Blockchain-as-a-Service: What Is It and How It Works

Despite all the benefits of blockchain technology, one of its biggest drawbacks is how costly and complicated it can be. Building blockchain networks or applications is a resource-intensive process due to the high energy and infrastructure requirements.

The bitcoin blockchain, as the first practical implementation of blockchain technology, plays a crucial role in financial systems by enabling peer-to-peer financial solutions and efficient transaction verification without a central authority.

Like every technology-enabled service on the internet, a blockchain development company can use blockchain infrastructure on an “As a Service” model. This is a relatively new niche, but one that will resolve many of the problems associated with blockchain implementation. In this post, we will explore what Blockchain as a Service means, its benefits, and potential challenges.

• Blockchain as a Service (BaaS) allows people or organizations to build and operate their own blockchain network using cloud-based infrastructure provided by a third party or vendor. 
• BaaS platforms offer a variety of services which may include core blockchain technologies, smart contract deployment, decentralized data storage, and other services. 
• BaaS solves many of the problems associated with traditional blockchain deployment such as cost, scalability, access, and interoperability. 

What is Blockchain-as-a-Service (BaaS)?

Blockchain as a Service (BaaS) is a software service model that allows people or organizations to build and operate their own blockchain network or applications using cloud-based infrastructure provided by a third party or vendor. 

BaaS is based on the popular “as a service” model which gives enterprises access to technical solutions over the Internet on a pay-per-use basis. In the case of blockchain as a service, the technical service being accessed on a subscription basis is the blockchain backend and infrastructure of a desired configuration. 

Blockchain as a service allows businesses to build their own cloud-based blockchain solutions without developing blockchain infrastructure from scratch or hiring in-house expertise on the subject. This lowers the barrier to entry for blockchain integration for businesses since the backend and infrastructure are provided by a third party. 

Understanding Blockchain Technology

Blockchain technology is a decentralized, digital ledger that records transactions across a network of computers. This innovative technology allows for secure, transparent, and tamper-proof data storage and transfer, making it a game-changer for various industries, including finance, healthcare, and supply chain management.

At its core, blockchain technology consists of a network of nodes that work together to validate and record transactions. Each node has a copy of the blockchain, which is updated in real-time as new transactions are added. This decentralized approach ensures that no single entity controls the data, making it more secure and resistant to tampering.

Blockchain technology has several key features that make it attractive for various use cases:

1. Decentralization: Unlike traditional centralized systems, blockchain technology is decentralized, meaning that no single entity has control over the entire network. This decentralization enhances security and trust, as the data is distributed across multiple nodes.
2. Security: Blockchain technology employs advanced cryptographic techniques to secure data and prevent unauthorized access or tampering. Each transaction is encrypted and linked to the previous one, creating a chain of secure data blocks.
3. Transparency: One of the most significant advantages of blockchain technology is its transparency. Every transaction is recorded on a public ledger, making it easy to track and verify data. This transparency is particularly valuable in industries like supply chain management, where tracking the origin and movement of goods is crucial.
4. Immutability: Once data is written to the blockchain, it cannot be altered or deleted. This immutability ensures the integrity of the data, making it a reliable source of truth for various applications.

Blockchain technology’s unique features make it a powerful tool for transforming traditional systems and processes. By leveraging its decentralized, secure, transparent, and immutable nature, businesses can create more efficient and trustworthy solutions.

Key Features and Takeaways

The exact mode of operation of a Blockchain-as-a-Service system depends on the specific types of blockchain services that an organization requires. In a BaaS model, the basic idea is that a third party (commonly referred to as a vendor) manages the installation, hosting, and maintenance of a blockchain network on behalf of organizations that are subscribed to its services. 

The cloud-based service provider handles the blockchain infrastructure and technology including nodes, consensus mechanisms, and security protocols, while businesses pay a small fee (typically monthly or yearly) to access these technologies and associated services. The fee allows subscribers to develop and host their own blockchain applications on the ecosystem provided by the vendor. 

Blockchain as a Service vendors may also offer software development kits and APIs that help simplify the process of building on the infrastructure they have provided. This makes blockchain networks accessible to developers with varying levels of expertise so businesses can customize the network to their specific needs. 

Once set up, the vendor continues to handle the complex backend operations needed to keep the blockchain platform (and all the blockchain applications built on it) running. A BaaS vendor also offers support activities, resource allocation, and security services. BaaS systems are often scalable, which allows them to accommodate growing workloads. Providers offer scalable blockchain networks to ensure flexibility and scalability in blockchain implementations.

How BaaS Works

Blockchain-as-a-Service (BaaS) is a cloud-based service that allows businesses to build, deploy, and manage blockchain applications without the need for extensive in-house infrastructure and expertise. BaaS providers offer a range of services, including blockchain development, deployment, and management, as well as tools and APIs for building blockchain applications.

Here’s how BaaS works:

1. Blockchain Development: BaaS providers offer blockchain development services, including the creation of custom blockchain networks, smart contracts, and blockchain applications. This allows businesses to develop blockchain solutions tailored to their specific needs without having to build the infrastructure from scratch.
2. Deployment: Once the blockchain network and applications are developed, BaaS providers deploy them on their cloud infrastructure. This ensures that the blockchain solutions are scalable, secure, and highly available, allowing businesses to focus on their core operations.
3. Management: BaaS providers take care of the ongoing management of the blockchain network and applications. This includes monitoring the network, performing maintenance tasks, and applying updates to ensure optimal performance and security.
4. Tools and APIs: To simplify the development process, BaaS providers offer a range of tools and APIs. These include software development kits (SDKs), APIs, and blockchain development frameworks that make it easier for developers to build and integrate blockchain applications.

BaaS providers offer a range of benefits, including:

1. Reduced Costs: By outsourcing the development and management of blockchain infrastructure to BaaS providers, businesses can significantly reduce the costs associated with building and maintaining their own blockchain systems.
2. Increased Efficiency: BaaS providers offer pre-built blockchain networks and applications, which can save businesses time and effort. This increased efficiency allows businesses to quickly deploy blockchain solutions and start reaping the benefits.
3. Improved Security: BaaS providers implement advanced security features and continuously monitor the blockchain network to protect against threats. This ensures that the blockchain solutions are secure and reliable.
4. Scalability: BaaS providers offer scalable blockchain solutions that can handle large volumes of transactions. This scalability is crucial for businesses that need to accommodate growing workloads and expanding operations.

Some of the top BaaS providers include IBM Blockchain Platform, Amazon Managed Blockchain, and Microsoft Azure Blockchain Service. These providers offer a range of services and tools for building and deploying blockchain applications, making it easier for businesses to leverage blockchain technology.

In conclusion, blockchain technology is a decentralized, digital ledger that records transactions across a network of computers. BaaS is a cloud-based service that allows businesses to build, deploy, and manage blockchain applications without the need for extensive in-house infrastructure and expertise. BaaS providers offer a range of services, including blockchain development, deployment, and management, as well as tools and APIs for building blockchain applications.

Examples of BaaS

BaaS platforms offer a variety of services to help businesses looking to leverage blockchain technology to meet their specific needs. These services allow businesses large or small to adopt blockchain technology to solve many of their operational problems without doing the technically complex work required to create and run their own blockchains. Examples of blockchain services that can be provided under the BaaS model include:

Core Blockchain Infrastructure

Scalable blockchain networks are crucial for Blockchain as a Service providers, as they can manage and maintain blockchain nodes. This ensures that enterprises can build scalable blockchain solutions with stable, high-performance infrastructure, without worrying about the intricacies of node management, security, or consensus mechanisms.

Blockchain Data Storage

Much like conventional cloud data storage services, BaaS providers can deliver a distributed database for organizations looking to store data on the blockchain. Blockchain data is stored on a distributed ledger system which is secure and immutable. It presents several benefits, especially for enterprises that need to store vital business assets or sensitive data like financial information and healthcare records and keep them protected against cybersecurity vulnerabilities. Such organizations can outsource their data storage needs to BaaS service providers. 

Tracking and Tracing 

This is a type of blockchain service that lets businesses leverage the transparency and openness of blockchain for tracing and tracking purposes. With a BaaS solution, organizations in need of this service can manage operations on a shared ledger system provided by a third-party vendor, which gives them full data visibility. This is particularly valuable in sectors like logistics, where verifying the origin and tracking the movement of goods are crucial for supply chain transparency and product authenticity.

Smart Contract Deployment

Blockchain-based smart contracts refer to self-executing contracts written on the blockchain. They have their terms of agreement written directly into their codes which allows them to automatically execute once the terms of the agreement have been reached.

Smart contracts have a wide range of real-world use cases from managing real estate transactions, to stock and commodity trading, lending, dispute resolution, and so on. A BaaS vendor can offer smart contract deployment as a service which would allow businesses to create smart contracts seamlessly without having to build the blockchain infrastructure from scratch. 

Decentralized App Development 

A Blockchain as a Service model can be used to manage the development of scalable decentralized applications. In this case, the vendor builds and manages the core blockchain infrastructure so users can simply plugin and create their applications.

Benefits of Blockchain-as-a-Service

The transition from a conventional system to blockchain-powered business operations requires significant technological and financial investment. Most businesses simply cannot afford to transition to a self-hosted blockchain. Blockchain as a service makes the transition to blockchain seamless and less costly. Making the transition to the blockchain through this method comes with numerous benefits as highlighted below: 

• Accessibility: BaaS companies are basically blockchain infrastructure providers. They lower the entry barrier of blockchain technology by making blockchain capabilities more accessible to businesses.
• Cost-effectiveness: Outsourcing blockchain infrastructure development can help organizations save time and money. Instead of building their own blockchain from scratch, they can simply plug into existing systems. Embracing BaaS also means you won’t have to hire developers to deploy and maintain your blockchain system. BaaS cost is on a pay-as-you-go basis which means you only pay for what you use and all latency costs aren’t on your business. 
• Reliability: It takes a lot of resources to create and manage a blockchain ecosystem, which most businesses don’t have. With BaaS, the provider handles the complex back-end operations such as resource allocation, hosting, and data security, needed to keep the blockchain in operation. For instance, BaaS providers typically implement multi-layered security measures, like encryption and hardware Security Modules (HSMs) which might be costly for individual organizations running a self-hosted system. 
• Integration and cross-chain compatibility: This is one of the hallmarks of third-party BaaS solutions. Since they’re built to be used by multiple individuals, BaaS platforms are often designed to seamlessly integrate blockchain solutions with legacy applications with ease. This way, enterprises using the service can easily connect and transfer assets between different systems. This is particularly beneficial to organizations that require interaction with various ecosystems and industries, such as logistics and supply chain management. 

Challenges of Blockchain-as-a-Service

Blockchain as a Service will solve many problems associated with blockchain technology adoption. However, this blockchain model isn’t without some limitations. Some of the challenges of a blockchain as a service approach are highlighted below: 

• A return to centralization: Decentralization is one of the major arguments to support blockchain adoption. Yet, blockchain as a service requires a return to centralization since your transactions and operations will now be funneled through the host’s infrastructure. 
• Scalability issues: BaaS service providers typically offer tiered services that allow users to pay for what they use. While this can help save costs, it can also limit scalability especially if usage increases drastically or an organization has more needs not covered by the blockchain network’s scope. 
• Lack of knowledge and expertise: BaaS reduces the need for dedicated blockchain expertise since you won’t need to build your own ecosystem for blockchain apps from scratch. But you will still require dedicated professionals whose core competencies allow them to manage and troubleshoot Blockchain-as-a-Service platform development and integration issues.  
• Cost: BaaS can reduce upfront costs since you won’t need to set up infrastructure from scratch. However, as your operations scale, ongoing subscription and usage fees can accumulate quickly, especially for businesses with growing demands or heavy network use.

Top BaaS Providers

Thanks to the growing appeal of blockchain technology, several players have entered the industry to bridge the gap in the BaaS space. This includes native blockchain companies or startups focused on BaaS as well as traditional software-as-a-service companies like Amazon web services and Microsoft Azure integrating this game-changing technology into their services. Some of the leading blockchain service providers include: 

IBM Blockchain Platform

IBM has a Blockchain-as-Service solution built on the Linux Foundation’s Hyperledger Fabric. This platform allows businesses to implement trusted data exchange and workflow automation on a blockchain network. The IBM blockchain platform can be used across various industries including financial services, healthcare, government, and supply chains. 

Bloq 

Bloq provides a suite of blockchain technology solutions for enterprises to handle a wide range of business needs including business reconciliation, authentication, and security. The company’s range of products includes a smart contract platform, a smart wallet solution, and a decentralized cloud for storing and managing business data. 

Kaleido

Kaleido is a blockchain digital assets management and tokenization platform for large-scale enterprise use cases. The platform provides a complete stack of solutions to help enterprises create, manage, and track digital assets. Using Keleido, businesses can launch their own custom networks and manage their asset tokenization initiatives without building a blockchain infrastructure from scratch. 

Amazon Web Services (AWS)

AWS, one of the giants in the cloud computing space, has also ventured into the blockchain as a service niche with its Amazon Managed Blockchain service, offering a fully managed solution for creating and managing scalable blockchain networks. This service provides a fully managed blockchain infrastructure for creating and managing blockchain networks.

Alibaba Cloud Internet

The Alibaba Cloud BaaS platform is an enterprise-level service designed to help businesses build secure and stable blockchain environments without complex configuration. This blockchain platform supports Hyperledger Fabric, Ant Blockchain technologies, and Quorum.

Microsoft Azure

Microsoft’s foray into the blockchain service niche is focused on decentralized blockchain application development. Known as Microsoft Azure Blockchain Service, this solution provides a fully managed blockchain platform that provides an end-to-end infrastructure for building enterprise-grade decentralized networks and blockchain apps.

Industry Use Cases for BaaS

The use cases for Blockchain as a Service are vast and limitless. Given the flexible nature of blockchain technology, virtually any enterprise that uses cloud-based software can pivot into a blockchain-powered alternative. The examples below demonstrate the potential use cases for BaaS across various industries. 

Logistics Industry and Supply Chains 

Blockchain technology can help operators in the logistics and supply chain industry establish transparent networks where products are easier to track. Instead of building infrastructure from scratch, individual operators can connect to an enterprise platform where they can record transactions, track shipments, and verify product origin. BaaS also supports blockchain identity management, enabling secure and streamlined authentication for supply chain participants while ensuring data integrity.

Gaming 

Blockchain gaming is a rapidly growing industry characterized by games that allow true game asset ownership. BaaS can provide the infrastructure needed to manage tokenization and in-game economy which would allow users to own and trade virtual assets within games. 

Banking and Financial Services 

Blockchain in banking remains one of the biggest mainstream applications of blockchain technology. Banks and fintech companies can leverage cloud-based solutions built on the blockchain to create secure and efficient financial services and cross-border payment solutions.

Blockchain anti-counterfeiting technologies and data security features can provide enhanced security for financial service companies. BaaS platforms for tokenization and asset management will also be valuable for financial service companies that want to create their own digital assets such as cryptocurrencies and tokenized securities. Additionally, blockchain in IoT can enable secure device-to-device communication in healthcare environments, ensuring that medical IoT devices transmit patient data safely and accurately.

Healthcare 

The healthcare industry needs to develop blockchain solutions for healthcare data management. A BaaS platform for electronic health records can help improve the process of storing, managing, and sharing patient data with healthcare providers, HMOs, and other stakeholders. 

Future of Blockchain-as-a-Service

At the moment, there’s no telling how big Blockchain as a Service will be. However, if stats are anything to go by, this industry will likely grow at an accelerated pace in the coming years. According to insights from MarketsandMarkets, the size of the global BaaS market is expected to hit revenues of up to USD 11,519 million by 2026. This represents a cumulative annual growth rate of 62.2% between 2020 and 2026. 

All factors seem to be in favor of this projected growth considering the potential benefits of blockchain as a service. Several companies are already considering blockchain adoption, with their biggest drawback being the high cost of blockchain infrastructure. While bigger companies will continue to create their own self-hosted solutions, small and medium companies will likely turn to BaaS service providers to achieve development goals, boosting blockchain adoption while keeping costs down. 

Blockchain Solutions from CrustLab

BaaS is a great way for small and medium businesses to get started with blockchain technology. It allows them to enjoy the benefits of this technology without the upfront infrastructure investment. 

At CrustLab, we help enterprise customers make smart development decisions like this. Our software development services cover blockchain development projects on both in-house and third-party BaaS infrastructure. Contact us to hire an expert team of blockchain developers to handle your blockchain integration projects.