Blockchain

Companies such as Amazon, Microsoft and Oracle will reap a financial windfall by offering blockchain as a service (BaaS), a market that’s quickly growing as companies look for ways to use the distributed ledger technology without spending a lot of money.

If just 2% of servers act as blockchain nodes some day, the BaaS market would reach $7 billion, according to Bank of America research analyst Kash Rangan. In a note to investors on October 2, Rangan named nine companies best positioned to take advantage of the BaaS movement. Along with BaaS providers Amazon, Microsoft and Oracle, Rangan named IBM, Salesforce.com, and VMware as leaders in the space. He also said real-estate/mortgage companies with blockchain-based online services, such as like Redfin, Zillow, and LendingTree, will also benefit. Those services digitize the transfer of property.

As enterprises look to deploy distributed ledgers, the industry's largest IT providers have launched BaaS efforts as a way to test the technology without the cost or risk of deploying it in-house and without needing to find in-house developers, which are in hot demand.

In 2015, Microsoft became one of the first software vendors to offer BaaS on its Azure cloud platform. The Azure service is open to a variety of blockchain protocols, supporting simple Unspent Transaction Output-based protocols (UTXO) like Hyperledger; more sophisticated Smart Contract-based protocols like Ethereum; and others as they are developed, Microsoft said. Azure supports distributed ledgers such as Ethereum, Hyperledger Fabric, R3 Corda, Quorum, Chain Core and BlockApps.

In 2017, IBM launched its blockchain service, and has since garnered some of the largest enterprise supply chain tracking deployments of the technology, including Maersk and Walmart. (In late September, Walmart asked its suppliers to enter their produce data into the IBM Food Trust blockchain, which the retailer is already using to track 25 food products from 10 suppliers.)

Walmart's pilots have shown that the amount of time it takes for the company to trace a food item from store to farm was reduced from seven days to just 2.2 seconds.

In the past year or so:

* The Hyperledger Project released Fabric 1.0, a collaboration tool for building out blockchain-based business networks.

* SAP launched its BaaS offering on its Leonardo digital software platform.

* Hewlett-Packard Enterprise (HPE) joined tech vendors offering BaaS. HPE plans to offer a flexible charging model, similar to other BaaS offerings, with prices based on the server node, CPU or core.

HPE's offering is based on Corda, a blockchain platform developed by New-York-based banking consortium R3. R3's Corda is the biggest commercial consortium among banks, insurers and others in a blockchain environment, according to Martha Bennet, a principal analyst with Forrester Research (FinTech firms have been among the first to embrace blockchain). Corda became an open-source distributed ledger when R3 gave the code over to the Linux Foundation's Hyperledger development project.

In July, Oracle announced its BaaS deployment, as did Amazon (as part of its AWS offering). Oracle's BaaS is based on the Hyperledger Project, as is IBM's, which aimed its BaaS offering at enabling cross-border money exchanges.

As for Amazon, it "will benefit from incremental cloud services demand from blockchain implementation, while improved supply chain tracking should make Amazon's retail operations more efficient," Rangan said.

While Amazon's offering may seem like just another tool in the AWS box, the adoption of BaaS isn't going to look or function anything like the adoption of other cloud services, according to Michael Fauscette, chief research officer of G2 Crowd, a business-to-business software review site.

As secure as blockchain is thought to be, it is not without its problems. That's because it's built atop software that serves specific purposes, meaning it must depend on outside application software and cryptography. But hundreds of start-ups developing blockchain technology that don't necessarily use tried-and-tested algorithms. Last November, for example, hundreds of millions of dollars in Ethereum cryptocurrency, called Ether, was frozen through a coding vulnerability that allowed one user to lockdown up to $300 million in other people's money.

"The thing to be thinking about is that we're still in the early innings of this blockchain wave," said Bill Fearnley Jr., IDC's research director for Worldwide Blockchain Strategies. "There are very few people with multiple years of deep, hands-on experience and as recent headlines would suggest, this makes testing especially important to try to see what happens when you put real data and real connections together," Fearnley said.

For most enterprises, blockchain will not likely be a do-it-yourself enterprise," Fearnley said. While there are some "interesting and powerful innovations" that come with the distributed ledger, "the challenge will be developing a staff to build out and maintain the network."

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