From Xbox to Renewables: Doing Cool Stuff With Smart Contracts and Privacy | Paul Brody - EY

[Music] I like to hear it thank you so uh hi everybody welcome I want to talk today about sort of really the Enterprise and institutional view of privacy and the massive opportunity and return on investment that is there I I think for the most part large companies are not used to a world where privacy is not standard and the fact is that I don't think we will ever get really substantial onchain usage until privacy is is widely available at the end of the day whether you're a professional institutional Trader or you're a large Enterprise you don't want to be telling your competition what you're doing what you're buying how much you're paying for it where it's going it's it's actually relatively straightforward now I'm going to start with the punchline because I think everybody wants to know the numbers and one of the the great an the things that is under appreciated is privacy is not just to keep um your uh transactions Secret you also need to keep the terms of your business agreements as well but automating smart contracts if we can move to a world where Enterprises and others can transact in an automated way the return on investment is absolutely massive and I want to give you just one very good case study ey built for Microsoft a a set of tools and smart contracts for the Xbox video game network it's actually relatively straightforward Microsoft signs thousands of contracts with other companies every year and keeping track of those contracts and all the rules is difficult what happens is uh we took those contracts we turned them into smart contracts automated the key business terms and conditions and the result was enormous 99% less time to calculate the books at the end of each month roughly half the operating cost and this was for the Prototype version more than 5 years ago right and uh significant Improvement in sort of business partner satisfaction so the return on investment is enormous if you can make it happen but without privacy uh most companies are not going to do this and this is a good example we built this from Microsoft on a private permission chain and it only runs with inside of Microsoft so we're only getting in my opinion those numbers there they represent a fraction of the total value creation that's possible by implementing privacy so what what do companies require in the way of privacy for uh onchain contracts the answer is all business agreements basically come down to this money is exchange for stuff under the terms of an agreement in a financial Market it's usually a swap but in the business World there are actually terms and conditions and you need privacy for both at ey we have been building public domain open-source solutions for the specific purpose of enabling both of these types of privacy both the payment and asset transfer and the complex business Logic on the payment side we have built an ethereum layer 2 Network infrastructure called Nightfall Nightfall is a network it's an L2 it's a ZK rollup that allows you to transfer assets and make payments under privacy right it is uh it's an Enterprise only and the transfers and payments are private but not Anonymous now a lot of people think privacy they think something like tornado cach which is not just private but it's also Anonymous that doesn't work for Enterprises and it it generally does not work for Regulators they don't like that so we we've sort of created something kind of interesting in in the world of privacy which is that if you think about a spectrum between uh identified versus not identified and between public and private Nightfall is here you cannot use Nightfall anonymously you need an Enterprise identity certificate to use it but when using it your transactions are fully private right and so that's kind of what we see is this is the space where regulated companies that are happy to be held account want to operate they want privacy but they want privacy primarily from their competition um and to be very clear the way we built Nightfall there is no back doors ey doesn't hold the keys it's fully public domain open source and decentralized based on zero knowledge technology um and you can actually go and have a look at it at um github.com blockchain we've been working on Nightfall for a while the original prototype we showed at Devcon in Prague uh each transaction at that time needed $1100 in gas so we're really talking with a very expensive transaction since then we have gotten it down to version four where we can do about 30 cents on the main net and about a penny on a layer 2 Network and so version three which we could do la uh in 2023 was a ZK optimistic rollup so we don't have instant finality version 4 is a ZK ZK rollup so we have both privacy and in instant finality and it's actually we're running it on the test net now internally and our goal is to make it generally available in beta sometime before the middle of this year now comp Nightfall allows you to move stuff around in addition to that we built a tool called Starlight and starlight allows you to set up complex business rules and actually execute those transactions as a zero knowledge circuit so basically you can create your own customized privacy enabled zero knowledge circuit which is really cool you just take a solidity smart contract you mark up the key components logic and variables that you want to keep private and it'll recompile it as a zero knowledge circuit this tool also public domain open source contribution by ey and both Starlight and Nightfall will basically run on any evm compatible network right now I don't guarantee instantly running you you probably need to take the code and modify it we are working with a number of l2s right now to consider and work with them for deployment on those l2s as effectively a layer three privacy solution so if you're able to do these things if we can combine Nightfall and starlight together which over time we think we can so they can work in harmony what can we do with this and the answer is really we can run the entire business kind of process end to end for an Enterprise ecosystem on chain under privacy that honestly is my goal basically I want to bring every B2B transaction on chain so if you think about a typical manufacturing process raw materials to support right it's it's complicated and today it's mostly driven by a whole bunch of silos and between the silos we have a lot of like very Antiquated processes um my favorite is where people like send PDFs to each other and then scan them or or print them and scan them that's one of my favorites but we still have fa machines um another really great one is something called EDI how many of you know what EDI is ah I love you EDI people Ed EI is as old as I am which is really old um EDI stands for electronic data interchange the way I explain it to the kids is that it's basically busino business text messaging and it's cool it works but uh the problem with EDI is that there's no business logic in there I can tell you what's coming but I'm really only going to tell you that right and if there are 20 other people in my supply chain it would be awfully nice to know what's happening two or three stops back today all of this is siloed right we can build a model on chain where every single item in the supply chain is represented as a token right and as those tokens move across the chain I have banking level quality of reconciliation and verification to every piece of inventory one of the ways things I talk to a lot of clients about is say what if you could apply the level of of quality and security and Reconciliation to your inventory that Banks apply to their financial services the answer is that would be amazing you would have significantly more accurate inventory data you could run your business with less inventory at lower cost we estimate you can run a business with about 20% a typical supply chain business with 20% less inventory just from moving to tokenization and having full reconciliation end to end I'm actually really happy to say that last year we did our first endtoend supply chain traceability pilot where every item in a supply chain was token IED and transferred under privacy for one of our clients so super proud of that that's I think that's a picture of where things are going and if you can combine that with automating the smart contract logic what you end up with is this fully automated endtoend process where product moves in this picture it moves from left to right and money moves from right to left and everything is in the same in sort of industrialized ecosystem so reconciliation validation kind of a all the business terms and conditions are done automatically and that to me is incredibly powerful right if we can combine the verification the reconciliation with the operational efficiency of smart contract automation what we end up with is an incredibly like vastly more efficient Enterprise um we estimate you know basically large companies depending on the company spend somewhere between three and 5% of their annual revenue on basically managing all the stuff that goes on in a multicom supply chain you can probably cut most of that in half if not more when we add these things together my hypothesis is that basically blockchains and to be very clear in my case my view on this is the public ethereum network public ethereum can tie together business ecosystems and do across multi company networks what Erp did inside the company right make sure that the left hand and the right hand are fully synchronized with each other right the miracle of Erp is that in large you know place like Walmart or some other big company you pull the last packet of potato chips off the shelf it triggers an order but the issue is almost all of the really cool stuff that companies done in the last 25 years are internal and focused on their Erp systems the minute you leave the company boundaries all the cool stuff that we built all the automation all the tools it kind of just evaporates and we are back to like hey did you get the spreadsheet I emailed you and that's not very useful so uh that's kind of where we are I am uh I'm very uh positive about where we're headed in this space um the the goal over time is to basically combine Starlight and Nightfall so Nightfall gives you this large scale privacy enabled black box and starlight allows for customized business logic and when you can combine the two together then you can have a fully composable multi multi-party complex business logic infrastructure so that's the overall goal when we're we're moving in this direction um and I think it's going to take we are if we look at our timeline so the goal is to have Nightfall four out this year we will immediately start work on Nightfall 5 Nightfall 5 will represent the integration of these two capabilities Nightfall and star light and I'm also hoping we're going to announce relatively shortly the availability of nightall through a major RPC provider so that you don't have to have your own zkp infrastructure you don't have to build all of that you can just use apis plug it in and start transacting with privacy on the public ethereum main net or or I should say starting with the test Nets and then moving to the main net so that brings me to the end of my presentation no presentation from me without be would be complete without offering you an ey nft and the ey legal department would like me to remind you that these are for entertainment purposes only and you should definitely not be selling them on openc and uh I have 1 minute and 49 seconds left so are there any questions complaints comments gratuitous flattery I will also accept what's that so Nightfall is nightfall for is written entirely in Rust yes sir uh yeah you can deploy it on any evm chain we will deploy it on the main net as an L2 and we are currently working with a number of the l2s to and a couple of other evm compatible alt l1s to deploy it as an L2 or an L3 it's just that you know there some tweaking has to be done to make uh make it work correctly in a in a particular L2 scenario uh we can do it on op version three was a ZK optimistic uh version four is ZK ZK with instant finality yes sir so we're ey so uh we are shamelessly uh ethereum Maxis I happen my in my free time I wrote a book called ethereum for business I am the chairman of the Enterprise ethereum Alliance so uh the uh we are we are laser focused on ethereum you know we're we're very pragmatic about that the reality is that 86% of the world's uh kind of um uh real world assets the vast majority of you know high value nfts Enterprise users they're on ethereum so kind of applying a strategic business logic my goal is I want to be the best and number one at ethereum and uh not worry too much about all the others thank you all have a awesome weekend bye-bye ladies