The state of blockchain ecommerce around the world 2 of 3: Europe-Middle East-Africa

By Edward W. Mandel

IOU.io is a pioneer in the field of blockchain ecommerce. While we have a unique story to tell, it needs to be understood in a broader context — that of worldwide adoption of distributed ledger technology in online retailing. Fortunately, our timing appears to be very good.

“The global market for blockchain in retail is estimated to reach $1.76 billion by 2024 growing at a 78.49% [compounded annual growth rate] during the forecast period 2018–2024,”according to a Market Research Future study. “The growing adoption of blockchain technology by retailers to streamline business processes such as inventory management, database management, payment and order management, incorporate supply-chain visibility, and ensure product authenticity and safety are some of the major factors expected to promote the growth of the market in the coming years.”

Our project’s ability to succeed is contingent upon acceptance of this technology, so let’s take some time to review the global state of how the world’s different economies are embracing it. In this series of three blog posts, we’ll examine how successfully blockchain has penetrated markets. Last time we looked at the Americas and we’ll conclude with the Asia-Pacific region. For today, we’re focused on Europe, the Middle East and Africa.

Western Europe

I’m personally very bullish on the rate of internet adoption in the Eurozone, the European Union and the larger European Free Trade Association. The United Kingdom, not so much. I examined these countries one by one as I sorted out which country would be the best for the operational and corporate headquarters of my other venture, the BQT decentralized crypto exchange. Specifically, I zeroed in on Switzerland and the Netherlands, as well as statelets Gibraltar and Liechtenstein based on their widely known support for all things blockchain.

Regardless of where on the continent you are, your ecommerce experience is governed by the General Data Protection Regulation, which I wrote about recently in this space. GDPR requires ecommerce purveyors to take “appropriate technical and organisational measures” to ensure consumers’ data privacy. Throughout the text of the statute, “pseudonimisation” is frequently advised, prescribed and hinted at as such a measure, without it being required. Even so, it’s apparent that the Brussels technocrats who wrote the law had “pseudonimisation” on their minds, and nothing accomplishes that better than blockchain technology. So I’m confident that blockchain-native ecommerce sites will have a comparative advantage in ensuring compliance with the law.

By the way, you don’t have to live in Europe to be covered by its provisions.

“It just doesn’t make business sense to subscribe to GDPR where it holds legal sway and to a lesser standard elsewhere,” I wrote. “So much easier having one standard that’s acceptable around the world, so every online business of any size is going to have to be GDPR-compliant.”

But even if the United Kingdom will still be covered under GDPR in fact if not by law after Brexit, I’m less than sanguine about its blockchain ecommerce prospects. You can’t do ecommerce if everybody in your country is going broke.

“The Organization for Economic Cooperation and Development — the club for wealthy countries — says that Brexit will cost the EU 1.5% of its economic output and cost the UK 4%,” I wrote back in December, when I noted that I was hesitant to fly the Union Jack over my business. “This is due, in equal parts, to its fairly antagonistic regulatory environment toward cryptocurrency and its decision to pursue an isolationist trade and financial course in a time when blockchain and other technologies are blazing a path to a more integrated world.”

Ultimately I settled on Malta as a place where BQT could set down roots. A lot of that had to do with the island nation’s sound, sensible, reality-based regulatory system. In response to the advent of blockchain, “Malta’s parliament passed a troika of laws to govern this space: the Virtual Financial Assets Act, the Innovative Technology Arrangements and Services Act and the Malta Digital Innovation Authority Act,” I wrote shortly thereafter. “ITAS is the one that will provide oversight to digital ledger technology software vendors, smart contract developers, database administrators and IT auditors.”

That’s right, there’s actually a country in this world where the financial regulators actually understand what distributed ledger technology is and the role utility tokens play in it, and how those are distinct from security tokens and cryptocurrencies.

And yet Malta, at least so far, has been more of a leader in the crypto space than with other uses of the technology. Actually, the most exciting blockchain ecommerce company I’ve come across within the EU is Repay.me, a German platform, currently in beta, which bills itself as “ the new online marketplace where you automatically get cashback for every purchase you make — no coupons or loyalty points needed.”

And that’s exactly the kind of think I look for in this kind of startup. Yes, there are lots of things — particularly around inventory control and payment processing — that blockchain can do more efficiently than legacy tech, but that’s not where it changes the game. With IOU, I wanted to build a site where you can effectively act as your own central bank, something you can’t do on Amazon. Repay.me has figured out how to give every consumer cash back on every purchase. That’s the kind of innovative spirit that will fuel blockchain enthusiasts’ projects long after the technology itself becomes widely adopted.

I’m also keeping an eye on Eligma, brought to you by the same Slovenian skunk works that brought us Elipay.

“We utilize [artificial intelligence] and blockchain to transform the way people discover, purchase, track and resell products,” reads Eligma’s landing page.

This reminded me of a conversation I had with my friend, fintech writer William Freedman, about how unusual this confluence of technologies is. He later wrote on his LinkedIn page, “today, with all the simultaneous advances in so many different fields, it’s hard to find a deep learning expert, a blockchain expert and [any other technologist] in the same Slack channel. Sometimes I get the feeling that we’re all just building Tower of Babel 2.0.”

So kudos to Eligma on being the project either Freedman or I have heard of that is bringing both AI and DLT to bear.

I wish there were more to say about Slovenia and blockchain, but I’m not sure there is.

On the one hand, you got to love the enthusiasm Slovenia shows for the entire blockchain space. The country’s largest shopping mall, located in the capital Ljubljana, is called “BTC City” and serves as a proving ground for retail applications of locally based, blockchain-native payment platform Elipay. But don’t be fooled, BTC in this case isn’t a symbol for bitcoin core. It stands for Blagovno Trgovinski Center and is named after the logistics company that owns the Marshal Tito-era facility.

The town of Kranj went so far as to erect a monument to bitcoin in a prominent traffic circle. That landmark was paid for in part by crypto exchange Bitstamp, which started there. Even so, Bitstamp left Slovenia years ago to set up shop in London and then Luxembourg (which we at BQT never really seriously considered because of the expense). The first wave of blockchain businesses are moving out, and, aside from Elipay’s new Eligma platform, I don’t see a lot of players coming up behind them.

Eastern Europe

As many of you know, I started out my life in Eastern Europe. It doesn’t matter where. You’ve never heard of it. And there are any number of reasons why my family left. Some of them have been resolved and others have not, but I consider it a competitive advantage today that I speak Russian. Not only is there a lot of blockchain innovation occurring now in Russia itself, this spirit of inventiveness has taken hold even more dramatically throughout the outer fringes of the former Soviet Union.

Let’s start with the obvious: IOU’s own development team is based in Ukraine. My colleagues Vladimir Shevchenko and Vitaly Garshtya lead an operation there that, as you already know, is revolutionizing how ecommerce will be done in the 2020s.

They have loads of company, though. The fact is, Ukraine more than most nations needs to innovate. That’s in response to the former Soviet republic’s continuing struggle against the hegemony of the current Russian regime. It has endured utility shutoffs, cyberattacks and even military/paramilitary invasion from the purported Third Rome. So you might expect Kiev to retaliate with all means at its disposal, and these include laws that promote Ukrainian culture over Russian culture. For example, web copy on ecommerce sites in the west-leaning republic are required to be written in the Ukrainian language. Also, legal sanctions against certain Russian conglomerates have resulted in at least three popular Russian ecommerce platforms being blocked by a government firewall.

While the local ecommerce community — except IOU — has been slow to move to blockchain as a platform, it is finding some use for DLT. For example, UATAG is gaining adoption as a blockchain-based anti-counterfeiting technology. Its team touts its ability to keep knockoffs out of the hands of consumers — you’ve learned a little about the importance of this previously in this space — as well as for non-fungible, one-of-a-kind works of art and other collectibles.

But here we need to parse the kleptocracy that is currently running Russia with the legions of entrepreneurial startups that spring up on a more-or-less hourly basis. It’s a sad commentary but true: The same environment that permits endemically corrupt politics also nurtures young, bootstrapping entrepreneurs. There’s no shortage of examples to support this assertion.

Retail.global is a white-label ecommerce platform, built for blockchain, that provides an integrated suite of software for e-tailers that includes analytics, supply chain solutions, loyalty rewards and affiliate advertising. It also works to connect management teams with service providers worldwide. Meanwhile, Ubcoin Market has developed into a peer-to-peer swap shop — think eBay — that is predicated on its own cryptocurrency. That’s a step beyond where we’re going with the IOUX token, but I wish them well.

Still, when you discuss where the blockchain action is in eastern Europe, the conversation is going to end up in Estonia. It’s a reflection of highly conscious decision on the part of the Baltic nation’s leaders to embrace the technology. The blockchain-friendly government is led by President Kersti Kaljulaid, who could be easily confused with Lena Headey, Game of Thrones’ Cersei Lannister.

President of Estonia and Queen of Westeros: separated at birth?

According to the EU — of which Estonia is most emphatically a member: “Although blockchain has only become hot technology in recent years, Estonia has been testing the blockchain technology since 2008. Since 2012, blockchain has been in production use in Estonia’s data registries, such as the national health, judicial, legislative, security and commercial code systems, with plans to extend its use to other spheres such as personal medicine, cybersecurity and data embassies.”

While it’s regulatory regime has been particularly accommodative of cryptocurrency exchanges, Estonia’s broadly pro-business and pro-technology stances make it a magnet for startups throughout the blockchain space. One kindred soul of IOU is SmartCredit.io, which is pursuing its own course toward reinventing credit for the 21st century. The approach the SmartCredit team takes is to create a decentralized marketplace that offers peer-to-peer lending denominated in ether or stablecoin. I’m definitely keeping an eye on this project.

Middle East

Of all the Arab states, it is the United Arab Emirates that has taken the lead in the blockchain revolution. I won’t feign surprise. While Egypt is beginning to develop the academic chops to incubate blockchain projects, Jordan has rightly focused its DLT attention to humanitarian applications around caring for Syrian refugees and Saudi Arabia throws money at IBM to figure out how to not miss the boat, the UAE is committing real resources to both blockchain and AI.

Perhaps the most interesting project out of the UAE is Seafood Souq. Seems that Emiratis and their guests consume almost a million metric tonnes a year of seafood. Who knew? What a lot of us do know is that a lot of the seafood sold on international markets is bogus. Odds are one in three that what you ordered isn’t what’s on your plate. (Don’t read this New York State attorney general’s report if you just had sushi for lunch.) If there were ever a market that needed blockchain-powered anti-counterfeiting, it’s seafood. I don’t know why nobody thought of this sooner, but I’m glad Seafood Souq is thinking of it now.

Turkey has also emerged as a blockchain development hub. Although it isn’t in the forefront of blockchain ecommerce, it is developing infrastructure elements from which online retailers can avail themselves. First, it’s the home of one of the more use case-driven cryptocurrencies, MenaCash, which intends to serve as a Shariah-compliant cross-border medium of exchange throughout the Middle East and North Africa. It’s currently looking to onboard merchants and resellers to realize the dream.

Israel has long been a technological leader, since at least the dotcom boom when it invented ICQ — what we know today as instant messaging — and at least 50 Silicon Wadi startups launched Nasdaq IPOs. Even so, the current crop of Technion grads (unlike American moms, Israeli moms don’t let their kids drop out) haven’t focused on applying blockchain to ecommerce.

One particularly lamentable missed opportunity was eToro, which had always been intended as a crypto exchange but, at one point earlier this year, had aspirations of also becoming an ecommerce platform. Israeli business news site Globes reports that was part of its strategy of moving into the U.S. market where, I surmise, they realized that the regulatory outlook isn’t favorable to crypto at this moment. But that online mall never materialized, so I’m left to wonder what eToro’s VC backers, who ponied up $100 million last year, think of this pivot.

If there’s one sign of progress along Israel’s path to blockchain adoption in ecommerce, though, it’s Colu. I don’t think that’s a word in Hebrew, but rather an homage to DC Comics. Colu is the homeworld of the hyperintelligent supervillain Braniac. (I can’t unknow that, and now neither can you.) Again, Colu itself is not a blockchain ecommerce company but what it does is potentially of great value to both online and brick-and-mortar retail.

It’s basically local-cryptocurrency-in-a-box. It helps a city’s merchants create their own Ethereum-based medium of exchange, which helps locals discover their business while everyone involved shows civic pride. And, if there are fluctuations in the fiat currency, this local medium could act as a buffer. (As it happens, Freedman has a fascinating blog post about when this has worked in the past.)

“It saves me the trouble of looking for change and it prevents forgery,” Colu’s website quotes a Tel Aviv restaurateur as saying. “I don’t have to pay a commission for every transaction like with credit card companies so as far as I’m concerned everyone should pay with the app. It’s easy and convenient.”

And hey, if it works in real life, there’s no reason it shouldn’t work for online stores that target a local community.

Africa

The days are long gone that Africa can be seen as an afterthought for any marketing department. This continent, which for so long seemed to be a tangle of deep problems without any hope of solutions, is figuring them out for themselves.

That being said, Africa is at least as diverse a continent as Europe or Asia, so generalities will have to be made at the inevitable cost of precision. Essentially, there are three economies we need to look at: Nigeria and its sphere of influence (including Ghana and Cameroon), South Africa and its neighbors (including Mozambique and Botswana) and Kenya and its adjacencies (including Tanzania and Uganda). Sad to say that Wakanda is not on the list, to give Marvel Comics equal time. Economic advancement almost always works its way inward from the coasts, and nations in the continent’s interior tend to lag the more prosperous regions with access to the seas. One other wonky note: We’re not looking at the north shore of Africa. The Mediterranean coast, also called the Maghreb, is more akin to the Arab world is considered here and elsewhere as being an extension of the Middle East.

All that said, writ large Africa is a huge market already and its potential is off the charts. According to the Phore Africa blog, the “African ecommerce market was estimated at $50 billion in 2018, from just $8 billion in 2013.” That includes the Magreb and contrasts against worldwide ecommerce revenues of $2.8 trillion, to be sure, but I’m sure any of us would sign a check made out for $50 billion. It’s also true that this $2.8 trillion is split fairly evenly between developed and developing countries, and it’s clear where the higher growth projections are.

Even so, it’s best to tread carefully when navigating through Africa’s business environment.

“Gradually, the ecommerce space has come to be a reference for where not to invest money in Nigeria,” according to local news site Business Day in an article that quotes a source as describing ecommerce ventures as “the easiest way to waste money and destroy value in Nigeria.”

Ouch.

But even so, Africa has no less a cheerleader than Alibaba founder Jack Ma, who sees specific use cases unique to the remoteness of many African consumers.

“The opportunity in ecommerce in Africa lies in the fact that Africa is lacking logistics, infrastructure and payment systems,” Ma has been widely quoted as saying.

Regular readers of this space shouldn’t be surprised. Africans leapfrogged over landlines and early mobiles and went straight to smartphones. Similarly, they by and large missed credit cards and retail banking and are ready for what comes next. And what comes next is using those very smartphones for shopping and payment processing, and this presents a host of use cases for blockchain: non-bank wallets, peer-to-peer credit and frictionless cross-border payments just to start.

As far as I can tell, though, this niche is not being filled by African-domiciled startups. The two blockchain players who have found their niche there are American Ovamba Systems and the aforementioned British Phore Blockchain. Phore actually has an up-and-running peer-to-peer mobile marketplace predicated on its own proof-of-stake cryptocurrency. It’s a global enterprise, but the marketing team has been keen to target Africa. Meanwhile, Ovamba is a step or two removed from ecommerce. It functions mainly as an venture capital and lending platform, but it has opened up field offices in Cameroon and South Africa, so I’m sure they’re looking to fund the first viable blockchain-native ecommerce site in Africa.

Summing up

Overall it’s difficult to come up with an overarching comment to make about western Europe, eastern Europe, the Middle East or Africa, no less all of them as a whole.

What can be truthfully said, though, is that this wide swath of the planet is only slowly coming to grips with the practical applications of blockchain technology. It’s developing all the pieces, but so far few have ventured into putting them together to actually sell stuff.

There are some green shoots. Some blockchain-native ecommerce sites are coming to fruition. But clearly IOU.io has an opportunity to be a first mover. We’ll take it.

Edward W. Mandel is a strategic advisor for IOU.io , he is an Ernst and Young Entrepreneur of the Year Finalist, Blockchain Enthusiast and visionary behind many successful organizations. An avid entrepreneur, Edward has a knack for designing distinctive business models complemented with superior technology to deliver unparalleled service and profitability. Edward also has been advising and consulting for various successful Blockchain technology and ICO projects and recently launched his own BQT.io P2P Hedge Exchange helping traders connect with each other to leverage their crypto assets.

IOU is a blockchain-based peer-to-peer platform designed to unify ecommerce transaction and customer retention processes, incorporating trade-able IOUs. It is currently raising capital through ICO. The platform can be found online at IOU.io and its community on Telegram at https://t.me/IOUCommunity.