Everyone who’s anyone is talking about blockchain and its effect on finance transformation. What are people doing with blockchain, which is a distributed electronic ledger? What is the value they are getting out of using the technology? What products that can be built using the technology?
During the June 2019 Committee on Finance and Information Technology (CFIT) at Ernst and Young in Los Angeles, CA, Deep Ghummann, Principal with Ernst & Young LLC Advisory Services presented on the firm’s blockchain vision. That vision can be summed up that blockchains will do for enterprise networks and business ecosystems what Enterprise Resource Planning (ERP) have done for individual companies.
Ghummann explained that EY continues to engineer blockchain for future research and development initiatives and is working on to find a way to scale the technology and overcome some of the challenges. He explained that blockchain is one of the top three technologies that EY is investing in for the next three years, targeting all service line; advisory, tax, transaction advisory and audit. The firm is on track with 350+ client projects utilizing blockchain technologies across all service lines and sectors, not just in financial services. There is currently 180 non-audit engagements consulting for large global companies as well as unique start-ups. 350 practitioners are dedicated to building products for blockchain using Microsoft capabilities.
EY sees the real value being driven out of public blockchain networks, Ghumman explained. However, it will take four keys steps to get there – the move from notarization to tokenization, crypto to fiat currency, separated to integrated networks and private to public blockchains. These movements could take 5-10 years, similar to the time the transition to the cloud did. EY has a long-term roadmap in place for this journey.
EY’s strategic partnerships with Microsoft and SAP are the heart of our growth and service to client enterprises. One of the external partnerships is with Maersk on the marine insurance area. Jointly developed by EY, Microsoft and Guardtime, using IoT on blockchain networks allows tracking and tracing the insurance claim process for maritime services. This product has substantially reduced the processing time from 6-9 months to 1-3 months. EY and its partners have won eight global industry awards for this technology product. Another product is EY’s Blockchain Analyzer which is all about linking the blockchain with enterprise transactions and real-world assets, such as tax liability calculations and smart contract testing.
In 2018, EY became the first company to execute a private transaction on the Ethereum public main net. All the script and code was posted back on public domain to be available to all and has been extensively reused by the blockchain community.
Additionally, one of the biggest shifts is moving towards public blockchains rather than private, Ghumman said. This shift is similar to the movement from intranet to internet, an evolution to a mature technology. EY OpsChain PE (Public Edition) Production Beta on the Ethereum stack enables the following:
- Private Transactions
- EY Nightfall protocol fully shields transfers and payments
- Private Contracts
- EY uses Zero Knowledge Proofs to execute contracts in a manner that is invisible to all users except authorized parties enabling complete contracting privacy on public blockchains
- Execution proof includes conforming to agreed upon contract terms
- Token Theft Protection
- Stolen tokens can be reported to the issuing authority and are marked as stolen by EY Blockchain Dye Pack system
- Issuing entity can issue replacements and block retrieval
- Works for fungible and non-fungible tokens
- Contract and Token Testing
- Automated tool will test for security, functionality, efficiency and quality issues
- Enables pre-deployment and post deployment contract testing
- Simulates main-net contract state and transactions
- Transaction Monitoring
- Helix Blockchain Analyzer provides full end to end transaction history and traceability
This movement will also cause the a change in the way audits are performed because distributed network allows everyone to have a copy of the same information. This is the power of blockchain technology. assets, such as tax liability calculations and smart contract testing.
EY is in the software business. We are building software from scratch. EY currently offers seven major blockchain business applications, six which we have developed in-house as follows:
- OpsChain for Supply Chain Management – tokenize and manage supply chains; procurement and sales
- OpsChain for Food Traceability – track and trace which works for all food types
- OpsChain Intercompany – enabling transactions within large enterprises
- Distributed Contracting Network – contract management, smart contracts and royalty payouts
- Tesseract – smart, connected asset management with IoT
- Public Financial Management – accountability for public spending programs,
- Insurwave Maritime Insurance – jointly developed; shipping insurance JV with Guardtime and others
The philosophy is to move toward a centralized function with full transparency and the ability to put much of it in the public domain for all to use. EY is driving this technology but also need to put some guardrails and regulations around it, especially with financial data. The OpsChain Platform is designed to make building repeatable and scalable platforms a reality.
OpsChain Traceability is gaining adoption among companies looking for truly open, global and scalable solutions. An example is wine – you can see the whole journey of wine through the system using components of IoT and Track and Trace on the blockchain network. You can actually can see weather conditions, when grapes were picked, how long have they been in storage, when moved to processing, when stored in barrel and where the barrel has been shipped to as well as vineyard and year – all via a QR code.
The most famous EY blockchain solution is the Distributed Contracting Network for the Microsoft X-Box platform, which is the biggest blockchain network today and processes 25,000 transactions daily. This allows Microsoft to pay royalties to its partners. The X-Box partner gets paid faster – a reduction from the 45 days it used to take. New use cases including oil and gas and other industries are currently being deployed.
The move from private to public blockchains may move to permissible blockchains first, Ghumman said. Permissible blockchains allow you to invite some of your key suppliers to access the network for better transparency and visibility. The blockchain governing body still controls who can have access to what type of data on the network. In public blockchain, you can use software to cloak data so secure data cannot be viewed – only those that have right access keys can see the transaction.
When the community comes together to share information in the public domain it allows us to get to the answer quicker than when we each work alone, Ghumman concluded.