Blockchain Market Overview
The blockchain market is gaining phenomenal growth, due to a shift towards digital economy. It is also known as distributed ledger.Growing interests in securing the online financial transactions continues to impel the market. This technology is useful for all sizes of enterprises. It has become the enabling technology for BFSI sector as banks and finance industry move into the modern age of real-time transaction processing.
The technology promises vast openings for various sectors. It can create a cross-national system of varied participants including individuals, companies, NGOs and government bodies. Every entity has a verifiable record of all transactions and the record can only be changed with the consent of participants. No single entity would be able to take charge of it unlike a government or corporate database. These factors are the driving the blockchain market.
Blockchain technology is used for various financial and non-financial applications like, payments, exchanges, smart contracts, documentation, and digital identity. Of them, payment is expected to continue generating the largest revenue in the global blockchain market in the coming years. Digital identity application is expected to witness the highest growth in the market during the forecast period because it eliminates the need for central authority and third party. The major players are looking forward to blockchain-based identity management solutions for financial transactions.
North America is expected to hold the largest share in the blockchain market, due to presence of large number of companies with large operation base and wide implementation of smart contracts, documentation and payment applications in industries. APAC is expected to hold the largest share in the market during the forecast period because of heavy investment in designing of such networks to minimize labor costs.
On the basis of service provider, the blockchain market is segmented into application and solution provider, middleware provider, and infrastructure and protocol provider. The application and service provider are expected to dominate the market among the providers as they provide distributed ledger technology to varied industry verticals.
Blockchain Market Dynamics
The key factors driving the growth of the blockchain market includes the government initiatives to promote blockchain, growing demand for distributed ledger technology, increasing demand for simplified business processes, increasing need for transparency and immutability, and need for faster transactions in real-time.
Governments are taking up initiatives to promote blockchain technology. For example, Indian government has set up The Blockchain Foundation of India (BFI) in December 2017, which is a community effort to promote the growth of blockchain-based initiatives in India. Online payments have gained huge popularity due to dominance of card-based payment methods, credit and debit cards. Blockchain technology is evolving as an aid to conduct financial transactions through online payments. This technology is supporting all these changes by increasing the speed of transaction processing and greater efficiency in real time, which has been driving the blockchain market.
The integration of blockchain solutions with the legacy systems to handle functions served by the legacy systems will drive the market growth. The integration of the two will lead to companywide adoption of the blockchain technology. Banks are looking for options to secure their data by technologies that cannot be easily breached. Distributed ledger technology is virtually non-hackable, as it uses timestamps to mark a data entry in a distributed ledger. Banks are leveraging this power to reform their backend operations, which is propelling the blockchain market.
The technology constantly records and shares information to address process inefficiencies of traditional paper records to register land and property ownership in the commercial real estate industry. Due to this, real estate sector is estimated to show highest growth in the blockchain market during the forecast period.
Companies in the blockchain market are expanding their partnerships with service providers to easily deploy blockchains for financial institutions. For example, Microsoft expanded its partnership with consortium R3 in 2016 to deploy blockchains in its Azure cloud. This partnership will aid in the development, testing and deployment of this technology, driving the blockchain market. The technology providers are teaming up to build a digital ID network, focusing to ensure that the technology that is being developed, is in response to the needs of individuals. For example, Microsoft Corporation and Accenture Plc announced such partnership in 2017 during the tech summit of ID2020.
There is a trend of technological shift from centralized infrastructure management to the distributed scenario, which is increasing the blockchain market in the BFSI sector. BFSI industry has realized the significance of distributed ledger technologies, which helps to secure the transaction for customers. Financial institutions are heavily investing in designing distributed ledger network to restructure their internal operations and minimize costs.
Despite the growing popularity of blockchain technology, the initial cost for the software required for it is quite high. Blockchain is a highly complex technology that requires customized installation at client’s site. Also, person engaged in the installation should be highly skilled in this technology. Specialized hardware might also be required to run the software. Finding qualified personnel for the same is also a typical task as the technology is quite new as of now. Therefore, due to the high setup costs for setting up partial or full blockchain system is out of the reach of the small or medium sized business enterprises, which is hindering the smooth sales of such systems.
To validate the transactions using this technology large amount of computations are required. The computers performing these computations require large amount of energy for their operations and also for cooling them down. It is restraining the adoption and hence the growth of blockchain market.
Blockchain Market Competitive Landscape
The ecosystem of the blockchain market include cryptocurrency vendors, research organizations, network and system integrators, distributed ledger service providers, distributed ledger technology solution providers, marketing analytics executives, third-party service providers, and technology providers. Also, the major players have already begun projects to measure the practicability of adopting it into their ecosystem. Several major players have begun projects to determine the feasibility of adopting this technology into their systems.
Some of the key players operating in the global blockchain market include International Business Machines (IBM) Corporation, Amazon Web Services, Inc., Microsoft Corporation, Ripple, Abra, Chain Inc., R3, Earthport PLC, Ethereum Foundation, BTL Group Ltd., BigchainDB Gmbh, Humaniq, Factom, Tierion, and BlockCypher Inc., AlphaPoint, Bitfury Group Limited, and Coinbase.