Can Ernst & Young Drive Greater Blockchain Adoption?

By January 6, 2020Ethereum
Click here to view original web page at www.paymentsjournal.com

This article in Forbes provides a good explanation for the issues delaying corporate adoption of blockchain. Corporates don’t trust a public blockchain, and a private blockchain may as well be a cloud-based database in that the managers of the implementation have an advantage:

“Ernst & Young’s advocacy of public blockchain network infrastructure, as opposed to permissioned and private networks (referred to as private networks going forward, for brevity), is notable given that the firm’s industry peers have either remained neutral on the public vs. private network debate or have voiced skepticism on the viability of public networks.

Whereas Ernst & Young, it seems, is in a league of its own by going all out on public blockchain technology.

Certainly, the firm’s peers have a point; public networks suffer from a number of challenges that make them problematic for enterprises today. Many are notoriously unscalable, open to hacking, potentially expensive to use and lack privacy and confidentiality. They tend to suffer from concentration of the interests that control the orderly state of the network, potentially placing it at the mercy of adversarial nations or parties.”

So E&Y is introducing Nightfall, a solution that runs on top of Ethereum that uses Zero Knowledge Proofs (see “Distributed and Self-Sovereign Identity Solutions-Part-1-Technology-Overview” for a technical description) to enable transactional validation while maintaining data behind the corporate firewall:

“Brody appears to have the answer to this, which is to avoid storing corporate data on the blockchain in the first place. While this may seem something of a contradiction given that blockchain has been touted as a single source of truth in data, in reality, blockchains make terrible databases. What blockchains are good at is serving as transaction registries – confirming that a transaction has occurred, and providing a validation mechanism for companies to check that the data that lives behind their firewall is the same what their counterparties have. Zero Based Knowledge Proof technology comes into its own here, allowing adopters to store far more data in “off-chain” storage than would have originally been possible.”

The blockchain problems described in this article were described by Mercator in 2016 here and we have yet to see a public solution that solves these performance and management problems, although Ethereum 2.0, released last week, is designed to solve the performance problems.

This makes this early Ernst & Young commitment interesting. Also interesting is that Nightfall does not put corporate data on the public blockchain, only a record of the transaction:

”Brody appears to have the answer to this, which is to avoid storing corporate data on the blockchain in the first place. While this may seem something of a contradiction given that blockchain has been touted as a single source of truth in data, in reality, blockchains make terrible databases. What blockchains are good at is serving as transaction registries – confirming that a transaction has occurred, and providing a validation mechanism for companies to check that the data that lives behind their firewall is the same what their counterparties have. Zero Based Knowledge Proof technology comes into its own here, allowing adopters to store far more data in “off-chain” storage than would have originally been possible.”

This is a concept that may provide a false sense of security: while hackers have penetrated many corporate firewalls, so far public Blockchains have proven far more resilient to hackers, even if performance and management problems continue to exist.

Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group

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