Impact Summit 💥 Ethereum's Impact on Business

[Music] what is the impact that ethereum has had and more importantly will have on the world of business and if you have been sitting at home and thinking wow this is ridiculous like I've heard about uh blockchain in the Enterprise for years and years and years and the impact is very slow uh what's taking so long the answer is a couple of really challenging things have been keeping keeping the world of Enterprises and the world of blockchain relatively separate Financial Services yes it's it's Enterprise but it's not quite the same as most like trans transitional TR traditional busines to business applications and so that's what I want to talk a little bit about today um maybe I want to jump to a a slide number three which is um uh you know sorry maybe slide them before next one so uh one of the things that uh I think people forget about one of the things that that is kind of my theme in in the world of blockchain is that everything is going to take longer than a lot of people realize so making uh blockchains work for Enterprises we should be looking back at some of the other big technology transitions in the global economic kind of history and one of the things that we saw over and over again was that for example uh the vision for new technologies is always incredibly ambitious and what happens is we go through these ups and downs on the path to realization and the reality for example with e-commerce was early on people like oh it's going to be this like multi-trillion dollar industry and it'll be ready by 2005 or 2010 and that's actually not what happens H and the reason it doesn't happen is because it's actually really really difficult to transform entire Industries and I'll just share with you like a couple of simple examples in the early days of e-commerce it was actually easier to order like a pallet of something than a single item and if you wanted to have a if you wanted to have uh a digital order you could order things but there often really wasn't any pictures or any kind of content to go with it and the reason for that is because digital ordering which absolutely existed at the time was built and optimized for store managers to order refills for their big retail systems they didn't need to know what the product looked like already knew they had it in store right and so there were all these detailed operational obstacles that were preventing people from implementing that and and the process of getting around it was very very slow there was you had to sort of knock down one barrier after another uh and a very similar thing is going on in the world of blockchain right we have we have a lot of challenges from an Enterprise perspective but the two most important ones that I'll be talking about today or really covering on briefly are number one scalability uh so when we sit down and we think about like what is it going to take to bring the world's big Enterprises onto the public ethereum blockchain which by the way is is my personal goal it's going to take a couple things number one massive volume so today you know ethereum can handle one to two million transactions a day and when we've we've made so much progress with all the l2s now so when I think you know when we sort of guess at ey about sort of What's the total capacity of ethereum now that we have all these l2s it's probably in the hundreds of millions of transactions today so in the last you know 18 to 24 months we've gone from one to two million transactions a day to hundreds of millions and we can see a path through sharding and other kind of uh capabilities to billions of transactions a day our own guess is that we think we need to be able to get to about 40 billion transactions a day on ethereum for Enterprises to sort of fully deploy their applic applications now we don't have to get there right away not by any means but we have to get there eventually and so that's a really um kind of important thing that that we need to get across and then the second thing that we need to deal with is privacy so Enterprises are not going to do anything on blockchains without privacy and so uh and again here's a there's a really good analogy to the world of e-commerce which is that when PIV they didn't really have a privacy problem but they had a sort of security problem which was that you in the early days of e-commerce you couldn't actually encrypt your web transactions that little sort of lock icon that we're so used to seeing on web RIS was now didn't exist because general purpose encryption wasn't available to the public it was actually considered um it was considered a munition and its export from the United States for example was actually restricted so uh those things had to be knocked down and when those challenges get knocked down the result isn't some overnight explosion and this is a last thing I want to talk about in this particular slide which is that when big obstacles get knocked down the result is not a few years of 500% growth the result is 20 to 25 years of 20 to 25% growth a year that's what the big Transformations will look like and that's the the sort of timeline that we need to think about so let me go into a little bit of the Transformations that need to happen and the ones that that are yet to be done um maybe let's jump to uh slide number six and I'll just talk a little bit about what I'm going to cover for the rest of this discussion so I want to talk about like the five what I think of is the five big transitions that enterprises have to make in order to take advantage of blockchain I think in many ways large parts of the crypto ecosystem are already there but Enterprises are still sort of figuring the stuff out uh and then we'll go into kind of a little bit of of uh what ey is specifically trying to do in this space and where I think we need to go ahead so uh let's go to the next page which is what are these five big transitions so I think Enterprises need to make five big transitions in how they think about blockchain the first is to move away from this idea of like hey blockchains are cool for like just timestamping documents yeah that's cool for the most part this has happened Enterprises Now understand tokenization is what matters secondly bat currency stable coins these are huge important most Enterprises do business in dollars and euros and Yen and that's what they need to be transacting on in chain thirdly they need to think of blockchain as a fully integrated part of their business ecosystem and Regulatory structure fourth and this is the most important the most difficult one uh for Enterprises to wrap their heads around which is that private blockchains or permission blockchains don't work and uh if if you're on E Global you're probably like a like me a public blockchain Maxi and one of the things I really struggle is with is like who thought that a centrally managed decentralized Ledger would be a good idea I I think it's crazy and yet companies are investing tens of millions of dollars in these projects and they have a terrible history they they they in almost always kind of end up badly and it's super frustrating people ask me often times in meetings I just finished a trip um pretty much all around Asia Tokyo Hong Kong Singapore Sydney and I get asked over and over again Paul what is the thing that you can say to business Executives that will get them to move to public blockchains and I have to tell you I have tried like packaging up this message in so many different ways with no with no noticeable success the only proven way to get an Enterprise to embrace public blockchains is for them to try a private blockchain and realize it doesn't work and then lastly I think it's incredibly important that we change the way for Enterprises that they think about privacy and by the way I think this is also really true for for for individuals as well uh a lot of sort of privacy and and rights Maxis sort of they they think about privacy and anonymity as quite the same thing and the reality is is that if we want ethereum to be fully integrated at into the global kind of business ecosystem we need to accept that Anonymous Financial transactions and payments are probably just not going to be uh a feasible thing that we can can have um but what we can have is confidentiality I think you know you have people have a right to privacy and Enterprises absolutely should not have to tell their competition what they're doing I think uh particularly in the case of Enterprises I'm I'm not sure that enterprises have a right to privacy but I believe that enterprises won't use the technology unless they can be confident that um their business transactions can't be seen by their competitors which is not at all the same as can't be seen by The Regulators or can't be uh uh inspected upon request by The Regulators so we try to think about privacy as confidentiality rather than Anonymous transactions now in particular uh jumping ahead a couple slides to uh number nine uh there's uh two types of privacy that people need to understand number one uh is is the transfers and payments and the second is smart contract terms and it comes down to a relatively kind of straightforward concept which is that every business agreement is based on kind of a fairly simple model which is I have money you have stuff and I want to exchange my money for your stuff under the terms of an agreement so the money and the stuff the movement of those things needs to be private otherwise your competition can see what you're doing but secondly the term terms of your business agreement the key rules what you're paying for when you get a discount how much money you're expecting to spend those business terms and conditions also need to be private so when we think about how to um how to address these privacy challenges these are the two categories that we think in and and ey specifically has been working on a two big projects which we have which we have and are donating into the public domain in the ethereum ecosystem so these are contributions that we are are donating their their public domain uh software applications uh and the first one on the next page is called Nightfall uh and Nightfall is an ethereum layer 2 it's on page 10 of the slides it's an ethereum Layer Two which is designed for Enterprise confidential business transactions and it just covers the money and the stuff the movement of the money and the stuff is an L2 privacy it's a ZK optimistic rollup for for Enterprises and uh the the goal here is that using this privacy technology Enterprises can move to business models like asset traceability Inventory management crossborder trade where they can move around tokens that represent products or services and receive payments without their competition being able to see what they're selling and how much they're being paid those transfers are confidential the way you think about is the transfers are confidential but they're not Anonymous and the reason they're not Anonymous is because uh in order to transact in a Nightfall ecosystem we have designed it in such a way that you have to have a uh an Enterprise x.509 certificate and that is basically an Enterprise identity certificate it's a variation of the SSL certificates that are used by companies on the web all the time right uh so in terms of the the sort of ecosystem of of privacy uh Nightfall fills in kind of a unique space which I try to describe on the next page um which is uh um page 11 which is that you know we think about this sort of two dimensions number one Anonymous versus identified and private transactional data versus public data so if you think of somebody's ens domain like pb. that's my ens domain right that's public you can go look at that you can see what nfts I have and it's also identified you know who that's associated with right an ethereum address generic one is it's effectively Anonymous but public then you have other services that are both Anonymous and privac private like tornado and zcash and those are not suitable for Enterprises because uh uh Regulators will really basically not allow them to use use them what Nightfall does is it offers you private transactional data but identified by the users and what that means is that enterprises will you will be able to see what Enterprises are transacting on the network you will not be able to see what they are actually doing the content of those transactions so that's one half of the picture second half of the picture is the business logic so if we skip ahead to slides and we'll talk about the other thing that we we've donated into the public domain which is called Starlight and what Starlite does is it basically allows you to take the business logic and turn it into a zero knowledge circuit so Starlite is a basically a smart contract compiler and what it does is it allows you to take a traditional solidity smart contract mark it up and then trans transcode it into a zero knowledge circuit that enables a private business logic to run on the public ethereum mainnet so it kind of runs as a black box right and what that means is that if you can make an ethereum contract you can make a zero knowledge circuit and this is really cool you know we actually uh Starlight emerged from our own failure at ey to teach our developers how to make zero knowledge circuits we have um in ey we have some developers who work on regular solidity contracts and then we have a team of mathematical experts in London that do a lot of our like ZK research for privacy technology and we thought okay we understand how how to make these zero knowledge circuits we understand how to do Nightfall which is just movements and transfers but we could do other things as well we could teach our other developers how to do this turns out actually we weren't very good at teaching it it was really really hard to learn so what we did was we basically said hey uh developers we're going to make uh a little trans pilot and all you have to do is Mark up uh follow the directions mark up your smart contract in solidity and turn it into a zero knowledge circuit so that that was much much more successful now both of these are available at our GitHub it's github.com blockchain um Nightfall is a ZK optimistic L2 it's running today on the uh as a layer two on the polygon proof of stake Network it has not yet been deployed on the ethereum net you can run it on test net uh we are thinking about mainnet deployment but we're also about halfway through Nightfall version 4 which will have some significant improvements so we might wait for main net deployment until then so that's what we've done again both of those public domain open source contributions by ey and some other uh uh entities and individuals that have supported this work into the ethereum ecosystem so not something that we are retaining control over so how do we make use of these things like what is it that actually we can do with this stuff and the answer is we can do a lot of cool stuff and the best way to illustrate this um is I made a little slide on page 16 which sort of talks about how how does this work and it's it's fairly simple if you think about a business to business supply chain today they're very very digitized but they're all siloed right when I started my care and I'm I'm old you can see all my gray hair when I started my career you could uh we would say oh we need to digitize our clients and we had clients that had a lot of stuff that was offline or they were just running it all in the spreadsheet um I actually I actually remember one of my first supply chain implementation projects a client kept talking about Excel oh we're doing it all in Excel and I was like I asked my boss and like is there some kind of like sophisticated supply chain software that just happens to have the same name as a spreadsheet and he's like now they're running their 10 billion Global Supply Chain in Excel uh and that that was pretty common today most big Enterprises are are much more sophisticated but they're all still got these like little silos and when you try to move between silos they literally send faxes I I was at a client in Singapore uh earlier this week they admitted they're still sending all their orders to their key suppliers by facts which is hilarious there's EDI which is like businesses to business text messaging PDF files Excel files that's not a great way to move data around on a blockchain right we can basically uh you know if we go to P the next page under Nightfall I can represent a supply chain uh on page 17 I can basically represent a supply chain as a bunch of tokens and under privacy I can move those tokens around and the cool thing is you know those tokens just like any other blockchain asset are subject to prevention of double spend right um You can prevent double spend you uh when you move a token from company a to Company B you're moving all of its Associated data and the company that has a token can see all of its history and this is really important you want to know where something came from you need to find out kind of uh uh what the history is or you get a notification that a batch of product is bad it's really easy to figure that out and of course when you put those together on the next page with the smart contracts you have this ability to to govern how all of these things should work together which is in my mind is kind of this really fully integrated automated vision of the future and you can do really awesome stuff with this like Supply Chain management business procurement maybe it's not exciting to you it's exciting to to business people um Supply Chain management business procurement carbon traceability uh which is I think is a really positive and constructive one that we can do so so I get really excited about all these capabilities um and it's also why kind of when I think about what it is that that if I could describe the power of blockchain and its impact on business it's it's uh I kind of boil it down to one sentence on page 20 which is that we think blockchains will do for business ecosystems what Erp did inside the Enterprise and um it it's going to be really transformational we spent two decades as a as a business World kind of trying to get companies to stitch up all of their data together and um it it's really really difficult and that's what Erp was all about it was kind of two decades of business transformation um now we can do the same for the interactions between other companies and and the impact can be really enormous and I I'm just going to share one example with you that I really really like which is on page 25 um somebody's is caric I think is is being very and he's he's moving all the slides for me because my iPad doesn't support um showing slides at the same time but car if you want to go on page 25 um uh this is a case example from the work that we did with Microsoft and for those of you who don't know e actually built a procurement system on the blockchain for Microsoft now this was on a private blockchain because we didn't yet have our privacy technology mature this is about 5 years ago that we did this but it's a really cool case example of a a case where we know the power of this system every single Xbox video game that gets bought is run through a smart contract system that ey developed from Microsoft and the way this works is M companies like Microsoft sign they have thousands of business agreements that cover all of the different cover all of the different sort of smart contracts or business relationship ships that they have with their key suppliers and each one of them is a little bit different has different threshold or a different royalty rate or something like that and Microsoft was having a hard time was a lot of work kind of at the end of each month processing all of the the transactions and giving everybody a statement with uh the smart contract product that we made from Microsoft called contract manager we were able to cut that basically to five minutes right 99% reduction in cycle time roughly half the cost and much happier business partners because they felt like they could inspect through the portal all the stuff that was going on now that was five years ago using smart contracts on a private chain and and what I'm really pleased with is that today uh we are in the testing phase for the new version of this product that runs using Starlight on the public ethereum blockchain and I really hope that before the end of this year at the beginning of next year I'm going to be able to share publicly the name of our first client that's actually doing a business procurement agreement with secure Private Business Logic on the public ethereum blockchain with privacy technology which will be kind of an enormous enormous achievement so I'm getting close to the end of my time I'm going to jump to the end here and just sort of talk a little bit about on page 32 some some some things that I like people to keep in mind which is timelines right it takes decades and decades and decades to build really transformational stuff and and I talk about and and you'll hear other people talk about you know we're building new rails for business and so I thought it'd be fun to look at like the history of the actual railroad industry most of the US railroad track was actually built up in a period of about 70 years I think you know you I think you we can look back and say we kind of made a mistake by getting rid of a lot of it but what's really amazing is it took about 70 years to build the US railroad Network which is it's about as hard a piece of like infrastructures you can build but on the next page this is the thing that's really amazing um over the last 150 years we have improved the productivity of this infrastructure that we built every single year almost every single year if you go to the next page what you'll see is that over 150 years the average annual productivity increase in the global railroad network is 3% a year on average every single year for 150 years and so when we think about kind of building ethereum into the world of business what I hope people will keep in mind is a sort of long-term timeline which is that um it takes uh decades to build and the payoff can take you know C can can be keep delivering for more than the century so to me that's kind of what's very very exciting um and and that's the time frame we should be thinking about time frames and I saw a great uh I saw a great quote the other day you know Sam Alman was was talking to a bunch of people and he said you know your plan should be measured in decades and your execution should be planned in weeks and I really love that sort of capturing of the thoughts but yes I think about the impact that we're going to have uh from ethereum on the world of business in the course of decades gonna wrap up here page 36 if you thought this was interesting uh may I just suggest one more thing which is uh I wrote a book book I wrote a book on this I now I can say I wrote the book on this um I think it's the only book that out there that's really focused on the use of ethereum in the world of business I'm actually uh uh very proud of the excellent endorsement that I received from falic this is somebody I've known for about 10 years now I met him in 2013 when I was working at IBM uh and worked on IBM's first blockchain and I had been in the world of Enterprise blockchain for a decade now it's called ethereum for business it's a available Amazon Apple Google Walmart uh it's I think it's pretty good read it's in use at about five universities now and um uh I hope you enjoy and I think that is that is it for me and I'm only about one minute over my schedule so uh thank you everybody for watching and tuning