On June 15, 2016, Microsoft released a white paper introducing Project Bletchley, Microsoft’s next iteration on its blockchain as a service (“BaaS”) product. In late 2015, Microsoft announced that it would be leveraging its cloud platform, Azure, to provide a low-risk sandbox for customers to gain experience with how blockchain may be applied in various business scenarios, such as supply chain management. Bletchley is positioned as incorporating the latest innovations on the blockchain protocol in the Azure cloud service.
Generally, blockchain is a decentralized digital ledger. Blockchain differs from traditional centralized ledgers because the blockchain protocol uses encryption combined with distributed copies of the ledger to replace the need for a third-party to serve as the ledger’s trusted guardian. Further, blockchain is more efficient because all transactions are mathematically provable and do not require a multi-day verification process. The protocol is append only, and distributed, thus every participant receives an update to their copy of the ledger with the latest transactions. Yet, this revolutionary framework, blockchain 1.0, was just the beginning.
Blockchain 2.0 introduced “smart contracts” to the protocol. Smart contracts are bundles of coded logic or procedures which sit along side the entries in the ledger. The promise of smart contracts is that they will allow certain business processes to operate independently by creating self-enforcing contracts. However, it was quickly recognized that these smart contracts would need to interact with the world outside of the blockchain network.
To incorporate external signals into the blockchain network, blockchain 3.0, Bletchley builds on the existing concept of blockchain oracles. Oracles are dedicated software designed to inject external signals into the blockchain. These signals can be triggering events defined by a smart contract, such as date, time, price, or interest rate. Once a particular signal strikes a predetermined value, for example, the smart contract can self execute through the blockchain and effect a transaction between counterparties.
Clearly, blockchain technology continues to captivate the attention of the largest companies in the world, and the BaaS concept is poised to make blockchain ubiquitous. We will continue to monitor developments as blockchain forges headlong into the crossroads of globalization, regulation, and innovation.