Banking on Blockchains
While the financial world has largely dismissed the digital currency bitcoin, it has looked with interest on the technology behind it: blockchain (see infographic below). Now, tech companies are teaming up with financial and other industries to integrate blockchain into the latter's systems.
And one tech giant may just have gotten a leg up over others.
Microsoft and R3, a consortium of 43 financial institutions, have formed a strategic partnership to accelerate the use of the blockchain technologies. The deal was announced at the company’s Envision conference on April 4.
According to David Rutter, CEO of R3, the blockchain may be commercially available in about a year, taking care to caution, however, that it’s “three to five years until significant commercial adoption.”
With a view to coming developments, providers of cloud-based services that can run blockchain software are already competing for partners in different industries. But Microsoft’s vendor relationship with R3 will likely give it a certain competitive edge when trying to win new business.
The Shadow of Bitcoin
Blockchains first gained popularity with the digital currency bitcoin. It is a public ledger of all Bitcoin transactions that have ever been executed, which is then recorded and stored on a global network so it cannot be tampered with. But now financial institutions are experimenting with blockchains to run their businesses more efficiently.
Arguably, blockchains operate more efficiently, more securely, and at lower costs than current systems in place. In essence, it cuts out the middle man.
Meanwhile, rivals such as IBM are allocating resources to their own blockchain ventures, such as the Hyperledger Project, which seeks to standardize and coordinate blockchain technologies.
But Microsoft is confident their partnership with R3 will yield real dividends, financial and technological. "The R3 partnership will help us to see what technology actually works, what combination actually works," says Marley Gray, director of technology strategy at Microsoft.
"We see it as a tremendous investment for Microsoft."