Expanding an ecosystem of more than $500 billion: enterprise use cases for Ethereum’s layer 2 solutions


Author: Andreas Freund, member of the EEA Mainnet Interest Group

Enterprise use cases with new, exciting, and unprecedented L2 solutions meet enterprise security, privacy, and compliance requirements, while still leveraging the security guarantees of the Ethereum mainnet and connecting to everything from financial services to supply chains to rewards The vibrant Ethereum ecosystem program. Although we are in the early stages of the innovation cycle, the opportunities are real, huge, and have short-term achievable return on investment.

Enterprise Tier 2 and scalability solution use cases

Typical blockchain/DLT use cases for enterprises fall into one of two categories: financial services and supply chains. Many enterprise projects have implemented solutions in these two areas. However, these are almost entirely on the private blockchain, not on the Ethereum mainnet.

The two main issues for enterprises adopting the Ethereum mainnet are transaction scalability and privacy.Both of these can now be solved by layer 2 solutions, such as zk-zk Rollups or zk-Optimistic Rollups or more interoperable side chains, such as in Previous blog post.

This means that the following high-volume, fully privacy-protected enterprise use cases are now feasible:

  • Digital Asset Exchange
  • Payment or digital asset transfer
  • Digital Asset Fund
  • Digital reward plan
  • Global supply chain traceability

We will discuss these in more detail below.Of course, there are more enterprise use cases, such as high-volume, ultra-short-term insurance product platform, digital game platform support Earn while playing mode And prevent online game fraud, or protect privacy with a joint machine learning (ML) platform to create an unbiased ML model.

Digital Asset Exchange

Unsurprisingly, the exchange of digital assets with fungible and non-fungible tokens (NFTs) and their complex combinations is not only the first use case of Ethereum’s public scalability solution

Mainnet and companies focusing on the following:

  • High-frequency trading is the backbone of current traditional exchanges.
  • A secondary asset market that traditionally has very low liquidity or is difficult to manage, such as a derivative market for debt instruments such as credit default swaps or repurchase agreements
  • Over-the-counter transactions of non-current assets, such as alternative investment vehicles, including funds in funds, oil and gas futures, and real estate investment trusts
  • For example, the real-time audit report of the end-to-end transaction life cycle from pre-transaction to post-transaction compliance, while protecting privacy but not affecting the correctness of the audit

Payment or digital asset transfer

Similar to digital asset exchanges, payment has been the focus of public and corporate projects from the beginning. Compared with traditional payment tracks such as VISA, SWIFT or ACH, the huge advantages of L2 and other scalability solutions are not mainly in traditional payments, but in:

  • Digital services micropayments in emerging economies that use SMS payments on mobile devices, such as streaming or data connection services and person-to-person transactions
  • Autonomous agent machine-to-machine payments, such as autonomous vehicles that have been entrusted with funds by their owners, and can control them to pay or receive payments on behalf of the trustee to cover congestion charges, usage-based insurance, or issued digital assets such as to avoid carbon dioxide Carbon credits emitted.

In these applications, L2 can provide additional benefits of privacy protection, while achieving full supervision of KYC or AML rules.

Digital Asset Fund

Traditional asset funds such as mutual funds or money market funds have important regulatory compliance requirements, ranging from customer investment suitability requirements to fund allocation restrictions and asset class restrictions, to stop-loss requirements based on their respective official investment specifications. Therefore, large funds must pay high operating costs to protect customer privacy while complying with all regulatory requirements. Layer 2 solutions, especially zk-zk Rollups and their recursive zk proofs, can help alleviate these problems in the following ways:

  • Based on the recursive zk proof on the chain, anyone can conduct a comprehensive fund audit in real time anytime, anywhere,
  • Make it impossible for the fund to cheat, because all zk-proofs need to be verified before finalization on the chain,
  • Enable investors to move back and forth between traditional assets and encrypted assets, or represent traditional assets through on-chain zk proofs, and vice versa.

These can be achieved while maintaining complete confidentiality through the nature of the zk proof.

Digital reward plan

Digital consumer rewards in the form of loyalty points or reward collections are steadily increasing, although they are currently troublesome for companies to manage, and as the cooperation between companies increasingly requires mutual loyalty programs Operational, allowing consumers to transfer reward programs between them. The requirements of these procedures are usually the combination of digital asset exchange, digital asset transfer, and digital asset fund that we just discussed. Therefore, given the large volume of global transactions within and between reward programs and the strict privacy requirements that have emerged worldwide (such as the EU’s GDPR, L2 or other scalability solutions), it is very suitable to expand and achieve through digital reward exchange Real-time interoperability program.

Large-scale synchronization of record systems between enterprises

B2B transactions have traditionally been full of issues regarding data synchronization between the two systems of record, because there is no guarantee that contract terms are correctly represented in the ERP system—address, product number, or payment terms—or business history transactions (orders, invoices, loans). Recording vouchers, etc.) are accurately reflected in the two ERP systems-incorrect tax calculations or incorrect application of volume discounts to pricing are classics. These problems result in an opportunity cost of hundreds of billions of dollars in nearly 3 trillion B2B transactions worldwide each year. Large organizations with thousands or tens of thousands of business relationships around the world not only face the problem of opportunity cost, but also the challenge of maintaining one-to-one integration between many systems of record, often using mysterious techniques.

Through design patterns and agreements, such as Baseline, L2, and other scalability solutions that support complex EVM-type smart contract logic, which is consistent with the business rules of business documents (such as orders and invoices), and protects privacy through zk-proofs:

  • Through zk-proofs to enforce data consistency to realize the synchronization of the recording system, the submitted commercial documents can only be generated correctly when they comply with the relevant business rules and the data encoded in the zk proof system program circuit.
  • Based on the recursive zk proof on the chain, anyone can conduct a complete B2B transaction audit in real time anytime, anywhere,
  • It is almost impossible for the counterparty to cheat, because all zk proofs need to be verified before finalization on the chain, and
  • Maintain complete confidentiality through the nature of zk-proofs

Global supply chain traceability

Finally, the global supply chain has always been the focus of blockchain projects, and some projects have been put into production, such as Food Trust, Marco Polo, Trade Lens or Morpheus Network.However, these are mainly on private networks, although there are some Notable exceptions Such as Murphys.However, facing challenges G7 will digitize the global supply chain in 18 months, The increasing number of small packages imported from abroad through online retail platforms, and the need for customs organizations to understand the supply chain even before ordering products, the so-called “import intention”, is generating tremendous pressure for transformation.On the one hand, it is necessary to create transparency, on the other hand, not to disclose business sensitive information, not only for individual transactions, but also for all supply chains with Their intersection. For example, shippers import goods into ports through containers, which involves not only customs, but also multiple importers of each item in the container.

Similarly, the L2 or other scalability solutions that support complex EVM type smart contract logic and privacy protection through zk-proofs are:

  • Based on the recursive zk proof on the chain, anyone can conduct a complete supply chain audit in real time anytime, anywhere,
  • It makes it difficult for supply chain participants to cheat because all zk-proofs need to be verified before finalization on the chain, and their predicates—that is, statements of fact—are public, and

Maintain complete confidentiality through the nature of zk-proofs.

What does this mean for companies?

Now, for the first time, companies have the opportunity to combine the best of both worlds-applications that meet corporate security, privacy, and compliance requirements, while also enjoying the enhanced economic security guarantees and digital asset network effects of the Ethereum mainnet. Although the technology is still developing rapidly, and the underlying cryptography is still “young” according to corporate standards, it is recommended that companies “act” now. Why? Use new DeFi opportunities to drive net new income, such as building enterprise-compliant and compliant products from these new asset classes, or mixing and matching new asset classes with existing asset classes on a large scale into new financial products, or Taking advantage of scalability, the new L2 solution uses the innovation of automated market makers of decentralized exchanges to create a centralized liquidity pool along the price or premium curve. Finally, cooperate with emerging L2 suppliers to build the next iteration of L2 solutions for the “Enterprise Specification”.

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