Ordinary people can do extraordinary things. Important ideas boil in their heads, and they have the strength and inspiration to hammer this rock day by day. This is exactly what we thought of Natalia Snezhkova, co-founder and CEO of Bloqly, which creates blockchain reality not only in pitch decks but also in reality. We spoke with Natalia about the difficulties of communicating with government agencies, the possibilities of blockchain technologies in the fight against corruption, and discussed the prospects of cryptocurrency in Ukraine.
Natalia, what did you do before you got into distributed technologies?
I have a fairly large sales experience and I've spent almost all my life selling everything that came to my hands. I have over 20 years of experience as a sales manager, head of sales, and a head of the company. I sold everything from food to aviation fuel; I worked with export and import, tech and services; I worked with IT companies that delivered outsource products as well as their own. That said, I was selling all of that. I've been improving all this time and, in fact, I'm still developing as a sales manager.
Why and at what point in your life did blockchain happen?
It was about two years ago, and the hype around Bitcoin played not the last role here. At the company where I worked, offers for blockchain development started to flow in. Most often, these were cryptocurrency products, various exchanges, tokenization, and more. The were lots of ICOs at that time.
And this interest has shown that blockchain is not entirely about cryptocurrencies. As we performed more tasks, we found that most blockchains available at the time were either forks or databases with many vulnerabilities that are easy to detect. With all this, the technology was still interesting because it remains unique even today in terms of building a trust line between the parties, and to some extent maintaining and protecting data.
Therefore, we began to explore the possibility of creating our blockchain with my partners and concluded that we needed a working group that I had assembled. It included representatives from departments, ministries, the business sector — I have a fairly large number of contacts, so people responded vividly to help us understand this. As a result, we gathered rather a skin-deep expert analysis but with lots of useful cases.
We have identified some of the most popular queries: blockchain without mining and blockchain without tokens, where decentralization is achieved in other ways. As it turned out, states and businesses are reluctant to launch companies that use third-party tokens into their internal structures: they do not consider it reliable, and perhaps have reason to do so, or maybe not — I am not going to judge. So we created such a blockchain and developed a few products for the state because to hard test it.
“Communication with government agencies requires specific communication, especially when we approach them with a mission to fight corruption. It's kind of a ‘bee against honey’.”
We proved to them, however, that it is much more advantageous not to live on bribes but to develop the country they live in, in particular, in the context of education. We argue that raising your reputation, such as the rank of your schools and kindergartens, is a more confident way to make more money than taking a bribe. So we created three projects: online waiting list for a kindergarten, a school, and now we are finilizing a feature for extracurricular facilities. They are very similar but have key differences. They are fully in compliance with Ukrainian law, they are sharpened under a new Ukrainian school. There are also commercial projects, but this is a bit of a different story.
What about technology: how is your blockchain different from others?
Who and how can you start using your blockchain? For whom was created this product in the first place?
We now have an API — an open protocol that any company can connect to in private blockchains or public sidechains, to store data or retain data sequences, or both. We have experience working with a company that uses our blockchain to store betting data where bets are to be entered into the blockchain and the bet status change is also recorded in the blockchain. There are examples of working with government entities that store document workflow on the blockchain — partly or fully. It is now very easy for us to integrate with everyone who wants to use our blockchain for own purposes, unless it is, of course, conditioned — that is, where we need to keep data and transactions history, and to keep trust.
Bloqly focuses on B2G segment, right?
No, the cases I mentioned are more of front-runners. Notable government projects, especially those related to waiting lists, are quite significant — they are unique even on a global scale. As far as I know, only Kazakhstan is now attempting to replicate this, but I have not yet encountered similar active products. Of course, this does not mean that we are unique, and most importantly, we created these projects not as commercial but as social, which will help to prove our efficiency. Now they remain the same.
Most likely, they will not enter the commercial plane unless there will be the law "Money goes after the child" — where private kindergartens and schools could actively connect, and from which commercial value could be obtained. Government agencies are not able to pay even the cost, and sometimes they are helped by donors simply to store the data in the hosting. This is the reality.
How did you choose the cities where you started implementing the project?
By transparency rating. It is an analysis that shows that many cities are not as engaged as others, are more open to eliminating corruption and putting themselves out of the shadows. Drohobych was in the first place, followed by Mariupol, then Vinnytsia. We proposed many cities and the first responded just Drohobych, and later others.
To be sure, the Drohobych administration, together with the mayor and Stas Heider, has made great efforts to work on the project. We constantly organized with them skype conversations, compiled SOWs according to their requests. In short, we felt their pain. A lot of work was done, and, of course, we did not take a coin for that. After some time, when the system started working, Drohobych agreed to pay us once for hosting the data.
So in Drohobych all kindergartens and schools are already on the blockchain. And now we are also introducing workshops. Everything works. They don't get overexcited but use it as intended. They all have widgets on the site, and only through these widgets people are recorded, the waiting list is unchanged, etc.
Do you work with other cities too?
Yes, about ten cities have now sent us a request for the blockchain waiting lists. These are the ones we made an offer to before, but they had a delay, for example, because of the banal hosting fee. Now they agreed — someone with a donor, someone with foreign investment, someone has found money in their budget. We are talking about small amounts, it is about 5-10 thousand hryvnias for a small town. As soon as they find them, they refer to us and we are engaged in implementation.
And what are your plans? Continue offering the project to other cities or transfer this product to someone else?
The process has already started, so we can't quit. Since the state does not show interest there is no one to transfer it to. After the appointment of the new Minister of Education, we will make him an offer for the transfer of these products, but only under the condition of some transparent automated service.
I do not know how much this will correspond to the "State in the smartphone" initiative that everyone is talking about. But we see it as a uniform office for the child: that is, a marketplace similar to ProZorro platform (where companies can place a bid and compete for an order) that offers parents all services in one place — from enrollment in the kindergarten, school, and university to some educational materials, payment options, and school rating votingthe. We already have a solution that we can offer to automate the mechanism "Money follows the child" because the law is adopted, but technologically nothing is provided. So as soon as it is handed over to someone, we are ready to do it for the benefit of Ukraine, we see no problem in this.
Besides, you still cooperate with the National Bank, right?
Yes, it’s true. We have a project that now requires tremendous involvement from the parties. This is a "Blockchain Bank Guarantee". If I'm not mistaken, such an initiative has already been implemented in Russia and Belarus. And it illustrated quite good results there.
We began to analyze and develop it after the NBU request because it turned out that we do not have a single register of bank guarantees. The tenders that apply to ProZorro companies are very difficult to verify — one has to find out if they are not forged but issued by a bank or financial company that is licensed and entitled to do so. The counterfeit market exists, and it is quite large; it affects the development of the market as a whole and the reputation of the NBU regulator.
This project is very big, and not even in terms of development, but in terms of finances — there is a request from the NBU, and there is no money. We have engaged the largest banks in the working group, which signed a memorandum with us; involved NABU (National Anti-Corruption Bureau of Ukraine), the Ministry of Economy, ProZorro, and now we are trying to find a joint solution to regulate this issue. Without legislation, this project makes no sense. And then, by and large, it is an automatic blockchain system that will allow you to take bank guarantees to a uniform registry. ProZorro and the NBU will remain observers who will constantly pull and check these guarantees for integrity, and banks will receive a regulated market that will lead to its growth.
What is the timeframe for implementing this project? Or does it rest against the law?
Right now, the law is the most important point. If the NBU decides that they recommend to use/issue bank guarantees on the blockchain, and then the Procurement Law for ProZorro will be supplemented, then it will take a maximum of half a year and the project is ready.
We have been organizing this project since November 2018, and now we have reached the point where banks will make a legal draft letter that would allow the NBU to raise it to the level of the resolution, and accordingly, it would affect ProZorro...
Then the deal is small. Most likely, you’ll need to look for a donor, because the NBU is unlikely to pay for it. By the way, the donor is the least of the problems, because this is a clear plan for the destruction of corruption schemes and fraud. Then, the project is done and transferred to the balance sheet of the NBU, for example.
It turns out that you first had an idea and articulated it before institutions, and only now do they turn to you for implementating it?
Exactly. The reputation has already been reached, and we understand that we have proven by social projects that we can do it.
Do you think you have competitors in Ukraine?
Yes, we have competitors in terms of blockchain development, and unfortunately, we do not see products of these competitors in the state or business sectors. Yes, they produce products as outsource firms, and such products are a whole different level of responsibility than their own projects. Therefore, we have competitors, but …
...they have not built a reputation for themselves yet?
More precisely, they have built a reputation in a different area. If we are talking about Bitfury, for example, the biggest competitor, it is still a mining company, which is now experiencing difficulties due to the fall in the value of cryptocurrencies and an increase in the cost of mining.
We have some suggestions from major government agencies to follow this company and change what they did... I don't want to name it yet, but I think you will hear it after we do it. This applies to large government entities that have declared a Bitfury partnership.
And what can you tell us about the logistics breakthrough announced on Facebook?
This is our self-funded project and is not related to anyone's requests. Speaking of logistics, it is a symbiosis of IoT devices and blockchain. Of course, this is no longer a novelty in this world, but we have some features.
We already have some memorandums with large international logistics companies, agrarian in Ukraine and freight carriers from abroad, who are very interested in the partnership after the pilot testing phase is completed. Nothing else to say, but I'm glad you are watching. That is very nice.
When are you going to talk about this in more detail?
We have a deadline for the fall — this is the end of the test. We are launching this product on two hundred cars: we will test both the data we will receive and the bugs that will undoubtedly occur. We already have manufacturing arrangements in China. Unfortunately, there. We wanted to keep production in Ukraine, but it turned out to be very expensive; the reasons are unclear, so we had to go to outsourcing there.
I think by the end of winter, we will be able to declare this publicly after all patents will have been approved. And I hope we will become a company that provides services no worse than Maersk. Although, these are parallel planes. We are focused on the maritime and annual cargoes of Ukraine and the world. We believe that for us it is a blue ocean on a tested blockchain and a very interesting (technologically) device.
Are some other cases you are ready to talk about?
In fact, after working with our test team for a very long time, we realized that blockchain is more about storing data, data histories, and a lack of trust. And we are trying to stay on this.
“I do not consider it is proper to push blockchain into the iron, at least at this life stage. Or use the word because it is fashionable. I think that this direction should be applied where these components are present.”
If it is not a secret, how profitable is Bloqly? You do a lot for your reputation.
The company now exists at owners’ expense. We received money from the sale of the previous project, and invested it in the development. We are now open to partnership negotiations, if not with investors, then with angels. The company is not profitable yet.
Complicated way. Speaking of the team, who are these people?
The founders include three owners, I am one of them. Plus there was a team of eight people left with five today — the budget is still shrinking. The whole team is outsourced. We have an office that houses the people who serve us, in terms of accounting, negotiations, acting as a call center support, but there are no technicians there — they are all over the world. Technical experts are involved in maintaining current waiting lists, daily implementing existing products and creating new ones, constantly writing and rewriting blockchain — this is a continuous process. We also have a hardware specialist who is now engaged in the industrial design and improvement of the current device. The company is small, as it is now fashionable to say — a company of up to ten people. Yes, we work legally and pay all taxes (smiles).
And you do great things!
We hope so! But so far they are not very needed. I'm talking about the state. But we believe that the current government still wants to change, and it will be topical. So we are waiting for those times to come.
I was invited to the eGovernment Coalition to head the department of education, where we discuss in closed group problems and suggestions of what is already there, and what we can offer. I'm talking about the State on Smartphone project. This is where we discuss the opportunity to bring all the services into a single system and to provide competitive access to companies that will be chosen by parents.
So do you believe that the "State in the smartphone" project will be implemented?
I have to believe. If it is not, then everything is somber. Just a little time passed, there were the first elections, the second. I hope, we will finally start working.
We have had several meetings with the Administration. Heads of state and their assistants are taking a rather active position, but unfortunately, there is no action. It may have been more important tasks since the election is just over, but it's time to get started, because our products are fully compliant, and I think that with such products we can improve Ukraine.
Can blockchain fight corruption in Ukraine?
I already see it. Although we had some doubts at the beginning of the project, we thought that these reputational risks could play out the other way, that any mistake would be ridiculed, hated... I see it for sure. Such waiting lists can defeat corruption. But it is still important for the state to explain people, though not to everyone, why it is necessary. Some in the Department of Education welcome us, and some put sticks in the wheels. Because we steal money from them, so they perceive us as rival enemies.
Even if there is the political will of a mayor, some education departments still sabotage it because they are well aware that if there is a waiting list that cannot be faked, they will automatically lose their bribes. And those bribes are a source of income. So you need someone to explain that you can soon reach a completely different level of income. If you stop taking bribes, start improving the quality of education, and provide high-level services to children, the state will be able to pay for these services, the rating of educational institutions will raise, and they will be able to charge more for their services.
According to New Ukrainian School, the plans for the next three years are to transfer all educational institutions of Ukraine to separate legal entities and for self-sufficiency. Therefore, if the school or kindergarten rating is very high, they will be able to set the payment cost for their services on their own, since they will have large competition — which is normal. But so far, a five hundred dollar bribe looks more real than a prospect to get a high rating in a year or two.
This is our problem: few people think about the long term, most of them are focused only on the present.
Unfortunately yes. But there are others. There is a wonderful organization "Kyiv Dialogue", which is engaged in educational activities. They invited me to four cities of Donetsk region where I had the opportunity to present our ideas. I can say that people there, unlike other cities, have welcomed us with open arms. They are glad that someone noticed them, did not leave them alone, helps to grow, develop and become honest and transparent. I came back with incredible feelings, this is probably the first meeting that ended with very long discussions and people's joy. Because there are meetings that end with pouted lips and not much interest. There, in Donetsk, people were fascinated. But this is a separate story about blockchain (smiles).
Then finally: your attitude to cryptocurrencies? Do you have crypto accounts?
Not yet. But we look in this direction, we consider IEO to be a real opportunity to get money for development, which we are lacking in a year and a half after launch. Programmers are not cheap, as you know, and charity is great when there are surpluses, not when there are other tasks. Therefore, we are currently considering the possibility of Bloqly tokenization. Through IEO, as one option, but we are also open to ordinary venture investors, perhaps angels.
“I think that cryptocurrency, in general, is about opportunities. And this is a very young market now. This is the foam after which there will be the taste of milk ,and then the taste of coffee, and only at the end there will be syrup, as if in a latte. We are now at the foam level when there is a lot of opportunities to hack, cheat, and cut hamsters. But time will cast off unstable ones and bring certain currencies to another level. I think there will be some crypto-fiat. I believe in this.”
What a nice comparison to latte!
I think we are all at the foam level, even with the blockchain. All the opportunities that we have now, they are hype, these are opportunities to move somewhere, to stand out somewhere. Most people don't understand how blockchain can be used, even in their own businesses. For them, blockchain equals bitcoin. Now, this is normal. Here, when we go to the level of coffee, leaving behind milk, then there will be some world leaders who have already emerged — IBM, Maersk… I hope we will be among them. And there will be products that will be just the beginning of the blue ocean.
How long will it take, do you think, to get to coffee?
I think ten years, no less. But I am not saying that during this time there will be no opportunities,money, and earnings, but there will be attempts to earn as soon as possible. Today, any company says, "Of course, we have a blockchain." They fork Ethereum, screw its horns up to some product and say that it is. Without thinking about the customer, without thinking that they have screwed it with errors, vulnerabilities that the customer will use it... When products will be created, not forked — this will be the coffee level.
Will we have a crypto regulation in Ukraine? If yes, within what timeframe?
I would like it to happen, to be honest. I have been a member of a very large group called "Cryptopolis" for about a year. There we discuss the legislative possibilities of implementation, analyze, communicate on the topic of regulatory messages of other countries. There are initiators, legal entities that submit these projects with the help of opinion leaders to the authorities. I think that it is pointless to deny reality. The objection is the first stage, as we know it. Here in Ukraine, there is still a mass objection. I think as soon as we pass this objection, and we have some acceptance, then the situation will change. I hope that during this authority's cadence we will settle it and legalize it. I want to believe that these authorities are a step closer to crypto reality than previous ones.
Thank you for conversation!
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