Markus Hautala, Head of Blockchain solutions at Tieto argues that blockchain technology allows us to create more democratically governed distributed platforms and avoid vendor lock-in.
And whilst these platforms have gained global reach, we still lack the ubiquitous means to digitally conduct common interactions, such as signing a business contract, opening a bank account, founding a company and more. As our personal and business lives are becoming increasingly digital and global, we need to invent next-generation platforms that can be efficiently scaled across national borders whilst avoiding the risk for monopolies to emerge.
“During the company founding process, a digital identity is created for the company. This enables the company to be reliably identified and allows it to operate at full extent by sharing online verifiable information about itself.”
During the past couple of years, distributed platforms based on distributed ledger technology have become more common providing the opportunity to establish new types of business and trust networks across multiple actors. Instead of relying on centralised platforms, we now have the means to establish new types of distributed business networks whilst avoiding vendor lock-in.
One example of such is the DLT-based business network created in Project Mercury earlier during 2018 in cooperation with Finnish authorities and businesses. Asiakastieto Group, Nordea Bank, OP Group and Tieto jointly with advisors from Finnish Tax Administration and the Finnish Patent and Registration Office, developed the world’s first DLT-based business network that enables the founding of limited liability companies on an entirely digital basis. The newly-developed based business network is a proof-of-concept project, but further development is planned for an even wider-ranging collaboration between a number of Finnish organisations.
The current end-to-end process for forming a limited company is very manual and time consuming for company stakeholders and involved entities. Typically founding a company can take several weeks as the company founders need to create and sign the founding documents manually, the documents have to be delivered through regular mail to public authorities and the company founders need to visit a bank branch to open a bank account for the company and so on.
Furthermore, there is no means to digitally identify foreign citizens nor to perform Know-Your-Customer (KYC) checks which further complicate the process. This is because current isolated systems do not cater for exchanging verifiable identity information concerning the individuals or organisations. There is neither a system that will manage the entire process and which can update company information to authorities and financial service providers both simultaneously and in real time.
In the future, Finns will increasingly be self-employed as entrepreneurs and as such, the mission of this pioneering development is to reduce the burden of administrative procedures and encourage more people to become entrepreneurs and create new jobs.
An additional key objective of this initiative is to attract foreign talent by making it easier for foreign entrepreneurs to found start-ups in Finland and therefore, to improve the country’s economic performance.
Thanks to distributed ledger technology, the business network orchestrates the end-to-end process across different actors and enables information about the company and its stakeholders to be updated and made available to every party in the network simultaneously.
During the company founding process, a digital identity is created for the company. This enables the company to be reliably identified and allows it to operate at full extent by sharing online verifiable information about itself. For example, the company can authorize its employees to represent the company digitally. Accounts can be opened for the company, it can be registered for VAT and Tax Administration prepayment register, the Finnish Patent and Registration Office can register the company and the company can manage its shareholder register – all this entirely digitally.
While the business network is developed in cooperation with Finnish organisations, it could also be used globally. The technology solution is not geographically limited as it combines the decentralised transaction network (Corda) and global identity network (Sovrin). By integrating these, we now have also created a model for other highly scalable global business networks that can serve the vast number of various industry use cases involving record keeping, asset trading, multiparty process management and decentralised contract signing.
This project combined for the first time the two major decentralised platforms in a practical implementation. Corda’s process and contract-centric architecture formed the backbone of the network between the different actors, while Hyperledger Indy – the basis for the Sovrin network – provides a decentralised platform for exchanging verifiable data. Sovrin is a global decentralised identity network that allows people, organisations and things to have their own digital identity which they control.
“An additional key objective of this initiative is to attract foreign talent by making it easier for foreign entrepreneurs to found start-ups in Finland and therefore, to improve the country’s economic performance.”
In Sovrin, the identity holder forms secure digital connections with entities (organisations, individuals or things) that can provide information about the identity holder. This information can literally be anything such as a personal identification number, home address, power of attorney or – in the context of Project Mercury – a right to represent a company. This information can then be shared by the identity holder to a party that requires these proofs. This provides for all kinds of rich digital interactions: Know-Your-Customer (KYC), contract and transaction signing (B2B, B2C, G2C), permits, asset ownership and so on.
Corda is an open source, blockchain inspired distributed ledger technology (DLT) platform that removes costly friction in business processes by enabling organisations to transact directly using smart contracts while ensuring the highest levels of privacy and security. It is the outcome of over two years of intense research and development by R3 and its 100+ members. Corda’s unique approach to privacy makes it well placed to support identity management on the distributed ledger as the platform combines privacy and confidentiality of business transactions with an ability to reuse business processes and data in the network.
During the past couple of years, DLT-based platforms have started to emerge, providing us with the means to establish new types of distributed business networks without vendorlock-in. The required technologies have matured at a rapid pace and during 2019, we will have reached a stage when they can be taken into use in large-scale production.
The public sector has a central role in digitalising today’s society, as it provides core services – such as base registries – required for societies to function. The European public sector should follow the example of their Finnish counterparts and actively drive the adoption of new distributed business networks in collaboration with the private sector to ensure a wide market take-up. Private and public sector participants should jointly and iteratively prototype, pilot and develop such collaborative solutions to ensure that Europe will be at the forefront in adopting this technology and that the European economy remains globally competitive.
This article is published in the October 2018 edition of Open Access Government
Markus has a broad experience on building innovative digital services and bringing them to market. He has over 10 years of experience in various lead business development roles within financial services and IT industry. He is currently Head of Blockchain Solutions helping to build smarter, more equal and inclusive societies with distributed ledger (DLT) technology.