Nightfall Brings the Light

Some would claim that Ethereum was single-handedly responsible for sparking the 2017 cryptocurrency bull run. By providing a means to easily introduce a token via the ERC-20 standard, Ethereum paved the way for millions of dollars to flow into new ideas, tokens, and scams. The resulting hysteria saw the total cryptocurrency market cap swell above $800 billion. The exuberance was not destined to last however. Ethereum gave anybody with an idea the opportunity to raise millions overnight, but did nothing to ensure the validity or longevity of those ideas. There was no oversight or investor protection, and as early adopters took profit others began to question their $1000 investment into that “AI powered global enterprise blockchain solution” with anonymous developers and barely-operational website. As the dollar signs in investors’ eyes began to fade the market crashed into a as-of-yet 16 month Winter. leaving those caught dreaming of Spring.

Now it is unlikely that we will see the equivalent of capital from the ICO craze re-enter the market in a similar fashion. ICO’s have come under SEC scrutiny and the sheer number of scams that flourished have eroded trust in Ethereum as a fundraising platform. We cannot expect an explosion of interest anytime soon, but that does not mean Ethereum has run its course. History does not repeat exactly, but it does rhyme, and the platform responsible for the first fire may just reignite a second. Betting on that outcome is accounting firm Ernst and Young, who on April 16 announced the release of two services built on the public Ethereum protocol: a zero-knowledge protocol for private transactions, and a smart contract testing service.

Ernst and Young (EY), together with Deloitte, KPMG, and PwC  make up the big four professional services networks. These firms offer audit, assurance, taxation, management consulting, advisory, actuarial, corporate finance, and legal services. They wield considerable influence by not only performing the majority of public and private audits, but also offering consulting services and by leading other firms through restructuring processes. When a company wishes to increase efficiency through reorganization, they consult with one of the big four. Now EY is rolling out the tools to introduce enterprise clients to Ethereum.

The first of these tools, codenamed “Nightfall” introduces a private transaction protocol that operates on top of the public Ethereum network. Nightfall uses zero-knowledge proofs, which are cryptographic methods of confirming the validity of information with revealing the information itself. Zero-knowledge proofs allow private transactions to take place on a public blockchain, and to quote the EY Nightfall press release “For most enterprises and investors, the inability to conduct secure private transactions has been a major obstacle to fully embracing public blockchain networks [1].”

The press release elaborates on the utility of these transactions saying “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 [1].”

Needless to say this is a considerable vote of confidence in the Ethereum ecosystem. To EY, Ethereum’s smart contract execution and payment platform potential clearly dwarfs its fundraising capabilities. Unlike the Bitcoin network, Ethereum does more than facilitate global payments between parties. It attaches terms and conditions on these payments via smart contracts, a useful characteristic because most transactions between peers are dependent upon mutual terms.

EY has seen the potential, but recognizes that a large knowledge gap exists between smart contracts and their intended use cases. Currently, to design a smart contract with specific functions/parameters one must be able to code in Solidity, the custom programming language of Ethereum. Creating a smart contract for a specific purpose is prohibitively expensive. To help counter this, EY has released a smart contract testing service, capable of performing over 250 auditing tests, as well as monitor smart contracts for known security risks, and providing simulations to study token performance and economics.

Paul Brody, EY Global Innovation Leader, Blockchain, elaborates, saying “Our clients are increasingly entrusting key enterprise business processes and valuable investments to software code. We don’t run enterprise computing systems without anti-virus tools and it only makes sense to run blockchain-bases investment systems with smart contract and token testing tools [2].” The ability to easily audit smart contracts and test token dynamics will greatly increase ease of use for non-technical clients. Thanks to the efforts of EY, the chasm between Ethereum and every-day users is rapidly closing.

In the true spirit of universal accessibility that blockchain pioneers, EY will release its Nightfall protocol into the public domain. This means that EY has waived it’s copyright of the protocol in favor allowing public access to test, build upon, and experiment with the zero-knowledge proof capability [3]. Brody says “We want to maximize adoption and community involvement, we want people to adopt it, and adapt it, and improve it. If we retain ownership, people may not invest that much time and energy in something they might not control. The cleanest way to make everybody use it is just to give it away with no strings attached.” He also added “A year of coding work. This is a million dollars worth of stuff we’re giving away.”

This move was selfless, and truly in line with the philosophy of open access that underpins blockchain technology. Blockchain is designed to remove the hurdles inhibiting roughly two billion people from accessing financial infrastructure, and EY is providing the services to allow blockchain applications widespread usage. Those two billion who don’t live near a bank, cannot open a bank account because they do not have proper documentation or credit, or live in a situation where their currency’s value is uncertain (Venezuela), can now access financial infrastructure for the first time. They can store value on the blockchain and send it globally using nothing but a smartphone and an internet connection. They can access credit using protocols such as MakerDAO, and participate in emerging economies.

EY saw $34.8 in revenue in 2018, and is operational in over 150 countries worldwide. The fact that one of the largest consulting firms in the world is investing heavily into the Ethereum ecosystem is bolstering news. It might be a good time to take a second look at the second largest cryptocurrency. As enterprise clients begin to better understand smart contract functionality the technology wmay just experience its first widespread use.


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These Chains Will Set Us Free
These Chains Will Set Us Free

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