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Blockchain Comes Mainstream as Facebook (FB) Starts Exploring

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Facebook’s (FB - Free Report) recent announcement of creating a new blockchain division has taken the market by surprise. The new division will be spearheaded by David Marcus, the head of messenger services for the last four years. Per Reuters, another senior-executive Kevin Weil, head of product at Instagram, is also joining the division.

The company’s push to include senior executives in the new division reflects the social-media giant’s resoluteness in getting itself fast accustomed to the emerging technology. Per David Marcus, the new division will “explore how to best leverage Blockchain across Facebook, starting from scratch.”

Blockchain Gaining Fast Traction

Blockchain powers bitcoin and other cryptocurrency transactions. The underlying distributed ledger technology (DLT) makes tampering of data impossible as a number of people are involved and have access to it. This safe system lowers monetary losses with minimum chances of double counting and hacking.

Notably, blockchain has already started gaining traction in insurance, banking, food supply, automobile, shipping and freight industries. We note that the industry is currently dominated by the likes International Business Machines (IBM - Free Report) , Microsoft (MSFT - Free Report) and Accenture (ACN - Free Report) .

IBM has been winning deals in multi-line insurance, bank guarantee, automobile industry and global food supplying industry among others.

Microsoft has also introduced blockchain solution on its cloud platform Azure, which is finding large scale adoption, given the flexibility in usage. Further, Accenture’s patent in editable blockchain and continuing deal win presents significant growth opportunities.

Nevertheless, Facebook’s foray into blockchain will surely bring the technology mainstream much faster. Blockchain’s decentralized, transparent and incorruptible characteristics are potent enough to prevent data mishandling, which has been plaguing the social media for a long time.

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Per IBM’s blockchain expert Bridget van Kralingen “the technology enables users to set permissions for who can access any data tracked by a blockchain.” Consequently, the technology can be used to authenticate a person. It can also be run to validate the source of news, which is likely to prevent the fake-news menace.

Facebook’s successful leverage of the blockchain technology will surely boost adoption in the long haul. Market research firm Gartner projects blockchain's business value-add to grow to $176 billion by 2025.

Facebook Can Use Blockchain to Secure Data Handling Process

Facebook’s data storage and usage practices have long been under the scanner of privacy advocates, which gained some credibility after the Cambridge Analytica (“CA”) data scandal broke out.

COO Sheryl Sandberg admitted that Facebook failed to audit CA’s data holdings. The company was made to believe that CA had deleted the user data, which was not the case. Apart from the CA data scandal, Russian ad-fiasco and proliferation of fake news on the platform have also hurt user trust in recent times.

Facebook is now taking all possible measures to regain user trust and the blockchain initiative is one of those strategies.

Although Facebook is rumored to launch its own cryptocurrency using the technology, we believe the company is more likely to use blockchain in building efficient data tracking as well as security systems. This will help the company prevent another data scandal like CA, which affected almost 87 million users.

Currently, the Zacks Rank #3 (Hold) stock has a monthly active user base (MAU) of 2.2 billion. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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