Scaling a $500Bn+ Ecosystem: Enterprise Use Cases for Ethereum Layer 2 Solutions

By Andreas Freund, EEA Mainnet Interest Group Member

There are new, exciting, never-before-possible endeavor usage cases for L2 solutions gathering endeavor security, privacy, and compliance requirements portion inactive leveraging Ethereum Mainnet’s information assurances, and connecting to the vibrant Ethereum ecosystem ranging from fiscal services to proviso concatenation to rewards programs. While it is aboriginal successful the innovation cycle, the opportunities are real, big, and person short-term realizable ROI.

Enterprise Layer 2 and Scalability Solutions Use Cases

The emblematic Blockchain/DLT usage cases of enterprises autumn into 1 of 2 categories: fiscal services and proviso chain. Many endeavor projects person implemented solutions successful those 2 areas. However, these person been astir exclusively connected backstage blockchains and not Ethereum Mainnet.

The 2 superior concerns of enterprises successful adopting the Ethereum Mainnet person been some transaction scalability and privacy. Both of these tin present beryllium addressed with Layer 2 solutions specified arsenic zk-zk Rollups oregon zk-Optimistic Rollups oregon much interoperable Sidechains arsenic was discussed successful item successful the previous blog post.

This means the following, high-volume, afloat privacy-preserving endeavor usage cases go present viable:

• Digital Asset Exchanges
• Payments oregon Digital Asset Transfers
• Digital Asset Funds
• Digital Rewards Programs
• Global Supply Chain Traceability

We volition sermon these successful much item below. There are, of course, much endeavor usage cases specified arsenic high-volume, ultra-short-term Insurance Products Platforms, Digital Gaming Platforms enabling Play-to-Earn models and preventing online gaming fraud, oregon privacy-preserving federated instrumentality learning (ML) platforms to make unbiased ML models.

Digital Asset Exchanges

Unsurprisingly, integer plus exchanges for fungible and non-fungible tokens (NFTs) and their analyzable composites are not lone the archetypal usage lawsuit for nationalist scalability solutions connected Ethereum

Mainnet but besides enterprises with a absorption on:

• High-Frequency Trading, the existent bread-and-butter of accepted exchanges.
• Secondary plus markets that traditionally person been precise illiquid oregon hard to manage, specified arsenic derivative markets of indebtedness instruments specified arsenic Credit Default Swaps oregon Repurchasing agreements
• Over-The-Counter trading of illiquid assets specified arsenic alternate concern vehicles, including Fund of Funds, Oil and Gas futures, andReal Estate Investment Trusts
• Real-time audit reporting for the end-to-end commercialized lifecycle from pre-trade to post-trade compliance, for example, portion preserving privateness but not compromising the correctness of the audit

Payments oregon Digital Asset Transfers

Similar to Digital Asset Exchanges, payments person been a absorption for some nationalist and endeavor projects from the beginning. The large vantage of L2 and different scalability solutions compared to accepted outgo rails specified arsenic VISA, SWIFT oregon ACH is not chiefly successful accepted payments but alternatively in:

• Micropayments for integer services specified arsenic streaming oregon information connectivity services and Person-to-Person transactions successful emerging economies utilizing SMS payments connected mobile devices
• Machine-to-Machine payments of autonomous agents specified arsenic autonomous vehicles that person been delegated funds by their proprietor and tin power them to marque oregon person payments connected behalf of the delegatee to wage congestion fees, usage-based insurance, oregon being issued integer assets specified arsenic c credits for the avoidance of CO2 emissions.

In these applications, L2 tin supply the further benefits of privateness preservation portion enabling afloat regulatory compliance with KYC oregon AML rules.

Digital Asset Funds

Traditional plus funds specified arsenic Mutual Funds oregon Money Market Funds person important regulatory compliance requirements ranging from lawsuit concern suitability requirements, to money allocation limits and plus people restrictions to stop-loss requirements based connected the respective authoritative concern prospectus. Large funds have, therefore, important operational costs to provably comply with each regulatory requirements portion preserving lawsuit privacy. Layer 2 solutions, particularly zk-zk Rollups with their recursive zk proofs, tin assistance alleviate these issues by:

• Enabling afloat Fund audits by anyone, anytime, successful real-time based connected the onchain recursive zk-proofs,
• Making it intolerable for the Fund to cheat since each zk-proofs request to beryllium validated earlier being finalized onchain,
• Enabling investors to determination backmost and distant betwixt accepted and crypto assets, oregon crypto representations of accepted assets done representing accepted assets with their zk-proofs onchain and vice versa.

These tin beryllium achieved portion maintaining implicit confidentiality done the precise quality of the zk-proofs.

Digital Rewards Programs

Digital user rewards successful the signifier of loyalty points oregon rewards collectibles are steadily expanding successful popularity, though they are presently cumbersome to administer for enterprises, and besides much and much necessitate interoperability betwixt loyalty programs arsenic enterprises spouse with each different and fto consumers transportation rewards betwixt programs. The requirements for these programs are often a operation of Digital Asset Exchanges, Digital Asset Transfers, and Digital Asset funds we conscionable discussed. Therefore, and fixed the ample transaction measurement globally wrong and crossed rewards programs unneurotic with the stringent privateness requirements arising globally specified arsenic the EU’s GDPR, L2, oregon different scalability solutions are eminently suited to standard and alteration real-time interoperability done exchanges of Digital Rewards programs.

Synchronizing Systems of Records betwixt Enterprises astatine Scale

B2B transactions person traditionally been fraught with issues astir information synchronicity betwixt 2 systems of grounds due to the fact that determination is nary warrant that declaration presumption are decently represented successful an ERP strategy — addresses, merchandise numbers, oregon outgo presumption travel to caput — oregon that the past of commercialized transactions (Orders, Invoices, Credit Memos, etc.) are accurately reflected successful some ERP systems — incorrect taxation calculations oregon incorrect exertion of measurement discounts to pricing are classics. These issues pb to hundreds of billions of dollars successful accidental costs each twelvemonth crossed the astir 3 trillion B2B transactions a twelvemonth globally. Larger organizations with thousands oregon tens of thousands of concern relationships globally not lone person the headache of the accidental costs but besides the situation of maintaining one-to-one integrations betwixt galore systems of record, often with arcane technology.

Through plan patterns and protocols specified arsenic Baseline, L2, and different scalability solutions that enactment some analyzable EVM-type astute declaration logic aligned with the concern rules astir commercialized documents specified arsenic Orders and Invoices and privateness preservation done zk-proofs are:

• Enabling the synchronization of systems of grounds by enforcing information consistency done zk-proofs that tin lone beryllium generated correctly if the submitted commercialized documents comply with the applicable concern rules and information encoded into its zk prover systems’ programme circuits,
• Enabling afloat B2B transaction audits by anyone, anytime, successful real-time based connected onchain recursive zk-proofs,
• Making it virtually intolerable for counterparties to cheat since each zk-proofs request to beryllium validated earlier being finalized on-chain, while
• Maintaining implicit confidentiality done the precise quality of the zk-proofs

Global Supply Chain Traceability

Lastly, planetary proviso chains person ever been a absorption of blockchain projects, and immoderate programs person gone into accumulation specified arsenic Food Trust, Marco Polo, Trade Lens, oregon the Morpheus Network. Yet these person chiefly been connected backstage networks, contempt some notable exceptions such arsenic Morpheus. However, with the situation of the G7 to digitize planetary proviso chains wrong 18 months, the ever-increasing watercourse of tiny bundle imports from overseas done online retail platforms, and the request for customs enactment to person visibility into proviso chains adjacent earlier a merchandise is ordered, known arsenic “Intent to Import”, are creating important translation pressures. On the 1 hand, determination is simply a request to make transparency, portion connected the different manus not revealing business-sensitive information, not lone for idiosyncratic transactions but for each proviso chains and their intersections. For example, a shipper importing goods into a harbor successful containers involving not lone customs but besides aggregate importers for each point successful the containers.

Again, L2 oregon different scalability solutions that enactment some analyzable EVM-type astute declaration logic and privateness preservation done zk-proofs are:

• Enabling afloat proviso concatenation audits by anyone, anytime, successful real-time based connected onchain recursive zk-proofs,
• Making it precise hard for the proviso concatenation participants to cheat since each zk-proofs request to beryllium validated earlier being finalized onchain and their predicates — a.k.a. statements of facts — are public, while

Maintaining implicit confidentiality done the precise quality of the zk-proofs.

What does this mean for Enterprises?

Now, for the archetypal time, enterprises person the accidental to harvester the champion of some worlds — applications that conscionable endeavor security, privacy, and compliance requirements portion besides enjoying the enhanced economical information assurances and integer plus web effects of Ethereum Mainnet. Even though the exertion is inactive rapidly evolving, and the underlying cryptography is inactive “young” by endeavor standards, enterprises are advised to get “into the action” now. Why? To instrumentality vantage of caller DeFi opportunities to thrust net-new gross specified arsenic gathering endeavor due and regulatory compliant products from those caller plus classes, oregon mixing and matching caller and existing plus classes into caller fiscal products astatine scale, oregon leveraging the scalability of the caller L2 solutions with the innovations of decentralized exchanges’ automated marketplace makers to make concentrated liquidity pools on terms oregon premium curves. And, finally, to collaborate with emerging L2 vendors to physique the adjacent iteration of L2 solutions to “enterprise spec.”

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