Yesterday EY announced plans to release a new technology protocol to enable secure private transactions on the public Ethereum blockchain. The target market: enterprises and investors. And the code licensing will go a step beyond open source. It will be public domain which means it won’t be subject to copyright. But it’s patenting the technology.
“Making public blockchains secure and scalable is a priority for EY. The fastest way to spread this privacy-enhancing technology was to make it public,” said Paul Brody, EY Global Innovation Leader, Blockchain. “The gold standard in security is only achieved with the kind of intense review and testing that comes with public domain releases.”
The technology is a zero-knowledge proof (ZKP) private transaction protocol. ZKP was introduced on Ethereum almost 18 months ago, initially to keep data private (as opposed to transactions). For example, a smart contract can prove whether someone is over the age of 18 without access to the user’s actual age. But the uses of ZKP extend beyond basic data privacy.
EY says the primary application is enabling secure private transfers and payments of custom tokens. Only authorized users will have the ability to view the transactions. But using the system, it will still be possible to reveal details to auditors and regulators.
Public Ethereum has “gas” charges for processing transactions. EY says it has managed to reduce these costs by 90% since the original prototype of its EY Ops Chain. The production version will be released in 4-6 weeks.
EY’s other blockchain tools
Additionally, EY announced that its Smart Contract Analyzer is entering a private beta testing phase and released the second version of its Blockchain Analyzer.
The Smart Contract Analyzer tests smart contracts and their security for the public Ethereum blockchain. The tool, developed in Israel, is designed to check smart contracts both pre and post-launch. It incorporates 250 tests as well as a patent-pending simulation system to run through likely transaction scenarios.
“Our clients are increasingly entrusting key enterprise business processes and valuable investments to software code,” said Brody. “We don’t run enterprise computing systems without anti-virus tools and it only makes sense to run blockchain-based investment systems with smart contract and token testing tools.”
The original version of the Blockchain Analyzer was a tool for EY audit teams to analyze and reconcile cryptocurrency transactions across multiple blockchains. The latest version enables financial reporting, forensic investigations, transaction monitoring and tax calculations.
It supports Bitcoin, Bitcoin Cash, Ethereum, Ethereum Classic and Litecoin public blockchains as well as private Ethereum, Quorum and Hyperledger blockchains.
Will enterprises adopt public blockchains?
Many people, including within the enterprise blockchain space, view public blockchains as the true technical innovation. In some ways, public blockchains are the business and financial extension of the internet, which is open. And hence they see private blockchains as new, more extensive walled gardens.
There are both legal and functional obstacles to enterprises adopting public blockchains. But the biggest issue is the technology is nascent. Unproven translates to risky, which makes it more palatable to try in a controlled environment.
Some point to enterprise adoption of cloud technology. As of 2018 more than 50% of IT environments were non-cloud. And Amazon Web Services is almost 13 years old. Ethereum is less than four years old.
In some cases, public blockchains are not an option. That’s particularly for regulated institutions with know your customer and anti-money laundering requirements. Plus organizations such as the Bank of International Settlements have issued caveats.
Beyond pure payments, some enterprise applications are more likely to use public blockchains sooner rather than later. These include consumer energy, credentialing, rewards and those targeted at smaller businesses.
EY acknowledged in a statement that the inability to conduct private transactions on public blockchains “has been a major obstacle to fully embracing public blockchain networks”. Its latest ZKP protocol aims to address this. But there are several additional public blockchain “obstacles” such as governance, performance and scalability which are risks for larger enterprises.