Big wow for blockchain collaboration amongst banks
This is a win for collaboration, blockchains and the frequently-bashed banking industry. It’s exciting enough to write about at 3am. It’s exciting because it paves the way for collaborative innovation. It’s not a major triumph for technology or blockchains, yet, but it’s by far the best that I’ve seen so far.
It is significant in itself that individuals in nine of the eleven banks have cleared blockchain-related comments with their respective communications departments. That in itself is “positive for blockchains”. Internal processes make it difficult for staff to make even hand-waving vague comments in the real press. So that’s a win.
What is Azure and Blockchain-as-a-service?
Microsoft Azure if a cloud platform. It’s a website where you can log in, pay money, and in a few clicks, kick off automated processes which generate (“spin up”) virtual computers with software pre-installed and pre-configured. You can then access these computers like others on your network.
For those who haven’t experienced the power of cloud, imagine being able to go to a shop, saying “I want a smartphone, already pre-configured to how I like it, with the right settings, and all my favourite apps already installed so I don’t have to download each one individually and set them up”. Microsoft’s Azure lets you do something similar, ordering a virtual computer/server with various blockchain-related software pre-installed and pre-configured; Microsoft calls it Blockchain-as-a-service.
Is this groundbreaking? No. You could, in a few more clicks order a “blank” computer and download your own blockchain-related software to run. But that’s as boring as getting a new phone and re-installing all of your favourite apps.
The Blockchain-as-a-service is a bit of a misnomer. It would be more clear to call it blockchain-software-installation-as-a-service. Reason being, Microsoft isn’t hosting a blockchain; it’s letting you easily install software that you then configure and point at either public blockchains or private blockchains at your discretion.
The directionally important thing to understand here is that these packages are available to click on, directly from Microsoft’s kinda-app-store, which means there has been approval from within Microsoft to support this kind of thing.
What has been achieved by R3? What does this mean?
According to the press release, “They simulated exchanging value, represented by tokenized assets on the distributed ledger without the need for a centralized third party.” – meaning technicians from the eleven financial institutions each logged in to at least one server on Microsoft Azure, and interacted with an Ethereum-flavoured blockchain by creating digital identities for themselves, and issuing commands to send the native token “ETH” (or other tokens that could have been created via smart contracts) between each other.
Is this a new thing? How hard is this?
The Ethereum blockchain is a public blockchain which has been running since August 2015. Developers at the banks could have done this months ago on the “real” Ethereum blockchain, and probably have done. It’s not hard. However, because the code that generates and maintains this public blockchain is open-source, anyone (including R3 and banks) can copy it and double-click to create their own private version of it, with control over who can access and write to it. This private clone is the version that is being experimented upon.
I try to differentiate by calling the real/canonical blockchain “the real Ethereum blockchain” or “the public Ethereum blockchain”, and private ones “Ethereum-flavoured” blockchains. It’s a bit like taking solar energy technology and creating your own electrical grid at home. There’s the “public grid” and you can create your own “private grid”. Similarly in Ethereum, there’s The Public Ethereum blockchain, and there are many private Ethereum-flavoured blockchains running on corporate networks and home computers.
The “big wow” is not that the banks have learnt how to use Ethereum: any good developer in a bank lab will have been able to download and run the Ethereum source code in a matter of hours; many have done so.
The “big wow” is not that the developers have been able to log into Azure and issue basic transaction commands like “I send you some ETH coins“.
For me, the breakthrough is that the silence around blockchains and distributed ledgers has been broken, and people in the financial institutions have been able to say “Hey, we can do this, we don’t need SWIFT or third parties to communicate.”. They’ve been able to get this past their conservative communications departments, and start a real dialogue.
That, to me, is the big wow.