3 Dow Stocks You Had No Idea Were Testing Blockchain Technology

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Last year proved to be a monumental coming-out party for cryptocurrencies. After beginning the year with a market cap of less than $18 billion, the aggregate market cap of virtual currencies by year's end had soared by almost $600 billion, representing a more than 3,300% increase. What caused such an incredible appreciation in cryptocurrencies, you ask? Look no further than blockchain technology.

Blockchain is the digital, distributed, and decentralized ledger that's tethered to most cryptocurrencies and is responsible for recording all transactions without the need for a third party. The entire development of blockchain, which was made famous when bitcoin debuted in 2009, is the result of perceived issues with the current banking system, such as high transaction fees and slow processing times.

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Blockchain offers three major advantages to the financial services industry. First, it's decentralized, meaning that rather than having transaction data stored in a single data hub, it's stored on servers and hard drives all over the world. This ensures that no single entity, or hacker, can ever gain control over a network. Second, it eliminates banks from the equation, which should help lower transaction fees. Finally, with validation ongoing 24 hours a day, seven days a week, settlement times are considerably faster, especially when it comes to payments that leave domestic borders.

Of course, I'd be remiss if I didn't note that blockchain has numerous applications beyond just the financial industry. Recently, I highlighted eight of these business uses. There are many more likely on the way.

These Dow stocks have welcomed blockchain with open arms

Some of the biggest U.S. multinational companies have been among the quickest adopters of blockchain technology. In fact, you can find quite a few of these businesses in the iconic Dow Jones Industrial Average (DJINDICES: ^DJI).

For example, IBM (NYSE: IBM) is on the leading edge of blockchain development. After being late to the party on cloud computing, IBM has gone all-in to be a leading adopter of blockchain solutions. It recently announced that it and shipping giant A.P. Moller-Maersk would be creating a separate joint venture to develop blockchain solutions for the shipping industry in a start-up-like environment. Meanwhile, back in October, IBM partnered with Stellar to use its Lumens coin to expedite payments made in the South Pacific region with 12 large participating banks over IBM's blockchain network.

Dow component American Express (NYSE: AXP) is getting in on the fun, too. In November, American Express and Banco Santander announced that they'd be partnering with Ripple to conduct a cross-border payment test. AmEx users who make non-card payments to U.K. Santander accounts over American Express's FX International Network will have those transactions processed by Ripple and settled almost instantly. That would certainly beat a multi-day wait for payment verification under the current banking system.

Even networking giant Cisco Systems (NASDAQ: CSCO) is deeply involved in blockchain. Aside from joining the 200-member-strong Enterprise Ethereum Alliance last year, Cisco filed for a patent on a blockchain solution in October that would oversee Internet of Things networks. In other words, Cisco has what could be a blockchain network that would continuously identify and assess devices on a network for trustworthiness. This would be particularly useful given how many smart cars and smart mobile devices regularly enter and leave networks.

Surprise! These Dow stocks are testing blockchain, too

However, it's been known for a while that these Dow components are betting big on blockchain. What you may not realize is that there are way more Dow components testing blockchain than just IBM, AmEx, and Cisco. Here are three you probably had no clue were tinkering with blockchain technology.

In September, payment network Omise announced that it had partnered with McDonald's (NYSE: MCD) to be its exclusive payment gateway for its Thailand website, as well as its McDelivery Thailand mobile app. Under the terms of the deal, transactions processed through the OmiseGo network are white-labeled, meaning the transaction isn't rerouted through unnecessary page redirections. Additionally, Omise's PCI DSS certified payment services allow frequent online and mobile app users to store their card information securely to expedite transaction completion in the future. Furthermore, Omise may even offer the ability for McDonald's customers to pay with other types of currency, including but not limited to cryptocurrencies. In short, McDonald's is using blockchain as a means to expedite the checkout process.

Another surprising Dow component that's testing blockchain technology is plane manufacturer and defense company Boeing (NYSE: BA). In December, Boeing filed a patent application with the U.S. Patent and Trademark Office for blockchain technology that would act as an onboard backup for in-flight GPS receivers. Not only would this immutable log of GPS data back up nonfunctioning equipment, but it would also be used as a means of overcoming GPS spoofing, which is the act of using counterfeit signals to trick GPS receivers into thinking they are in a different location. According to Boeing's application, this technology could be applied to manned and unmanned planes.

Finally, pharmaceutical giant Merck (NYSE: MRK) is utilizing blockchain to its and its customers' advantage. Globally, more than $1 trillion worth of pharmaceuticals are sold annually. But within the U.S., some $2 billion to $3 billion are returned each year. Under the Drug Supply Chain Security Act (DSCSA), Merck is required to track and authenticate returned drugs. To comply with DSCSA, it's turning to blockchain. Working in cooperation with SAP, AmerisourceBergen, and SAP company Cryptowerk, an application was created that runs on mobile Android or iOS devices and uses a barcode to provide a real-time look at the location of a drug. Blockchain gives Merck the ability to track drugs by their serial number, batch number, and expiration date to ensure that consumers are getting a genuine, not counterfeit, product.

The big question at this point is this: Which Dow component will be next to jump on the blockchain bandwagon?

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Sean Williams has no position in any of the stocks or cryptocurrencies mentioned. The Motley Fool is short shares of IBM. The Motley Fool recommends American Express and Cisco Systems, but has no position in any cryptocurrencies mentioned. The Motley Fool has a disclosure policy.