Estonia becomes the world’s first virtual nation capable of rebooting itself

How do you reboot an entire country? It’s an odd question, but in 1991, after 51 years of occupation by hostile regimes, Estonia had to do exactly that. Decades of state ownership were rolled back to return land expropriated first by the Soviets, then the Nazis, then again by the Soviets in the period during and after the Second World War. In 1991, that meant poring through reams of documents stored in church halls and government buildings across Estonia. If residents could prove that they or their family owned a piece of land or property before the Soviet occupation in June 1940, they were entitled to its return or compensation. Inevitably the process of restitution, that is of uncovering and in some cases recovering paper trails that went back almost a century, took years. But if Estonia needed to reboot itself again today then, thanks to some innovative thinking, team work and modern technology, it could do so almost instantly.

"Paper can be cheated and paper can be faked, but information in a register can't," says Taavi Kotka, the Estonian government's CIO and the man tasked with setting the IT agenda for the world's most digitally-advanced society. Citizens can vote in national elections, find businesses and register baby names online using an identity card and a PIN enabled reader. Patient health records are secured by the blockchain, a revolutionary distributed ledger technology that even now some governments are only just getting their heads around, while land records are timestamped and held on publicly accessible online registers.

Estonia has, in every sense of the word, converted itself into binary code and, according to Kotka, other countries will soon be following its lead.

"Digital countries,” or virtual nations as they’re commonly becoming known, “will be a new normality some time soon," he says, before adding, “if Estonia was somehow wiped off the map, by invasion or a natural disaster, its data and services would allow the functions of the state to reboot.”

But that data is under attack. In April 2007, a series of hacks thought to have originated from Russia forced government websites offline for nearly a month. Now, says Kotka, Estonia fends off hundreds of thousands of cyberattacks every day – most of them coming from China and Russia.

As a result, and to keep his country's data and online infrastructure safe, Kotka is experimenting with something he calls "Data embassies". Friendly countries would host servers housing Estonia’s critical data and applications and, in the event of an attack, the Estonian government could switch over to those external databases to keep the country running.

"There has to be a plan for if, or when, the bad things happen," says Kotka. "If there is a heavy cyberattack, how do you run your applications? You have to have a plan for that."

Kotka is currently in talks with friendly governments, including the UK, about installing Estonian data embassies on their territory.

"We would like to put data embassies under the Vienna Convention," he says. “If they were protected by the Convention, data embassies could not be entered by the host country without explicit permission from the country that owned the embassy. It would also need to be decided whether the host or foreign nation would be responsible for securing the data embassy against sophisticated cyberattacks. Those questions are not agreed internationally at the moment. We're trying to work that out.”

Estonia, a tiny nation of 1.33 million people, has a good reason for looking outside its own borders to secure its data. In 2014 the country watched warily as Russia annexed the Crimea, a former Ukrainian territory with almost two million inhabitants.

"It's a question of continuity," Kotka explains. If the worst happened, data embassies would mean that an Estonian government could keep supplying crucial services even if it no longer controlled the country's physical territory.

While Estonia’s plan to place data embassies on foreign soil is mired in a swamp of diplomatic conundrums, the country is already putting its digital infrastructure in the hands of privately-owned networks.

"We also talk about privately-owned public clouds like AWS and Microsoft Azure," says Kotka. Such companies have vast resources for combatting cyberattacks, and with Microsoft, Kotka has already run two simulations exploring how easily his country is able to switch from its own servers to those hosted by a private company.

The Estonian government currently only uses commercially owned servers to store non-sensitive public data.

"Eighty five per cent of the data is not so privacy sensitive. Even if the information leaks, they're public databases anyway. Who cares?" explains Kotka. The other 15 per cent, including patient health records and national security communications, is kept safe using the blockchain and heavily secured private servers.

Whether that data is stored on private services or in the bowels of a nondescript government building in a foreign country, the Estonian approach to cyber security is emblematic of a new way of thinking about nationhood, and it’s one I’m increasingly intrigued by as I see more chatter about it in the ether.

"The concept of a country has changed," says Kotka. "Land is so yesterday. It doesn’t matter where you physically live or operate. That is how the game will change."

Estonia has been leading the pack when it comes to digital innovation for a long time. In 2002, the government built a free wifi network that covered the most populated parts of the country. In 2007, it started allowing citizens to vote in elections online and now over 30 per cent of voters elect their representatives over the internet. Filing taxes in Estonia takes just two clicks – and that's only because the zero click solution seemed too easy.

"We force them to use those clicks because we want them to feel that they actually pay taxes," says Kotka.

But the country's most ambitious online project, Estonian e-residency, goes way beyond digitisation and streamlining. Anyone in the world can now apply online to become an e-resident of the tiny Baltic state. Once they’ve completed the application process, which can take up to one month, an e-resident receives an Estonian national ID card entitling them to register an Estonian company online, set up an Estonian bank account and use the country’s secure digital document signing system, as well as let non European Union (EU) companies get access to the EU market and all its benefits.

"You can use our digital society – the same tools and the same services - we didn't have to develop anything extra for e-residents," says Kotka. “It's a zero cost project for us."

In the one and a half years since the scheme started, e-residents have created 1,000 new companies in Estonia, adding to the 60,000 already established. Citizens of non-European countries can create a business based within the EU, while Estonian banks, accountants and auditors benefit from the increased number of customers.

E-residency isn’t an abstract experiment with borderless citizenship, though, it’s a potential solution to a very real problem. Estonia’s population growth rate has flatlined. While other European countries such as Germany and the UK currently rely on steady immigration to compensate for low birth rates, last year only seven families emigrated to Estonia. An ageing population will mean the country's 650,000 strong workforce will be reduced by 15 per cent over the next ten years.

"We need to connect more people and companies with Estonia. That's why we offer the e-residency," says Kotka. So far, the project has brought over 13,000 e-residents into digital Estonia. In an average year, only 14,000 children are born in the country. "Those children start to contribute to the country in two years, these [e-residents] are contributing today."

By 2025, Kotka hopes to turn Estonia from a country of 1.3 million to an international community of over 10 million, the vast majority of them e-residents. E-residency, he says, is about "finding the best customers" for Estonia.

Kotka’s pragmatic outlook is indicative of his entrepreneurial approach to government. After six years as CEO of Nortal, the largest software development company in the Baltic states, Kotka accepted the position of CIO on the condition that he was allowed to be as ambitious as he liked. "I said that I can do crazy stuff," he says, "and they have to trust me."

Though he originally planned to stay in the job for just two years, Kotka will soon celebrate his fourth year of working in government.

"I've been like a kid in a candy store. I've had full political support,” he says. Alongside his work for the Estonian government, he is finishing up a PhD in software engineering and advising the European Commission's vice president, Andrus Ansip, on digital economies and e-governance.

In startup terms, e-residency has gotten off to a strong start. Thirteen thousand signups in one and half years is a record that most fledgling services would be proud of, Kotka points out. In the post-Brexit world, the scheme would give British citizens the option of having a business in an EU country without needing to relocate there. In a turbulent Europe, a country that sells itself on stability and continuity – at least digitally – is well-placed to outcompete other nations beset by internal bickering.

And as Estonia attempts to overcome its internal and external challenges, it has found itself starting to redefine the concepts of nationhood and citizenship. The country is coming up with solutions at a rapid pace, but those solutions are leading to even bigger questions.

"What if [e-residents] start to play a significant role in our society?" asks Kotka. "Should we give them voting rights, at least on economic questions? Should we start representing those people in front of the European Union?"

As the race to digitise both industries and governments, as well as entire countries, continues to accelerate it’s about time, in my estimation at least, that we discuss the role of the nation state and whether the concept of the nation state itself, with its physically defined borders and visa entry systems is increasingly out of date in and increasingly interconnected, digital world.