Why Google is Building its Own Blockchain

Alphabet Inc.’s Google (GOOGL) is working on a blockchain-related technology that is aimed at supporting cloud business, according to Bloomberg News. 

Blockchain- based services have enabled numerous startups to offer novel online services, assuring customers that their information is more secure and more efficiently managed compared to the traditional methods of online data hosting. Such new offerings are proving to be a tough competitor for  various technology companies, especially the ones operating in the hosted solutions space, like the cloud-based data storage.

Why is Google Working on Blockchain?

Digital ledgers like blockchain allow the secure recording of transactions and processing of data points over the Internet or other private networks. Because they are more secure and efficient in storing and retrieving key business data and content, businesses are increasingly moving to digital ledgers and blockchains. 

Additionally, businesses are also wary of the risk of having only a single company host their key business data. The decentralized nature of blockchain is preferred by such businesses for better security and risk management of their content.

With a growing number of online services now available on the blockchain platform, it poses a natural threat to the traditional internet-based businesses. Technology giants like Google are taking an inclusive approach to fend off such competition. If you can’t beat them, join them!

Google is said to be venturing into the blockchain space to complement its cloud business, as it faces stiff competition not only from other cloud providers, like Microsoft Corp (MSFT) and Amazon.com Inc (AMZN), but also from the many other new-age blockchain service providers. (For more, see How Amazon Competes With Google.)

 “The Alphabet Inc. unit is developing its own distributed digital ledger that third parties can use to post and verify transactions,” according to a person familiar with the matter quoted by Bloomberg. 

The company is also expected to offer a white-label version of its distributed digital ledger. White labeling is the practice allowing of a developer or manufacturer allowing other companies to rebrand a product or service as their own.

With such white-label offerings, Google, which is known to host all of a client’s data on its own servers and data centers, may also be open to offering private blockchains. These private blockchains may be completely owned, controlled, and operated by the clients, either over the various servers spread throughout the Internet or hosted securely on a private network. (for more, see Public vs Private Blockchains: Challenges and Gaps.)

Google Actively Pursuing Blockchain

Blockchain has been on Google’s radar for a long time, as it comes as a natural extension to its cloud-based services.

The same source also mentions Google's recent acquisition and investment spree in startups with blockchain expertise.

Though many of these unannounced deals remain outside of public knowledge, a CB Insight report ranks Google in the second place in the list of most active corporate investors in the blockchain space between 2012 and 2017. SBI Holdings takes the top spot, while Overstock.com Inc (OSTK), Citigroup Inc (C), and Goldman Sachs Group Inc (GS) rank behind Google. Google has also hired many blockchain experts.

“Like many new technologies, we have individuals in various teams exploring potential uses of blockchain but it’s way too early for us to speculate about any possible uses or plans,” a Google spokesman told Bloomberg.

There are also hints that Google may come out with an enhanced version of blockchain. Sridhar Ramaswamy, Google’s advertising chief, said at a recent conference that his division has a "small team" looking at blockchain, but noted the existing core technology can’t handle a lot of transactions quickly. 

Over the last decade, the blockchain market has grown rather slowly. However, it is poised to surge ahead rapidly over the next few years. From an estimated value of $706 million as of 2017, the blockchain market is expected to grow phenomenally and reach $60 billion worldwide as it creates new digital economic infrastructure, according to WinterGreen Research.

Technology giants like IBM Corp (IBM), Microsoft, and Accenture PLC (ACN), are currently leading the pack of blockchain service providers. With Amazon already offering services to build blockchain applications, and Facebook Inc’s (FB) founder Mark Zuckerberg also expressing interest in virtual tokens, encryption and other decentralized technology, Google seems all set to get into the blockchain game.

Take the Next Step to Invest
The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace.