Last year, the cryptocurrency market was unstoppable, with the aggregate value of all virtual currencies soaring by nearly $600 billion. The major catalyst to thank for this surge is blockchain technology.
The buzz about blockchain technology
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Blockchain is the digital, distributed, and decentralized ledger that records transactions in a transparent and unchanging manner, without the need for a financial intermediary. In even plainer English, it's a transparent means of transferring money from one party to another, or of recording data, without the need for a bank or third-party intermediary. It also means that data is stored on computers all over the globe, as opposed to one central hub, so as to ensure that no single entity, be it a business or hacker, can gain control of a network.
The entire reason we're even talking about blockchain right now is that developers view the current payment system as flawed. Banks get to act as third parties and collect fees for transactions run on their networks, while at the same time taking up to five business days to settle cross-border payments. To some, that's just not acceptable.
With blockchain, transactions have the potential to be processed in real time, or within a matter of seconds, at least as it pertains to remittances. Transactions are also broken down into a bare-bones structure whereby financial institutions are removed from the equation, potentially reducing transaction fees in the process.
However, blockchain has plenty of applications beyond just currency-based remittances. It can be used to oversee supply chains, regulate networks, create digital IDs, maintain loyalty rewards, manage energy trading platforms, and so much more.
These 10 Dow stocks have an open mind when it comes to blockchain technology
The potential for blockchain is so great that even some of the largest U.S. multinational companies in the iconic Dow Jones Industrial Average have come around to testing its application or filing for blockchain-based patents. Here are 10 Dow stocks currently working with blockchain to some varied degree.
Global payment processor and credit card issuer American Express dove headfirst into blockchain when it announced a partnership with Ripple and Banco Santander in mid-November. Under the terms of the deal, American Express users sending non-card payments over AmEx's FX International Network to U.K. Santander accounts will have those payments processed over Ripple's blockchain almost instantly. No more multiday waits for validation and settlement. Since blockchain is expected to be most useful for the financial services industry, American Express' test with Ripple seems logical.
In October, networking kingpin Cisco Systems (NASDAQ: CSCO) filed for a trademark with the U.S. Patent and Trademark Office (USPTO) for a blockchain platform that would regulate the Internet of Things (IoT), i.e., interconnected devices that can send data to and from each other. The idea here is that Cisco's blockchain would be capable of recognizing devices on a wireless network and continuously assessing their trustworthiness. Additionally, Cisco's proprietary blockchain would need to do this for devices entering and leaving the network, such as smart cars or smartphones. It has the potential to bring new levels of safety and security to the IoT.
With consumers pushing online sales through the roof, it's probably no surprise that the king of brick-and-mortar retail, Walmart (NYSE: WMT), is facing shipping challenges when it comes to perishable products. About a month ago, an application from the USPTO shows that Walmart aims to develop a so-called "smart package" that would include a device capable of registering information to a blockchain. This info would include the contents of the package, weather conditions, its location, and also key addresses so it could be ascertained who last had the package. Walmart is looking at blockchain to make its supply chain more efficient as well.
When we think of Boeing (NYSE: BA), we probably envision an industrial powerhouse with massive commercial airplanes. However, Boeing is also dipping its toes into the water by recently filing for a patent application with the USPTO for a blockchain platform that would act as a backup for in-flight GPS receivers. Using blockchain as an immutable and transparent log of GPS data would ensure that pilots would have a way to maintain their course even if their equipment malfunctioned, or if hackers "spoofed" the GPS receivers into thinking they're in a different location. We're talking about a potentially big step forward in travel safety.
Perhaps no Dow stock has embraced blockchain more than IBM (NYSE: IBM). In October, IBM announced a partnership with Stellar and KlickEx to process remittances over its proprietary network in the South Pacific region. Stellar's Lumens coin is being used as the intermediary currency to expedite cross-border transactions among 12 major banks in the South Pacific.
In addition, IBM recently announced a joint venture with A.P. Moller-Maersk (known more commonly simply as Maersk) to create blockchain-based solutions for the shipping industry. The company that'll be spun off will look for ways to make shipping supply chains more transparent, as well as remove paper from the equation, which should expedite approvals and the entire shipping process. In other words, IBM is a real blockchain leader within the Dow.
Though Microsoft (NASDAQ: MSFT) is best known for its dominant Windows operating system, it's also making a name for itself as a blockchain pioneer. Via a blog post in February, Microsoft announced that it'd be working to create digital blockchain-based IDs to help the more than 1 billion people worldwide who face identity challenges. Such a decentralized system would make the verification of personal credentials more efficient, as well as allow individuals to control their own digital identities. It may even allow apps and services to be customized to the point where less personal info is needed in order to log into an application.
When not selling beverages in all but one of the world's 200-plus countries, Coca-Cola (NYSE: KO) is busy testing out blockchain as a means to improve the rights of global workers. Last month, Coca-Cola announced that it was partnering with the U.S. State Department, Emercoin, Bitfury Group, and Blockchain Trust Accelerator to create a decentralized blockchain-based registry for global workers. For its part, Coca-Cola agreed to 28 country-level studies on child labor, forced labor, and land rights by 2020 in its sugar supply chain. This blockchain registry, which comes complete with smart contracts – protocols that aid in the enforcement, facilitation, or verification of a contract -- may have the potential to coerce businesses to honor contracts with their employees.
Even Big Pharma is getting in on the action. Merck is using blockchain technology as a means to track and authenticate returned drugs. The Drug Supply Chain Security Act requires pharmaceutical companies ensure that counterfeit medicines don't make it onto pharmacy shelves when some $2 billion to $3 billion in prescription drugs is returned each year. Blockchain gives Merck a way of referencing these prescription medicines based on their serial number, batch number, and expiration number. And since blockchain is immutable, there's no concern that hackers will tamper with the data.
Back in September, the home of the Golden Arches, McDonald's, announced that it was partnering with Omise to be its exclusive payment gateway for its Thailand website and McDelivery Thailand mobile app. What's unique about this deal is that it allows transactions to be white-labeled, which essentially means they won't be rerouted, pushing for quicker execution and validation. Omise's network will also allow mobile app users to securely store their credit card information to expedite transactions in the future.
It appears that even the largest publicly traded company in the U.S., Apple (NASDAQ: AAPL), is tinkering with blockchain. A Dec. 7 patent filing that became public shows that Apple is working on a platform that would incorporate blockchain technology to verify timestamps and protect "secure elements," such as SIM cards and microSD cards. The long-winded application points out that global position systems and network servers reliant on network time protocols could be adversely impacted by hackers. This patent application from Apple would create a platform where falsified timestamps would be rejected, leading to only true timestamps being accepted.
The only question left is, which Dow stock is next?
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Teresa Kersten is an employee of LinkedIn and is a member of The Motley Fool's board of directors. LinkedIn is owned by Microsoft. Sean Williams has no position in any of the stocks or cryptocurrencies mentioned. The Motley Fool owns shares of and recommends Apple, but has no position in any cryptocurrencies mentioned. The Motley Fool is short shares of IBM and has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool recommends American Express and Cisco Systems. The Motley Fool has a disclosure policy.