JD.com launches a Blockchain platform – But it's not for Bitcoin – The Motley Fool


JD.com (NASDAQ: JD) the second e-commerce player in China, recently launched the open platform JD Blockchain, a blockchain-as-a-service platform that helps companies to develop their own blockchain-based applications. A blockchain is a decentralized ledger of data that is distributed in various positions. This data is protected in encrypted blocks, accessed via peer-to-peer networks. The first blockchain was a distributed ledger for bitcoin transactions, but technology can also significantly improve the supply chain and financial records with easily traceable and tamper-proof transactions.

China Pacific Insurance one of China's largest listed insurers, is JD's first partner to use its new platform. The insurer will use JD's blockchain infrastructure to "implement a traceable system for electronic invoices" by applying "unique blockchain IDs to each document." JD states that the app will help the insurer improve its overall efficiency by "streamlining the accounting process".

  A visual representation of blockchain technology.

Image source: Getty Images.

Tracing JD blockchain efforts

This is not JD's first blockchain initiative. Last year it launched a blockchain tracking platform that helps customers track the origins of food products. Subsequently, JD implemented blockchain tracing for over 400 brands and 11,000 SKUs (inventory maintenance units) on its market.

This March, an Australian beef producer used JD blockchain tracking to track beef imports and, in June, JD & # 39; s fintech affiliates JD La Finanza announced that it will issue asset-backed securities on a blockchain network through partnerships with Xingye Bank and Huatai Securities.

Launching a blockchain-as-a-service platform, JD could generate a new cloud-based revenue stream by allowing companies to create their own blockchain-based applications. In addition, it could increase the viscosity of JD's e-commerce ecosystem as customers become more dependent on JD's service offerings. This growth could add to diversify JD's revenue outside of its core online market business, which faces intense competition from (NYSE: BABA) Tmall .

Understanding logistical applications of the blockchain

Last year the head of food safety Walmart Frank Yiannas showed that the condition and origin of any food product through the network of the dealer could be traced in two seconds via blockchain – a process that would take about a week with older tracking methods.

That's why it's smart for JD to use blockchain tracking on food sold in its market. China has been plagued by food safety issues, and the implementation of blockchain-branded food offers customers a higher level of assurance, which integrates JD's corporate mantra "authentic products delivered today."

  A woman cuts fresh produce. [19659014] Image source: Getty Images. </p>
<p>  Meanwhile, corporate invoices (known as "fapiao" in Chinese) are tightly regulated in China, where they are released for all financial transactions to discourage tax fraud. Keeping track of all corporate invoices can be a time-consuming and error-prone process, so digitizing all those bills on a blockchain network where transactions can be monitored quickly could save companies like China Pacific Insurance a lot of time and money. </p>
<h2>  But JD is already late for the party </h2>
<p>  JD's blockchain platform seems revolutionary, but many other companies have already entered the blockchain-as-a-service market. Technology giants such as <strong> IBM </strong><strong>  Microsoft </strong> and <strong> Amazon </strong> offer blockchain-as-a-service solutions as extensions to their cloud operations. </p>
<p>  In China, <strong> Baidu </strong> launched a blockchain-as-a-service platform in January. <strong> Alibaba </strong> already uses blockchain to track purchases, and its fintech affiliate Ant Financial uses blockchain to allow Alipay users to track charitable donations. Alibaba and Ant Financial also hold the largest number of blockchain patents in the world. </p>
<p><strong>  Tencent </strong> launched a blockchain-as-a-service platform last year, applied that technology to its transactions and logistics fintech and even used to help consumers keep track of medical prescriptions. </p>
<p>  JD could struggle to grow its blockchain platform against these rivals because it does not have a large cloud infrastructure platform. It could eventually expand the service, but that could be an expensive effort for a company that is already struggling with high expenses. JD's technology and content expenses have increased 80% last year and contributed heavily to the net loss </p>
<h2>  It's not a turning point </h2>
<p>  The news related to Blockchain draws a lot of attention in these days, but few of these projects will actually move the needle for their companies. JD's investment in blockchain should improve quality control standards in its market – which could increase customer loyalty and broaden the gap against Alibaba. </p>
<p>  However, the blockchain platform will probably not become a significant source of revenue because there are simply many competitors on the market and, unlike JD, these competitors can bundle their blockchain solutions with other cloud services. </p>
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John Mackey, CEO of Whole Foods Market, a subsidiary of Amazon, is a board member of The Motley Fool. Teresa Kersten is a LinkedIn employee and is a board member of The Motley Fool. LinkedIn is owned by Microsoft. Leo Sun owns shares in Amazon, Baidu, JD.com and Tencent Holdings. Motley Fool owns shares and recommends Amazon, Baidu, JD.com and Tencent Holdings. The Motley Fool has a disclosure policy.

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