Hyperledger Fabric

Starting your business at the speed of blockchain

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According to the World Bank’s latest Doing Business 2018: Reforming to Create Jobs report, the largest number of reforms made in the past 15 years aimed at facilitating the requirements for starting a business, with 626 reforms recorded in the past 15 years. As it stands, the time needed to start a new small or medium-size business has been cut in half to an average of 20 days worldwide, compared with 52 days in 2003.

The report also reveals that, in 65 economies, entrepreneurs can complete at least one business incorporation procedure online, compared with only nine in 2003. This is all excellent progress, but in the era of instant everything, can’t we do more?

What if the time to start a business could be reduced to only a few hours? Wouldn’t it be a competitive advantage for a country or a city to lure entrepreneurs? You bet.

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Just ask New Zealand, which has the smallest number of procedures required (one) and the shortest time to fulfill them (0.5 days) to start a business. The result is that the country’s startup scene saw 9 percent growth year-on-year between 2014 and 2015, with $61.2 million invested into 94 companies across 132 deals in 2015.

Not to be outdone, the Swiss know a thing or two about competing, currently ranked number one by the World Economic Forum’s (WEF) Global Competitiveness Index for the ninth year in a row — but surprisingly the country is ranked 73rd in the world for starting a business.

Switzerland took this on a challenge and they didn’t have to look far for the answer – blockchain.

Crypto Valley

For the past several years the Swiss canton, or state of Zug, has been marketing itself as “Crypto Valley”, an obvious tip of the hat to Silicon Valley, to spur on blockchain innovations — and it’s working. This past year the Crypto Valley Association touted 500 members, with growth at 30 per month.

Last year to demonstrate their new crypto credentials, officials in Zug openly accepted to join in for a challenging idea. Let’s register a new start-up using the blockchain, not in weeks or days, but in hours and let’s do it live for the world stage. Take that World Bank!

Expectations exceeded

Within the scope of this challenge, several businesses, including IBM Switzerland, Handelsregister Zug, Proxeus, Swisscom and Vermögenszentrum, as well as with the notary firms Grunder Rechtsanwälte, Kaiser Odermatt & Partner and Zwicky Windlin & Partner to joined forces to tackle the task.

Digitizing the registration process involved combing both new and existing technological components to effectively optimized performance.

To begin, the entrepreneur behind the new start-up entered all relevant information just once into a web-based tool. The necessary bank, notary and commercial register documents were then generated from this data and stored in The Linux Foundation’s Hyperledger Fabric, an open source blockchain platform initiated to support blockchain-based distributed ledger solutions.

To everyone’s surprise, the demo of the entire process, which consisted of bank, notary and commercial registration, and included all checks, was completed in less than two hours, well exceeding the original challenge of 48 hours. This is a noteworthy achievement as it currently takes four to six weeks to register a business in Switzerland.

Blockchain efficiency

By shifting the entire registration process, which encompasses the entrepreneur, lawyer, bank, notary and commercial registry, to a digital workflow and a blockchain featuring smart contracts, key steps can processed instantly and even in parallel, drastically reducing the time it takes to verify the multiple steps of registry.

The bank states that the founding capital has indeed been paid — the notary holds the foundation assembly and confirms that the necessary documents have been provided, reviewed and approved — and the commercial registry checks that everything is compliant and forwards it to the federal commercial registry for final approval. If all the conditions are met, the filing, which up to this point is provisional, is then officially registered with the Commercial Register. The parties involved can also track each phase of the registration process electronically at any time via the blockchain and a connected cloud service.

The possibilities ahead

Reducing the time to register a new business is an important first step. The true potential lies in digitizing all multi-partner processes such as bylaw changes, capital increases and even services around important corporate events by means of blockchain. Shifting to smart contracts within the blockchain, promises to have significant impact in all these processes. Current applications integrate smart contracts in a simple form, as with meeting the conditions of company registration. Future models could be far more complex and designed to include share restrictions, partnership agreements, power of attorney and more.

Look out New Zealand, blockchain has leveled the entrepreneurial playing field.

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CTO Europe Team & IBM Research, Cognitive Industry Solutions - IBM Research

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