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Consultancy EY's Enterprise Differentiator is Privacy on Public Blockchains: Global Lead Paul Brody

For many enterprises, the idea of venturing alone into the wilderness of blockchain is a frightening proposition. Not only is there a general lack of blockchain and cryptocurrency talent within their executive, management, and developer ranks, the talent pool from which to recruit enterprise-grade blockchain expertise is, in 2023, tiny. In other words, demand for talent is outstripping supply. Enterprises could simply do nothing when it comes to blockchain. But sitting still while competitors and startups are keen to discover how blockchain can be used to disrupt the status quo is not the best option. So, what's an enterprise to do? Who can they turn to?

Enter the so-called "Final Four," the four major accounting and IT consultancies that survived the shakeout from what was once called the "Big Eight." Keen to capitalize on the enterprise's need for professional assistance with everything from blockchain strategy to tax to regulatory compliance, Accenture, Deloitte, EY, and KPMG have all established global blockchain practices. And each is competing to win the hearts and minds of enterprises ready to enlist a consultancy for blockchain help.

While he was covering the action at the Consensus 2023 conference in Austin, Texas, Blockchain Journal editor-in-chief David Berlind met up with Paul Brody, the global leader of EY's Blockchain Practice, to better understand what EY (formerly known as Ernst and Young) is doing in hopes of differentiating itself from the other Final Four consultancies.

According to Brody, among other investments in privacy and supply chain, EY views its own software investments, such as Nightfall — a Layer 2 technology it jointly developed with Polygon — and Starlight (a zero-knowledge compiler for building private smart contracts) as major differentiators that make it possible for EY to not just bring expertise to the negotiating table, but intellectual property as well. (The full-text transcript appears below.)



By David Berlind

Published:May 4, 2023

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10 min read

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Audio-Only Podcast

David Berlind's Interview with Paul Brody of EY

David Berlind: Today is April 25, 2023. This is the Blockchain Journal podcast. I'm David Berlind, your host. I'm coming to you from the Consensus 2023 Conference in Austin, Texas. The show is about to begin tomorrow, but standing with me right now is Paul Brody, who is the global blockchain leader for EY, one of the remaining big consultancies out there. And so Paul, first of all, thank you very much for joining me on the show.

Paul Brody: Oh, thanks for having me.

Berlind: Paul, there are a lot of consultancies out there, big and small. They're all interested in getting their piece of the pie when it comes to what's going on with blockchain, what enterprises are doing in terms of business reinvention, digital transformation, [and] institutions who are doing all kinds of investment stuff. What is it that EY is doing in the blockchain space?

Brody: So we are really, I think, quite special and differentiated in this space in a couple of different ways. First of all, we are huge technology investors, so we are very focused, in particular, on enterprise problems, and the enterprise problem that we are focused on solving is in implementing privacy on public blockchains for enterprise users. So that's been our biggest primary investment. We actually have a layer-2 network that we have supported at a build-out called Nightfall. That's live on Ethereum and the Polygon proof-of-stake network. It's on Polygon now. It'll come to Ethereum very soon. So that's one really critical thing. We actually built a smart contract, zero-knowledge compiler called Starlight that lets you build private smart contracts. And then, we've really focused, over the last few years, on supporting enterprise business processes, particularly supply chain, and operations on Ethereum, primarily public and occasionally the permissioned, but mostly on the public.

Berlind: Let's go back to the comments about privacy that you're really focused on [in] that area. Why was it that you guys chose to really zero in on that? Is that a major issue for enterprises, and you just realized that was a big opportunity to go after?

Brody: Yeah, absolutely. So the biggest issue for enterprises is most of the ways in which enterprises transact with each other kind of leak too much data. So if you think about how consumers transact on a blockchain, they buy or sell ERC-20s, these fungible tokens, and they do it through exchanges and things like that. So a lot of consumer transactions have the benefit of being, if not exactly fully private, sort of anonymous.

Enterprise transactions aren't like that. Enterprises typically have unique terms and conditions and they often buy non-fungible items or semi-fungible items that's easy to track. So without privacy tools, most enterprises would never be able to touch a public blockchain. And since, fundamentally, we don't really believe that there's any point in a permissioned in a centrally run, decentralized ledger, we thought if you're going to do a blockchain, it's got to be a public blockchain, and if you're an enterprise, you've got to have privacy. We didn't really see anybody working on solving this problem, so we decided we had to go out and solve it for the industry as a whole.

Berlind: You mentioned something called Starlight and then what was the other one?

Brody: Nightfall. So we have two critical privacy technologies, one called Nightfall, which is from moving stuff around under privacy, and the other one called Starlight, which allows you to make private zero-knowledge contracts that run like smart contracts but execute under privacy.

Berlind: Okay, and Nightfall is the layer-2. You mentioned that it's on Polygon right now, but now, you're going to make it its own layer-2 directly on top of Ethereum?

Brody: Yes. So, it was always designed to go primarily on top of Ethereum. We've been working very closely with Polygon, so we decided to deploy on the Polygon proof-of-stake network first. So it's there, it's live, and it's been live for a couple [of] weeks, and assuming things go smoothly and we don't have to redeploy because we found some kind of a bug, we will push it onto Ethereum in the near future.

Berlind: Isn't this unusual for a big consultancy to develop its own technology? Usually, the consultancies might have a little bit of some tooling here and there, but to build out an entire solution like that that sits on top of one of the layer-1s?

Brody: Absolutely. It is unusual. I think we're really the only firm that's done anything like this and we've done it because we believe that [the] value proposition in blockchain is so absolutely transformational. This is something we can't afford to miss out [on]. Our view is Blockchains for enterprises will eventually have a similar effect as ERP did, right? So in the '80s and '90s, companies started using ERP systems to stitch all of their internal processes together, common process, common data, and it was like a $400-500 billion a year business, right? I expect the same thing to happen with blockchain, but instead of it being inside of the enterprise, it's really about stitching together these business ecosystems so you can follow products and assets from one company to another.

Berlind: That sounds like a multi-party transparency or supply chain kind of application. So, what are the biggest use cases that you're seeing in your client base?

Brody: So in the long run, I always say if you think about how enterprises transacted with each other, they really come down to "I've got money, you've got stuff, and we're exchanging my money for your stuff under the terms of an agreement." So in the long run, I believe every single B2B transaction is a candidate for transition to the blockchain. Where we're starting right now is supply chain transactions, product traceability, emissions tracking and carbon offset tracking, and then, of course, our first smart contract privacy-enabled product will actually be a procurement product.

Berlind: Why does all of that have to be moved onto the blockchain? Aren't the current technologies more than sufficient?

Brody: So absolutely, and you ask such a great question. This is one of my favorite questions, and I always tell people, "Anything that you can do on a Blockchain, you can also do with a centrally run system." The issue, the value proposition, is, "Do you want to use a centrally run system?" Because all centrally run systems are basically future potential monopolies, right? They all follow Metcalfe's Law, which is eventually, that network becomes so powerful that you have no other choices. And so if you want to retain your strategic independence in a digital world, you need to run on an ecosystem where there is no central controlling entity that can exert power over your business in control of the integration with others.

Berlind: Well, that's been a long-time issue with all technology because if you acquire some technology, bring it into your portfolio, and then you become addicted to it so badly that you can't get off of it because the cost of switching is unbearable, well then, now, that company controls everything. And we've seen that with some pretty big technology companies where they just suddenly start jacking the price up of the software that's on everybody's computer and what are those people going to do about it? So are you implying that the same sort of thing could repeat itself unless... and maybe blockchain is the thing that can finally set us free?

Brody: So it is already repeating itself in the consumer space in these digital marketplaces. It will repeat itself in the enterprise space if companies are not careful and strategic. The thing that people forget is that there are actually a lot of technologies that are properly decentralized, which are amazing and work extremely well, and they have no predatory monopolies in the center. Think about email or the internet. The Internet is a decentralized, permissionless public network. And even though it's immensely valuable, the cost of using the internet keeps going down and blockchain should be like that, but for all complex business-to-business transactions.

Berlind: Who are some of the clients that you guys are working with that our audience would recognize, and what are they doing?

Brody: So we have a bunch of fantastic clients. So over in the traceability business, we have something like 16 million bottles of wine, vodka, [and] beer. One of my favorites is Peroni beer. Every single bottle of beer that Peroni makes has a little QR code on it, and if you scan it, it takes you to a website that allows you to track the organic origins of their beer. And all of that's managed by EY blockchain through our APIs.

Berlind: What's the business benefit of doing that? I can imagine customers would appreciate it, but at the end of the day, is there actually a business benefit? Will the customers come back and buy more of that beer because they can trace it, or is there a multi-party transparency in terms of the supply chain that is making that beer happen?

Brody: So right now, over on the things like for beer and for wine and for food with Carrefour or mozzarella or some of the other stuff that we do, there's a bunch of wineries, for example. It's much more of a marketing activity. It's valuable to the consumers, and it generates a lot of consumer engagement. What we needed to go from consumer engagement and marketing, right? Marketing comes and goes, to be honest, but [the] supply chain is forever. Operations are forever. And the key thing that was missing is if you are a beer maker, you can issue one token for each batch of beer and that doesn't tell your competition how much beer you're making or where it's going. But if you want to move into the operational side of things to improve the quality of your data, drive down your inventory levels, improve your planning, [and] your retail integration, for that, you must have privacy. And we're just now starting our first implementations of blockchain privacy for supply chain traceability.

I'll give you actually a really good example from a permissioned blockchain that proved that the case for us a few years ago when we set it up with Microsoft. So, with Microsoft, we implemented a smart contract system to replace the semi-automated Xbox video game procurement contracts. Once we put that system in place, we took the cycle time for processing contracts each month from 45 days down to five minutes. That's an incredible cycle time and probably about 40% lower cost. So we know this works if we can scale it up onto public blockchains. And so even though permission chains are not ideal, they've been a useful testing ground. Now, we're really starting to deploy on public chains with mission-critical business applications in mind.

Berlind: Is the practice divided into units? I noticed that at some of the other firms, there's a tax advisory, there's an audit unit, there's a consultancy. They're broken up in a variety of different ways. How is EY structured?

Brody: So we still have those same kinds [s] of rules, and in particular, it's super important, for example, for our auditors to be operationally independent of other parts of the business. What's different about what we are doing is that we have a global blockchain team. We have a global blockchain engineering group, R&D. And so even, for example, all of our audit clients, our audit teams use a software that's built for them by the global team, where, I think, we're really the only big firm that makes our own blockchain analytics, blockchain security, blockchain software tools for financial statement audits, for example.

Berlind: [Do] you pay a lot of attention to what's going on in Washington because you have to help your clients navigate the shifting regulatory perimeter?

Brody: We do, absolutely. Huge, huge issue for our clients and [is] having a very big impact in the short run on how they think about the market.

Berlind: Paul Brody, the Global Blockchain Leader for EY. Thanks for joining us on the Blockchain Journal podcast.

Brody: Thank you for having me.

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