Around the Block With Jefferson Nunn – Interview With Paul Brody of Ernst & Young

Around the Block With Jefferson Nunn – Interview With Paul Brody of Ernst & Young

In the newest edition of “Around the Block With Jefferson Nunn,” Jefferson interviews Paul Brody. Paul Brody is the Global Blockchain Leader at Ernst & Young, responsible for directing work and investments across assurance, tax, consulting, and software development worldwide in blockchain. Prior to joining EY, Paul was the Vice President for the Electronics Industry at IBM. He started his career at McKinsey & Co. in Los Angeles and Seoul. 

Hey guys, buckle up for a new edition of the Around the Block podcast, the only podcast to go behind the scenes to talk with the movers and shakers of the cryptocurrency world. Today we’re talking with Paul Brody. Paul Brody is the global blockchain leader at Ernst and Young, responsible for directing work and investments across assurance, tax consulting, and software development worldwide and blockchain. Prior to joining E & Y, Paul was the vice president for the electronics industry at IBM. He started his career at McKinsey and Company in Los Angeles and Seoul.

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Jefferson Nunn  0:47 

Hello, and welcome to another edition of Around the Block with Jefferson and I’m here today with a very special guest, Paul Brody with Ernst and Young Welcome to the show.

Paul Brody  0:59 

Yeah, thank you very much. Thanks for having me.

Jefferson Nunn  1:02 

So, we were just talking a little bit. And let’s just kick it off, though. What are you working on now.

Paul Brody  1:11 

So, I am the Global Blockchain Leader at EY. And we are at as you may know, we’re one of the world’s big the big four, and one of the largest professional services firms in the world. So, our priority, my priority is a couple of things. If you were to sort of boil down my goals into a single sentence, it’s this, I want to make blockchain safe, simple, reliable, and regulatory compliant for the world’s big companies. And that, for me, really means a couple of really sort of important things. Number one, I want to make software tools that make using blockchains. For enterprises, simple, safe, and secure, and easy. And then number two, I want to make the regulatory compliance part, particularly our specialty, which are financial statement audits, I want to make that something where CFOs, and CEOs can look at this and say, I feel comfortable doing business on the blockchain. And I am not worried that I’m gonna fall afoul of the law. And so, I think those are that at the very highest level, that’s what I’m doing. And that translates into a lot of heavy-duty engineering work, and quite a bit of consulting and professional services as well.

Jefferson Nunn  2:29 

Well, that’s a very ambitious goal. Considering that you know, you’re going within the regulatory space, things are changing almost day to day. How do you handle that?

Paul Brody  2:43 

So that’s true, I am, for the most part, I’ll call it a regulatory optimist. So even though things are changing on a day-to-day basis, and even though there’s, there’s a lot of uncertainty there, for the most part, more regulation, more clarity on regulation, is a path to unlocking a huge amount of investment, and the clients that we deal with, right. And keep in mind that we don’t, we don’t serve your average blockchain company, partly because we’re very picky. And partly because we’re, we’re large and kind of expensive, but our clients, they want to be regulated, they want rules to be set, because once the rules are set, and they’re regulated, they can grow the market, they can operate with confidence. So, as a regulator is closing in on setting more and more clarity, providing more clarity on the rules, they’re actually feeling pretty positive about it, it at the surface level, it looks very messy. But when we get a chance to talk to a lot of regulator central bankers, and I would say overall, I’m, I remain pretty optimistic that there’s positive the positive news is going to come out of this, and this is mostly going to contribute to growing the market.

Jefferson Nunn  4:03 

Well, let’s talk a little bit about the companies. I know just about every other day, I’m reading, you know, this company or that company is getting into crypto, or they’re getting into the metaverse. Are you seeing a large demand lately for people or companies wanting to enter the space?

Paul Brody  4:27 

Absolutely. So, demand at the large-scale enterprise level has, it’s gone through some phases, right. And there was an early phase, which can only be described as innovation theater, people wonder the blockchain they, they wanted to know what colors that came in, and when we could deliver one and that in particular, that faith was a thing of where people really focused on private blockchains. They wanted to show that they could bite off base sophisticated use cases. But the problem of private blockchains is that they don’t really work and that they don’t have any sort of long-term viability So, when that fizzled around the time of the last kind of crypto winter, the markets are shrank quite a bit. Since then, the market has moved back towards what are the use cases that can be supported with public blockchains. And those are things like Supply Chain Management, product traceability, DeFi right, Stable coins. And now there’s an incredible amount of demand. And, of course, the most explosive source of demand are banks and financial services entities who see DeFi as an emerging ecosystem of competition and their right to do so. Right. But there’s also as privacy technologies mature as supply chain technologies mature, we’re seeing huge growth in demand around Supply Chain Management around things like carbon emissions, traceability, product traceability and, and other sort of supply chain focused services like procurement. So, the use case as the use cases grow, demand is growing, but it’s, it’s moved away from what I’ll call the generic like, I need to show my investors or my board that we’re doing something in blockchain at that phase is over.

Jefferson Nunn  6:15 

That’s incredible. And I think good for, you know, moving forward well into the 21st century. But that said, I noticed a lot of your competitors, you know, say like IBM, they’re still trying to do private blockchain. Can you tell me more about the benefits of public blockchain versus private?

Paul Brody  6:40 

I can you basically, thank you so much, I should pay you for asking a question like that, like my favorite topic, private blockchains don’t work, I understand the desire to pursue them. Right. But private blockchains have kind of two fundamental big problems. Number one, you’re not really trading something that’s meaningfully decentralized, right. You’re just creating something that looks decentralized but actually has a central controlling entity. Number two, very importantly, as a part of that, what we found over and over again, and we actually hired Forrester Research to, to go look at this. Companies don’t want to join and digital ecosystem that could be run by one of their competitors or one of their customers, they’re very frightened of the possibility that their data or their business operations could become in essence hostage to the power of a centrally controlled blockchain marketplace. And sure enough, we had Forrester look at like 250, some companies that had participated in blockchains of one kind or another. And the stats were amazing for every one company that was willing to join somebody else’s blockchain. And I want to use the word willing very loosely, because when your biggest customer comes and says, would you like to join my blockchain? They’re not asking, right? They’re really just politely telling you that you have to join. But for every one company that was willing, or could be coerced into joining somebody else’s blockchain, there were two companies that tried to start their own. And it doesn’t take a math genius to figure out that that will never lead to any kind of a meaningful network. So basically, private blockchain fizzled, I asked you why people are still trying to sell them and implement and build them. To be perfectly honest. It’s a mystery to me.

Jefferson Nunn  8:28 

That’s fascinating. I appreciate your insight. That’s a great way of looking at it. And then you can go forward, the Ethereum Foundation has been investing quite heavily into the programming technologies around their blockchain, more so than say Bitcoin. And I look towards some of the upcoming notable releases that Ethereum founder Vitalik is talking about, and they’re impressive everything from sharding. Basically, being able to instantiate your own blockchain, sub blockchain, if you will, but still public down to something that may be not so well known. The Ethereum diamonds think it’s 5059. And we’re 5025 is the number it’s fake up at the moment, but Ethereum diamond basically not having that memory limitation on smart contracts. And in a way being able to modify a smart contract later. So, with all of those innovations, can you tell me just a little bit just kind of even looking toward the midterm future, you know, what companies might be able to do to benefit from those innovations?

Paul Brody  9:48 

Yeah, so I will just sort of add, before I do that, I want to add to one of your comments you talked about sort of all the things that Ethereum Foundation is doing. We are at EY very committed to Ethereum and right this is So we’ve made a choice, which is that we want to be focused on Ethereum. And we made this choice for a couple of really important reasons. Number one, we believe in public blockchains. And very importantly, I believe, you know, and I don’t think it again, doesn’t take a rocket scientist to do this. But I believe that sort of Metcalfe’s Law, which is a sort of power of network effect, is in effect, right. These are network businesses, and the rules about network businesses, are they a winner take all businesses, but the more of the bigger the network becomes, the more valuable it becomes. So, if you’re going to play in the world of blockchains, you really should just focus on the best. And then I’m applying to the kind of I’ll call it the GE role, the famous you will be number one in the market. Well, every dollar I have is focused on from an engineering perspective, and making sure that we are number one in the Ethereum ecosystem. And I am immensely grateful. I want to take a moment to express my incredible gratitude to all of my competitors who continue to push private blockchains are talking about a mock multi blockchain future, right, thank you, because you are clearing the space for us. That, let me give you one other comment about Ethereum, which is that if you didn’t have something that we don’t see in any other sizable public blockchain, which is institutional maturity, the Ethereum foundation is run by a bunch of super boring nerds. And that’s pretty much the highest compliment I can give them. They spend more time thinking about scalability about security, they hire top notch people, they pay them well, right. And they focus on public good. And if you look at the process that they’re taking on around the merger, shift from proof of work to proof of stake, it’s been slow, meticulous, painstaking, carefully plans, right. And what I talked to clients about, which are our clients are all the world’s biggest financial and business enterprises, I tell them, what you want, is institutional maturity, you want this kind of slow, careful, methodical execution, from infrastructure that you are going to trust a big part of your business to in the future. So, we’re all in on this area, with regard to what we are going to do in the future and where we see business cases going big. Now that if the mergers coming in at layer two networks are maturing, we are no longer really worried about transaction costs or transaction volume. What we are worried about and our big strategic focus from an r&d perspective, and the why is privacy blockchains work because the transactional data is public. And for some things like financial services, you get a level of privacy by running your transactions through an exchange, where it’s impossible to see if yours is with somebody else’s. But if you’re an enterprise, you have specialized products, right? For example, one of our clients, they still are using a private blockchain, we’re trying to convince him to move over but they meant 500,000 NFTs every day, each NFT is aligned to a single package of their product. That’s got a serial number on it. Well, you can follow 500,000 NFTs around on a blockchain out there, and you could figure out how their business is doing all kinds of stuff. The only way they can move to a public blockchain is if they can have privacy. And so, the big milestone for us is with privacy technology, we can unlock lots of new business cases. And in the case of Ethereum, the privacy technology we developed and put into the public domain is called nightfall and nightfall lets you take any ERC 2721 1155 and put it into a privacy contract. Then once it’s in there, you can move it around without having to show anybody else what you’re doing. And one of the big milestones that happened for us this year is we released a third version of this technology and then polygon which you may know is the basically the biggest kind of layer two inside chain operator in the Ethereum ecosystem. They picked up that technology and they launched a layer two privacy and network focused on enterprise users called polygon nightfall. And with polygon nightfall up and running, we can start to build Supply Chain Solutions and, and finance solutions that make use of privacy technology, which starts to expand the range of use cases that enterprises will want to take on.

Jefferson Nunn  14:37 

That’s incredible, and I think very innovative and you mentioned you touched on something polygon, for example. There’s a lot of these different, you know, let’s call them it’s a theory of scalable networks, for lack of a really better word. Layer twos is just not something that rarely conveys but what did they do? Right? But they were scalability solutions for 30. And their blueprinting. Polygon, several others. Do you think they’re still gonna be around? After all the Ethereum upgrades at the next set of Ethereum upgrade, secondly?

Paul Brody  15:21 

Yes, absolutely. So, in fact, I believe, right, right, when we look at how our business is going to evolve, so today, the Ethereum blockchain can handle about a million transactions a day, and side chains and scaling solutions that support Ethereum, whether they’re layer two of their side chain, they can handle up to another couple 100 million transactions a day, when we think about our long term forecast for enterprise usage, right, when you think about sort of tokenizing, and tracking and managing car parts, product parts assets, as they move around the world, our calculations of our thinking is around, you know, it’s the area needs to be able to handle billions of transactions per day. So, you know, I believe actually the most competitive and important battleground in the next few years isn’t, it’s not way can anybody beat Ethereum because they don’t think they can. The competitive battleground that we’re about to see is which scaling solution is going to be the most successful, which is going to become the most dominant, because they’re going to be absolutely necessary. As we start to scale into the solutions. I mean, we’ve got multiple clients who alone, you know, they when fully deployed, they’re going to have a demand for 10s of millions of transactions a day, right? They’re just in the prototyping stage, now the pilot stage, but once they get going, you know, they were there, their supply chain requirements alone, would overwhelm all the main scaling solutions for Ethereum. today. So, this market isn’t, is far from being done. And by the way, they’re not going to pay a million bucks a day for gas fees, they can’t afford that that would cripple their supply chain. So, these, these transactions have got to be massively scalable, and really cheap.

Jefferson Nunn  17:14 

Which is rare, all the technology upgrades are coming quite handy. So, tell me, how did you how did you get your start in crypto.

Paul Brody  17:24 

I got my start in crypto really more than a theory. And when I was working at IBM, so I used to work at IBM and I used to be the vice president in charge of the global electronics industry. And the best part of my job, the most fun part of my job was that each year, we got to pick off a new technology problem that was challenging our clients and try to think very creatively about what the solution might be. And one of the problems at the time, which Samsung was working on, was how to manage large scale device networks without driving up the cost of managing those networks. Right? If you if you buy $1,000, phone or tablet, a few bucks a year for cloud services is not bad. But if you buy a $20 light bulb, and it’s an LED light bulb, and it’s going to last for 15 years, you know, you know, 50 cents a year for sort of network services is already way too much. So, we sat down and said, you know what, all these things are becoming quite smart. What are these devices could sort of manage themselves? What if your washing machine could sort of help you manage your lightbulbs and your doorknobs and your neighbor’s washing machine? So, we’re going to get built into a big mesh network. And so, we spun up a little engineering and sort of business team to do that. And somewhere along the way, I don’t really remember somebody said to me, you know, what do you think about Bitcoin. Like it’s distributed computing. And I was like, oh, that sounds interesting. We looked at Bitcoin it was we got into Bitcoin, we got quite interested in Bitcoin we sort of played around with it. And about a little bit later on, somebody came to me said, you know, I met this guy, to Terra could be Terran. And he’s got a cool idea to kind of adapt to Bitcoin, but make it more of a computing platform like ah, that’s the ticket. And so, we hooked up with Vitalik. And we worked with the alpha version of Ethereum at the time, to put together a product called ADEPT, which stood for a synchronous, decentralized peer to peer telemetry, it was basically a, it was basically a blockchain for IoT devices, and we prototyped it in cooperation with Samsung. And I, in fact, I have I have in my in my photo folder, I have a picture of me and my IBM colleagues Vitalik and a bunch of Samsung executives at CES 2015, where we showed it off. Now we never went to production. But I will tell you, like I was taught that’s like this. This is the future of computing. This is the future of business operations. I don’t know how it’s gonna work yet but I got to work on it and interestingly, IBM wasn’t quite so enthusiastic about blockchain at the time they, they came around eventually, I’m happy to say, but at the time, it looked like if I wanted to do it, I wanted to go elsewhere. I didn’t need to go elsewhere. And interestingly, EY was, was waking up to the possibilities of both blockchain and IoT at the time, and I came on over, and I’ve been here ever since.

Jefferson Nunn  20:25 

That’s fascinating. And that’s probably one of the most interesting journey stories I’ve heard in a while, especially considering you got to meet Vitalik. That’s, that’s amazing. He’s actually one of my idols really follow everything he does. He’s brilliant.

Paul Brody  20:43 

He’s brilliant. And one of the things I really appreciate him and I, I don’t see Vitalik Buterin a lot, I chat with him occasionally. And I see him every now and again. He was a really young kid, I mean, to the point where like, the people at IBM Security are like, you have a 12-year-old waiting for you in the lab. And by the way, I think he’s smoking and you need to tell them to stop smoking. And, you know, so he’s a young guy, and he’s been wildly successful. And in one of his like, first things are he’s really done. And when I think that has really impressed me about Vitalik, is it just not giving them a crazy ego, it hasn’t made him kind of power hungry. He doesn’t, he has created in Ethereum Foundation, an organization that’s bigger than him. And it takes a very ego free person to be able to do that. I don’t even think I know how to do it. Like, I gotta got a bit of an ego. But it’s really impressed me and I think he has, he has really stewarded Ethereum. And he has treated it as an act of stewardship, not a get rich quick program or a way to make him famous or powerful. And I really respect that I don’t know him closely. But he, he’s really impressed me.

Jefferson Nunn  22:00 

So, this has been a fascinating show. I thoroughly enjoyed it. Do you have any final thoughts for our listeners?

Paul Brody  22:09 

Um, you know, Blockchain, my aspiration, I tell us all the people who come to work for me, my goal very modestly, is to change how the entire world does business and blockchain, if we do this, right, it will be the most boring revolution in history, it will be a revolution, where we make things more efficient, where we make them simpler, where we make them faster, and we make an economic system that is fairer, because it is not so heavily centralized. And so, as people go through the day today, one of the things that’s always disappointing is how many people in the blockchain ecosystem are so money focused and finance focus, and there’s a role for finance. There’s a role for money and people who do great work should be rewarded. But it is about making the world a better place, and then finding a way to make sure that people keep more of what they create, that they have a fair experience. And so, I really hope that more people will enter blockchain and they will enter blockchain from the standpoint of using it as a tool to make change, and that that change has a positive social impact.

Jefferson Nunn  23:28 

Fascinating. Well, it was really good.

Paul Brody  23:31 

We are hiring. We’re hiring. Come, come, come follow me on Twitter. I’m Prbrody.eth on Twitter. I always post the job openings there. We have a not quite endless, I wish it was endless. I wish had an endless budget. But we had a bit of a substantial appetite for smart, clever people who want to change the world and be paid and work in a really good environment while they’re doing it on Ethereum.

Jefferson Nunn  23:57 

So, the links should be at the top of the show page. Thank you so much, Paul.

Paul Brody  24:02 

Thank you very much. Thanks for having me.

This concludes today’s episode of the Around the Block Podcast, the only podcast to go behind the scenes to talk with the movers and shakers of the cryptocurrency world.

This podcast is produced by

Our host is Jefferson Nunn.

Managed by Urooj Fatima.

Edited by Muhammed Wasay.

Voiceovers by Daniel Rubin.

Please follow us on any major podcasting platform. Thanks for listening.

Jefferson Nunn

Since 1999, Jefferson Nunn has been a consultant to high net worth individuals. Always an innovator, his ideas have generated millions for his clients including Ronco and GoWireless. He has been involved in the CryptoCurrency industry since mining his first Bitcoin in 2010. Since then, he has met with many of the early pioneers in the CryptoCurrency space including the founders of Ethereum and the founders of Crypto Capital in Panama, and more.