Silicon Luxembourg met and jointly interviewed Paul Brody, the Global Blockchain Leader at EY and Gaël Denis, Partner, Technology, Media & Telecommunication (TMT) and FinTech Leader at EY Luxembourg who discussed their respective developments in parallel with the blockchain evolution, as well as the future of blockchain at both the corporate and individual level.
(Featured Image: Paul Brody, Global Blockchain Leader at EY / Image Credit © Olivier Dessy)
Can you introduce yourself briefly?
P.B. I’ve been the Global Blockchain Leader at EY for three years, which means I’m responsible for the development and strategy for business process transactions as well as audit and tax, a unique blend. I joined EY after 14 years working for a famous software multinational company. The last thing I worked on there was blockchain technology, so the transition was quite logical.
G.D. I’m the TMT and also the Fintech Leader at EY Luxembourg. I have assisted start-up companies, regulated e-money and payment institutions, major e-commerce players and telecom operators in many parts of the world over the last 20 years. I’m also involved in various crypto currencies projects as well as assets based tokens managed on blockchains. These projects include auditing crypto exchange platforms and assisting in developing assurance services in the context of blockchain and digital currencies.
Paul, how did you get into blockchain?
P.B. I ran the global electronics industry unit during my previous experience. We had a lot of discussions with clients building large Internet of Things (IoT) device networks. The thing is, they struggled with the cost of managing their current and projected networks. It’s funny because we thought instinctively of the basics and how to innovate them, for example, a fridge today is really smart, almost as smart as the moon landing was decades ago. Although, however smart they were, we still pay datacenters to manage the information held by these kind of devices. So we asked ourselves: why do datacenters hold all the data if fridges are so smart?
“If there are 1 million fridges, and they’re all smart, why can’t they back each other up? That was my “ah-ha moment.”
One of our clients came to me asking if I had a better idea on how to manage this data. The ambition was there: there just had to be a better way to design devices so that they could serve and act as servers for themselves. If there are 1 million fridges, and they’re all smart, why can’t they back each other up? That was my “ah-ha moment.” I was once at another client in Taiwan, who said the brains they put in new smartphones are the same that goes into fridges. The software power is there.
So we got a small team together and asked a question, could we design something from scratch to make a radically different and better system? If so, how would we do it? The answer that came back was the same: we should make these devices serve each other.
Now, there are many ways to do so and make it work, but blockchain has a unique added value as it has the tools to transfer value. We weren’t sure if there was a business case for the IoT, but if there was, somebody would be paid for it. Based on this principal, we put blockchain technology at the heart of our efforts.
“Like databases, blockchains will become a part of the invisible infrastructure. It will be transformational, but not visible.”
At EY, what is the impact of blockchain on services you provide?
G.D. EY started blockchain from the audit side. In late 2000s, EY moved from the telecom to the payments industry, that’s when our first license came through, so we started on the financial side. In today’s world, product development and payments are separate, but blockchain combines product development and delivery with payments in the same transaction. In other words, blockchain makes it possible to integrate the world of physical operations, payments, and financial services.
P.B. We realized that if our focus was only on audits, we were going to miss out on a huge amount of potential value and opportunity. So, we developed a single global blockchain team that is building both audit solutions and other technologies. This explains why my role now focuses both on audits and finances, by the way.
On a day-to-day basis, how does blockchain impact our lives?
G.D. On a day-to-day basis, for the most part, nobody will know they’re using blockchain. It’s the same way today.
P.B. We don’t know about oracle databases or DB2s, but we enjoy them. Like databases, blockchains will become a part of the invisible infrastructure. It will be transformational, but not visible.
What kind of challenges do you face?
P.B. To date, we’ve done about 150 blockchain projects worldwide, and we have learned a lot. The key insight we have is that blockchain will do for multi-company networks what Enterprise Resource Planning (ERP) did for the single enterprise.
A lot of the activities we take for granted role out through a combination of multiplenetworks of companies. These companies struggle to keep track of physical services, software, and their payments. ERP allowed those cross-company relationships. A famous clothing company, for example, can conceive and get a product on their shelves in two or three weeks – that requires a system and teams with very tight connections. They’re an exception in the status quo, but blockchain technology will make this much, much easier for almost any industry going forward.
“I think what the world will see is a tokenization platform where one token equals one product, for example a bottle of wine. Blockchain treats tokens the same way that banks treat money. Everything will become a token.”
Are there new developments around blockchain for corporates? Within the next year or three years?
P.B. We foresee a lot of developments taking place. In general, we expect several things. The first is the ability to do secure private transactions over public networks. Large companies are all building private blockchains. Why? Because no company wants competitors to start tracking and developing this information. There aren’t many ways to do secure private transactions on a public server. Right now, there’s zero-knowledge proofs, but this is pretty advanced math and not easy to use.
We’re just now learning to industrialize the complex mathematics. In general, corporations have a lot of different blockchains: one for tracking food, another for maritime insurance, and more. This is not sustainable. Connecting private blockchains on a public chain is key. That’s our job number 1.
Our second job is tokenization. We need to figure out how we are going to transact against tokens. I think what the world will see is a tokenization platform where one token equals one product, for example a bottle of wine. Blockchains treat tokens the same way that banks treat money. Everything will become a token.
On the other hand, we will also see a fiat currency token. That means you will have token equivalents of modern currencies, for example 1 euro is equal to 1 token. Perhaps even 1 token is equal to one bar of gold. We buy and purchase in euro, yen, and dollar now, and this will help the transition and interaction between these currencies.
Lastly, we will see a change to a more regulated environment because the days of “I have bitcoin, I don’t know where it’s from, but I need cash” are over. Once cryptocurrencies are safe and legal, the system will explode in a good way. We will start to ask an important question: where did you get your tokens from? If you can’t prove that, then the tokens will be useless.
On the other side, tokenized money could lead to money laundering, so, we need to make blockchain secure, reliable, safe, and legal. This will unlock the floodgates.
“Some people say the States are the ‘laboratories of democracy,’ meaning the States try different things and find different solutions. This is currently what’s happening in Dubai – they have different regions trying different things. Eventually, this will lead to regions of specialized knowledge.”
Do you see more and more companies coming to you?
G.D. American and European companies are coming to us now, yes. It’s an investment to make this project regulatory compliant so we can better serve them.
Competitive deregulation is also happening, we’re aware of that, but there are two problems. One, just because you have low regulations doesn’t mean you have technical talent. Two, those small countries are too far from major markets, like the European Union and the United States (US), which means they will eventually have to meet regulations if they want to grow.
P.B. Luxembourg has skills, power, and good regulations. Japan has similar skills. In Dubai, the target of 50% of public services is blockchain. In general, the US is strong for industrial projects. Some people say the States are the “laboratories of democracy,” meaning the States try different things and find different solutions. This is what’s happening in Dubai – they have different regions trying different things. Eventually, this will lead to regions of specialized knowledge.
As a regulator, you need a reason for people to do business in your region. Agencies across the world are creating a market for expertise to build up there. They’re essentially forcing markets to build up using targeted policies. California, for example, made people sell zero-emission in addition to big cars in California, and now look where we are—electric cars are the future.
G.D. Luxembourg is becoming an important area. It is creating the right system—a perfect blend of regulations, talent, and money. We look forward to seeing what comes out of this.