Market Dynamics
Global blockchain technology market drivers
Increasing acceptance of cryptocurrency
Blockchain forms the base technology for Bitcoin, a cryptocurrency created and managed using an advanced encryption technique called cryptography. Numerous advantages of blockchain technology exist, including decentralization and transaction anonymity. The application portfolio of blockchain technology is expanding to include a wide range of businesses due to cutting-edge encryption and decryption algorithms. No financial institution is required to begin and validate transactions, which is one of the main factors promoting the adoption of cryptocurrencies. Instead, as long as the recipient is linked to the same network, blockchain technology enables any coin owner to send the desired amount to the other party. Blockchain is a better database because transactions are encrypted more thoroughly, and data can be accessed for auditing reasons but cannot be modified or changed. Such a setup eliminates the typical risks that online financial transactions typically encounter. As a result, blockchain-based cryptocurrencies are becoming more popular.
Global blockchain technology market restraint
Lack of clarity regarding regulations
One of the major factors restraining the growth of the blockchain technology market is the absence of dedicated regulations to regulate the use of blockchain for fintech applications. Unlike Bitcoins, a distributed ledger with known participants that have already been defined in advance and received the required KYC certifications is created using blockchain technology. Furthermore, a financial entity is no longer necessary to begin and validate transactions because of aspects including high transparency, an auditable transaction log, fewer infrastructure costs, and low counterparty risks. However, regulators and policymakers remain concerned about blockchain technology at the super-national, international, and national levels. The present debate centers on whether blockchain apps need to be registered under the regulatory frameworks for commissions, such as those that apply to clearing or transfer agents. Regarding integrating such technologies inside the federal securities regulations, uncertainty abounds.
Global blockchain technology market opportunities
Instant settlement of financial transactions
One of the most promising aspects of blockchain technology is the potential for instant settlement. Currently, the settlement process usually takes 2-3 days in the U.S. Other financial transactions, such as syndicated loans, may take up to 20 days to clear. By giving a clear indication of the participant's present state in the overall approval process and enabling the participant to observe the sequence of required papers, the implementation of blockchain technology is anticipated to revolutionize the settlement process and shorten the settlement time.
The risk of a capital tie-up increases with a drawn-out settlement process, but blockchain technology can guarantee a quicker settlement window and cheaper trading costs. Additionally, it aids in lowering counterparty risk and enhancing the overall effectiveness of the settlement procedure. In other words, blockchain technology has a critical role in improving operational and financial efficiency by lowering the settlement period from T+3 to T+0.
Regional Analysis
North america dominates the global market
The global blockchain technology market is bifurcated into four regions, namely North America, Europe, Asia-Pacific, and LAMEA.
North America is the most significant global blockchain technology market shareholder and is expected to grow at a CAGR of 81.5% during the forecast period. The market expansion in North America is driven by the rising number of blockchain technology-based startups in the region. States across the U.S. are currently promoting the usage of blockchain technology. For instance, a bipartisan bill exempting cryptocurrencies from security requirements was enacted in Colorado. Similar to this, Oklahoma introduced a law that permits cryptocurrencies to be used, offered, sold, received, and exchanged within the state's government entities as a medium of temporary value. However, some American states, like Lowe, have proposed legislation making it illegal for states and political subdivisions to accept cryptocurrencies as payment. Authorities have restricted the use of cryptocurrencies in at least ten U.S. states, including Hawaii and Maryland. Various states in the United States are working to encourage industries to adopt innovative technologies. For example, Arizona has chosen the regulatory sandbox model to promote emerging technologies like blockchain, fintech, and cryptocurrencies.
Europe is expected to grow at a CAGR of 81.9%, generating USD 378,437.34 million during the forecast period. Banks in the U.K. have not yet created a central bank digital currency since cryptocurrency is not recognized as money or has the same value as fiat currency in the country. To develop a single EU policy on blockchain and European blockchain infrastructure for public services, the EEA Member States, the EU, and the European Commission jointly launched the European Blockchain Partnership. European nations are making efforts to implement blockchain technology throughout the industry. As an illustration, Austria founded the Austrian Blockchain Center to investigate blockchain applications in energy, logistics, the internet of things, and others. Germany's energy industry is also expressing interest in the blockchain ecosystem. For instance, Energy Web and the Elia Group, an oil and energy corporation, announced a multi-year agreement. The partnership's primary goals would be to validate and test blockchain-based systems.
Asia-Pacific is anticipated to grow significantly over the forecast period. Asia-Pacific nations, including Singapore, Hong Kong, Japan, Thailand, and Malaysia, have regulated cryptocurrencies. The Securities and Futures Commission of Hong Kong unveiled its licensing framework for cryptocurrency exchanges in November 2018. In the next ten years, consumer products companies in Asia-Pacific are predicted to use blockchain technology, according to a study by Ernst & Young. By 2022, a blockchain-based stock exchange is anticipated to exist in Japan. A digital stock market will be launched by SBI Holdings in collaboration with Sumitomo Mitsui Financial Group, allowing investors to conduct digital trades using blockchain technology. The Japanese government is working to hasten the country's adoption of blockchain technology.
The Indian government has started taking steps to legalize cryptocurrencies. The government mandated that businesses in the nation disclose their virtual currency transactions on their balance statements as of March 2021. This program hopes to increase investor and government openness and open up new business opportunities. In addition, Indian businesses are working to improve the adoption of blockchain technology there. For instance, the Distributed Ledger Technology solution has been deployed by Tech Mahindra in collaboration with IBM and Microsoft and will be used to track customer complaints against UCC.
The absence of cryptocurrency rules in Brazil has forced several firms, including Acesso Bitcoin, Latex, and Xdex, to cease operations there because of the difficulties they encountered operating in an unregulated market. To address several of these issues, the Brazilian government declared in April 2020 that cryptocurrency exchanges will soon be subject to the code 6619-3/99. In addition, by 2025, JBS, a Brazilian meatpacker, intends to stop deforestation in the Amazon by keeping an eye on its supply chain. The corporation plans to use blockchain technology to monitor its indirect cattle suppliers. Brazilian online currency exchange brokers Cambio Store and BeeTech also declared that they are investigating blockchain technology to improve financial operations' transparency and cut expenses.
Segmental Analysis
The global blockchain technology market is segmented by type, component, application, enterprise size, and end-user.
Based on Type
The global market is bifurcated into public, private, and hybrid.
The public segment is the highest contributor to the market and is expected to grow at a CAGR of 83.1% during the forecast period. Blockchain technology offers distributed retention of encrypted data on the public cloud. Additionally, the public cloud makes data and apps with blockchain support accessible. The advantages of integrating blockchain technology and the public cloud include decentralization, improved data security, accelerated disaster recovery, and improved essential private security. This is anticipated to fuel the public cloud segment's expansion over the forecast period.
Private cloud investment has increased due to growing security concerns, significantly speeding up penetration. A private cloud service provides enterprises with specialized infrastructure and resources only available to them. They benefit from receiving the best results and services possible due to the private cloud's more significant data protection level than the public cloud. The private cloud segment is anticipated to rise due to rising concerns about data security.
The hybrid blockchain technology market segment blends characteristics of public and private blockchains, hence being versatile and efficient in leveraging these various strengths of the system. This kind of blockchain allows for selective transparency and controlled access, it is especially interesting to industries that demand both privacy and public verification, such as finance, supply chain, and healthcare. Hybrid blockchains allow one to maintain confidentiality and secure sensitive data while still allowing public auditability for parts of the process. Accordingly, it also achieves scalability, security, and flexibility making it rather favoured by organizations that need to balance their transparency with privacy. The hybrid segment is bound to grow significantly and see major adoption as businesses continue to seek robust, adaptive blockchain solutions.
Based on Components
The global market is bifurcated into application and solution, infrastructure and protocols, and middleware.
The infrastructure and protocols segment owns the highest market share and is expected to grow at a CAGR of 81.5% during the forecast period. Infrastructure and protocol providers create fundamental software building blocks for a network to run efficiently. One of the main drivers of the market's expansion is the rising need for blockchain standards and protocols, including Openchain, Hyperledger, Ethereum, and BigChainDB. Additionally, protocols assist blockchain application and network developers in creating client-specific, distributed register networks. These elements will propel the infrastructure and protocols segment expansion over the forecast period.
Developers of applications and solutions create programs that work with the current blockchain networks. The segment's expansion is fueled by the providers' capacity to offer crucial value to organizations by limiting transcription data replication and delivering rapid authentication. The growth is due to adoption of blockchain technology as an application and solution platform to foster trust among lenders, owners, investors, and service providers. Additionally, the segment is growing due to the development of highly sophisticated blockchain solutions and substantial expenditures made in the automotive blockchain by Tier I companies and OEMs working with solution providers.
Based on Application
The global market is bifurcated into digital identity, exchanges, payments, smart contracts, supply chain management, and others.
The payments segment is the highest contributor to the market and is expected to grow at a CAGR of 80.9% during the forecast period. Blockchain technology reduces operating expenses, boosts the effectiveness of payment systems, and provides transparency. These advantages increase the technology's application in payment solutions, fueling the segment's expansion. Business demand for smart contracts is also rising due to the ability to lower execution, verification, arbitration, and fraud prevention expenses. The use of smart contracts over a blockchain network ensures that the contract's terms and conditions cannot be altered. It is difficult for third parties to change or hack the data in contracts, thanks to blockchain technology. As a result, businesses in various industry sectors are implementing blockchain-based smart contracts to cut down on the expenses associated with execution, verification, fraud detection, and arbitration.
The digital identity solutions built on blockchain technology hold immense potential to improve security, privacy, and efficiency over traditional systems. These applications become especially useful in those fields that need robust identity verification and management, as in the case of finances, healthcare, government services, and supply chain management. The blockchain is decentralized, which means that all personal data will not be in singular location, reducing the risks of data breaches or unauthorized access. Besides, this property of blockchain helps to ensure a reliable and tamper-proof way for checking identities, hence actually helping to ensure compliance with various regulatory requirements and create trust in digital interactions. As digital transactions and services offered online increase, so will the demand for secure and reliable digital identity solutions built on blockchain platforms; this will contribute to drive innovation and adoption in different industries.
It primarily comprises platforms that facilitate trading in digital assets such as cryptocurrencies. Exchanges are important for providing liquidity to the market and allowing users to buy, sell, and trade different digital currencies. Further segmentation can be based on centralized and decentralized exchange markets. Centralized exchanges, such as Binance or Coinbase, are essentially intermediaries that hold users' funds and facilitate transactions. They have high liquidity, customer support, and advanced trading features. In contrast, decentralized exchanges, like Uniswap or SushiSwap, operate with no central entity involved and enable peer-to-peer transactions right from a user's wallet.
Blockchain technology spells well for transparency, traceability, and efficiency across different stages of the supply chain. It provides an immutable ledger recording each transaction, which makes it quite easy to trace back the origin of any commodity to its destination. This kind of transparency tends to reduce fraudulent activities, counterfeiting, and discrepancies, ensuring that products are originals and are delivered safely. Another critical aspect of blockchain technology is the automation of processes such as inventory management, processing of orders, and settlement of payments, which reduces delays and human errors. Altogether, blockchain in supply chain management is increasingly getting adopted due to associated advantages such as enhanced operational efficiency and ensuring compliance with regulatory provisions.
Based on enterprise size, the global market is bifurcated into large enterprises and small and medium enterprises.
The small and medium enterprises segment owns the highest market share and is expected to grow at a CAGR of 83.7% during the forecast period. The expansion of the small and medium enterprise category is anticipated to be fueled by an increase in the number of blockchain startups worldwide over the projected period. By eliminating the need for intermediaries in interstate commerce, blockchain technology aids small and medium businesses cut operational costs. Additionally, small and medium-sized businesses can benefit from technology in semi-automatic and manual procedures, including payroll, inventory, and invoicing.
Large businesses in practically every industry, including financial services, insurance, healthcare, supply chains, and trade finance, initially spearheaded blockchain development because they wanted to make their existing key activities more efficient. Large businesses can quickly obtain sufficient funds and various assets to combine more modern, cutting-edge technologies and take the lead in the market. Another element influencing the segment's growth is the significant amount of money invested in R&D to provide the best solution to increase an association's business productivity.
Based on End-User
The global market is bifurcated into financial services, government, healthcare, media and entertainment, retail, transportation and logistics, travel, and others.
The governmental sector is the fastest-growing area of the blockchain technology market, where technology is used to bring transparency, security, and efficiency into public service. Governments worldwide are exploring blockchain applications in secure voting systems, transparent public procurement procedures, and land registry systems. Blockchain's decentralized nature helps mitigate fraud and corruption by ensuring data integrity and trust. Moreover, blockchain is being used in enhancing identity management for secure and efficient digital identification of citizens. It is further used in regulatory compliance and monitoring; whereby smart contracts facilitate automated and immutable enforcement of regulations. With governments remaining committed to their investment in digital transformation, the blockchain technology adoption pace is likely to quicken and enhance innovation in public sector services.
The healthcare sector is emerging as a significant end user due to its potential to enhance data security, streamline operations, and improve patient outcomes. Blockchain technology provides a decentralized, immutable ledger system that solves some of the essential challenges facing healthcare today: security breaches of patient data, fragmented records of patients, and inefficient administrative procedures. This gives healthcare providers an opportunity to create secure, transparent electronic health records using blockchain technology that allows for easy transfers of patient information from one institution to another without data integrity loss or violation of privacy. Apart from this, blockchain ensures more efficient management of the supply chains of medical products and assistance in fighting fraudulent activities in clinical research by tracking and tracing pharmaceuticals and medical devices.
Media and Entertainment sector refers to businesses related to film, music, television, gaming, and digital content distribution. Blockchain technology has high values in this sector, like transparency and traceability of digital rights and royalties, combating piracy, safe, secure, and direct transactions between content developers and consumers. This helps media and entertainment companies ensure accuracy in their payment timing and ensures intellectual property protection, smoothing content distribution procedures. Moreover, the blockchain's decentralized nature mitigates issues related to fraud and data manipulation, providing a more reliable and efficient framework for managing digital assets and enhancing user experience.
