Blockchain-as-a-Service (BaaS)
Blockchain-as-a-service (BaaS) is a in-development third-party creation and management of cloud-based networks for companies in the business of building blockchain applications whose technology has moved well beyond its best-known use in cryptocurrency transactions and has broadened to address secure transactions of all kinds; the result is an implementation of demand for hosting services.
KEY TAKEAWAYS (Investopedia)
- Blockchain-as-a-service (BaaS) refers to third-party cloud-based infrastructure and management for companies building and operating blockchain apps.
- BaaS functions like a sort of web host, running the back-end operation for a block-chain based app or platform.
- BaaS may be the catalyst that leads to the widespread adoption of blockchain technology.
How does it work?
BaaS is based on the software as a service (SaaS) model and works in a similar fashion. It allows customers to leverage cloud-based solutions to build, host, and operate their own blockchain apps and related functions on the blockchain. At the same time, the cloud-based service provider keeps the infrastructure agile and operational.
As a development in the greater blockchain ecosystem, BaaS is seen as boosting blockchain adoption across businesses; the major players included in the Baas space are:
- Microsoft, which partnered with ConsenSys to introduce Ethereum blockchain-as-a-service on Microsoft Azure in 2015.
- Amazon, which has introduced Amazon Managed Blockchain, a service that "makes it easy to create and manage scalable blockchain networks" using open source frameworks including Ethereum and Hyperledger Fabric.
- R3, a consortium of global financial institutions that produced a distributed financial ledger called Corda.
- PayStand, which specializes in sending and receiving payments between companies.
Consumers and businesses are increasingly willing to adapt to blockchain technology; however, the technical complexities and operational overhead involved in creating, configuring, and operating a blockchain and maintaining its infrastructure often act as a barrier.
BaaS offers an external service provider to set up all the necessary blockchain technology and infrastructure for a fee. Once created, the provider continues to handle the complex back-end operations for the client.
The BaaS operator typically offers support activities, such as bandwidth management, suitable allocation of resources, hosting requirements, and data security features. The operator frees the client to focus on the core job: the functionality of the blockchain. In fact, a BaaS’ provider's role is similar to that of a web hosting provider.
The website creators create and run all the website content on their own personal computers.
They may hire support staff or sign up with an external hosting provider like Amazon Web Services or HostGator.
These third-party companies take care of the infrastructure and maintenance issues.
BaaS may be the catalyst that leads to a wider and deeper penetration of blockchain technology across various industry sectors and businesses: instead of creating and running their own blockchains, a business, large or small, can now simply outsource the technically complex work and focus on its core activities.
BaaS Can Change The Way B2B Companies Handle Transactions (Forbes)
In 2016, global financial services institution Visa announced a new partnership with blockchain enterprise company Chain to develop a simple and fast way to process B2B payments across the globe. Payments at this level can be difficult for B2B companies to complete efficiently and securely, but with blockchain, Visa can offer companies a consistent process for managing settlements.
Making cross-border payments can often be an onerous and lengthy process even for corporations, but blockchain technology simplifies the process.
Even though companies offering BaaS essentially serve as middlemen between B2B companies and blockchain technology, the hallmark of this technology is that it cuts out the middlemen in financial transactions by automating them. For this reason, transactions made on blockchain have the potential for faster than usual speeds.
With BaaS B2B companies can exchange high-value international payments.
By speeding up the process, BaaS can lead to real savings for B2B companies. A study by Accenture found that blockchain technology could help eight banks save at least $8 billion per year, or approximately 27%. Annual cost savings were predicted to reach as high as 38%, or around $12 billion.
If blockchain can help large institutions process hundreds of thousands of transactions per day, save money, it’s likely to help B2B companies as well.
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