Blockchain Investing

Microsoft’s blockchain bet pays off

The potential of blockchain technology goes far beyond artificial currencies like Bitcoin and Ethereum that grab the headlines.

It holds far more promise for mundane things that are at the heart of many businesses. By streamlining basic functions, the technology is helping drive down costs. Industries where major players are well along the blockchain road include banking, insurance, healthcare, and food safety. The biggest IT multinationals are helping them develop the software they need.

Blockchain is so-called because transactions are shared openly. Everyone can see them on a network and nobody can change them once entered. That makes the information tamper proof.

Microsoft (NDQ: MSFT) is one example of a  multinational that is well along the way in exploring and developing the technology. It has already found profitable ways to exploit it. Microsoft is the world’s largest software company, best known for its Windows operating system, which runs about 90% of the world’s personal computers. It also owns LinkedIn, Skype and markets the Xbox gaming system.

It’s shares have been on a tear and are up 28.23% year-to-date (as of Aug. 9.)  This has a lot to do with the growth of its cloud storage business. Here data is remotely managed and backed up on internet-based servers. Business partners have access to the servers and share information about their contracts, the movement of goods and price changes for inputs.

It’s a small step to apply that platform to blockchain. Microsoft has a partnership with Maersk, the Danish shipping firm, to develop a cloud-based technology for marine insurance that involves an open, shared ledger. The ledger captures information about the movement of containers, where they are and if they are on time or delayed. This offers a more accurate assessment of the insurance risk at any given time.

Maersk Tangier 2In June, Microsoft agreed to acquire GitHub, a community where 28 million software developers collaborate and share their work, including blockchain applications. Microsoft, together with KPMG has co-developed a piece of software for Singapore Airlines that uses blockchain technology for its digital wallet loyalty program.  The wallet converts frequent flyer miles into units that can be used to pay for retail purchases.

One of the safest ways for investors to profit from new technologies is to focus on companies that are most affected by them. Companies like Microsoft are global players with the wherewithal to acquire startups, the money to invest in R&D and the leeway to make mistakes. They are motivated to find solutions while relying on mainstream businesses to generate the profits to pay dividends in the meantime.

This article was written for Harvest Portfolios Group.


Adam Mayers writes about investing and personal finance. He is a contributor to the Globe & Mail’s Globe Advisor and a contributing editor to Gordon Pape's Internet Wealth Builder newsletter. Adam was Business Editor and investment columnist at The Toronto Star and is the author of six books.

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