If blockchain, as a still-emerging technology, sits at the interface of cutting edge computer science and business, it is still too new for general and widespread adoption and too complicated for enterprises to take the risk of investing in it. It is also still not clear as to what the business case for blockchain is even if there are a number of industries and situations where organizations are starting to show interest.
Blockchain, in its simplest form, is a database similar to Microsoft Excel, but it has much greater attributes that make it a superior product that eventually nearly all business models can take advantage of. Public blockchains are distributed through a peer-to-peer network similar to an Excel sheet that the whole world can access and to which all users can add data. Like other technologies, though, there is a way of investing, using and taking the best from blockchain while leaving the heavy technology lifting to others, notably BaaS.
Blockchain Offered As A Service
Jayson Kim is co-founder of New York City-based Bevite, which created a new hybrid blockchain for the retail industry. He explained that BaaS is a private blockchain network solution offered by 3rd party service providers that allows its user base, or the community, to focus on using the blockchain application rather than managing its infrastructure. IBM’s use of Hyperledger Fabric is an example of a private Blockchain framework maintained by the Linux Foundation and offered by IBM as a BaaS solution for enterprise businesses.
Like its evolutionary cousins (IaaS, PaaS, SaaS), the primary benefit of using a BaaS is convenience, where the solution provides the industry-specific domain knowledge necessary to quickly deploy and use a private blockchain to improve business processes in ways that reduce risk through transparency, saving companies time and money.
Digital identity, for instance, is a common use case used across a wide range of industries, from tracking products in the logistics industry to exchanging patient/provider personal data in the healthcare sector, where minimizing the risk of “counterfeit” data generates significant business value. It’s not all good though.“BaaS solutions are not without challenges. By design, BaaS solutions significantly improve the reliability, security, and scalability to generate some short-term operational benefits. However, its underlying architecture lacks the features, including extensibility, to deliver long-term financial benefits,” Kim said.
He points out that this is especially true in the broader retail industry where its more restrictive, permission-based trustworthy-consensus protocols paradoxically prevent the widespread user adoption necessary to achieve any ROI benefits from operating efficiencies at scale. Yet despite these challenges, these limitations can be overcome if the BaaS solution, were repurposed for more practical, commercially relevant use cases.
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Blockchain or BaaS?
So how does it work? Say a project wants to build on blockchain, Ben O’Hanlon, who works with the UK-based Komodo Platform, points out that there are a number of challenges. If they have their own chain or they face congestion and if they build on the same as other chains (like Etherum with crypto kitties) they face challenges getting a coin listed by centralized exchanges who charge exorbitant fees.
India- based Vellum Capital is a cryptocurrency, and blockchain investment asset management firm. Its CEO Eric Kovalak said that despite what appears almost overwhelmingly complex, organizations should think of BaaS in the same way that they do standard blockchain technology. But to better understand BaaS, it is helpful to first think about blockchain’s foundational features. This includes the need to store some data, a ledger for the data storage, and its distribution across a network. “A lot of people have data that they would like to store, and they can create a custom ledger which matches the uniqueness of their data, but building out a widely distributed network is often difficult,” he said.
He explained that creating a “chain” of distributed ledgers across a network requires some incentive for people to support the cost of the infrastructure. In the case of Bitcoin, the Bitcoin miners are rewarded for supporting the network through mining and transaction costs. Blockchain developers competing to bring new solutions to market are likely to find it’s easier to use an existing distribution network than attempt to create a distributed network from scratch. This is where blockchain-as-a-service is really valuable. “BaaS people to prove and grow their ideas on existing distributed network services without waiting for public consensus to participate in the race to build stand-alone distributed ledgers. I think blockchain-as-a-service will continue to grow in popularity because it solves the most difficult hurdle for entrepreneurs and tech startups trying to bring new products to market,” he said.
In sum, BaaS removes the risk for large enterprises who want the benefits of blockchain but without the risk of losing control of their distributed ledger. This is important if the data being stored is more complex than cryptocurrency accounts, for example, international shipment certificates of origin, or manufacturing inventory tracking.
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Advantages Of Technology Services
Instead of thinking about BaaS though, it is important to keep in mind that any technology as-a-service is going to take the deployment and maintenance of any technology and make it easier, providing organizations are prepared to pay monthly fees for the service, according to Loudon Owen, Chair and CEO of Toronto-based DLT Labs. “Since the beginning, organizations large and small have sought to avoid large upfront capital expenditures and match revenue to expenses by paying on the basis of ongoing services. The lion’s share of BaaS offerings today center around existing players enabling blockchain access on a pricing model akin to cloud services, or pay as you play,” he said.
However a new breed of BaaS offerings will rapidly emerge to offer distributed applications (Dapps) on the basis of a recurring service fee. This spreads paymentsout, allows more flexibility for users and allows organizations to scale their usage. “For a new technology like blockchain that offers to dramatically change business services, this is a fundamental model for the simple reason that we believe these businesses will become category-killers, and a BaaS model allows companies to literally leave others in the dust,” he added.
Ultimately, though, the power of BaaS is all in the “B” for blockchain. For generations data has been stored and locked up in silos with different hardware, software and access requirements. BaaS solutions sweep away this spiderweb of complexity and enable simple, secure access to data leveraging blockchains, that keep data current, everywhere and all the time.
Blockchain In The Cloud
Like other cloud services, BaaS allows enterprises to explore or adopt a technology — in this case distributed ledgers and smart contracts more quickly and safely than starting from scratch. These services range from bare-bones ready-to-program blockchain nodes to sophisticated purpose-built services for popular blockchain use cases like supply chains and tradeable tokens that integrate directly with an enterprise’s existing systems. What the services all have in common is a reduction in the technology expertise and investment, and time, needed to make blockchain solutions a reality. They allow IT departments to focus directly on finding where this young technology fits into their strategy, instead of having to first become blockchain infrastructure experts.
“With increased speed to market, [Baas] users quickly reap many of the advantages of blockchain solutions such as immutable record-keeping and global data redundancy,” Owen said. “And Blockchain-as-a-Service leaves open the option of future on-site implementations, making it a great initial choice for working out a new network, even in cases where total decentralization is the ultimate goal.