Many people associate blockchain with the volatile cryptocurrency Bitcoin, but they’re not one and the same. And blockchain has implications for investors beyond what you might imagine.
Blockchain is a method of distributing encrypted information among members of a network, who themselves authenticate the information.
There are two types of blockchain: public and private. In a public blockchain, like Bitcoin, every member of the network houses data, makes decisions about its accuracy, and reconciles transactions. In a private blockchain, every member has access to data, but only certain members have permission to verify and reconcile it.
Many public companies (companies in which you can invest) are using blockchain to more efficiently exchange information among various points of a network, like a supply chain.
Walmart, for example, is using blockchain to monitor its food-delivery supply chain. Blockchain tells Walmart from which supplier a product came and on what date. This can help prevent food recalls and is so significant the vice president of food and safety at Walmart has said that “blockchain will do for food traceability what the internet did for communication.”
The trucking industry is also using blockchain to help transport goods from one point to another. This is a complex process that often involves a large number of transactions via email and phone calls, which can take days. Now, a trucking consortium hopes to make that process more efficient by using blockchain.
The U.S. Food and Drug Administration is even testing blockchain to exchange medical records, data from clinical trials, and health data gathered from wearable devices.
What does that mean for investors? Companies that use blockchain could become more efficient, and that could affect their profitability. While there are many factors involved in analyzing a company’s suitability for a portfolio, this is one to consider.