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03/24

The History of Blockchain in Berlin

What made the capital an internationally sought-after hub for the blockchain community. A retrospective.

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A broad spectrum of tech-savvy communities, innovative start-ups, a large number of SMEs, companies and research institutions, excellent investment opportunities, coupled with a high quality of life and an outstanding cultural offering - it's obvious why Berlin is the first port of call for many when it comes to web3 and blockchain solutions. But how has the topic of blockchain developed so strongly and why is Berlin considered one of the world's blockchain hubs?

The beginnings of blockchain

Blockchain as a technology emerged in the early 1990s. In 1991, the two scientists Stuart Haber and W. Scott Stornetta began working on software that provided documents with a cryptographically secured chain of blocks. This created a timestamp for digital files that could not be falsified at a later date - and the principle of blockchain was born. With the addition of the "Merkle tree" or "hash tree" concept a year later, they were able to integrate several documents into one block - and enabled efficient and secure verification of the content of large data structures.

Time jump: 2008, Japan: Satoshi Nakamato, who to this day no one knows whether he is a person or a collective, published a much-noticed white paper on a decentralized currency based on blockchain. The foundation stone for the cryptocurrency Bitcoin was laid. After the first Bitcoin purchase in 2010, the currency took off like a rocket. Just two years later, the marketplace for bitcoins exceeded the billion mark. The next step in its development can be traced back to Vitalik Buterin, who added additional functions in 2015 with the global decentralized platform Ethereum. Joseph Lubin, who later founded ConsenSys, helped turn this vision into reality as a developer. Not only could financial transactions now be processed, but contracts and certificates could also be deposited. For the first time, real developer communities and ecosystems emerged around Ethereum.

In China, AntShares (ANS) was launched in 2014, which later developed into the Neo Blockchain platform. From 2015, IOTA opened up the Internet of Things as a cryptocurrency platform and from 2017, large companies and governments also began to invest in blockchain. The hype surrounding trading platforms ran its course.

A bar in Kreuzberg becomes a meeting place for Bitcoin enthusiasts

What does all this have to do with Berlin? The German capital became one of the most important meeting places for the international crypto and blockchain scene early on. Ethereum co-founder Joseph Lubin, for example, named Berlin as the most important international city in the blockchain cosmos. While German companies are notoriously slow when it comes to digital innovation, the strong tech scene in Berlin quickly recognized the potential that could be tapped into and drove development forward. The Room77 bar in Kreuzberg played an important role in this, being one of the first to accept Bitcoin as a means of payment. "1 BTC = 1 beer" was the bill there back in 2011. Various meetings of the Berlin crypto scene took place in the living room atmosphere between retro sofas, candlelight and stickers with the likenesses of Edward Snowden or Julian Assange - even Nick Szabo, father of the blockchain idea Smart Contracts, is said to have been a guest. Jörg Patzer, owner of the now closed bar in Berlin's Gräfekiez district, sympathized with the anarchist ideas behind the decentralization promise of cryptocurrencies and thus saw himself very much in the tradition of rebellious Kreuzberg. With his enthusiasm for Bitcoin, he also motivated other business owners in the neighborhood to accept Bitcoin in payment. The small, colorful Gräfestraße with its coffee shops, restaurants and stores thus became Europe's "Bitcoin Street" in the early years, as the British Guardian put it in an article in 2013.

However, Berlin's anarchist spirit and critical view of existing systems is not the only reason why blockchain development has been driven forward in Berlin. Since the noughties, Berlin's low cost of living and bustling cultural and art scene have made it a magnet for talent from all over the world. Added to this were the government and research institutions, which also revitalized the capital politically and academically. An active start-up scene then established itself from 2010. While blockchain and cryptocurrencies were the promise of fast money for some, for others it was and is associated with the hope of challenging the global financial system and the dominance of central banks, ensuring more transparency in trade routes and jointly developing technologies and science in an open ecosystem - which is also the motivation of many Berlin teams: "Berlin is the only place where people are still enthusiastic about decentralization as an idea, not the means to get rich quick," said crypto founder Rhian Lewis.

2017 and 2018: One of the most dynamic crypto communities in Europe emerges

One of the protagonists who put out feelers in the Berlin ecosystem early on is Sandeep Bajjuri, who came to the capital for a Master's degree in new energy technologies. He then worked as a startup scout and investment associate, keeping an eye out for promising startups for Venture Capital. He quickly came across companies that were working in small teams on the further development of blockchain. "'Decentralization of everything' - that's what I understood at first and what immediately sparked my interest," he says in the interview. When he talks about the development in Berlin, he divides it into the first and second cycle. In the first cycle in 2017 and 2018, more and more companies came to Berlin to drive blockchain development forward with talent, at times counting over 100 companies and teams. It was astonishing that only a very small single-digit number of them were involved in token sales - the majority focused on infrastructure - decentralized storage locations, databases and processors. For the innogy Innovation Hub (now: Future Energy Ventures), which has since been dissolved, Bajjuri listed the most important projects and companies that Berlin teams were working on in a graphic in 2018. Firstly, those that focused on infrastructure - decentralized storage locations, databases and processors. Ethereum and IBM Hyperledger are at the forefront here. Aeternity as a blockchain protocol and smart contract platform, the open source blockchain platform Lisk and the blockchain database BigchainDB also worked on the requirements of a global infrastructure. In the second category as a middleware layer, Spherity or Cosmos should be mentioned. Projects and companies in the third category "Decentralized Application Layer" offer concrete application possibilities via apps or direct access, including Gnosis or the Bitcoin bank Bitwala (the latter is currently relaunching after insolvency).

The blockchain ecosystem grew and grew: interested parties from all over the city met at meetups in Berlinn on blockchain topics - those who wanted to could do so 2 to 3 times a week, that's how dense the offer was. "Meetups are so crowded and you meet people from different companies and backgrounds. It's a very open ecosystem. People like to work together and form partnerships. People are excited about blockchain and crypto. Regardless of whether it's a bear or bull market," Jasmine Zhang, CEO of LongHash Germany, told Deutschen Welle back in 2018.

"Berlin has one of the most dynamic crypto communities in Europe, which is why we focus a lot of our energy here," confirmed her colleague Emily Parker, co-founder of Longhash. Sandeep Bajjuri also characterizes the Berlin scene of these years as very development-oriented and less focused on the market. "The teams in Berlin quickly go into the following mode: We encounter a problem, so we ask ourselves: How do we solve it so that we don't repeat it in the future?"

During this time, Sandeep Bajjuri co-founded the "Blockchain for Social Good" meetup series with Positive Blockchain, which brings blockchain experts together with NGOs or other organizations from the social sector to educate people about the problems and potential impact of solutions developed through blockchain technology.

From 2019: Blockchain Berlin Week and pandemic

The time just before the pandemic marks the second cycle and another peak phase in Berlin's international blockchain community. One of its other key protagonists is Fabian Vogelsteller. The German web developer is an Ethereum veteran. Together with Vitalik Buterin, he presented ERC-20, a blueprint for the creation of tokens that are compatible with blockchain.

Fabian Vogelsteller "When I wrote ERC-20, I didn't expect it to become so big and influential. At the same time, it was the first smart contract standard. Very little experience went into this standard, as Ethereum was not even six months old at the time. This led to the problems we have today. Everyone uses ERC20 and simple private keys as wallets, which leads to a poor UX and too much focus on tokens and quirky smart contract hacks to make protocols interactive.

Today, Vogelsteller is working from Berlin with LUKSO, a blockchain solution that is used for the fashion and creative industries, among others. As a layer 1 network based on Ethereum, it enables creatives to create digital assets from their services and manage communities and projects - without centralized ownership. Developed as a generic blockchain, it can also be used for other industries.

"The LUKSO development was launched in 2018 in response to these problems: UX issues and an excessive focus on finance," says Vogelsteller. "Blockchain can be used for social and global communities of all kinds. And it needs an Ethereum that has the right building blocks from the start. This will enable more social and human applications, which will eventually lead to widespread adoption and bring the space out of its trading niche. To achieve this, the standards had to be rebuilt - with the learnings of the last 7 years and in a more comprehensive form. These new standards are called LUKSO Standard Proposals or LSPs and are at the heart of the LUKSO ecosystem."

The Ocean protocol is also based on the ERC-20, which Vogelsteller helped to develop. This open source blockchain project is all about data sharing on a decentralized marketplace. OCEAN Tokens (ERC-20) are traded here. Its pioneers are Trent McConaghy and Bruce Pon. The latter is also the founder and CEO of BigchainDB, based in Berlin.

Having reached its peak, 2019 saw the launch of the first Blockchain Berlin Week, which is now considered the largest crypto festival in the world. Events such as the Web3 Summit, DAOfest, ETHBerlin and the C³ Crypto Conference attracted international speakers as well as participants from politics, business and science. Dappcon (Developer conference for Ethereum DApps and Infrastructure) attracted over 600 participants, including around 20 speakers from blockchain companies such as Aave, Argent, Aragon, Ethereum Foundation, DAOstack, Golem, Maker or MolochDAO.

This second cycle in Berlin's blockchain history was brought to a sudden halt by the outbreak of the coronavirus in 2020. During the pandemic, the lively meetup scene in Berlin came to a standstill and many people moved abroad due to the possibility of working remotely. In addition to hours of sunshine, Lisbon, for example, offered tax and bureaucratic relief as well as support programs for crypto and startup companies.

Globally, NFTs attracted more and more attention: thanks to platforms such as SuperRare and Nifty Gateway, artists were now able to sell their digital works there as NFTs (based on the Ethereum blockchain). In 2021, the artist Beeple made headlines worldwide with the record sale of 69 million US dollars for his digital artwork „Everydays: The First 5000 Days“. The next peak had been reached. NFTs were seen as one of the most promising use cases in the blockchain ecosystem - until the hype was dampened in 2022: Bitcoin prices plummeted and NFT collections struggled with a massive loss in value - a combination of several factors played a role: unsettled financial markets due to the energy crisis and a difficult global political situation, loss of trust in crypto and a more restrictive approach by central banks are considered to be the reasons.

What does it look like now - after the hype?

Today, almost 50 percent of German blockchain companies are based in Berlin. And Berlin's appeal within Europe also remains unbroken: The latest CV VC German Blockchain Report 2023 counted a total of 160 companies operating in the German capital. While the community shrank significantly during the pandemic, many of the international teams are now back in Berlin. According to Sandeep Bajjuri, who now acts as Secretary General at BerChain, the blockchain community in Berlin has almost doubled again in the past two years. Founded by Ricardo Garcia and Silvan Jongerius, among others, the non-profit association has set itself the task of promoting the Berlin blockchain community and making it visible. In addition to networking events, the member-led organization organizes working groups, workshops and establishes contact with political intuitions. BerChain is currently working on an EU project - CHAISE - to create a curriculum for university education on blockchain.

Blockchain has also arrived in politics: The Bundesblock is a trade association that represents blockchain start-ups in Germany and works together with government representatives. In 2019, the German government published a blockchain strategy aimed at exploiting the opportunities offered by blockchain and mobilizing the digital transformation.

Thanks to the combination of large companies such as innogy and Deutsche Telekom on site, co-working spaces, startups, meetups, hackathons, initiatives such as BerChain, foundations such as the IOTA Foundation and numerous events and conferences, Berlin is also considered the most important international center of the blockchain ecosystem today. And the local crypto community continues to grow. If you are looking for physical locations to connect with the virtual blockchain world, events at the Lisk Office or at W3 Hub are a good choice. Co-working spaces such as Factory Berlin or Full Node are also still considered to be well connected in the network. BerChain regularly lists events in Berlin in its own calendar. The meetup series "Blockchain for Social Good" - curated by PositiveBlockchain.io - celebrated its fifth anniversary in Berlin in summer 2023. The BerChain association will celebrate a similar anniversary in 2024, and the fifth edition of Berlin Blockchain Week (May 18-26, 2024) is already scheduled for spring 2024.

Sources

Interviews:

  • Interview with Sandeep Bajjuri (Januar 2024)

Articles:

 

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