Blockchain is touted as the next game-changer in the tech sector. The underlying technology behind bitcoin mining and trading has rapidly gained traction over the last few years, driven by accelerated multi-industrial adoption.
The technology is primarily used for tracking transactions related to digital assets or documents, particularly in industries like banking, financial services and insurance.
The commercial versions of blockchain currently in use are mostly based on either Ethereum or Hyperledger technology. While Hyperledger is an open source global collaboration hosted by the Linux Foundation, Ethereum has been developed by a Swiss non-profit called Ethereum Foundation.
In April, the Hyperledger Technical Steering Committee (TSC) approved a proposal to incubate Burrow, a permissionable smart contract machine. Burrow is the first Ethereum-derived project to get this kind of approval. We expect the integration between the different approaches of the two communities to improve in the near future. This will accelerate the mainstream adoption of blockchain.
Enhanced Security Drives Blockchain’s Growth
Adoption of the technology has increased due to the fact that the distributed ledger technology (DLT) that blockchain is based on ensures secured data storage and transmission. As every member involved in the consortium using the data can see the changes made, a breach is unlikely. This makes the process even more trustworthy.
Moreover, the decentralized database puts a check on hacking and double counting, thereby decreasing the possibilities of monetary losses via cyber crime.
With increasing instances of cybercrime, which per a recent report by Juniper Research is expected to cost global businesses over $8 trillion in the next five years, the secured ledger-based technology is bound to gain further importance.
Moreover, blockchain technology is projected to reach $2.3 billion by 2021 from $210.2 million in 2016 at a CAGR of 61.5%, per data from MarketsandMarkets.
4 Stocks to Gain from the Blockchain Boom
Swiss Bank UBS Group AG (UBS - Free Report) is playing an instrumental role in bringing blockchain mainstream. The company is a co-founder of the Utility Settlement Coin (USC) system that helps banks and other financial institutions to process faster security transactions among themselves.
Deutsche Bank, Santander and BNY Mellon were already a part of the initiative, which was announced last August. Most recently, six other financial institutions – Barclays, HSBC, State Street, Credit Suisse, MUFG and the Canadian Imperial Bank of Commerce – joined the consortium.
UBS currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
IBM Corporation (IBM - Free Report) is currently the dominant player in the blockchain market. Recently, CNBC quoted Juniper Research, which placed IBM above Microsoft in blockchain related advancements.
IBM uses hyperledger technology for its blockchain applications and is also a key member of the Hyperledger committee. This enables it to gain access to prior notification of any changes in the underlying infrastructure.
IBM has been winning significant deals in recent times. The company has struck bank guarantee deals with ANZ and Westpac and a multi-line insurance contract with American International Group and Standard Chartered PLC.
IBM has also inked a deal with global food suppliers and another one with automobile manufacturer, ZF Friedrichshafen to enhance its Car e-Wallet technology.
IBM has a Zacks Rank #3 (Hold).
Microsoft Corporation (MSFT - Free Report) is another prominent provider of blockchain technology. The company’s solutions are built on Ethereum. However, it is not a member of the concerned foundation, which is hurting its ability to win customers compared with IBM.
Nevertheless, Microsoft has been aggressively trying to expand its footprint in the technology domain. The collaboration with Accenture and the unveiling of the Coco framework for faster and secure blockchain-based transactions are some of its key initiatives. Moreover, the company recently announced a contract with Israeli Bank Hapoalim that will boost its penetration in the blockchain market.
Microsoft also carries a Zacks Rank #3.
Despite being huge a critic of bitcoins, U.S.-banking giant JPMorgan Chase & Co. (JPM - Free Report) has left no stone unturned to develop solutions using the underlying technology.
JPMorgan is currently involved in the development of an enterprise focused version of blockchain called Quorum, which is based on Ethereum technology.
This initiative was taken up by the company after it reportedly exited a behemoth blockchain collaboration in April 2017 that was backed by around 80 financial institutions led by New York based start-up, RS CEV. The consortium aims at developing finance sector related blockchain technology.
JPMorgan currently has a Zacks Rank #3.
The increasing adoption of blockchain technology is expected to cut down on expenses as it will limit data theft related losses. This in turn will have a positive impact on consumer margins and the bottom line. We believe that the above mentioned stocks are solid picks for investors looking to benefit from blockchain’s increasing adoption.
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