The byzantine world of bonds and bank guarantees is about to get the blockchain treatment, with an Australian startup using the building block of cryptocurrencies to take paper documents out of the equation.
Lygon CEO Justin Amos: “The problem is with paper and it is what we are here to fix.”
Sydney-based Lygon, backed by Australia’s biggest banks and tech giant IBM, says paper-based bank guarantees that underpin hundreds of thousands of business contracts locally are simply no longer fit for purpose.
Instead, Lygon is pitching its platform to digitise the entire process, in a manner akin to what PEXA has done for property conveyancing. Bank guarantees are used for everything from shop leases to the deposits that businesses need to secure new equipment or a work project.
“It’s about the synchronisation of the industry,” said Lygon chief executive Justin Amos.
“Everyone is on the same page with everything, at all times, in real time.”
Lygon says its system gives all parties access to the document on an enterprise-based distributed ledger system, with IBM operating as the backbone offering bank-grade security.
With heavyweight backers behind it, Lygon has already executed a blockchain-based payment guarantee in a commercial contract for law firm Piper Alderman.
Mr Amos said the conversation began four years ago in a meeting with Westpac and its commercial lease customers. As the discussions unfolded, the paper guarantee stood out as a major pain point for all parties concerned.
“It takes six weeks to get a guarantee or, I’ve got to somehow manage this bearer instrument in a safe, or I might have to pay a custodian for it, or I might lose it, or we don’t have an operational process that correctly manages this,” Mr Amos said.