According to Jim Sinegal, a senior equity analyst with
Morningstar, an investment research and management firm, a handful
of companies will benefit from maintaining their centralized data systems,
meaning that blockchain technology may be less likely to impact their business
— at least in the short term.
Sinegal and a team of Morningstar analysts examined a wide
range of firms in a research
report to see which ones would be most vulnerable to blockchain disruption.
Surprisingly, some of the most data-intensive titans may have the widest moats.
Those companies that would incur mammoth costs in switching
to a blockchain system, for example, might be better off with their current networks,
Sinegal observed. They may already be operating at scale and can spread costs
along to millions of customers. These companies include Amazon, Costco and Microsoft.
“Decentralized systems could have a hard time building networks
rivaling the big centralized players,” Sinegal said. “A decentralized
application won’t initially have the same scale in marketing and distribution
as a Visa or Amazon.”
Some of the widest moats may be held by companies that use
data in a centralized way. They have what Sinegal called “network efforts.” You
have to work through their system to reap benefits. They include companies like
Alibaba, American Express, eBay, Expedia and PayPal.
“Network moats are powerful because they are often difficult
to form and to disrupt, and because they rapidly lead to efficient scale in
many cases,” Sinegal noted in the report.
“Forming a new network business typically requires large amounts of funding and
a brilliant business plan.”
While blockchain-based cryptocurrencies can potentially take
business from financial service companies and banks, the majority of blockchain
transaction times are still snaillike compared with those of credit card
companies. And crypto volume is miniscule compared with established credit card
and other payment systems.
bitcoins essentially rely on word of mouth to gain consumer users, and only a
few small startups are actively attempting to sign up merchants,” Sinegal said.
“Merchant acceptance is rumored to be falling, not growing. Thus, the new
payment paradigm has a steep hill to climb if it is ever to threaten Visa and
Still, it’s unwise betting against the potential of
blockchain technology to lower costs across the board through distributed
If financial transactions can be done efficiently on a large
scale through a blockchain, the cost advantages could be significant. The
average merchant discount fee is 2.3 percent. If blockchain applications can
offer similar service at lower costs, they will eat into that revenue. Even
more value can be added if blockchain technology offers higher security and
greater protection against fraud.
“Decentralization via blockchain
[technology] offers several potential benefits to customers,” Sinegal wrote.
“For example, [Bitcoin] offers more privacy, greater transparency, more
security, and lower costs (at least in theory) than centralized methods of
The path for widespread use of major blockchain-based
digital coins may be getting clearer as an official for the U.S. Securities and
Exchange Commission (SEC)
said in a speech this month that bitcoin and ether are not securities,
which are strictly regulated by the SEC. Cryptocurrency offerings are
frequently used to raise money for blockchain ventures.
In “cases where there is no …
central enterprise being invested in or where the digital asset is sold only to
be used to purchase a good or service available through the network on which it
was created,” that digital asset is “out of the purview of U.S. securities laws,” according to William Hinman, the SEC’s director of the division of corporation
finance. He was speaking at the Yahoo Finance All Markets Summit: Crypto.
Hinman, however, noted that token offerings for blockchain company funding may
Hinman’s comments echoed an
earlier statement by SEC Chairman Jay Clayton that cryptocurrencies like
bitcoin are not securities.
Although it’s unclear whether
Hinman’s view will greenlight more blockchain initial coin offerings — and
threaten more mainstream companies engaged in digital commerce — it can be seen
as a positive signal for blockchain developers. But it’s uncertain how this
will impact the global industry as other regulators across the world are eyeing