November 7, 2022

The Estonian Miracle: E-Estonia and the Future of Digital Infrastructure

By Mathis Bitton

Web3, or the promise of a decentralized internet powered by blockchain technology, is reshaping entire industries. But these cutting-edge developments have barely affected the public sector. While companies experiment at the frontier, local and national governments continue to use outdated software, with no political will to renovate the country’s digital infrastructure as we renovate its physical infrastructure. Apart from exceptions like Miami’s Francis Suarez, few local leaders are willing to embrace burgeoning technologies. The result? A sclerotic public sector that does not capture the value that private innovation can bring to cities and nations.

Outside of the US, one government stands out in its pioneering integration of new technologies: Estonia. The country, which regained independence after the Soviet collapse of 1991, had to rebuild its economy from the ground up. At the time, the country’s infrastructure consisted of dysfunctional remnants of the Soviet era. Most Estonians did not have a phone line or access to public services, particularly in the countryside. More problematic still, the country’s small size and lack of infrastructure made it difficult to compete in conventional markets. No matter the industry, companies preferred to work in more developed economies in Western and Central Europe, trapping Estonia in a perpetual cycle of under-development.

To escape this situation, then-Prime Minister Mart Laar made a risky bet: to turn Estonia into a leader of the digital age. At the time, the internet seemed like a great equalizer. Unlike real-world industries, which required extensive infrastructure and advantaged larger countries, the burgeoning internet economy allowed Estonia to compete on an even playing field. Thirty years later, Estonia has become a digital powerhouse, integrating technologies like digital ID, blockchain-enabled voting, and decentralized data storage into its government’s day-to-day operations. For cities and countries looking to harness the potential of new technologies, the Estonian case represents a model to emulate. Let’s dive in.

Understanding the Digital Revolution

Estonia’s digitization efforts began with the “Tiigrihüpe,” or Tiger Leap program. Led by future President Toomas Hendrik Ilves, the program focused on two projects. First, the government invested heavily in network infrastructure via public-private partnerships. Second, schools across the country received computers and support to launch large-scale digital education initiatives. By 1997, 97% of Estonian schools had an internet connection, and most Estonian banks offered online account management services. Ilves, a technologist, understood that education and infrastructure were pre-conditions for the digital revolution. With the right human capital and extensive resources in place, the country was ready to be transformed by the end of the 1990s. The next revolution revolved around five pillars.

Digital Identity: All Estonians have a state-issued digital identity. This electronic identity system, called eID, is the cornerstone of the country’s e-state. e-ID and its ecosystem are part of people’s daily transactions in the public and private sectors. People use their e-IDs to pay bills, vote online, sign contracts, shop, access their health information, and much more. Estonians can use their e-ID via state-issued identity or ID-card, using Mobile-ID on their smartphones or the application Smart-ID.

Digital Governance: Estonia’s governance rests on three technologies. First, Internet voting (i-Voting) allows voters to cast their ballots from any internet-connected computer anywhere in the world. Second, the e-File is the heart of the Estonian judicial system; it provides data to the country’s court information system and the information systems of the police, jails, prosecutors, and criminal case management. Third, the Government Cloud supports the modernization and renewal of existing information systems, partnering with the private sector to embrace opportunities offered by new technologies as soon as they become available. As a result, 99 percent of public services are available online 24 hours a day, and Estonia saves over 1400 years of working time annually thanks to its digital governance infrastructure.

Digital Healthcare: Anyone in Estonia who has visited a doctor has an online Electronic Health Record (e-Health Record) record that can be tracked. The e-Health Record integrates data from Estonia’s different healthcare providers to create a common record that every patient can access online. Functioning like a centralized, national database, the e-Health Record retrieves data as necessary from various institutions, which may be using different systems, and presents it in a standard format via the e-Patient portal. Identified by the electronic ID-card, the health information is kept completely secure and, at the same time, accessible to authorized individuals. The use of blockchain technology ensures data integrity and mitigates internal threats to the data.

Digital Business Infrastructure: With the highest number of unicorns per capita, Estonia consistently ranks as one of the most open economies in the world. The digital solutions offered to businesses — digital signatures, electronic tax claims, and the availability of public records online — provide transparency and efficiency. In particular, Estonia’s e-Business Register is an advanced tool that allows entrepreneurs to register a new business online in just minutes without going to a notary or some other official. Since 2011, most companies have been established online using the e‑Business Register; the time associated with the registration process has fallen from five days to a couple of hours.

Cybersecurity: Estonia has designed its blockchain ecosystem (KSI) to ensure that networks, systems, and data are secure, decentralized, and 100% private. The government has also partnered with private companies specializing in data sharing to ensure that its digital services are interoperable and protected by state-of-the-art cryptography. The country has also established “data embassies” abroad to ensure that citizens’ data would remain attack-proof if government servers were hacked.

A Blueprint for Adventurous Statesmen

Estonia’s uncompromising bet on digital infrastructure has paid off. Once a desolate post-Soviet economy searching for vitality, the country has become a global leader. Thanks to its efficient government, it attracts top engineers and operates at the frontier of web3. This story should be a source of inspiration for local and national leaders. If a small country of 1.3 million inhabitants and no pre-existing resources can succeed, so should larger cities with established advantages. From Estonia’s bet on education to its creative use of digital ID, the country’s trajectory represents a blueprint to be followed. But the Estonian miracle also shows the importance of statesmanship and risk-taking. Without leaders like Toomas Hendrik Ilves, who bet on early-stage technologies when no one else would, Estonia would not be where it is today. This lesson applies to the United States: without bold, adventurous politicians willing to embrace experimentation, the future of the internet will continue to be written by the private sector alone. 

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