The prices of bitcoin, ethereum and other cryptocurrencies have come down a lot this year, but that doesn’t mean it’s the end of the road for the blockchain. The applications for blockchain beyond cryptocurrencies are nearly endless, but investors may have a difficult time determining where to invest to get a piece of the blockchain pie.
Total addressable market for blockchain
Every so often, investment banks will offer up some suggestions. This time it’s Bank of America Merrill Lynch with a list of suggested stocks that could benefit from the blockchain trend at some point in the future.
In a recent note by a large team led by analyst Kash Rangan, BAML pegged the total addressable market for the blockchain at about $7 billion. On the surface, that seems like a rather arbitrary number, especially given that the firm doesn’t commit to putting an estimated timeframe on it. The big problem is that there are many different ways to estimate the market for blockchain.
BAML’s analysis is based on average selling price per server per year, the number of servers installed worldwide, and the percentage of servers which are running blockchain. The firm’s model assumes 2% of the world’s servers run blockchain for a value of $5,500 per server per year.
IDC estimated the blockchain market at $735.6 million last year; the firm pegs the market at $10.9 billion by 2022. IDC expects that within the next two years, one-quarter of the world’s top banks, 30% of retailers and manufacturers, and 20% of healthcare organizations will be using blockchain.
Monetizing blockchain technology
Another clear issue in estimating the value of the blockchain market is that it’s still unclear just how blockchain services could be monetized. While numerous analysts and experts have outlined a wide variety of potential use cases for the technology, actually monetizing those use cases is still a bit of a mystery. However, BAML analysts have some suggestions.
They see blockchain monetization in the future as mirroring cloud services today. They describe one potential monetization as “blockchain infrastructure as a service,” which basically entails providing end-to-end blockchain solutions. They see VMWare as the biggest potential vendor for this monetization style.
Another suggestion they offer is “blockchain platform as a service,” which basically just means providing a platform upon which customers can set up their own protocols and applications. BAML suggests IBM, Oracle, VMWare and Ethereum could be among the potential vendors for this type of blockchain technology, among others.
They also see the potential for “blockchain applications as a service,” which basically just means offerings of blockchain services which are ready for use in various ways, such as through smart contracts, e-commerce transactions, supply chains and more. They suggest Microsoft, Oracle and Salesforce as potential vendors for this type of blockchain.
Investing in stocks for blockchain exposure
Based on their ideas for monetizing blockchain, the BAML analysts selected their “Blockchain 9,” which are the companies they feel could end up being the biggest beneficiaries of the technology.
It should come as little surprise that perennial tech favorite Amazon is first on the list. The BAML team sees benefits from improvements to payment processing and supply chain tracking. Given that Amazon also offers cloud services, they also think the company could benefit from increased demand for those services caused by blockchain implementation.
In second place on their “Blockchain 9” list is Microsoft, which they said already supports a number of blockchain protocols and projects, such as the Azure Blockchain as a Service program. Oracle offers platform support for blockchain technology through its Oracle Blockchain Cloud Service and other software-as-a-service apps. Oracle should also benefit from the increased cloud demand due to blockchain.
BAML analysts see IBM as already the leader in blockchain with its Hyperledger Fabric, and they expect the company to hold at least 10% of the blockchain market eventually. Salesforce may not be far behind, as it introduced new solutions for the technology at Dreamforce this year. Other potential blockchain beneficiaries include VMWare with its Project Concord and Redfin, Zillow, and Lending Tree.
This article originally appeared on ValueWalk Premium