Banking giant JP Morgan is continuing to build out the privacy functionalities of its permissioned Ethereum fork, Quorum.
That’s because the bank’s blockchain developers have built out a modified version of Zether, a zero-knowledge proof (ZKP) system that allows users to conceal transaction amounts on Ethereum or similar account-based smart contract blockchains, e.g. Stellar. Morgan’s rendition, “Anonymous Zether,” goes one step further, allowing users to obfuscate their identities in addition to transacted sums.
On May 28th, the bank redistributed their Anonymous Zether as open-source software, meaning anyone can now use the code freely as they please.
Devised by Visa and Stanford University researchers in a 2018 paper, the original Zether works by deploying a smart contract dubbed ZSC. In the context of the Ethereum blockchain, ether (ETH) is sent to ZSC, at which point the sender receives an equivalent amount of ZTH.
Practically speaking, the generated ZTH is not a separate and distinct asset, but rather the “concealed” version of ether sent to ZSC. Accordingly, it’s ZTH that can be transacted with privately, and JP Morgan’s Anonymous Zether further optimizes the system’s privacy by also allowing for the concealment of senders and receivers, not just the transactions.
Elements of JP Morgan’s leadership, like the bank’s head of global clearing, John Hunter, have previously noted that blockchain technology could potentially streamline institutional transaction validation processes. The problem is that, on the main, such tech has proven pseudoanonymous at best to date.
That’s where Anonymous Zether comes in — it, and tech like it, can allow major organizations to leverage blockchain applications without having to sacrifice the privacy of their respective operations.
Notably, JP Morgan’s not the only powerhouse entity working on building out such a system. Last month, global “Big Four” accounting titan EY announced it would be releasing into the public domain a protocol called Nightfall. Similar to Anonymous Zether, EY’s ZKP protocol has been designed to help enterprises use Ethereum privately.
In releasing their privacy tools to the public, both Morgan and EY are signaling early on their intentions of being good faith stakeholders in the cryptoeconomy.
The difference between the two firm’s releases is that the Morgan is specifically primed to use its ZKP system in or around projects associated with its in-house blockchain projects.
JP Morgan Ramps Up Its Blockchain Activities in 2019
Two of those in-house projects are the Interbank Information Network (IIN), a bank-to-bank blockchain payments rail, and JPM Coin, a forthcoming stablecoin-like token that is set to be backed by USD deposits. Both are built atop Quorum.
Regarding the IIN, Morgan’s aforementioned executive John Hunter said last month that the interbank system was being positioned to launch settlement functionalities at some point in Q3 2019. Such a move seems to directly challenge other cryptoeconomy mainstays that are focused on cross-border payments, e.g. Ripple.
At the time, Hunter said the IIN could be used for real-time validation of transaction data for the purposes of compliance, as he noted about one in five legacy financial payments currently get hampered over basic transaction errors.
The bank’s other major crypto announcement this year came back in February, when it announced its builders had begun working on JPM Coin, which was to be pegged to the dollar. JP Morgan’s blockchain team lead Umar Farooq said the token’s possibilities were open:
“The applications are frankly quite endless — anything where you have a distributed ledger which involves corporations or institutions can use this.”
Most recently, JP Morgan teamed up with tech power Microsoft in a strategic partnership that saw Quorum supported as the first blockchain offered on Microsoft’s Azure Blockchain Service. The mesh aims to help enterprises build on Quorum with ease.