EU establishes EDIC to drive blockchain innovation

Last week, the European Union launched the European Digital Infrastructure Consortium (EDIC) at the Digital Assembly 2023 in Stockholm, Sweden. Plans to establish the new entity were first introduced at the end of last year as part of the EU’s 2030 Policy Programme: Path to the Digital Decade.

The new entity will work differently from its predecessor, the European Blockchain Services Infrastructure (EBSI). Member states will govern and fund EDIC, with a rotating presidency every six months.

EBSI, on the other hand, emerged exclusively under the guidance of the European Commission. Serving as the EU’s current blockchain project, it was established in 2018 through collaborative efforts involving 29 European countries.

Daniël Du Seuil, the Belgian representative, called EBSI a decentralized project. At full scale, each country would operate at least one node of EBSI.

EBSI is one of several approved applications that responded to the call for interest at the end of last year. The call was to form a consortium responding to Europe’s digitalization push.

After the Stockholm assembly, EBSI is slowly transitioning into a new political entity. Before the end of the year, EDIC will be formally established. Then, a spokesperson from the Commission said it would “gradually organize itself into being fully operational during the course of 2024.”

EDIC’s framework

EDIC has the authority to shape blockchain policy in Europe. It will compete with similar efforts in China (the Blockchain-based Service Network) and Latin America (Lacchain).

EDIC will support the implementation of multi-country projects (MCPs). MCPs are large-scale digital transformation projects that pool EU, national and private resources to achieve progress that no member state could do on its own.

According to trading service YOMAEX, the project can bring credibility to blockchain technology. Lately, the sector has been hindered by its association with cryptocurrencies, which are currently under global scrutiny.

The EU has also adopted the world’s first comprehensive regulations to oversee crypto assets, called the Markets in Crypto Assets Regulation (MiCA). MiCA requires crypto providers to obtain licenses to issue, trade or store their crypto assets throughout the European bloc. These regulations aim to protect consumers by promoting transparency and enhancing security.

This effort will elevate Europe’s position in the global digital economy, allowing citizens and businesses to leverage digital technology.

“Blockchain does not have an established institution in Europe yet,” said Nena Dokuzov, one of the key figures in the project, in an interview with DL News. She is currently the head of the blockchain group in Slovenia’s Ministry of Economy, Tourism and Sport.

“This [EDIC] is the real contribution: blockchain will be recognized, it will be visible, and people will know there is an institution there to take care of blockchain’s broader application.”

Just like any other EU policy move, the blockchain project is complex, but the goal is simple — to harness the decentralized financial innovations of Bitcoin, Ethereum and their progeny in the long run.

The instrument aims to promote the use of blockchain technology in public applications for a secure, transparent and efficient digital service experience. It includes using blockchain for digital identities and wallets, product tracking and verification and license storage.

Some sources have suggested that private applications can build on the EU blockchain as well later. If this statement is accurate, it means the blockchain might be a private, permissioned blockchain instead of a public, permissionless one.

“For now, there are public use cases but after further development also private ones,” Dobukov said.

DIGITALEUROPE, the leading trade association for 41 national digital associations in Europe, said it is willing and ready to work with Member States to provide private sector support for the initiative. It will tap into its vast membership of 45,000 business members.

There are rumors that the EU blockchain is already in talks with other jurisdictions to integrate blockchains. One example is the potential sharing of academic credentials with Canadian authorities.

The EU is also in preliminary discussions with South America’s Lacchain about the potential for interoperability between blockchain infrastructures. Lacchain is a blockchain that spans 15 countries and over 190 nodes, supporting over 60 applications.

“The intention is to become the first interoperable cross-border infrastructure in Europe that can enable certain use cases to be implemented,” Dobukov said.

Preparations for the blockchain system

While the United States has taken a more aggressive approach to regulating cryptocurrency, opting to clamp down on the industry, Europe has taken a more measured approach, steadily moving forward to embrace the technology.

However, there is still little information on the technological capabilities of the blockchain that the EU is building.

According to Coindesk, the EU will need blockchains capable of processing hundreds of thousands, even millions and billions of transactions per second, to achieve the ambitious goals. So far, the original Bitcoin blockchain, BSV, is the only blockchain that has demonstrated the ability to process such high volumes of transactions.

There is a possibility the EU and other jurisdictions may face challenges scaling their blockchains to meet the market demand. They also need to navigate the ever-growing patent portfolio of blockchain companies like nChain, which Dr. Craig Wright leads.

EBSI has been developing a functional prototype for several years. The blockchain infrastructure uses Hyperledger Besu, an open-source Ethereum client.

The code is available for anyone to review and modify, but the blockchain itself is permissioned, meaning only authorized bodies can participate in its development.

Moving forward, EDIC will be responsible for coordinating the use cases of EBSI. This includes research and development, sandboxes for testing new projects and Web3 and metaverse development. EBSI has already been working on several use cases, and some are already considering legislation.

A use case example is the EU’s blockchain linking with the digital identity framework. Citizens would have digital wallets to hold personal documents, licenses and data. The European Commission proposed this in 2021 and it is currently in negotiations.

EBSI has also begun working on a project approved by the European Union to define an umbrella reference architecture for traceability. This architecture would track products and materials on the one hand and data and documents on the other.