Is Amazon Getting Serious About Blockchain?

Even as blockchain continues to dominate headlines and conversations across the tech sphere, some of the biggest names in the industry remain on the outside of the sector looking in. However, following several high-profile announcements in recent months, it seems one of the top tech giants may finally be ready to dive into the field.

Amazon, which ranks among the largest corporations in the world, has spent months exploring the possibilities of blockchain. Starting earlier in 2018, however, those explorations turned into real actions after the company announced several partnerships and plans that would put it squarely in the conversation of the sector’s future. With its new “Blockchain-as-a-Service” (BaaS) offering, the questions surrounding Amazon’s dalliance with blockchain go from the theoretical to the very practical.

A Multi-Faceted Motivation

There is little question that blockchain is quickly becoming a profitable sector. While it was long tied to cryptocurrencies’ ebb and flow, the technology has since shed its chains and become a key driver of innovation. Most of the change and disruption has been propelled by developers, entrepreneurs and smaller companies, but large corporations have started to see both its value and virtue. This is evident from the many partnerships announced between blockchain startups and major corporations.

For Amazon, however, the need to incorporate blockchain tools has two distinct faces: changing trends in the eCommerce and consumer sector along with seeking avenues to expand its increasingly vital AWS platform.

The Changing Retail Game

There is little doubt Amazon still reigns supreme in online retail—the company accounted for nearly 44% of eCommerce sales in 2017, and a whopping 4% of all retail sales in the US.

However, this dominance comes at a price, as most companies that operate their sales through Amazon highlight a major issue. According to Eran Eyal, CEO of blockchain-based customer intelligence firm Shopin, “Amazon presents a conundrum: While also providing a huge platform for wide product distribution, logistical support and marketing, all of this comes at the expense of a personalized relationship between the brand and their customers.”

For many retailers, the biggest issue is the loss of end users’ information, which is collected by Amazon. This greatly hampers retailers’ sales ability considering most modern consumers prefer a personalized experience, which retailers through Amazon simply cannot deliver. According to an Accenture study, 91% of consumers prefer shopping with businesses that recognize them and remember their preferences, something Amazon precludes. More surprising, 83% of shoppers are happy to share their data if it means a better experience.

In lieu of gaining any concessions from Amazon’s data collection practices, many retailers are looking at alternatives, and blockchain is already providing them. Projects like Shopin, which rewards users for loyalty while providing retailers with vital information, are becoming more widespread. Other like Sandblock leverage loyalty programs to gather user data and deliver better services.  For Amazon, working with these technologies would help them improve service both for consumers and the businesses that work through the platform. Even so, the company’s efforts still seem largely focused on the B2B opportunities blockchain affords for now.

Expanding B2B Domination

On the business-to-business front, blockchain’s value to Amazon, and the company’s initial splash into the area, are much clearer. For one, the B2B realm has a much more developed ecosystem for blockchain, and Amazon’s existing platforms are already optimized to incorporate the technology. Amazon Web Services, the company’s cloud server solution for businesses, has the pieces in place to easily adapt blockchain.

The company has also been aggressive in finding ready-made partners to integrate its new BaaS platform. For example, Amazon recently announced a partnership with the Qtum foundation to incorporate the project’s dApp development and smart contract tools into AWS. Qtum, which provides a blockchain optimized for business users, will help companies quickly create blockchain applications and smart contracts without having to handle the heavy lifting associated with infrastructure.

More importantly, perhaps, are the many opportunities still available in the business intelligence realm for B2B solutions. These include blockchain-based supercomputers that leverage existing network resources to reduce costs while supporting greater computational power. Platforms such as blockchain-based AI computing platform Tatau, for instance, which deploy unused resources on its blockchain for data processing and graphics rendering, could thrive on AWS’ massive network. Moreover, AWS could supply these services as part of larger BaaS offerings, or even as standalone services that reduce its operational costs and dispense tremendous value.

“Consider that Amazon offers a huge range of services from streaming video, to cloud computing, to bricks and mortar retail. However, decentralized solutions will have a sustainable advantage over AWS in the foreseeable future as AWS runs a cost + model with slim margins and will not reduce prices significantly. This means that the decentralized players will always have a price advantage (which doesn't require returning hardware capital cost)," said Martin Levy, the cofounder and CEO of Tatau.

For Amazon, entering the blockchain arena is more than an opportunity at this point—it has become a necessity. Several of its largest competitors in the computing and business services sectors have a head start as first movers and have already proven successful. IBM’s Hyperledger, for instance, continues to roll along, adding partners and expanding its reach. Network solutions provider Cisco has also had a service online since late 2017, and even Microsoft has entered the fray with its own enterprise blockchain.

"AWS is all about providing infrastructure as a service. Even though they have a nice set of proprietary services, their claim to fame is to deploy and scale any infrastructure service faster and easier than anyone out there. For example they are not shy to claim that “88% of TensorFlow projects run on AWS” being TensorFlow a proprietary technology of Google. So I think that AWS will (and probably is already) be very serious about being one of the best and easiest ways to deploy a blockchain based infrastructure. Not only providing templates, like they already do for ethereum and hyperledger, but as a full stack blockchain service interconnected with all other available products like storage, databases, development, machine learning and IoT," said Daniel Trachtenberg, CEO and Founder of Zinc, a user centric blockchain based advertising protocol and app.

Can Amazon Catch Up?

By all accounts, Amazon is a late entrant to the blockchain environment. The company has made overtures as early as 2017, but 2018 has seen it grow more aggressive in its forays into blockchain. However, with the industry quickly taking a more solid shape, Amazon has its work cut out. While its use case in the B2B space is obvious, ignoring blockchain in the retail sector could be harmful over the long run for the ecommerce behemoth as shoppers demand a more personalized experience. While Amazon remains the de facto gatekeeper for most online retail, avoiding blockchain could derail this hegemony unless Amazon opts to join the race in a more serious fashion.