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Blockchain technology is slowly making its way into the mainstream. It took a big step this week, when Microsoft certified a development environment for Ethereum, running on its own Azure cloud service.

Ethereum is a new kind of blockchain, building on concepts originally piloted by the bitcoin network. Bitcoin’s blockchain is a decentralized financial ledger, enabling everyone to record and see everyone else’s transactions. These transactions are cryptographically sealed, making them immutable.

The point of the bitcoin system was to enable people to exchange money with each other even when they didn’t trust or even know each other. The ledger is a single source of truth that stops anyone claiming they hadn’t sent money and trying to spend it again.

Previously, people relied on banks to maintain these ledgers, acting as a central hub for transactions. Bitcoin promised to do away with centralized transaction processing altogether and enable people to send each other money without the need for a central arbiter.

A new kind of blockchain

Bitcoin was designed just for transferring money, but Ethereum is a blockchain designed to run entire applications, which it calls smart contracts. These enable developers to build any application on the blockchain, and have it run on all computers in the Ethereum network simultaneously in the same decentralized way.

Examples of Ethereum applications could include an AirBnB-style rental service without the large, overvalued unicorn company in the middle running the whole thing and taking the commission. Or a decentralized exchange for property, or a crowdfunding service in which participants dealt directly with each other rather than needing a Kickstarter or Indiegogo in the middle. In these scenarios, the smart contracts themselves would manage payments according to executable rules. No one could tinker with those rules because they wouldn’t reside on any one server. And for the same reason, the application couldn’t go down just because one computer stopped working.

Ethereum was originally a public blockchain, designed, like bitcoin, for anyone to run. But organizations have created versions of it designed to be ‘permissioned’ – usable by participants in private groups.

Banks are already taking an interest in permissioned Ethereum blockchains, primarily because of their ability to run complex applications that could help to settle complex trades. Large software companies are also seeing value in the concept. IBM is developing its own blockchain technology, while Microsoft’s aim is to put many different types of blockchain technology on Azure.

Microsoft started down that road by putting Ethereum on Azure last November. This week, it certified BlockApps, which is a software development platform for Ethereum applications, giving companies a development sandbox to experiment with their own Ethereum blockchains. BlockApps was produced by software firm Consensys. The founder of that firm, Joe Lubin, was also a cofounder of Ethereum.

“Companies can build out solutions on Azure, and if they’re ready to deploy them they can deploy them on Azure too,” he said.

Decentralized blockchain-based applications are useful for situations where CIOs want multiple points of failure and resilience, because it allows them to replicate data across lots of different nodes that work together running the same applications, he added.

“Any time that you don’t want to be subject to an infrastructure that has central points of weakness or control, blockchain infrastructures are good for that. They can be massively decentralized or partly decentralized,” he said. “Any situation in which a rogue system administrator or corrupt CFO or a hacker can get in and mess with the system is absolutely right for the use of blockchains.”

Wouldn’t running a decentralized application framework on one company’s cloud computing platform simply recentralize it again? Lubin doesn’t believe so. Ethereum applications on Azure can still run on multiple different data centres around the world, he points out.

Ethereum is still currently in beta mode, but in a few weeks the community behind it will launch Homestead, the next version of the blockchain application platform, said to be the first version safe for commercial implementation.



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