Blockchain-as-a-Service, or BaaS, means the creation of a service that allows users to quickly implement all the advantages of blockchain technology into business processes in a short time and with minimal effort from the customer. ABI Research, a major consulting and analytical company, predicts that by 2023, revenue from the sale of distributed ledger technology (DLT) software and services will be more than $10.6 billion. There is no doubt that a substantial part of this market will be occupied directly by the BaaS segment, and the world’s largest companies are already actively exploring and conquering a new niche. DeCenter figured out how BaaS works, what the main advantages of this service are for businesses, and who are ready to offer them on the market.

How the BaaS Segment Developed

Nothing is surprising in the fact that a vast number of companies and enterprises are showing a great interest in using and introducing blockchain technology into their business operations. After all, the use of such solutions can bring a huge number of advantages that are inaccessible when using ordinary, centralized systems.

All information entered can, if necessary, be completely (or partially) transparent and publicly accessible for the clients of the business (B2C) or the partners and contractors (B2B), which significantly increases the transparency of the work and eliminates the “need for trust” factor for all parties involved. All the information is on the blockchain, and it significantly reduces the need to check the activities of all participants in business processes, allowing users to work together much faster. The same factor will enable businesses to refrain from expensive third-party intermediary services, which act as guarantors, fixing and confirming the necessary data/transactions/facts, their execution, and so on. It also allows users to refuse the services of contractors, replacing them with a blockchain environment that will perform the same functions (only much faster and more reliably) and will not require substantial financial expenses.

Initially, Blockchain-as-a-Service developed only in the field of finance and insurance. For example, the Corda platform from a large consortium of R3, which was created in 2015 together with such giants as Barclays, Credit Suisse, Goldman Sachs, and JP Morgan, and has recently launched an active collaboration with SWIFT.

But it is already clear that the use of BaaS is not limited to financial market only. Blockchain-as-a-Service can be successfully and effectively implemented in such areas as retail, supply chain management and control, registration of ownership of goods, accounting art, and certification of intellectual property.

High Entry Threshold as the Main Reason for the Appearance of the Segment

Technologically, the creation of blockchain systems is challenging because it requires a solution that will be truly reliable and efficient for data storage, and will also have a high degree of scalability. Moreover, such a blockchain solution must be compatible with other systems, which makes the implementation of blockchain solutions an extremely costly process, and finding and preparing truly qualified specialists in this area that is just beginning its formation becomes a separate problem.

Against this background, Blockchain-as-a-Service remains almost the only serious opportunity for businesses to implement and use blockchain technology for their needs, using a low entry threshold. In this connection, the largest technology companies are well aware of this fact and rush to take their place in the industry, creating universal blockchain ecosystems:

 Microsoft Azure Blockchain Service was one of the first in the world to offer BaaS services. The specially created Enterprise Smart Contracts service simplifies the creation of blockchain solutions using such networks as Ethereum, Hyperledger Fabric, Corda (R3), Chain Core, and Quorum (solution from Enterprise Ethereum Alliance). The business is offered ready-made versions of the architecture, regulated interaction logic and counterparty functioning in the system, models for the delivery of external data to the blockchain (oracles), and other tools and solutions necessary for easy launch.

The Azure Blockchain Development Kit service launched at the end of 2018 and includes the creation of SMS and voice platforms and autonomous user identification systems that will allow users to create various solutions for user interaction with the blockchain, as well as integrate the Internet of Things (IoT) solutions and different mobile clients and applications.

 Amazon, the largest U.S. company in its segment, has created and actively uses two BaaS products: the Amazon Quantum Ledger Database (QLDB) and Amazon Managed. The offered products allow customers to easily create and manage private blockchains themselves, using one of the two best solutions at the moment: Ethereum or Hyperledger Fabric. The use of AWS Blockchain templates is proposed for quick creation and deployment. And the “Managed Blockchain” software is a ready-made solution for managing the created blockchain—this service allows users to control the necessary certificates, connect new members, and expand the access rights of existing ones. Amazon’s blockchain product also provides statistics on the current network status, workload level, and other operational indicators, such as the use of computer resources, memory, and storage systems.

 The IBM Blockchain Platform includes software, templates, code samples, and other tools sufficient to create own blockchain solutions, test them, manage them, and launch them in the IBM Cloud. In February 2019, the IBM Blockchain Platform Free 2.0 was introduced, which is announced as a solution for the “new generation to deploy and launch blockchain networks.” It contains a ready-made architecture and a centralized, simple, and understandable user interface that allows professionals with a relatively small level of technical knowledge to “assemble” solutions with satisfying conditions for their functioning and scaling. As well as interfaces for deploying individual components and managing them and the blockchain network.

 There are many newcomers in this area and seemingly direct non-core participants, such as KT Corporation—the largest telecom company in South Korea, which plans to release a platform that provides BaaS services for businesses already in April of this year. According to the CEO of the project, the platform will lower the entry threshold and the price of introducing blockchain technologies into the business of local companies and will create a large and sustainable ecosystem, in which the efficiency of all its participants will increase.

Today, in the Blockchain-as-a-Service field, dozens of major participating companies are actively developing, in addition to those mentioned above: Hewlett Packard, Oracle, Google, SAP, HPE, Intel, Deloitte, Blockstream, and others. Unions and large consortia exist, such as R3 and Hyperledger, to unite the efforts of large market participants and create a large, universal environment for providing Blockchain-as-a-Service.

Crypto Enthusiasts Are against the Centralization of Blockchain-as-a-Service

One of the drawbacks of the Blockchain-as-a-Service model is the architectural complexity of creating such a network, with the result that most existing solutions have some degree of centralization. As a result, in these solutions, transactions can be sent through a centralized service host. For example, in the Hyperledger Fabric, all participants are equal, make decisions and act on the basis of strictly fixed blockchain rules, each participant has their own node and is a validator on the blockchain, which is guaranteed not to allow any of the other participants to perform illegal actions, delete or modify “data retroactively entered in the ledger.” But at the same time, all transactions are sent out by the generally accepted centralized server before they are validated, and this creates potential opportunities for an attack on the entire system in order to slow down or temporarily paralyze its work.

For this reason, blockchain enthusiasts do not like corporate blockchain solutions and consider that the blockchain is relevant only as an open and publicly accessible database, for example, like the Bitcoin or Ethereum blockchain. But businesses are not particularly concerned about the views of third parties on this issue; they need a tangible positive result of the introduction of technology, and there certainly is one.