The most advanced digital society in the world is a former Soviet Republic on the edge of the Baltic Sea, a stone’s throw from Scandinavia. Not long after its independence from the Soviet Union in 1991, the country decided the online economy and massive technological innovation was the only way forward for a tiny country with no natural resources. Today, Rene Tammist, Estonia’s Minister of Entrepreneurship and Information Technology is committed to making all government services wholly user-centric, easy to access and service-delivery efficient by grouping them according to life or business events.


A ‘once only’ principle

To his way of thinking, an Estonian citizen shouldn’t have to search out government departments to report life events to. A one-stop-shop interface would guide every citizen through the process, pre-populating the data by pulling it from every available source. Estonia’s ‘once only’ principle (TOOP) dictates citizens should only enter their information once and various organisations and systems must be interoperable to make this possible. In other words, the government is working more efficiently so citizens can work less.

One of the originators of Estonia’s digital platform is Tarvi Martens, a systems architect who today heads the country’s e-voting program. In what is now seen as a pivotal historical turning point catapulting Estonia into the twenty-first century, Martens realised that whoever offered the most secure digital platform would determine the country’s digital future. It would start with a digital ID card issued by elected leadership and would not come from the profit-seeking tech sector.

More than 30 years later, Estonia delivers an enviable 99% of services online saving 800 years of work time for government administrators, related agencies and citizens. Citizens can pay taxes, transfer money, vote, buy prescriptions and sign documents online, using the digital ID-card.

 

 

e-Estonia

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10 million ‘e-Estonians’ by 2025

With a declining birth rate and an icy climate offering little appeal to immigrants, Estonia began searching again for a new concept to grow this tiny nation. In 2014, three government officials submitted a 10 million e-Estonians by 2025 proposal in a business idea contest and won. Originally the idea was to enable visiting business people and foreign dignitaries to also enjoy the benefits of the ID-card. Today 35,453 e-residents across the globe use the country’s e-services for their efficiency. The fact is, doing business across international borders as an Estonian e-resident is delightfully simple and Estonia has worked hard to make this possible.

From start-up to global enterprises

It takes just five minutes to register a company in Estonia, says Mihkel Tikk, head of the country’s one-stop-shop for e-government services. Businesses can scale from start-up to global using Estonia’s one-stop-shop business event approach.

The convenience, security and safety of the online platform has captured the attention of global venture capitalists. Of the €21.6m ($28.6m) of venture capital that was invested in Estonia last year, for instance, nearly €18m was foreign money.

Notable companies originated in Estonia and include Skype, Transferwise, Fits.me, Erply and Playtech.

It seems Estonia is punching above its weight entrepreneurially because it dared to be creative institutionally.

X-Road Government Platform

Estonia’s X-Road government platform is what makes these innovations possible. X-Road links individual servers through end-to-end encrypted pathways, letting information live locally. For example, Estonian GPs holds their own patient data, as do banks. When a user requests a piece of information, it’s dispatched like an airplane crossing a heavily supervised runway.

Such is the reputation of Estonia’s X-Road government platform and its secure infrastructure that X-Road is also implemented in Finland, Azerbaijan, Namibia and Faroe Islands.

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KSI Blockchain

The backbone of Estonia’s digital security is a blockchain technology called Keyless Signature Infrastructure (KSI). After Estonia’s experience with the 2007 cyber-attacks, they developed scalable blockchain technology to secure data stored in government repositories and protect it against insider threats. KSI is used globally to make sure networks, systems and data are free of compromise, all while retaining 100% data privacy. Today, Estonia is one of the most recognised and valued international cyber security experts.

A blockchain is a distributed public ledger – a database with a set of pre-defined rules for how the ledger is appended by the distributed consensus of the participants in the system. Due to its widely witnessed property, blockchain technology makes it also impossible to change the data already on the blockchain.

It means that hackers, system administrators and not even government itself can manipulate the data.

The KSI blockchain overcomes two major weaknesses of traditional blockchains, making it usable at industrial scale:

  • Scalability: The most significant improvement over traditional blockchain approaches is scalability. The KSI blockchain scales at O(t) complexity – meaning it grows linearly with time and independently from the number of transactions.
  • Settlement time: In contrast to the widely distributed crypto-currency approach, the number of participants in KSI blockchain distributed consensus protocol is limited. By limiting the number of participants it becomes possible to achieve consensus synchronously, ensuring settlement can occur within one second.

A Digital Single Market

Such are Estonia’s achievements in digital government, they have influenced the development of the EU’s Digital Single Market ecommerce policy. To date existing online barriers:

  • Preclude EU citizens from accessing goods and services across the EU.
  • Limit internet companies and start-ups’ horizons.
  • Prevent businesses and governments from benefiting from digital tools.

The EU is creating a single market fit for the digital age by dissolving regulatory walls and moving from 28 national markets to a single one. These initiatives could contribute up to €415 billion per year to the economy and create hundreds of thousands of new jobs.

Significant economic growth

In 2017, economic growth in Estonia was significant and the country’s economy was one of the fastest growing in the EU. The rapidly developing economic activities of information and communication (15.6% and 0.8% of GDP growth), and professional, scientific and technical activities (13.9% and 0.6% of the GDP growth) contributed substantially.

First cryptocurrency bank

Estonia’s forays into blockchain have laid the groundwork for the viability of cryptocurrencies and the launch of the country’s World Bit Bank (WBB), the world’s first legal cryptocurrency bank.

 

World Bit Bank

 

Based on blockchain technology, WBB facilitates quick, cheap and secure monetary transactions in real time.

 

 

A tiny country with a population of just 1.3 million has wrought a magnitude of innovation across the globe, breaking new ground in e-commerce, digital government, blockchain as well as IT security infrastructure. It’s all been possible through a willingness to re-think government services and infrastructure from the perspective of local and global customers. This creative institutional approach is driving efficiency, reaping financial rewards and creating jobs and growth at a scale unprecedented for a nation of its size. Estonia will continue to lead the world as long as their vision, innovation and creativity continues.

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