cross pond high tech

The Ethereum project and ConsenSys, the company created by one of the project’s co-creators, have received a huge vote of approval from one of the world’s biggest enterprise software providers — Microsoft. The company will be working with ConsenSys to provide development tools for Microsoft’s enterprise customers on the Azure platform.

Focusing on financial services we saw a lot of potential for a framework and platform like Ethereum to go across the platform of financial institutions and modernize a lot of processes that were stuck in the past,” says Marley Gray, Director of Technology Strategy, US Financial Services at Microsoft. “We thought that Ethereum was a really good platform for building distributed ledger applications.”

Unlike bitcoin-based blockchain applications (and companies like Chain that are developing projects on top of bitcoin) Ethereum uses a different token called the Ether.

“Bitcoin offers one functionality which is the monetary functionality. Because it’s a very narrow protocol… it’s difficult to build arbitrarily difficult functionality into the program,” says Joseph Lubin, the founder of ConsenSys, and a major supporter of the Ethereum Foundation.

With Ethereum, there’s a complete computational machine running within every node of the network, Lubin says.

BITCOIN has a bad reputation. The decentralised digital cryptocurrency, powered by a vast computer network, is notorious for the wild fluctuations in its value, the zeal of its supporters and its degenerate uses, such as extortion, buying drugs and hiring hitmen in the online bazaars of the “dark net”. This is unfair. The value of a bitcoin has been pretty stable, at around $250, for most of this year. Among regulators and financial institutions, scepticism has given way to enthusiasm (the European Union recently recognised it as a currency). But most unfair of all is that bitcoin’s shady image causes people to overlook the extraordinary potential of the “blockchain”, the technology that underpins it. This innovation carries a significance stretching far beyond cryptocurrency. The blockchain lets people who have no particular confidence in each other collaborate without having to go through a neutral central authority. Simply put, it is a machine for creating trust.
To understand the power of blockchain systems, and the things they can do, it is important to distinguish between three things that are commonly muddled up, namely the bitcoin currency, the specific blockchain that underpins it and the idea of blockchains in general. A helpful analogy is with Napster, the pioneering but illegal “peer-to-peer” file-sharing service that went on line in 1999, providing free access to millions of music tracks. Napster itself was swiftly shut down, but it inspired a host of other peer-to-peer services. Many of these were also used for pirating music and films. Yet despite its dubious origins, peer-to-peer technology found legitimate uses, powering internet startups such as Skype (for telephony) and Spotify (for music streaming)—and also, as it happens, bitcoin.

The blockchain is an even more potent technology. In essence it is a shared, trusted, public ledger that everyone can inspect, but which no single user controls. The participants in a blockchain system collectively keep the ledger up to date: it can be amended only according to strict rules and by general agreement. Bitcoin’s blockchain ledger prevents double-spending and keeps track of transactions continuously. It is what makes possible a currency without a central bank.

Blockchains are also the latest example of the unexpected fruits of cryptography. Mathematical scrambling is used to boil down an original piece of information into a code, known as a hash. Any attempt to tamper with any part of the blockchain is apparent immediately—because the new hash will not match the old ones. In this way a science that keeps information secret (vital for encrypting messages and online shopping and banking) is, paradoxically, also a tool for open dealing. Bitcoin itself may never be more than a curiosity. However blockchains have a host of other uses because they meet the need for a trustworthy record, something vital for transactions of every sort. Dozens of startups now hope to capitalise on the blockchain technology, either by doing clever things with the bitcoin blockchain or by creating new blockchains of their own (see article).