Organizations are forecast to spend nearly $6.6 billion on blockchain solutions this year, an increase of more than 50% compared with 2020, according to a new update to the International Data Corporation Worldwide Blockchain Spending Guide. In addition, the guide says that blockchain spending will continue to see strong growth throughout the 2020 to 2024 forecast period, with a five-year compound annual growth rate (CAGR) of 48%.

“This is an important time in the blockchain market, as enterprises across markets and industries continue to increase their investment in the technology. The pandemic highlighted the need for more resilient, more transparent supply chains, healthcare delivery, financial services and so much more, and enterprises around the world have been investing in blockchain to provide that resiliency and transparency,” James Wester, research director of worldwide blockchain strategies for IDC, said. “What is also very important right now is that we are seeing real interest and investment by corporations, financial institutions and even governments in areas they previously viewed with some uncertainty, such as cryptocurrencies, digital assets, central bank digital currencies, decentralized finance and stablecoins. This investment will have major implications in a very short time on everything from retail to financial services to capital markets.”

The leading use case for blockchain in 2021 and throughout the forecast is cross-border payments and settlements, which use distributed ledger technology to track, trace and manage payments and settlements. The second largest blockchain use case is lot lineage/provenance, which is used to verify the origin and authenticity of a product as it moves throughout the value chain. Other leading use cases include trade finance and post trade/transaction settlements, asset/goods management and identity management.

From an industry perspective, banking leads the way in blockchain spending, accounting for nearly 30% of the projected worldwide total in 2021. Banking will remain the top industry for blockchain spending throughout the forecast, although its share of spending will diminish slightly by 2024. The primary use cases for blockchain within the banking industry are cross-border payments and settlements and trade finance and post trade/transaction settlements.

The next largest industries for blockchain spending are process manufacturing and discrete manufacturing, which together will account for more than 20% of all spending worldwide in 2021. The leading use case in both industries is lot lineage/provenance. Following the manufacturing industries are professional services, retail and insurance, which rely on blockchain to trace the movement of payments and products. The industries that will see the fastest growth in blockchain spending over the forecast period are professional services (56% CAGR), state/local government (53.3% CAGR) and healthcare (52.7% CAGR).

“While the effects of the pandemic had organizations diverting budget or pausing projects to focus on more essential endeavors, this was not the case with blockchain,” Stacey Soohoo, research manager of customer insights and analysis for IDC, said. “Along with the ongoing pressures of digital transformation, COVID-19 made it clearer than ever that in order to have resilient business operations, changes in behavior, demand and supply have forced companies to adopt a digital-led and blockchain-driven business model to survive lockdowns, supply disruptions and future crises. Within the current environment, the use of blockchain is coming up especially within banking, manufacturing, professional services and retail. Specifically, focus has been in tracking items from manufacturer to distribution to the end consumer and related payments and settlements that come with goods movements and management. The market is now reaching a point where successful pilots and deployments have proven the need, but other key factors such as a willingness to collaborate are needed to instill blockchain technology across the entire value chain, with every single participant needing and wanting to be a part of the network.”

From a technology perspective, IT services and business services (combined) will account for more than two-thirds of all blockchain spending throughout the forecast, with IT services receiving slightly more investment over the forecast period. Blockchain platform software will be the largest category of spending outside of the services segment and the fastest growing technology category overall, with a five-year CAGR of 52.9%.

Spending on blockchain solutions in the United States will be nearly $2.6 billion this year, making it the largest geographic market, followed by western Europe ($1.6 billion) and China ($777 million). All nine regions covered in the spending guide will experience spending growth over the forecast period, led by China with a five-year CAGR of 54.6% and central and eastern Europe (50% CAGR).

The Worldwide Blockchain Spending Guide quantifies the emerging blockchain market by providing spending data for 10 technologies across 19 industries and 17 use cases in nine geographic regions. IDC defines blockchain as a digital, distributed ledger of transactions or records. The ledger, which stores the information or data, exists across multiple participants in a peer-to-peer network; there is no single, central repository that stores the ledger. Distributed ledgers technology (DLT) allows new transactions to be added to an existing chain of transactions using a secure digital or cryptographic signature. Spending associated with various cryptocurrencies that utilize blockchain and distributed ledgers technology, such as Bitcoin, is not included in the spending guide.