commercial services or fundamental rights of an e-resident of Estonia, there are no restrictions or a sense of discrimination throughout Estonia and EU. Since the beginning, these schemes and services needed a strong back to expand the potential range. However, several new integrations have been introduced to strengthen the systems.
What is it to become an Estonian?
The entire process to become an e-resident of Estonia is quite quick and straightforward. All you need is to fill and submit a form to the Estonia border police with a fee of €100. Then comes visiting the local embassy to get digital keys issuance which completes the whole process. During this process, they scan thumb physically and are asking to sign each document digitally. It takes 10 minutes to complete this process in Madrid.
To this, Vatter said- “E-residency has been an interesting journey that started from the idea of having foreign board members of Estonian companies as digital identity owners so that they could sign board meetings or documents digitally so that they wouldn’t have to spend time or money traveling, and they would be able to conduct more business more comfortably.
“From there, the idea grew into something much greater, as we quickly understood that there was a greater need for so many more people and target groups. For example, there are so many countries in the world which make it very difficult to run a company.”
Safeguarding the Digital Borders of Estonia
Security is one of the crucial and elemental aspects of Estonia. They consider banking, health, voting records as sensitive data.
Do you remember the Russians? Estonia has a sensitive history of occupation. In 2007, a disputed verdict of shifting a Soviet-era statue located in the center of Tallinn to a cautious place originated riots throughout the nation. During those times, the Bronze soldiers were referred to as “Monument to the Liberators of Tallinn.” This whole scenario represented the USSR’s win on Nazism for the Russian speakers living in Estonia. On the other hand, for the native Estonians, the Red Army was nothing but a sign of liberation.
"I illustrated this to revive the capacities of such cyberattacks that can be devastating for the entire nation. Back then, it all happened even after the involvement of NATO’s Computer Emergency Response Teams and the EU’s European Network and Information Security Agency. Eventually, there wasn’t any damage, but Vatter said- it strengthened the security infrastructure. He also said- “n’t find solid proofs against Russians in the cyberattack. As A Result, the Estonian legal authorities arrested only one man.
On the other hand, the Russian higher authorities said a rogue aide committed this crime. However, this kind of cyberattacks is quite common to witness in the present time. Still, back in 2007, it was considered as a state-level attack to which Estonia fought back immediately.
I illustrated this to revive the capacities of such cyberattacks can be devastating for the entire nation. Back then, it all happened even after the involvement of NATO’s Computer Emergency Response Teams and the EU’s European Network and Information Security Agency."
Eventually, there wasn’t any damage, but Vatter said- it strengthened the security infrastructure. He also said- “Today we host the NATO cybersecurity Center for Excellence. We have that in Tallinn, Estonia. So, we are considered — together with Israel — one of the top experts in cybersecurity in the world.”
Vatter illustrated that the focal point of Estonia is its X-Road interoperable ecosystem. This can be accessed via EiD (Estonian ID card). However, there is no data information saved on the ID card. It’s more like a PKI system in which the users have to prove their authenticity via unique PIN code and strengthen deals with PIN two. (For instance- I have entered PIN 1 to log-in to the bank and begin the transaction but to complete the transaction process, I would need the PIN 2. There is a Smart-ID app which is an easy way for bank logins. The app works best if I don’t want to use my ID card). There is a microchip containing private and public vital details and not any data information. The public key is essential to connect the user with multiple services listed on the X-Road decentralized system.
In addition to this, Vatter said- “X-Road is like a vast highway, and then smaller roads connect to it. But the smaller roads are connecting roads to different state organizations and databases. Now, on all of these state databases, like the health registry, data is kept safe by blockchain technology, timestamp technology, and you use the certificates that only you have through your pin codes to access this data, — only, of course, if you have the right to access this data.”
“So for example, say I bought a new car. And now I want to re-register the new car from the former owner to my name, so that happens completely online. I need my own digital identity, he needs his own, and he has to start the transaction of owner exchange, and I have to sign my key to agree to get this exchange started. Then the inputs update that data from the registry to show that he is the former owner, and now I am the new owner, all using personal ID codes — everything happens online. No written contract, because the platform takes care of everything. It’s super easy and comfortable.”
Vatter continues to recall the overall experience of purchasing a car some ten years back. During those times, people had to wait in a queue for at least 3 hours to get done with the car documentation process. But I couldn’t explain to him how scary and tiresome this process seems like in Spain in the present time (2020).
However, it’s not written to refer to Estonia as a ‘Blockchain Nation,’ but Estonia was the first-ever nation to deploy a Blockchain technology in the production system successfully. It happened in 2012 with the Succession Registry maintained by the Ministry of Justice.
Back then, KSI® blockchain technology stack, Blockchain technology was deployed by Guardtime (also operated by NATO), the U.S Department of Defense, Boeing, Ericsson, Lockheed-Martin, and several other prospects.
Further, Vatter said- “There is a misconception that e-residency ‘run on the blockchain’, that it’s a blockchain project or something like that”
“In Estonia, Blockchain is used, or let’s say similar technology to Blockchain a timestamp technology, is used to keep our data safe. So the data of our citizens, the data of our residents, things like healthcare data, is all surrounded by this layer of distributed encryption which is what keeps us safe.”
“So to say, it’s a keyless signature infrastructure, the blockchain technology that is developed by one company in Estonia called Guardtime”.
X-Road is one of the applications that employ cryptographic hash functions. It predicts Blockchain as it is somewhere relevant to cryptocurrencies. To secure the personal data and other interlocking systems stored on X-Road, Estonia uses the KSI Blockchain and other technologies.
It has some interfaces which look outdated as compared to the newbies in the marketplace. For instance,- there is no fully automated & remote digital ID.
"However, Estonia has good relationships with cryptocurrency. For this, I had to re-enroll myself as a financial trading firm. It won’t be another surprise for me if this set-up changes in the nearby future as well. Although, I have managed to calculate the crypto receipts through instant cashing in the crypto account for fiat and by offering an apt audit trail for the same.
I observed that Coinbase and I use the same Estonian bank in Europe. On asking Roivas about his perception of the crypto concept, he showed his real concern ends up on user-experience only." said Maya Middlemiss
“I don’t understand the concept of cash anymore, because the payments have become so easy I can pay with my not only plastic cards, I can pay with my phone, I can pay with my watch. I can make remote payments. You know, the credit card was invented almost 60 years ago, and this plastic version is also rather crude compared with internet payments. It’s not rocket science anymore, and the same applies to crypto. I think crypto just needs to be easier to use”.
Estonia’s Present and Future
When the world is facing a pandemic situation, Estonia is still operational for all public and businesses continuously. The entire world’s administration and operational sectors have restricted their operations, and only allowing emergency payments to carry the necessary functions, on the other hand, E-Estonia didn’t experience many changes in the infrastructure and work processes.
On this, Roivas illustrates- “In Estonia, just like in the UK, the main Parliament session is still very ceremonial, but now the virus crisis is something new. And even with all our traditions, we decided that in such a crisis, we needed to be able to take our Parliament fully online as well. One hundred percent of the activity, all the committee meetings, and all the political party factions, have gone online from the first day of the special situation. Everybody’s using Microsoft Teams for that.”
As we step ahead towards the ordinary world like before, he predicts a prosperous and successful future for Estonia and its tech-driven infrastructure.
“Talking about future work, of course, the digital government helps in that if you can take care of all of your official business digitally. There is less need to physically meet up… We know already that video conferencing has already boosted and it will continue to be used at a much higher level than it used to be before the crisis.”
Vatter considers Estonia as a role model for other governmental bodies as they start to realize the importance and leverages of complete digitization. “We were already approached by a few EU institutions. There are about 40 institutions in the EU that function on paper, and their whole modus operandum was to sign a document and then push a cart through the next office and then get it signed. So their whole life is basically non-existent anymore. They’re not working at all, and because they can’t work, there are no decisions that can be made. For Estonia, it’s definitely an opportunity, and we should use this chance to convince governments and private companies to finally go digital, to use proven digital identity systems like ours for transacting because who knows how long this will last? I think the trend of work will change immensely.”
As the operations transform, the literal meaning of identity will flip, and the definition of payments and confirmation…
Can the topic of E-cash and its acceptance by far?
On this, Draper wraps up via an email-
“Other countries should immediately user digital signatures. It saves Estonia 2% of its GDP. And digital identity reduces the crime rate and increases business activity (better trust, wealthier country). And digital voting brings more people to the polls (and it is more honest than most paper-based or booth-based systems.)”
“The rest is obvious: easier to pay for government services, taxes, parking, health care, etc. Estonia has a lead, but other countries are trying to catch up. Malaysia now has a virtual residency program, and last I heard Kazakhstan is implementing a virtual citizenship program. Governments are finally starting to try to compete for citizens on the virtual level.”
Beyond the implementations to the sovereign currencies value at harsh times proves that the perception of Estonia administration displays basic operations that can be handled digitally. It is an essential aspect for mass acceptance of E-currency, which breaks all geographical boundaries making the sovereign nation streamline work easily.
No matter what the future is, the start-ups and Estonia’s operations will be at the decentralized power always.
True reality check!
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