Die Ära von Web3 & AppChains

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Market Overview

In today’s world, organizations and institutions in the fields of data security, digitization, and cybersecurity face a range of challenges, especially when it comes to central systems that are prevalent in digital infrastructure. These systems are particularly susceptible to cyberattacks since they often have a single critical point of compromise that can jeopardize the entire system. Additionally, central systems grapple with scalability issues as the increase in data and users can impact their performance. Data privacy and integrity are further concerns, as safeguarding sensitive data from unauthorized access and manipulation must always be ensured. Resilience and swift recovery after failures, along with the physical security of data centres, are also critical aspects.

These drawbacks are driving the search for alternative solutions like decentralized blockchain technology. Blockchain offers a decentralized infrastructure that addresses some of the inherent weaknesses of central systems, particularly vulnerability to centralized attacks and single points of failure. With the increase in automation, networking and data storage, technology is needed to provide data security and authenticity. This is accelerating the adoption of Blockchain in the industry, and the market is proliferating at 68% annually.

There are several hundreds of cryptocurrencies, and the applications of blockchain technology are also numerous, but what are the fundamentals behind the technology, and how does it really work?

• Blockchain is a particular type or subset of so-called distributed ledger technology („DLT“). DLT is a way of recording and sharing data across multiple data stores (also known as ledgers), each of which has the exact same data records and is collectively maintained and controlled by a distributed network of computer servers, which are called nodes.
• Blockchain is a mechanism that employs an encryption method known as cryptography and uses (a set of) specific mathematical algorithms to create and verify a continuously growing data structure – to which data can only be added and from which existing data cannot be removed – that takes the form of a chain of “transaction blocks”, which functions as a distributed ledger.
• In simple terms, the blockchain can be thought of as a distributed database. Additions to this database are initiated by one of the members (i.e. the network nodes), who creates a new „block“ of data, which can contain all sorts of information. This new block is then broadcasted to every party in the network in an encrypted form (utilizing cryptography) so that the transaction details are not made public. Those in the network (i.e. the other network nodes) collectively determine the block’s validity in accordance with a pre-defined algorithmic validation method, commonly referred to as a „consensus mechanism“. Once validated, the new „block“ is added to the blockchain, which essentially results in an update of the transaction ledger that is distributed across the network. In principle, this mechanism can be used for any kind of value transaction and applied to any asset that can be represented in a digital form.

While the technology is often associated with digital or virtual currency schemes, payments and financial services, its scope is much broader. Blockchain can theoretically be applied in a large variety of sectors (e.g. trade and commerce, governance and more). In essence, blockchain technology enables the digitization of processes that were previously not digitized for security reasons, primarily due to its unique security features and resilience to hacking attacks.

The distinctive characteristics of blockchain technology make it well-suited for digitization in sectors where security considerations and protection against cyberattacks are of paramount importance. In fields such as finance, healthcare, government services, and the military domain, where data reliability and integrity are crucial, blockchain presents the ideal solution.

Growth is accelerated by the increasing use of blockchain in industry and -as-a-service offerings, which significantly lower the barriers to using the technology. However, it is still incredibly hard for enterprises to adapt to blockchain. The integration requires each corporation to set up its own infrastructure and to program APIs and applications by specific expensive experts.

*Deloitte, Statista 2022

Hybrid Chains / AppChains

There are primarily three types of blockchains: public, private, and consortium-based blockchains. Each has its own characteristics and use cases. Hybrid Chains (AppChains), a type of private or consortium-based blockchain, can be particularly advantageous when it comes to data privacy and control.

• 1. Public Blockchain: This is the most well-known type, represented by cryptocurrencies like Bitcoin and Ethereum. In a public blockchain, anyone can participate, conduct transactions, and partake in the consensus process (such as mining). They offer a high level of transparency and security but less control and privacy since all transactions are public.
• 2. Private Blockchain: A private blockchain is controlled by a single organization. Access and participation are strictly regulated. This type of blockchain provides more privacy and efficiency since fewer participants are involved, and the organization can set the rules. However, it is more centralized, which diminishes some of the decentralized advantages of a blockchain.
• 3. AppChains: AppChains are hybrid blockchains designed explicitly for a particular application or set of applications. They are highly customizable and offer a middle ground between public and private blockchains, combining both advantages.

Hybrid blockchains, often referred to as AppChains, are increasingly seen as the best solution for many enterprises due to their unique blend of advantages. These hybrid blockchains combine features of both public and private blockchains, offering a middle ground that aligns well with the needs and challenges faced by businesses.

Big Picture and Origin of Web3

The growth of blockchain technology is unparalleled. The market price of Bitcoin or Ethereum since its inception until today demonstrates how investors are pricing in its potential not only as a speculative asset but as a future global digital financial asset. Blockchain technology is quickly gaining ground in the world of enterprise adoption.

• Why? Because it has the potential to streamline and secure transactions while also providing transparency and accountability across all actors in the network.
• There are several reasons why organizations are warming to blockchain. For one, it is able to reduce the time and costs associated with transaction processing. Businesses can also benefit from reduced errors thanks to the transparency provided by blockchain technology.

The blockchain market is estimated to grow to $ 227 Billion in 2028. Over the past few years, we have seen the introduction of Web3, including the rapid emergence of digital assets like NFTs, as well as Decentralized Finance (DeFi) as the first killer apps.

An organization’s operations are driven by information. Data needs to be received as quickly and accurately as possible. Where data integrity is paramount, blockchain is ideal since it provides immediate, shared and transparent information stored on an immutable ledger, as described previously. Blockchain networks are used to track orders, payments, accounts, production and exchange value overall, which leads us to the origins of the definition “Web3”. Participants can view all transaction details in one place, giving them more confidence while generating greater efficiencies and opportunities.

• The decisive advantage of blockchain is its proposition to enable secure automation without a single point of failure and intermediaries.
• Most use cases are data-driven and aim to increase revenue through new business models, decrease the cost or risk through better transparency, or out-tasking previously complex and expensive functionalities through the always available blockchain as an always-on, globally available database for tokens (cryptocurrency) and data.

The adoption of blockchain technology is increasingly being explored by organizations in various industries. But the technical complexities, a lack of domain expertise and the operational overhead costs of developing, operating and maintaining the blockchain often slow plans for adoption.

Biggest Blockchain Adoption Hurdles

Blockchain belongs to Web3, which is meant to be the next generation of the internet.

• Web1 was about information, Web2 about creators, social interactions and e-commerce, while Web3 is called the Internet of Value. Web3 is built on the idea that the internet should be a decentralized network of computers rather than a centralized one.
• This means that there is no single point of failure and no central authority controlling the flow of information.
• An internet that is secure, decentralized, democratized and has the power to transform the way we interact with each other in the digital world. Web3 is about decentralized ownership and control and putting the web in the hands of its users and the community.
• Web3 enables the metaverse, which is a shared digital reality that enables users to connect with each other, build economies and interact in real-time.

State of the Web3 Market – an Overview

The global Web3 market size reached USD 3.2 Billion in 2021 and is expected to register a significantly rapid revenue CAGR during the forecast period.

Rising demand for more user-oriented, interactive, advanced, and secured technologies and increasing initiatives by governments of various countries to develop newer technologies such as Web 3.0 to enable better transparency to users are some major factors expected to drive revenue growth to a significant extent during the forecast period.

• Augmenting preference and use of Non-Fungible Tokens (NFTs), as well as digital collectables, digital currencies, and other blockchain entities, are expected to continue supporting the market’s revenue growth.

Service providers reinforcing traffic on existing websites will be required to modernize, and as apps and websites that use Web 3.0 gain traction among users, incumbent firms will be prompted to enhance their digital services to avoid losing user bases and revenues.

The global Web 3.0 market is expected to register a CAGR of 43.7 % over the forecast period, and revenue is projected to increase from $ 3.2 Billion in 2021 to $ 81.5 Billion in 2030.

The increasing adoption of blockchain technologies and rising investment in research and development activities by governments of various countries and major market players are some factors currently contributing to market revenue growth.

Web 3.0 is, in other words, the third generation of internet service.

• The development and expansion of machine learning and artificial intelligence capabilities, as well as the explosive growth of blockchain technology, will support this transformation.

Blockchain technology is critical to the growth of Web 3.0 firms since they will utilize decentralized protocols.

• The growth can be attributed to the increasing demand for data privacy through Web 3.0’s decentralized identity and the growth of the Internet’s technologies. Additionally anticipated to contribute to the expansion is the quick rise in popularity of digital assets like cryptocurrencies and the rollout of 5G and 6G technologies.
• The increasing use of linked devices and better transaction processes also aids the expansion of the Web 3.0 blockchain business.

Blockchain and Web 3.0:

The global Web 3.0 blockchain market is segmented on the basis of type, application, end-user and region.

• By type, the market is segmented into public, private, consortium and hybrid, as stated in the previous chapter.
• By application, the market is segmented into cryptocurrency, conversational AI, data and transaction storage, payments, smart contracts and others.
• By end-use, the market is segmented into BFSI, retail & eCommerce, Media & Entertainment, Pharmaceutical, IT & Telecom, and others.

In 2022, government services dominated the market and produced more than 50% of the global revenue. A key aspect influencing the growth was/is the public blockchain networks‘ capacity to enable people from all over the world to engage in the network without any limitations. Users worldwide can sign up to the network, read, publish and participate in a public blockchain. Furthermore, public blockchain provides better distribution, democratization, comprehensive transparency, high security and an open environment. One crucial aspect influencing the hybrid segment’s growth is its capacity to provide permission-based and permissionless systems. A hybrid blockchain combines public and private blockchain applications, with certain parts controlled by the organization and others releasing the internet. A hybrid blockchain also allows users to access information via smart contracts.

When it comes to application, the market has been dominated till now by the cryptocurrency segment (25% of the worldwide revenue). Due to the rapid progress in technological innovation, including digitalization and automation, businesses today have a higher demand for high-performance bitcoin transaction services. Therefore, several players globally use blockchain technology solutions in cryptocurrency to efficiently carry out their transactions to satisfy the demand for high-performance cryptocurrency transactions. The smart contracts segment is expected to grow significantly in the coming quarters and years. A more open and collaborative environment is made possible by the immutable, traceable, and secure smart contracts made possible by Web 3.0 blockchain technology. These inherent characteristics make smart contracts more likely to catch on, and more companies will be able to reduce costs and increase speed with secure transactions.

The Blockchain – Infrastructure-as-a-Service Market

The Blockchain-as-a-Service Market Size accounted for $ 1.4 Billion in 2022 and is projected to achieve a market size of $ 120 Billion by 2032, growing at a CAGR of 57.1% from 2023 to 2032.

Blockchain-as-a-Service (BaaS) refers to a cloud-based service that allows businesses and individuals to create, host, and use their own blockchain applications, smart contracts, and other services without the complexity of building and maintaining a blockchain infrastructure. Essentially, it enables users to leverage the benefits of blockchain technology, such as transparency, security, and immutability, without the need for extensive technical knowledge or investment in hardware and software. BaaS providers handle the back-end operations of blockchain networks, allowing users to focus on developing their applications and services.

• By offering pre-built blockchain frameworks and infrastructure, BaaS providers streamline the process of developing and deploying blockchain-based applications. Users can access these services on a subscription basis, eliminating the need for substantial initial investments in hardware, software, and technical expertise.
• BaaS platforms handle the backend operations, such as network maintenance, security, and scalability, allowing developers to focus on building innovative blockchain applications and services.

The Blockchain as a Service market has witnessed substantial growth in recent years and continues to expand rapidly. One of the primary drivers of this growth is the increasing adoption of blockchain technology across various sectors. Enterprises recognize blockchain’s potential in enhancing transparency, security, and efficiency in their operations.

BaaS offers a practical solution by allowing businesses to leverage these benefits without the complexities associated with building and maintaining an entire blockchain infrastructure. This ease of adoption has spurred a surge in demand for BaaS services, especially among smaller businesses and startups that may lack the resources for in-house blockchain development. Furthermore, the expanding influence of the crypto asset management market, as well as the increasing deployment of the blockchain technology segment, will fuel the blockchain as a service market in the coming years. Moreover, the market growth is also fuelled by the continuous evolution and innovation within the blockchain space.

As blockchain technology becomes more sophisticated, BaaS providers are offering advanced solutions, including smart contracts, decentralized applications (DApps), and interoperable networks.

Depending on the industry vertical, the BFSI segment dominated the blockchain-as-a-service market share in 2021 and is expected to continue this trend during the forecast period owing to the large-scale accounting operations being maintained by BFSI sector businesses, which are incentivizing banking and financial firms to invest in effective blockchain solutions and services for their organization. However, the manufacturing segment is anticipated to witness the highest growth in the upcoming years, owing to the rising technological investments and upscaling of the sector, which is envisioned to aid in driving investments in the blockchain as a service (BaaS) industry.

Key trends of the sector and Conclusion:

• The growing adoption of blockchain and distributed ledger technology (DLT) in the banking and financial sectors over the past few years has led to positive growth. Blockchain systems enable banking and finance to create more transparent, inclusive, and stable business networks, shared operating models, more productive processes, lower costs, and new products and services. It allows for the issuance of digital securities in less time, at lower unit costs, and with greater levels of customization. As a result, digital financial instruments can be customized to meet the needs of investors, widening the market for investors, lowering issuer costs, and dwindling counterparty risk. These benefits of blockchain technologies drive the overall blockchain-as-a-service market growth.
• Every company has hundreds of programs and databases, and its employees use their credentials (their username and password) to access them daily. Since they appear to be a legitimate user, an intruder with such valid credentials can get around established security measures. According to the Verizon Data Breach study from 2020, compromised credentials were involved in more than 63 % of successful breaches. As a solution to this rapidly increasing challenge, two-factor authentication (2FA) adds another layer of security to the current credential-based device defence. Blockchain authentication services on crypto wallets further this principle by encrypting credentials using a public key.
• Moreover, blockchain authentication applies to systems that validate users‘ access to services on Bitcoin and other digital currencies‘ underlying technologies. To encrypt wallets or instances on the blockchain where value or work is safely stored, the blockchain employs public-key cryptography (PKC). As a result, there are some fascinating parallels between blockchain technology and its application in the security sector. In addition, many organizations are using non-fungible tokens (NFT) to create unique digital items which can be used to create unique identifications of various entities. Such factors are great opportunities for the growth of the Blockchain-as-a-Service Industry.