Ernst & Young rolls out ‘Nightfall’ to enable private transactions on Ethereum

Ernst & Young first presented the prototype of Nightfall, called EY Ops Chain Public Edition (PE), in October 2018 at Ethereum Devcon in Prague. The launch of the prototype marked the first implementation of zero-knowledge proof (ZKP) technology on the public Ethereum blockchain.

E&Y puts zero-knowledge proofs (ZKP) on Ethereum

Zero-knowledge proofs (ZKP) are a cryptographic function that allows individuals to prove to other individuals that they have possession of some information (such as a transaction) without revealing the details of the information.

The intention of Nightfall is to enable the private transfer of tokens on the Ethereum blockchain through the use of zero-knowledge proofs (ZKP). This provides a secure, traceable audit trail of private blockchain transactions on a public blockchain. It is designed for enterprise use.

At the time, Ernst & Young’s blockchain lead, Paul Brody, stated: “EY Ops Chain PE is a first-of-its-kind application and a major step forward for blockchain adoption. Private blockchains give enterprises transaction privacy, but at the expense of reduced security and resiliency. With zero-knowledge proofs, organizations can transact on the same network as their competition in complete privacy and without giving up the security of the public Ethereum blockchain.”

Six months later, in April 2019, E&Y announced in a press release that it plans to release its ZKP protocol into the public domain to help push the adoption of private, secure transactions on public blockchain networks.

Ernst & Young releases Nightfall into the public domain

On May 31, Paul Brody announced the official release of Nightfall into the public domain. Blockchain developers and businesses can view the code and download the software from Ernst & Young’s GitHub.

Nightfall enables users to transact using fungible tokens compatible with the ERC-20 and ERC-721 token standards in a manner that is private to the public but can be traced and audited by those authorized to view them.

Enterprises that wish to transact on the Ethereum blockchain will be able to do so while still retaining transactional privacy for themselves and their counterparties. Additionally, businesses will be able to provide a fully auditable transaction history to regulators without revealing transactions to the public.

Brody wrote in a blog post on LinkedIn: “This software release is an important milestone for EY because it gets us closer to our vision and our aspiration to change how the world does business. Very simply, we hope and believe that 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.”

Why private transactions on public blockchains matter

Private blockchains have been developed to protect transactional privacy and increase transaction speeds, which are more challenging on public blockchain networks. However, private blockchain networks are not as secure and trustworthy due to their lack of decentralization.

Security and trust are the biggest selling points for using a public over a private blockchain network. A decentralized public blockchain that is secured by thousands of nodes provides immutability and is more secure than a private blockchain network.

Furthermore, setting up a private blockchain, onboarding counterparties to it and maintaining the network can become very costly for businesses. That makes Nightfall’s use-case compelling.

Transaction costs on the Nightfall protocol will be between $8 and $10, according to Brody. While that is substantially higher than what users pay in gas fees for public Ethereum transactions, Ernst & Young believes that it will still be more affordable for businesses than opting to build their own private blockchain network.

“Private blockchains have operators and managers and are still likely to empower those operators with advantageous market positions. While they can be useful, we believe that private blockchains will never deliver upon their full promise of this technology,” Brody stated in his blog post.

Private transactions on public blockchain networks, even if more expensive, marry the security of a public blockchain with the transactional privacy required for widespread blockchain adoption to occur. Additionally, it ensures that blockchain transactions remain GDPR-compliant.

“The most efficient way to maximize blockchain adoption is to release [Nightfall] to the community as a true contribution, with no strings attached. The only way that blockchains deliver upon their true promise to the world is if public blockchain networks are the preferred path for enterprises and investors,” Brody stated in a press release.