Microsoft and IBM at the forefront of the next cloud service: Blockchain as a service

Blockchain is exploring new industries and enterprise use cases every day, and soon this technology will be everywhere. The complexity of blockchain requires all the vocabulary to explain, but it is expected that the ecosystem participating in the future technology improvement will be larger, including startups, academic institutions, open source institutions, alliances and financial institutions. Among them, the participants who are most in line with the future trend of blockchain are technology giants such as IBM and Microsoft.

IBM and blockchain are defining a new blockchain-as-a-service market (BaaS), investing heavily in enterprise blockchain service projects, and using cloud service infrastructure to reduce a lot of back-end work in enterprise blockchain development. Last November, Microsoft released BaaS on the Azure platform, and IBM released IBM Blockchain as a Service in February this year. This week, IBM once again released a secure developer blockchain network.

They also each promote independent open source initiatives; IBM and the Linux Foundation launched the Hyperledger Project in December 2015, ahead of the heavyweight tech company Redmond. Then Microsoft followed suit in June this year and launched Project Bletchley. Marley Gray, blockchain director, director of BizDev, and director of Microsoft's Strategy for Cloud & Enterprise, and Arvind Krishna, senior vice president and director of IBM Research, accepted an exclusive interview with reporters. Gray and Krishna discussed their respective BaaS platforms, cooperative and competitive projects in the field of open source blockchain, and their respective companies' predictions on the future trends of this technology.

Editor’s note : This is part 1 of a two-part series on IBM, Microsoft, and the future of blockchain in enterprise tech. Below we explain what blockchain services are and the disruptions dueling the company’s cloud platform. Part 2, coming soon, will delve deeper into the open source ecosystem around blockchain and take a broader view of the blockchain space to determine who will lead the way in blockchain technology next.

Difference between Blockchain and Blockchain as a Service?

Blockchain is a distributed ledger technology used to record transaction data. It is an encrypted, unalterable digital record, including cryptocurrencies such as Bitcoin and Ethereum, as well as smart contracts, various online assets, data and transactions.

Blockchains can be public or private. Bitcoin is the first and most famous example of a public blockchain - it is where miners around the world build blocks of transactions and a global network of machines serve as a decentralized node infrastructure, allowing blockchains to maintain their anonymity (especially for cryptocurrencies) and the security of keeping data immutable.

On the other hand, enterprises are investing more in private blockchain developments. These use the same distributed ledger technology to record transaction data, including private cloud technologies or virtual environments that do the same, but only allow access to the enterprise network (or enterprise networks like those in the Hyperledger Project or R3 Consortium work).

Why would an enterprise want a private blockchain? Think of blockchain as an exchange structure for any business application or service, whether it is a system for processing banking and financial transactions within an enterprise or a database infrastructure. With blockchain, every business process and transaction is synchronized to a tamper-proof ledger that permanently ensures its transparency, accountability and data integrity.

BaaS comes from private blockchains. Public blockchains rely on a huge peer-to-peer network of nodes and machines to maintain and strengthen decentralized infrastructure, making blockchains such as Bitcoin more innovative. Private blockchains require companies to invest a lot of manual development work and back-end cloud computing capabilities to build and maintain distributed infrastructure. Therefore, IBM and Microsoft have developed cloud service infrastructure platforms that are said to have many developer tools. They and many other companies provide blockchain applications to enterprises, helping enterprises reduce a lot of burdens. This blockchain uses Platform-as-a-Service (PaaS), and IBM and Microsoft are trying to add a variety of cloud services on this basis.

The tech giants know there is a huge market to win in the future of blockchain-based commerce. Both IBM and Microsoft want to build an open blockchain that is secure, reliable, open and interoperable, but they also want enterprises to choose to build cloud services on the blockchain. Even Amazon is taking action, partnering with the Digital Currency Group earlier this year to create its own "sandbox" on Amazon Web Services.

Microsoft's BaaS product is aimed at both enterprises and developers. Microsoft's idea is to provide enterprises with all the necessities for building blockchains in the cloud, using the backend infrastructure of the Microsoft Azure platform, developer tools, templates, resources of Microsoft Visual Studio, etc., to make the whole process simpler, safer and interoperable.

“We went into the space and saw all the different technologies, our enterprise customers, the consortiums, and saw problems and confusions that only Microsoft could solve,” Gray said. “The common blockchain pain points we learned about were identity management and key management: how do you get started. Privacy was the second pain point. The third pain point was interoperability with existing systems and other blockchains. One blockchain is not going to solve all the problems, we’re going to have many blockchains.”

Microsoft BaaS includes many services and resources needed by enterprises and developers. In the Azure Dev Test Labs environment, developers can build, test and deploy blockchain-based applications in the Azure cloud. Developers can also obtain the Visual Studio integrated development environment (IDE) to add more complete analysis and monitoring functions and tools to blockchain applications, such as Cortana Intelligence Suite, machine learning and IoT services.

Microsoft is sticking with Ethereum. In addition to its partnership with R3, the company also offers an Ethereum-specific BaaS environment for developing smart contract applications. Gray said that all BaaS features in blockchain applications are compatible with Microsoft Azure Active Directory, Microsoft Microsoft Office 365 and Microsoft Power BI.

The company's main goal is to provide guidance to application developers. Microsoft's device focuses on smart contracts and virtual machines, while BaaS takes care of the backend infrastructure and database integration.

Gray said: "There are idle business processes beneath the surface of any industry that should be significantly adjusted. Blockchain data services are a huge opportunity. We just don't know what we can get from it. We have never had such a large-scale cross-enterprise data collaboration, and we can take a lot of cross-domain historical data from it and use machine learning to analyze it. Visual Studio has the ability to embed the Azure platform, so you can deploy smart contracts in this ecosystem, create archives, do static analysis, etc. The current smart contracts do not need to be adjusted, but the system needs to be adjusted globally."

Microsoft BaaS is closely related to the Bletchley Project, a blockchain middleware that fills in the missing elements of BaaS, especially identity, interoperability, key management, privacy, and security.

IBM looks at blockchain development from multiple angles. In IBM's z Systems, the company sees blockchain-based application development as a new feature of its server technology, as part of the parallel open source work of the Hyperledger project. Krishna explained that the key is how to integrate blockchain into existing systems without forcing banks, governments and other institutions to abandon traditional technologies, which would only delay the widespread use of blockchain for many years.

“Blockchain simplifies a lot of things, but it will eventually have to integrate into the system of record,” Krishna said. “Banks will throw away all the applications they are using. We will expand the mainstream traditional systems so that they can directly enter and exit the blockchain network. Let’s say I have a blockchain smart contract that allows the mainframe system or the existing system of the bank, airline, or large retailer to operate those important applications. All the regulatory issues and costs of the large mainframe system cannot be solved all at once. Blockchain needs to integrate with these systems. Anything that has to do with the real economy must be compatible with it.”

Krishna said that IBM will begin deploying internal applications of blockchain this summer. In addition, IBM has broken down blockchain development for enterprises and developers into a set of cloud-based services. Krishna said that the purpose of operating blockchain on IBM's cloud platform Bluemix is ​​to simplify blockchain development and operations. The secure blockchain service running on IBM's server system LinuxONE adds firmware protection and root access restrictions to blockchain applications and data. This "high-security enterprise network" is an important step in allowing system regulators in highly regulated industries to use blockchain.

“Blockchain is relatively new, so if you go to GitHub and get some code and install it, blockchain requires a lot of code to execute,” Krishna said. “Application development and operations become complex for developers, and many existing code bases are incomplete. We want to make this very simple. We do our best to allow you to enter the Bluemix DevOps environment and blockchain network with one click.”

IBM also provides enterprise consulting services on the BaaS platform and recently announced that its blockchain Bluemix Garage has begun a global rapid development phase. IBM's blockchain ecosystem is closely related to the open source projects of the Hyperledger project. Like Microsoft, IBM's corporate value proposition is to provide a developer network, reference architecture, application programming interface (API), and all the same open source resources as the Hyperledger project.

The BaaS and open source sectors of blockchain are closely related, as IBM and Microsoft are competing for not only market share but also visibility in the blockchain space. As for which company will be the vanguard as the technology continues to evolve; all we can say is that competition in the enterprise blockchain space will intensify. Krishna said IBM is ready.

"Competition is always there. Something as interesting and impactful as blockchain is bound to attract competition. Do I believe that IBM has the superior capabilities and talent to understand the technology and bring benefits to customers? My answer is a resounding yes."