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

Blockchain-as-a-Service (BaaS) is the third-party creation and management of cloud-based networks for companies in the business of building blockchain applications.

Key Takeaways

  • Blockchain-as-a-service is third-party cloud-based infrastructure and management for companies building and operating blockchain apps.
  • It functions like a web host. That is, it runs the backend operation for an app.
  • BaaS may be the catalyst that leads to the widespread adoption of blockchain technology.

These third-party services are a relatively new development in the growing field of blockchain technology, The business of blockchain technology has moved well beyond its best-known use in cryptocurrency transactions and has broadened to address secure transactions of all kinds. As a result, there is a demand for hosting services.

Understanding BaaS

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 while the cloud-based service provider keeps the infrastructure agile and operational.

It is an interesting development in the blockchain ecosystem that is seen as boosting blockchain adoption across businesses.

Some Big Players

Major players in the BaaS space include:

  • 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.

How BaaS Works

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.

Microsoft, Amazon, and R3 are among the big players in BaaS.

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 like bandwidth management, suitable allocation of resources, hosting requirements, and data security features. The BaaS operator frees the client to focus on the core job, the functionality of the blockchain.

Below is a graphic demonstrating the working model of Blockchain-as-a-Service Hyperledger Cello, a BaaS-like blockchain module toolkit and utility system under the Hyperledger project.

Cello
Image by Julie Bang © Investopedia 2020

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.