The very idea of cryptocurrency may be fatally flawed. But, Microsoft (NASDAQ:) and JPMorgan Chase & Co. (NYSE:) are teaming up to use its underlying tech, blockchain, in a way that makes far more meaningful use of the innovation.
It’s not a reason in and of itself to step into Microsoft stock (not that investors were struggling to find one). But, it’s a development all current and potential owners of MSFT stock may want to note. The software giant hasn’t waded as deep into blockchain waters as many of its peers and rivals have, but made a big splash last week with the unveiling Azure Blockchain Services. The fact that a major bank is the company’s first big customer speaks volumes.
Entering the Race
Credit has to be given where it’s due. International Business Machines (NYSE:), of all companies, is arguably leading the blockchain charge, finding practical applications of the technology to solve problems that before the advent of blockchain had no solution.
IBM isn’t positioned nearly as well as Microsoft is, however, to turn the opportunity into a profitable business venture. Microsoft already has close relationships with the business world, and cloud customers.
Enter , launched last week in conjunction with its ‘Build’ annual conference to let enterprises “build, govern, and expand blockchain networks at scale.” Microsoft explains the platform “simplifies the formation, management, and governance of consortium blockchain networks” so organizations can focus on business logic and app development.”
The new application of Microsoft’s Azure platform is intended to use blockchain in ways well beyond cryptocurrency. Yet, its inaugural application will indeed , which is a version of digital coin Ethereum tailor-made for business users.
Microsoft blockchain marketing manager JT Rose explained that customers increasingly wanted a managed infrastructure from us as well as a set of tools to write smart contracts and interact with them. “In our conversations with JPMorgan, they were seeing the same things,” he said.
While an encouraging step from a company that has been slow to dive all the way into the emerging idea, the Azure-driven platform still isn’t the proverbial killer app that Microsoft stock owners may have been hoping to see.
Blockchain Problem Solving
No two blockchain technologies are coded alike. But, most of them are hampered by one common shortcoming … . That is to say, a particular blockchain ecosystem can only effectively facilitate business among buyers and sellers participating in the same blockchain ecosystem.
In other words, a buyer that prefers bitcoin can’t readily do business with a seller that only accepts Ethereum payments.
While an annoyance to cryptocurrency speculators, the limitation is hardly stifling to the global economy. Not so for the use of blockchain as a safe and fast way of conveying value from one party to another. JPMorgan’s Quorum currently only works as a form of payment among Quorum users. “Azure blockchain is only talking to other Azure blockchain nodes. It can’t talk to AWS or Google.”
Microsoft was already working on a solution to a challenge that partner JPMorgan may not even fully realize it has, however. In October, the software icon partnered with Nasdaq to .
It remains to be seen how quickly that technology could be utilized as a means of facilitating business transactions that may cross borders, and still must maintain an accurate ledger even though counter-payments aren’t being made. It’s a start, however.
Looking Ahead for Microsoft Stock
Though few observers would deny that blockchain is the future, it remains to be seen exactly how far into the future it may be before it becomes the norm. In the meantime, the industry appears to be becoming more fragmented, with most — and more — blockchain platforms and corresponding cryptocurrencies only muddying the waters.
If there’s any entity besides IBM in good position to lead the blockchain charge, however, it’s arguably Microsoft. Enterprise customers love its Azure framework, and there are still too few major players working on interoperability solutions that could de-frag the fragmented landscape.
While not a reason in and of itself to buy Microsoft stock right here and right now, the blockchain technology market is expected to be . Others suggest the whole blockchain market in its entirety could be worth more than $23 billion by 2023.
That wouldn’t be a bad market for Microsoft to control.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can learn more about James at his site, , or follow him on Twitter, at @jbrumley.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.