Breaking Down IBM's Blockchain; Amazon's Alexa; Facebook's Building 8

Authors: Fred McClimans, John Freeman, Zach Mitchell.

IBM launches Blockchain offering

IBM (NYSE: IBM) has formally launched its previously disclosed Blockchain-as-a-Service offering, targeting developers of emerging blockchain technologies for enterprise users. Additionally, it confirmed it is working with SecureKey Technologies to develop a blockchain-based digital identity network for a group of Canadian banks, including the Bank of Montreal, Royal Bank of Canada, Bank of Nova Scotia, Canadian Imperial Bank of Commerce and Toronto-Dominion Bank.

Bottom line: The launch of Blockchain-as-a-Service has been a topic of open discussion for the past year as IBM moves to drive the direction of this emerging technology and to bring developer-focused offerings to market. While blockchain is still very early in the development/adoption cycle, we believe it holds considerable transformative and disruptive potential well beyond its role as the software basis for digital currency Bitcoin, the best-known blockchain application to date (digital crypto-currencies are only scratching the surface of blockchain's disruptive potential). For starters, the technology could render unnecessary a range of intermediary and middlemen roles within the financial services industry, removing both the friction and the profitability from market processes ranging from writing and pricing insurance policies too much of the underwriting function within investment banking.

Blockchain also is likely to revolutionize accounting software and even many of the legacy processes within accounting itself. Additional areas of opportunity and disruption for blockchain: medical records, identity authentication and tracking, all manner of transaction processing, and, effectively, most of the mission critical tasks considered to be the last bastion of traditional, centralized relational database software. To be sure, these kinds of massive, system-level changes to software architecture never occur overnight. However, we do believe they will happen - and in fact are presently happening - much more rapidly than many expect. Regardless of one's opinion of blockchain's adoption and disruption timeline, we believe investors in tech sector equities, as well as in financial services equities, should be closely monitoring blockchain developments such as this one. While IBM's announcement and overall efforts here are not likely to move the needle anytime soon, it clarifies the company's leadership position with the emerging blockchain ecosystem and brings it closer to large-scale deployment.

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