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Netherlands expertise unravels enterprise blockchain

Dutch hackathons, pilots and projects are building new applications based on blockchains

Dutch expertise and level-headedness could help broaden the use of blockchain within the finance sector and into a wider range of business and government organisations.

It has been three years since IT venture capitalist Marc Andreessen wrote about the promising future for bitcoin and its base technology, blockchain. The pioneer, who built the first broadly available web browser, said in his New York Times article that blockchain was then in a comparable state to that of the World Wide Web in the early 1990s.

In some industries and areas, the impact of the internet has been disruptive and even destructive. Use of postage stamps is increasingly rare, while the music industry and retail have been transformed. A recent example of the latter in the Netherlands is the demise of store giant Vroom & Dreesman (May 1887-December 2015).

Now it is blockchain’s turn. “A mysterious new technology emerges, seemingly out of nowhere, but actually the result of two decades of intense research and development by almost anonymous researchers,” Andreessen wrote in 2014. The former Netscape founder was talking mainly about bitcoin, but now it is becoming clear that the underlying blockchain technology will make even bigger waves.

Blockchain is a distributed data transaction system built on egalitarian nodes that chains blocks of data together. Each new mutation in the data transactions is put into a new block, which then is locked down with powerful encryption. Each block contains information about its predecessor, thereby forming a traceable, verifiable chain.

With this setup, it is impossible to rewrite a past transaction. Of course, fraud is not completely eliminated, but it would require cracking the encryption and making a fraudulent change on each and every node simultaneously. This is the power of the encrypted peer-to-peer system that is blockchain.

Blockchain is basically an accounting ledger, but one that is decentralised, self-checking, protected by encryption and only able to add changes but not make changes to past transactions. Sounds ideal for the financial world, but the use of this cryptoledger is not limited to money.

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One of the likely real-world applications is for smart contracts – an automated form of microtransaction to quickly draft and conclude contracts with a limited duration. It could be used for renting a car or purchasing electricity or gas at certain price levels, for example.

The blockchain-based smart contract would not just be a digitised contract, but would also contain intelligence. It would be able to automatically expire or change certain sections based on agreed conditions, with no contract guardian or other intermediary authority necessary.

A logical field of application is therefore the supply chain. This broad applicability explains the interest of IT giants such as IBM and enterprise resource planning (ERP) supplier SAP. There could be experiments, pilot projects, hackathons and conferences galore.

Fintech first

Banking systems could be made obsolete by blockchain, so the banks and other financial institutions are among those dipping their toes into the blockchain water. But they are not the only ones affected and not the only ones involved with this new decentralised technology.

In the Netherlands, banks such as ING are taking part, as are the Dutch Chamber of Commerce (KvK), business software supplier Exact, pension fund APG, the city of Groningen, and the national government’s e-stimulus platform Dutch Digital Delta.

Partners are joining the Dutch Blockchain Hackathon, which is just one Netherlands initiative exploring the possibilities of this distributed transaction technology, and this month, Prince Constantijn, who is ambassador for the Dutch startup booster StartupDelta, will kick off the 2017 hackathon for promising blockchain prototypes.

But despite the rhetoric, it’s still early days for blockchain. “Blockchain is really overhyped now – everybody is jumping in.” said SAP CTO Mark Raben. The Dutchman emphasised the need for level-headedness – to not get carried away by the hype and to focus on actual useful applications. “Blockchain is just a technology, but it all comes down to applications,” he said. “Likewise with the internet – without applications, it too is quite useless.”

Raben sounds like a sceptic, but he is a blockchain enthusiast. The CTO of the German IT giant sees enticing possibilities for blockchain in establishing and registering ownership of wildly different things, ranging from real estate and raw materials to music royalties, medical records and  diamonds.

But even loftier goals are on the blockchain roadmap. Rutger van Zuidam, owner of and organiser of the Dutch Blockchain Hackathon, sees much potential in public services.

Public services

Van Zuidam’s company has developed the software for a real-world use case – the new, digital version of the Stadjerspas in Groningen. This is a discount card for citizens with low income, which gives several thousand people in the Dutch city price reductions for libraries, sports clubs and museums, for example.

The Stadjerspas used to be “a paper affair”, he said, with physical coupons to cut out. Now it is running on blockchain technology, connecting thousands of citizens with a few dozen discount offering organisations.

A bigger example of blockchain mentioned by Van Zuidam is found outside the Netherlands. It is the country of Estonia, which has a government-mandated e-residency programme that deals with citizenship and marriages. Estonia has the advantage of being a relative greenfield site; when the Russians left the country, a completely new government system had to be built.

Market forces

SAP’s Raben pointed out that the Netherlands, like many countries, does not have that luxury. “In the Netherlands, we have good registries for things like real estate,” he said.

“Blockchain doesn’t offer an immediate advantage there. That is different in countries with less development or with less stable governments. There, blockchain can offer the trust in transactions that a government cannot offer.”

Examples of blockchain use in pioneering countries such as Estonia, Switzerland and Singapore can be useful for others, said Yuri van Geest, co-author of Exponential Organizations and founder of the Dutch think tank Singularity University.

Other nations and governments should learn from those examples because they really have to, said Van Geest. Although citizens are not like consumers in a free economy with many competitors, there are market factors in play, such as the lure of cities or countries for entrepreneurs, startups and company offices. Much of the attraction depends on ease of business, including dealing with public services, he said.

Flash companies

For developed nations, the promise of blockchain lies mostly in optimising existing systems, supply chains and applications. Its technological pedigree also makes new business models possible. The Dutch Chamber of Commerce might, for example, facilitate the speedy creation of small organisations for a specific task or limited time-frame – so-called flash companies.

A seemingly far-out application has been suggested by Ronald Prins, founder of the originally Dutch security company Fox-IT. He is not convinced that blockchain has a broad field of applications, but thinks e-voting is one potential use.

Blockchain’s distributed and secure setup could certainly help with the political desire for electronic or even internet voting. “The blockchain solves some problems in that area, although it doesn’t solve everything,” said Prins. “So, I am critical in this regard.”

Most experts think the killer app for blockchain has not yet been found. Many applications look promising, but the one breakthrough use case is still to be identified. Consultancy McKinsey reckons blockchain will reach its full potential in three to five years’ time.

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