The Invisible Billion-Dollar Market: Blockchain Data Access
Blockchain data is the lifeblood for most – if not all – Web3 projects and protocols. NFT marketplaces need exchange and wallet information to update listings on their site. DeFi applications require on-chain price data to facilitate swaps. And with the growth of transactions, protocols, and the Web3 market in general, the blockchain data industry is exploding.
Using the Bitcoin network as one example, the number of blockchain transactions has shown significant growth in the first half of this year. Source: Blockchain.com
Quietly, companies that aggregate, organize, or provide access to both static and real-time data across multiple chains, are now worth tens of billions of dollars. That’s because they provide the necessary data that fuels current applications and protocols, as well as dynamic multi-chain data for future projects with more advanced blockchain data requirements.
Blockchain data access continues to progress, with major SaaS-like providers offering seamless, streaming data access from a wide range of blockchains, it shows the total addressable market (TAM) is growing, with plenty of room for expansion and innovation. It’ll be a substantial portion of the projected overall blockchain compound annual growth rate (CAGR) through 2030.
The blockchain industry is set to increase exponentially and with it the need for on-chain data access and providers. Source: Grandview Research
Current providers continue to serve live blockchain data to projects effectively, although not in a truly decentralized fashion. This is one area where the blockchain data market can evolve, as decentralized models that involve direct node-to-node communication possess several key advantages in terms of cost and latency.
New platforms in the space will arise due to certain bottlenecks, challenges, and hurdles that currently face providers, users, and builders. While the sleeping giant of the blockchain data market is beginning to raise eyebrows – and funding – the market has even more untapped potential when more novel, decentralized, and cost-effective data access options emerge.
The Growing Need and Market for Blockchain Data
The blockchain data industry is all about gathering, storing, and providing transactional information generated across blockchain networks. And it’s not just raw transactional data but things like smart contract interactions, asset transfers, and governance. Depending on the protocol or application, Web3 ecosystems need specific types of data for ongoing operations.
Think about an NFT marketplace, for example. The protocol needs up-to-date prices and transactional data to keep listings up to date. It also requires real-time access to various cryptocurrency price data to display NFTs with an exact, corresponding price amount. And if the marketplace spans multiple chains, that’s even more live data needing to be piped in constantly.
Layer 2 solutions that facilitate these growing number of chains, and corresponding multi-chain applications, continue to be a significant driver in the blockchain data access market. Some of the newest DeFi applications, for example, now use centralized data providers that gather and bundle the data for ease of use and access.
One of these providers, QuickNode, recently raised $60 million at an over $800 million dollar valuation, handling over 200 billion API requests per month. And that’s just one provider in the space, highlighting that the demand for convenient, real-time, multi-chain data access is exploding – and is something VCs and investors are banking on.
The Diversity and Importance of Blockchain Data
The blockchain data market is servicing an increasingly diverse array of projects, chains, requirements, and use cases. Areas like gaming, virtual reality (AR/VR), big data, and derivatives will be some of the fastest growing in the coming year. With these new applications comes a demand for even more multi-chain data, at low latency, for increasingly complex purposes.
From developers crafting next-gen dApps to traders creating automation to optimize entry and exit points, blockchain data is vital for just about every stakeholder and participant in Web3. Institutions are also an increasing part of the market, harnessing blockchain data for market analysis, risk assessment, and investment strategies.
Better blockchain data access means faster transaction confirmations, more reliable dApps, and higher levels of user trust. This also translates to smoother experiences, whether they're making a payment, trading on a DeFi platform, or playing a blockchain-based game. And real-time data is taking center stage for more companies, projects, and users.
In volatile DeFi markets, for example, a delay of a few seconds can mean the difference between a user saving their funds or withdrawing at a massive loss. For DApps, real-time blockchain data ensures seamless user experiences, fostering trust and growth. For developers seeking to debug or improve platforms, streaming blockchain data to their dev console provides instant insights.
And while centralized data access solutions are effective, they shouldn’t be wholly relied upon to meet the diverse data demands of tomorrow’s blockchain applications and ecosystems. As chains expand and data volumes grow, decentralized data networks that foster node-to-node communication have the potential to further democratize access to real-time blockchain data.
Valuations, Challenges, and Innovations
Another way to assess the current state and future potential of the total blockchain data market is by analyzing current valuations, what bottlenecks still exist, and how innovation could unlock additional value within the space. For example, cost is a barrier to entry for centralized data services for smaller projects, as they operate under a SaaS-based business model.
Other major players in the blockchain data service industry, such as Infura and Alchemy, have reached valuations in the tens of billions of dollars, showcasing the market potential and current utility of the blockchain data industry. Estimations suggest that, given the current CAGR and growing reliance on blockchain across industries, the market cap for blockchain data services could well surpass $100 billion by the end of the decade.
But as blockchain applications multiply, so does the volume of data, putting strain on existing infrastructures. Moreover, with different blockchain networks adopting distinct protocols, interoperability becomes a substantial hurdle. Centralized systems can, at times, pose risks of single points of failure.
The total size of the blockchain interoperability market – of which data access and providers are an increasingly large portion – is projected to increase from $300 million in 2023 to $1 billion by 2028. That’s a compound annual growth rate (CAGR) of roughly 27 percent, with the demand for multi-chain data access exploding to power more interoperable applications.
The present and future of the blockchain data market are not without challenges. Real-time access demands massive computational power and seamless integration across varying chains and platforms. Ensuring data accuracy, combating network congestion and latency, and guaranteeing data security are also pressing issues today.
Despite these challenges, innovation is rife. Companies are pioneering multi-threaded data access methods, ensuring faster and more efficient data retrieval. Compression algorithms are being employed to tackle massive data volumes. Advanced encryption techniques are fortifying data security.
There are also innovations around distributing data access load across networks, reducing risks associated with central points of failure. Syntropy is leading this path with the upcoming Data Layer. Emphasizing decentralization, security, and efficiency, the Data Layer will contribute to further growing the market, and democratize access with a unique peer-to-peer architecture.
The Syntropy Data Layer: Expanding the Overall Market
Thus far, the total addressable market of the blockchain data industry can be estimated mainly by the revenue and market share of major centralized providers like Alchemy, QuickNode, and Infura. While these platforms do perform their stated functions, the centralized model can’t fully tap into the full potential of the market when it comes to data access and availability.
Here are some of the main issues with the status quo:
- Pricing Model. Depending on data needs, the current SaaS-based pricing model can be prohibitive to certain projects, protocols, and builders. Direct node-to-node access and live streaming subscriptions in a decentralized framework like the Syntropy Data Layer will open the door for exponentially more participants.
- Decentralization Concerns. Relying solely on centralized data providers comes into conflict with the inherent decentralization principles of blockchain and Web3. Decentralized projects using centralized data sources may also face potential risks related to single points of failure.
- Latency Issues. Centralized providers may sometimes suffer from slower data retrieval speeds compared to a decentralized model, especially during times of high network demand. Such latency can impact real-time applications like DeFi trading platforms or gaming experiences.
- Data Sovereignty. Projects may have concerns about data ownership, privacy, and security when relying on a centralized party. Decentralized data solutions can provide better data sovereignty, ensuring the data remains within the purview of the intended users or stakeholders.
- Scalability Limits. Centralized solutions might struggle with scalability, especially as blockchain projects multiply and transactions skyrocket. This can lead to bottlenecks, performance issues, and inhibited growth for protocols and platforms relying on real-time data from these providers.
To address these shortcomings, there's a growing movement towards a decentralized data layer in the blockchain space. It’s why Syntropy’s Data Layer prioritizes peer-to-peer data exchange, allowing projects to harness the collective power and speed of the entire network, instead of relying on singular data points from centralized providers.
The Data Layer sources information from multiple nodes, ensuring both faster access and greater redundancy. This approach not only mitigates the risks of single points of failure but also democratizes data access, leveling the playing field for projects regardless of their size or financial clout.
As the demand for blockchain data continues to expand, the goal is for the Syntropy Data Layer to become the backbone of decentralized application development. By further empowering applications with more robust, reliable, and real-time data solutions, decentralized blockchain data access will enhance the current ecosystem of providers and grow the market substantially.
Conclusion
The blockchain data market is on an upward trajectory, and will only continue to expand with new chains, advanced applications, and investment into the Web3 space. The growth, valuation, and success of major centralized providers illustrate how and why the blockchain data industry is probably the biggest segment of the Web3 market that flies under the radar.
The total addressable market (TAM) of blockchain data is poised for expansion, and the transition towards more decentralized solutions is becoming more necessary and apparent to builders, users, and investors alike. The push towards decentralized access frameworks like Syntropy’s Data Layer is not just about bringing the space into alignment with Web3’s ethos.
It’s a pragmatic approach to addressing the real-world challenges of today’s centralized model in key areas like scalability, latency, and sovereignty. The appetite and demand for faster, developer-friendly, real-time blockchain data won’t slow down, and Syntropy is bringing a novel, decentralized approach that will help address the market and fuel more innovative applications.
Stay in the Data Layer Loop by following Syntropy on Twitter. Stay tuned for updates on live events, roadmap progress, and the upcoming testnet launch!
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