A strategic step toward modernizing digital gold investments with blockchain technology

Overview

UBS recently conducted a proof-of-concept (PoC) for UBS Gold, testing ZKsync Validium, a Layer 2 (L2) blockchain solution designed to scale Ethereum while maintaining privacy. Financial service providers leveraging Ethereum must adopt strategies to maximize the network’s utility.

The goal of the PoC was to address challenges in scalability, privacy, and interoperability as UBS experimented to expand UBS Gold into global markets, in a test environment. Following a thorough evaluation of blockchain options, ZKsync Validium was selected for its ability to meet the specific requirements of the UBS Gold Network. This PoC reflects UBS’s continued efforts to explore how blockchain can enhance its financial offerings and support its broader digital asset strategy.

What is UBS Gold?

UBS Gold is an investment product offered to retail and wealth clients in Switzerland. It allows for fractional gold investments with real-time pricing, deep liquidity, secure physical storage, and optional physical delivery.

The product is powered by the UBS Gold Network, a permissioned blockchain connecting vault operators, liquidity providers, and distributors. While the network operates effectively within Switzerland, the permissioned blockchain presents limitations for scalability, privacy and interoperability that need to be addressed for potential global expansion.

Selecting ZKsync Validium

To address these challenges, UBS evaluated multiple blockchain technologies and identified ZKsync Validium as a promising choice. ZKsync Validium addresses three critical needs:

• Enhanced scalability: High transaction throughput at lower costs by storing data off-chain

• Privacy: Transaction data is stored off-chain, ensuring confidentiality for users

• Interoperability: Seamlessly connects to Ethereum, ‘’the foundational layer for Decentralized Finance (DeFi)’’ (-UBS)  enabling cross-network asset transfers

The PoC: Objectives and Results

The PoC simulated a UBS Gold Network on ZKsync Validium, testing the feasibility of meeting all above mentioned requirements, while assessing cost implications. To achieve this, smart contracts were deployed on a testnet to simulate the Gold Network. These contracts replicated key functionalities of the UBS Gold Network, including: gold token issuance, transaction processing, and reconciliation. The Validium model allowed UBS to operate the network while maintaining off-chain storage, ensuring privacy and control.

Key Objectives:

• Technical feasibility: evaluate operational requirements and implementation options for scalability and privacy

• Business viability: Analyze cost implications under various transaction volume scenarios

Results

The PoC successfully demonstrated UBS’s ability to meet its privacy and interoperability objectives while addressing scalability requirements to a significant extent. By leveraging Validium mode, UBS ensured user privacy, allowing participants to view only their activity while enabling verifiability through Ethereum’s L1 bridge smart contract. Interoperability was also validated as stablecoins bridged from Ethereum were successfully utilized to purchase gold tokens, and dummy tokens were employed to simplify reconciliation processes for back-office operations. While ZKsync’s Validium supported high throughput, achieving optimal cost efficiency would require thousands of transactions per hour, highlighting opportunities for further scalability optimization.

Future opportunities for UBS Gold

Building on the success of the PoC, the results underscored the broader potential for integrating L2 solutions into UBS’s operations. Key opportunities include:

• Future proofing: Preparing for increased transaction volumes without bottlenecks

• Customization: Creating tailored solutions to address specific financial needs

• Regulatory compliance: Leveraging auditable and transparent blockchain solutions

• Customer demand: Meeting expectations for real-time, cost-efficient financial services

• Market access: Seamlessly participating in multichain ecosystem to access liquidity

• Cost predictability: Stabilizing operational expenses to support scalable growth

Conclusion

This PoC highlighted ZKsync Validium’s capability to support UBS Gold’s privacy and interoperability requirements. By leveraging blockchain technology, UBS continues to explore innovative ways to enhance its financial offerings while adapting to the growing demand for digital assets.

About ZKsync

ZKsync is the pioneering ZK technology powering the next generation of builders with limitless scale. Secured by math and designed for native interoperability, ZKsync enables an elastic network, an ever-expanding ecosystem of customizable chains. Deeply rooted in its mission to advance personal freedom for all, the ZKsync technology makes digital self-ownership universally available.

To learn more about ZKsync, visit https://enterprise.zksync.io/