Multiple private blockchains: driving value or fragmenting it?

By

Paul Brody

EY Global Blockchain Leader

Leader of blockchain technology. Proficient in mobile technologies, business strategy and internet of things.

3 minute read 22 Jul 2019

Show resources

Public, not private, blockchains will drive value and change the way the world does business.

For most enterprises and investors, the inability to conduct secure private transactions has been a major obstacle to fully embracing public blockchain networks. Most tech companies are offering private blockchain as a solution, but this will only perpetuate fragments in business.

Making public blockchains secure and scalable is a priority for EY.

Why blockchains?

Blockchains will do for networks of enterprises what enterprise resource planning (ERP) did for the single company. The value generation of blockchain comes from integrating across enterprise and organizational barriers without requiring a central authority to validate and complete that work.

Blockchains will integrate information and process within and across enterprise boundaries. A decade from now, the standard way in which multiple companies contract and work with each other will be through digital smart contracts managing the exchange of goods and services tokens for payment tokens. All executed securely, privately and legally on public blockchains.

It will, however, take time to get there. For blockchain to be able to deliver on its promise, four things have to happen: start transacting in tokens, transition to Fiat currency, recognize it’s the era of regulatory compliance, and go forward on public blockchains.

Why public blockchains over private ones?

Private blockchains were created largely because transaction privacy was not possible on a truly decentralized public blockchain until recently. For each member of the network to approve transactions, it was necessary to know who was sending (or agreeing) to what and with whom.

The result would be that if any company wanted to exchange money tokens for product tokens, everyone would be able to determine how much they bought and what they paid. Given the extremely sensitive competitive nature of enterprise pricing, that made truly decentralized public blockchains unusable.

Private blockchains allow for more privacy and control, but they are not decentralized. Private blockchains have operators and managers and are still likely to empower those operators with advantageous market positions.

They are, in the end, only modestly better than a web portal when it comes to reducing the strategic risk of participation in digital business networks. While they can be useful, we believe that private blockchains will never deliver upon their full promise of this technology.

Why create Nightfall?

We created Nightfall in order to make transactions on public blockchains secure and private. Developed by the EY Blockchain team, Nightfall replaces sensitive business information with a type of cryptography called a Zero Knowledge Proof (ZKP). This technology is designed to bring trust to public blockchain transactions. 

Secure, public blockchains will not just create an enormous blockchain market, they will have a hand in driving a global gain in productivity. With the release of Nightfall software into public domain, the EY brings this vision closer to reality.

The idea is simple even if the math is hard. Instead of showing the actual information, you simply show the mathematical proof that you did something instead. Other parties on the blockchain cannot determine from that who passed what information to whom, but they can use the proof to verify the truthfulness of the statement.

Transactions processed using this technology are private to all blockchain users except those authorized to see the information. Companies will still be able to provide full traceability and transaction history to auditors and regulators without revealing transaction content more widely.

Read “Say hello to Nightfall” to learn more about this privacy-enhancing technology and how the software’s release to public domain brings is a major milestone in the transformation of the full business lifecycle.

Summary

The only way that blockchains will deliver upon their true promise to the world is if public blockchain networks are the preferred path for enterprises and investors.

About this article

By

Paul Brody

EY Global Blockchain Leader

Leader of blockchain technology. Proficient in mobile technologies, business strategy and internet of things.