Microsoft has teamed up with ConsenSys, a Brooklyn-based blockchain development specialist, to offer Ethereum Blockchain as a Service on Azure. Ethereum is a framework for building blockchain-based applications.
Financial services companies are keeping an eye on blockchain technology, and not only because it is integral to Bitcoin and other cryptocurrencies. Many in financial technology circles are exploring blockchain-based banking and trading systems to help further automate, modernize and secure the industry.
Microsoft and ConsenSys want to give them a friendly nudge.
The companies’ new Ethereum Blockchain as a Service “allows for financial services customers and partners to play, learn, and fail fast at a low cost in a ready-made dev/test/production environment,” Marley Gray, director of technology strategy for Microsoft U.S. Financial Services, said in a Nov. 9 announcement. “It will allow them to create private, public and consortium-based Blockchain environments using industry-leading frameworks very quickly, distributing their Blockchain products with Azure’s World Wide distributed (private) platform.”
Blockchain, a foundational technology powering Bitcoin, serves as a public, decentralized ledger of transactions. Despite recent controversies surrounding Bitcoin and other cryptocurrencies, blockchain is generally regarded as an innovative way of lending transparency to an exchange or system, keeping it honest and averting fraud.
In online “Frequently Asked Questions” information detailing the differences between Bitcoin and Ethereum, Gray said both technologies serve as a security-enhancing, “peer-to-peer network for discovery and communications. This turns the traditional client-server architecture into one in which all nodes are both clients and servers, decentralizing the system and removing single points of control or vulnerability.”
Serving as a backend database, the blockchain “is a time-stamped, non-reputable database that contains the entire logged history of the system,” Gray said. “Each transaction processor on the system maintains their own local copy of this database and the consensus formation algorithms enable every copy to stay in sync.”
For banks and traders, blockchain-based tech can lead to a faster, more efficient and responsive generation of financial platforms.
“In financial services particularly, Blockchain is a major disruptor to some of their core businesses, and [financial technology] companies are driving innovation in this space,” said Gray. “Ethereum is open, flexible [and] can be customized to meet our customer’s needs allowing them to innovate and provide new services and distributed applications,” he said.
“Ethereum enables [Smart Contracts] and Distributed Applications to be built, potentially cutting out the middle man in many industry scenarios streamlining processes like settlement,” Gray said. Smart Contracts, as the term suggests, are digital, self-executing contracts that trigger actions when certain conditions are met. For example, a bank may be instructed to automatically release funds when the parties electronically approve the terms of an agreement.
The new offering also opens the door to Microsoft-powered integrations. “Surrounding capabilities like Cortana Analytics (machine learning), Power BI, Azure Active Directory, O365 and CRMOL [Dynamics CRM Online] can be integrated into apps launching a new generation of decentralized cross-platform applications,” Gray added.