Redefining Blockchain as a Service — Beyond Buzzwords
Today, the “Blockchain as a Service (BaaS)” term is being used interchangeably by various organizations to refer to entirely different offerings. This has led to an urgent need to define subcategories within the sector. This article proposes a new BaaS categorization in order to establish standard, common terminology.
The “Software as a Service” Model as a Reference
Of the many “[x] as a service” models (software as a service, infrastructure as a service, cloud as a service, etc…), we’ll be focusing on the “software as a service” model (SaaS) because it is both a well-established concept, and it is most similar to the “blockchain as a service” concept.
Gartner, a leading research and advisory company, defines “software as a service” (SaaS) as “software that is owned, delivered and managed remotely by a third party. The provider delivers software based on one set of common code and data definitions that is consumed in a one-to-many model by all contracted customers at any time on a pay-for-use basis or as a subscription-based on use metrics.” (3)
The key takeaway: Companies don’t need to create their own software to deal with processes that can be managed with outsourced online tools, and they can rent or borrow these tools instead of creating them and maintaining them. SaaS has become one of the greatest innovations of the last 20–30 years and it significantly reduces the demands on internal IT staff at businesses looking to leverage these tools.
Some use cases of SaaS are (4):
- Example #1: instead of acquiring a copy of Microsoft Word for $300, Microsoft’s cloud platform “rents” this software to you through the Internet at something like $15/month
- Example #2: your small business would not spend thousands of dollars on a sales database. Instead, you “rent” access to a sophisticated online sales database like Salesforce.
- Example #3: you decide to start a gym in your hometown, and need computer tools for your receptionist, financial controller, salespeople, and personal trainers. Instead you “rent or pay” for online tools that streamline business processes such as scheduling, timesheet tracking, and accounting.
The great benefits of SaaS are:
- It is cheaper than purchasing the full software
- You save storage space and maintenance costs because the software does not need to be installed locally on your computer
- You can access your SaaS applications from different locations and devices
Having those benefits in mind, it is not a surprise that SaaS remains the largest segment of the cloud market. According to the Gartner Forecast 2018 (5), SaaS is expected to grow 22% to reach $73.6 billion in 2018. It is expected to grow to 45% of the total application software spending by 2021.
It is crystal clear that SaaS has changed the way businesses leverage software and technology.
So, the next question is: how much effort do small and large businesses need to put forth in order to integrate their offerings with the blockchain? Let’s take a look.
Analysis of the BaaS market
For those who are new to the concept of a blockchain, a blockchain is:
- A digital ledger — that contains data that is stored somewhere
- It is verifiable — only valid transactions can be recorded on the blockchain through a security consensus shared by a network of nodes
- The database is decentralized — there is not one copy of the ledger, instead, every node has the same copy of the ledger
- It is immutable — recorded transactions can’t be altered or erased
Reflecting on these characteristics of the blockchain, we can identify the following three criteria to compare the different BaaS offerings:
- Storage — the blockchain stores data
- Software — the blockchain includes permission, business-ready features
- Decentralized network
BaaS landscape: who is on the playground?
BaaS is a very new thing, and there is not much written about the blockchain as a service model at this moment. In general, the BaaS term refers to situations where an external service provider provides the necessary templates and back-end technology for launching and maintaining a private blockchain network.
In order to articulate the distinctive differences between BaaS service providers, we’ll be using the 3 criteria noted above to create two overarching categories for BaaS providers. One category we can call Cloud BaaS. These options offer storage in the cloud and software (blockchain frameworks). We call the second category Full BaaS, that offers storage, software, as well as a decentralized network. Using a Full BaaS, companies don’t need to create and manage their own decentralized infrastructure of nodes.
So, who is in the playground?
The Cloud BaaS category
In this first category, Cloud BaaS, we find companies offering storage and software. This means your company gets access to all the tools you need to launch a private blockchain; however, the responsibility for hosting a decentralized network of nodes remains with your business or consortium.
In a Cloud Baas, nodes are maintained and administered by the companies. This means your company or consortium must do regular health checks and maintenance to ensure the system is in good health, such as monitoring disk and CPU usage, performance, OS and core BaaS software updates, etc.
Amazon Web Services (AWS) Templates
It provides a fast and easy way to create and deploy secure blockchain networks using popular open-source frameworks. The service basically consists of a cloud service (storage) providing the Hyperledger and Ethereum pre-configured templates already installed and set up to make the deployment of a blockchain easy.
It offers a simplified development environment and easy experimentation with prebuilt networks and infrastructure. Azure is oriented to configure and deploy a consortium network easily.
It is a flexible software as a service offering that is delivered via the IBM Cloud. It simplifies your blockchain journey of developing, governing, and operating a network.
Oracle Autonomous Blockchain Cloud Service
It is a distributed cloud ledger platform to provision blockchain networks, join other organizations, and deploy and run smart contracts.
Different words, same offering: cloud storage and blockchain frameworks that make the journey of creating a blockchain easier. But notice what they are missing a vast decentralized network of nodes, a crucial aspect of blockchain technology. Businesses using any of the services above can create a few nodes…three, five… And they can use a consensus algorithm to reach an agreement between the nodes. But at the end of the day, they remain a centralized network and thus more vulnerable to certain attacks.
And this might have great use cases, of course. For example, IBM announced in June last year, a great use case. Some of the big global banks (Société Générale, Natixis, HSBC, KBC, Deutsche Bank, Rabobank, and Unicredit) joined their efforts to leverage together a blockchain-based trade finance platform called Digital Trade Chain (DTC), and IBM was selected to build it over the IBM Bluemix service (storage) using the Hyperledger blockchain technology (software). (7)
It looks like the most valuable value proposition offered by the Cloud BaaS giants could be summarized by (a) experimentation networks and (b) consortiums of companies that, for any reason, don’t need or don’t look for a pure decentralized network.
The Full BaaS Category
The second category, called Full BaaS, offers not only storage and applications but also decentralization, offering end-to-end blockchain as a service. In the Full BaaS model, businesses can outsource all three components of the blockchain development process — saving valuable time and resources.
In the Full BaaS category, we have the Ardor multi-chain platform that launched its mainnet on January 2018.
Ardor Blockchain as a Service Platform
Ardor is a scalable multi-chain platform that uses the energy-efficient Proof-of-Stake consensus algorithm. Ardor allows businesses to reduce costs and time-to-market by deploying a permissioned child chain with a custom selection of built-in features and instant security provided by the Ardor parent chain’s network of nodes. The innovative parent-child chain (also called multi-chain) architecture is the main characteristic that makes it possible for Ardor to offer not only cloud storage and client software, like Azure, AWS, etc…, but it also provides instant usage of a decentralized network of nodes from day one without taking care of the maintenance and system administration. Hence, businesses can focus more on leveraging the blockchain to add value to their service offerings, while focusing less on the intricacies of their own blockchain network.
Ardor works as follows:
- The parent chain uses the Ardor token (ARDR) for the consensus mechanism to secure the whole platform, including all the child chains.
- Every child chain can correspond to an organization. Every organization has its own token and can operate with a fully customizable blockchain within the Ardor ecosystem.
- Every child chain is connected to the parent chain through transaction “bundlers.” A Bundler is a feature that allows nodes to collect fees in company tokens when they bundle company transactions and then pay the Ardor fees in ARDR tokens to the Ardor parent chain.
There are two major consequences of this design.
First, users of a child chain can experience free transactions if Bundlers decide to sponsor the full cost of registering these transactions on the Ardor chain.
Second, and most importantly, companies can build their products in a child chain and enjoy having instant usage of a decentralized network of nodes to secure their blockchain, from day one. This significantly reduces the upstart and maintenance costs for businesses to begin integrating legacy systems with cutting edge blockchain infrastructure.
Ardor is backed by 5 strong years of community development and support. , The network has reached up to 1,000 nodes at its best moments. The core code is developed and maintained by Jelurida, the company incorporated in 2016 by the core developers of the project, which fundraised a $15M ICO on October 2017, but the team has been active in the blockchain market since 2013.
Other BaaS in development
Notice that there are other companies or organizations that have announced via press releases or have mentioned in their whitepapers their intention and ideas for building a full blockchain as a service. It is the intention of legit and well-recognized entities or projects like SAP that is working on its SAP Cloud Service called Leonardo, or Stratis. There are other projects, like Kaleido, that are even in an earlier stage since they are companies incorporated very recently with no track record of performance of the team. However, since none of these projects are a working product yet, we will avoid talking about them at the moment. We will keep this article updated when any of them reach the market.
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