Blockchain federalism – When the Swabians pass by Berlin

On Monday, June 18th, Stefan Krebs, CIO of the state of Baden-Württemberg, was presented with a strategy paper to make his state fit for blockchain adaptation. Among the initiators are well-known names such as IBM, Daimler, Stuttgart Stock Exchange or Bosch – companies that have already gained initial blockchain experience. In addition to a general improvement of the Blockchain ecosystem in business and administration, the goal is to include small and medium-sized companies in the crypto-economy.

Blockchain as part of Bitcoin evolution

Although a single state initiative will not be decisive in determining whether Germany will keep up with the blockchain economy and the Bitcoin evolution, it can undoubtedly be one important impulse among many. The last few months have shown that initiatives at EU or federal level often progress very slowly. Impulses from the lower administrative levels, i.e. from individual municipalities and federal states, can help to raise the profile of the issue in the discourse at EU and federal level like seen here: The more municipalities and federal states push blockchain projects, the more likely it is that the federal government will also be prepared to implement crypto-friendly regulation.

Stuttgart, not Berlin
Competition at state level could thus lead more quickly to small blockchain use cases and sandboxes than is the case at federal level. Baden-Württemberg in particular can play a leading role in Germany as a federal state. Although the Berlin blockchain startup scene may have great long-term value creation potential, the corporations and the so-called hidden champions are more likely to be found in Baden-Württemberg. Here, blockchain technology can lead to economic success much more quickly than is the case in other regions of Germany.

The mechanical engineers and automotive suppliers in the Ländle need a secure decentralised infrastructure in order to successfully implement the Internet of Things within the framework of Industry 4.0. So if a production machine automatically orders new raw materials, simultaneously initiates payment and communicates this information to the other machines via machine-to-machine communication, then some blockchain use cases are necessary. In logistics and supply chain management in particular, the short-term value creation potential is greater than in most other industries – including finance and energy. As efficient as most companies in Baden-Württemberg and in Germany may be, there are still large friction losses and inefficiencies in the external relationship with external service providers, which can be drastically reduced by blockchain solutions such as IBM.

Blockchain federalism in Bitcoin evolution

It is difficult to measure in advance how high the effective benefits of such Bitcoin evolution initiatives will ultimately be. For sustained success, the pithy announcements must be followed by action like this For this to succeed, there needs to be an exchange between block-chain start-ups and the old economy. However, this is exactly where things are lacking so far: the medium-sized companies in Baden-Württemberg and the start-ups in Berlin, Hamburg or Munich are not yet quite compatible. Thus, there has long been a lively exchange within the blockchain scene at the countless Meetups, but industry representatives have only rarely been seen here so far. Too bad!

Hopefully the initiative will also infect the remaining 15 federal states, so that in future each federal state will have its own crypto valley, which is in active exchange with the others – decentralised, as provided for by federalism.