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After gathering positive momentum over the last few years, the push to integrate blockchain into more business and consumer applications began to slow slightly in 2020. At least some of the slowdown can be attributed to COVID-19, although a new ReporterLinker market report says there could be other factors at work.
In “Blockchain Services Global Market Report 2020-30: Covid 19 Growth and Change,” the company says that the global blockchain services market is expected to decline from $1.26 billion in 2019 to $1.06 billion in 2020 at a compound annual growth rate (CAGR) of −15.8%.
“The decline is mainly due to economic slowdown across countries owing to the COVID-19 outbreak and the measures to contain it, which impacted industries negatively and resulted in low investments in technology,” the research firm points out. “The market is then expected to recover and reach $4.36 billion in 2023 at a CAGR of 60.01%.”
IDC is also forecasting a drop in blockchain spending in 2020 versus its pre-COVID forecast scenario. This decline is led by marked reductions in IT spend and bleak economic growth in recent months due to the pandemic, IDC says.
“The technology has helped enterprises across many industries to overcome the challenges from managing supply chains, medical data verifications, and tracking insurance claims in the Asia/Pacific region where the adoption is still in its nascent stage,” IDC points out. “Although there is reluctance to utilize the technology, many of the professional services firms and manufacturing firms will start pushing the implementation of Blockchain technology in the post-COVID marketplace.”
The Rise of Blockchain
Based on a peer-to-peer (P2P) network, blockchain is a distributed ledger technology (DLT) that allows data to be stored globally on thousands of servers. Anyone on the network can “see” everyone else’s entries in near real-time. That makes it difficult for one user to gain control of the network, and is thought to be a more secure and accountable way to transact.
After being introduced in 2016, blockchain has become somewhat of an experimental medium for companies looking to streamline and secure their global transactions. Organizations like IBM jumped onboard quickly, and procurement was brought into the mix, namely because it relies on global supply chains and transacts with suppliers from around the globe.
Fast-forward to 2020 and the blockchain services market now consists of sales of blockchain services and related products. For companies engaged in building blockchain applications, blockchain-as-a-service acts as a third-party service that creates and manages cloud-based networks, which represents a growing field for blockchain technology.
“The revenue generated by the blockchain services market is through sales of blockchain services by platform vendors and service providers for the application of identity management, payments, smart contracts, supply chain management, and others,” ReporterLinker points out, noting that North America was the largest region in the blockchain services market in 2019, and that Asia Pacific is expected to be the fastest-growing region by 2023.
What’s Holding Blockchain Back?
In assessing the key issues that are holding blockchain back from a wider-scale adoption, ReporterLinker blames the inefficiency of scalability in blockchain technology, which it says “impedes the blockchain services market as it obstructs the processes involved.”
“There is a partial dependence of the blockchain network’s health over the number of nodes in the network and the spread of those nodes across the world,” it continues. “The bigger the blocks, the increase in the size of the blockchain is even faster which removes out the solo miners, and that eventually results in more pile-up of transactions.”
On a positive note, the firm says there is a growing significance of blockchain services with increased investments in blockchain technology from both government and private entities (i.e., banks and financial institutions). The blockchain technology gives rise to new business models in various areas such as cross-border payments, remittance, exchanges, Internet banking, trade finance, Know Your Customers (KYC), and risk and compliance with decentralized applications of this technology.
“In 2019, the South Korean government allotted a budget of KRW 1 trillion for blockchain development among the KRW 5 trillion budget for economic development through innovation. Among the total cryptocurrency trading worldwide, 30% was from South Korea,” ReporterLinker concludes. “The increased use of blockchain technology in organizations will require services to manage the networks and infrastructure, which will increase the demand for blockchain services and boost market growth.”
Lending a Hand During Crises
Blockchain’s momentum may have been momentarily thwarted by COVID-19 and other factors, but that didn’t stop this advanced technology from making a positive impact during some of the outbreak’s darkest moments. According to Blockchain.News, many blockchain-based firms mobilized quickly to help fight the coronavirus.
In China, for example, Ant Financial’s online Mutual Aid blockchain-based platform Xiang Hu Bao introduced a new function to process several coronavirus claims. “This function undoubtedly has helped the firm reduce in-person contact as these claims are made online,” Blockchain.News points out.
On the education front, Odem is providing free access to its blockchain-powered educational and credentialing platform to higher institutions. And, with donations coming from sports celebrities, business leaders and other high-profile donors, blockchain startup Hyperchain created a donation tracking system that helps donors see where funds are urgently needed. “With this ingenuity,” the publication notes, “Hyperchain has raised millions of dollars in coronavirus donations with the promise of transparency and responsibility.”
