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| (Photo by NASA on Unsplash) |
Blockchain technology holds the
potential to transform almost every sector of the tech industry. The top blockchain stocks will be businesses that leverage this
potential effectively, although many have tried and failed.
Companies that have promising
blockchain projects in the works tend to be those that already have the
existing expertise and infrastructure necessary for the technological demands
entailed.
A wave of innovation fueled by
blockchain tech is sweeping the globe. What’s the best way to gain related
exposure?
Of course, you can always buy and hold
cryptocurrency, which amounts to placing a call option on the underlying
technology. But doing so requires an understanding of how to hold your own
private keys in addition to having a high tolerance for risk and volatility.
It’s not for everyone.
What about blockchain stocks? These are
companies making investments into practical applications of blockchain
technology. Holding blockchain stocks gives you exposure to the tech without
having to invest directly in related coins or tokens.
Investing in companies that are
pursuing realistic blockchain projects will prove profitable in the long run.
The blockchain allows for transactions
that can be verified, secure, transparent, and immutable. The first application
of this technology was for financial transactions involving a peer-to-peer
digital currency known as bitcoin. But that’s only one potential use for
blockchain, and a limited one at that.
It reminds me of a scene from “Avengers:
Age of Ultron” where Ultron is talking about Vibranium, the strongest metal in
the Marvel universe. Ultron notes that after having discovered this
revolutionary material, humans did nothing more than make a frisbee out of it
(referring to Captain America’s circular shield).
Bitcoin is sort of like the equivalent
of a blockchain frisbee. The ability for decentralized financial transactions
is great, but there’s so much more that can be accomplished.
To be clear, this isn’t the mania that
pervaded the industry during late 2017 and early 2018. During that time, any
company that so much as uttered the word “blockchain” in a press release saw
ridiculous share price increases at the hands of fevered speculators. And some
companies devoted massive amounts of capital to blockchain projects that only
lost money in the long run.
Now that the initial high has worn off
and things have come back down to Earth, it’s time for a more down to Earth
assessment of the potential of blockchain tech and companies that are investing
in its development.
These companies are building an
economic moat for themselves. By creating new and unique applications of
blockchain technology, they are effectively entering into a league of their
own, as most competitors have yet to even fathom the paradigm change that has
begun.
That’s not to say that competition is
nonexistent. Just look at the hundreds of altcoins that have come and gone over
the last several years. But there’s a big difference between some obscure
crypto startup and a well-established company that is investing in blockchain.
Here are some top blockchain stocks that
fall into that category.
Microsoft (MSFT)
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Microsoft has almost been making too
many forays into blockchain to count. Two early concepts involved using
blockchain to empower supply chains and to create a fraud-proof digital
identity database.
The real mover and shaker for
Microsoft, however, has been Azure
Blockchain Services, which is part of Azure Cloud
Services. Azure is a fully managed service that gives users the ability to
create and manage consortium blockchain networks. Basically, it’s intended to
make it easier for businesses to build decentralized applications using
blockchain technology.
— aster.cloud (@aster_cloud) October 9, 2019
The first distributed ledger to be
managed on Azure Blockchain Services is Quorum, created by J.P. Morgan. Azure
CTO Mark Russinovich said the following about Quorum:
“Because
it’s built on the popular Ethereum protocol, which has the world’s largest
blockchain developer community, Quorum is a natural choice.”
This statement doesn’t make a whole lot
of sense given that the majority of decentralized apps are also built on
Ethereum, so by this logic any of them would also have been “a natural choice.”
Russinovich added the following, though:
“It
integrates with a rich set of open-source tools while also supporting
confidential transactions – something our enterprise customers require.”
Azure Cloud Services boasts that “95%
of Fortune 500 companies trust their business on Azure.” That’s a long list of
clients. If they begin adopting blockchain, chances are they will do so through
Azure Blockchain Services, and Microsoft
will be the main benefactor.
IBM (IBM)
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Trust Your Supplier uses a unique
digital passport to verify the identity of suppliers on its blockchain network,
which allows suppliers to securely share information with specific buyers.
Through the use of the service, companies can qualify, validate, and manage new
suppliers in a faster, cheaper fashion.
The focus will be on "#digital transformation, #customer experience enhancement and #business innovation” among" other things #blockchain #technology https://t.co/zFjehy9CyO— IBM Blockchain (@IBMBlockchain) October 2, 2019
IBM has a long list of
blockchain-related projects in the works. In fact, IBM may be the single-most
prolific filer of blockchain-related patents, as Cointelegraph.com
reported in August:
“The Trust Your Supplier network thus joins an array of other blockchain-based projects from IBM. In mid-July, the company tripled the number of blockchain patents secured in the United States since 2018, boasting over 100 active patent families.”
It’s a safe bet that at least a few of
those patents turn into something profitable.
For now, IBM already has the Trust Your
Supplier network up and running in addition to its “Blockchain as a Service”
implementation called “IBM Blockchain.” IBM Blockchain allows
customers to build new blockchain networks, much like Azure by Microsoft.
Akamai
Technologies (AKAM)
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Akamai is a tech company that provides
an array of digital services to world-class clients. Their areas of expertise
include web performance, media delivery, network operations, and cybersecurity.
The company is trusted by scores of the top eCommerce sites, banks, asset
managers, and video game companies in the world. They claim to have mitigated
some of the largest and most sophisticated cyberattacks the world has ever
seen.
Akamai is developing a blockchain
payment network that can process millions of transactions per second (compared
to 40,000 per second for Visa or 7 per second for bitcoin). The solution is intended
to solve the biggest problems facing established blockchains, particularly
scalability and latency.
MUFG and Akamai set sights on 2020 launch for blockchain paymentshttps://t.co/1eNSHHF4XA— Cointelegraph (@Cointelegraph) February 13, 2019
The company has partnered with MUFG,
the largest cloud delivery platform in the world, to help make this dream a
reality. They intend for the payment network to first be available in Japan
during the
first half of 2020.
Other projects have made similar
promises and failed to deliver. If AKAM can make it work, they stand to profit
well. They already have the infrastructure in place, and so have a certain
synergy with the blockchain. A press release issued by the company in May 2018
provides a good
summary of that fact:
"Akamai drew upon its decades of experience in developing and deploying distributed systems at global scale, along with market-leading performance and security services, in building the blockchain architecture. The new blockchain platform offers improved scalability, reliability, performance and security that is unique to Akamai’s Intelligent Platform, which is trusted by the top brands around the world."
The world has been waiting for a
scalable blockchain-based payment solution for years. Could Akamai be the first
to make it work? Time will tell, and they’re certainly capable of pulling it
off.
These Top Blockchain
Stocks are Positioned to Succeed
Of these four, I like Akamai the best. The company stands to improve its entire business
model by implementing blockchain-based solutions. If they can do so effectively
while maintaining the portions of their business that have led them to be
successful so far, it’s hard to see them not doing well. And given they already have some of the necessary infrastructure and expertise in place, their
odds of succeeding are higher than average.
There’s not much need for discussing
downside risk or competitors to these top blockchain stocks. As mentioned, making
investments toward creating and utilizing practical applications of blockchain
technologies puts these companies ahead of most, if not all, of the competition
as of 2019.
I make the qualification of including
the current year because I believe that over time all organizations will have
to use blockchain tech to remain competitive. For the time being, the companies
named above are just a few of the top thought leaders blazing the blockchain
trail.
A notable example of an established
company failing to deliver on its big blockchain dreams is Overstock.com (see
my previous
article on OSTK). But that failure came about as a
result of poor management decisions coupled with an overzealousness about the
usefulness of one particular application of the technology. Most of the
companies above have experimented with multiple use cases for blockchain, and
none of them are becoming obsessed with it to the detriment of the rest of
their business (as was the case with Overstock).
In sum, companies are betting big on
blockchain. And it’s wise to bet big on those companies that are pursuing
realistic blockchain projects. Whether you want some exposure to blockchain or
are just looking for good places to invest in tech in general, you can’t go
wrong with being long blockchain stocks like these.
Disclosure: I have no positions in any stocks mentioned.
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