Interest in blockchain technology has been rising, and many are wondering about ways to invest in blockchain. Here’s a brief overview.
Blockchain technology is increasingly being implemented in business processes across a variety of industries, meaning now may be the best time to learn about ways to invest in blockchain.
A blockchain is a digitized and decentralized public ledger of all cryptocurrency transactions. Blockchains are constantly growing as completed blocks are recorded and added in chronological order; the appeal is that this enables market watchers to track digital currency transactions without central record keeping.
The technology is becoming increasingly mainstream, and many investors are looking for ways to cash in on this exciting industry. Read on for a look at the basics of how to invest in blockchain.
What is blockchain?
Before exploring how to invest in blockchain, it’s important to know its origins. The story more or less starts in 2008, when Satoshi Nakamoto published a paper on bitcoin, birthing the idea of two people or companies transferring payments without the need for a third-party financial institution.
The first bitcoin was mined in January 2009, and it didn’t take long before cryptocurrency hype began.
Today, blockchain technology is being used in various industries, though it is still mainly used to verify transactions. The appeal is that this technology creates an unalterable record whose authenticity can be verified by anyone using the blockchain — not just a third-party financial institution like a bank.
A blockchain begins with a genesis block that births other blocks, or bundles of transactions. The parent block is always the previous block. The “tip” or “top” is the most recently added. The chain then becomes fossilized under layers of children and subsequent generations of grandchildren.
As mentioned, there are many different uses for blockchain. Unsurprisingly, banking is one of them, with other places it has been implemented including the cybersecurity, networking, internet of things and online music industries. More applications are seen emerging in the future.
Ways to invest in blockchain
As blockchain tech continues to grow, there will be many opportunities for investors. Blockchain is not a physical asset that can be purchased, so many are turning to other ways of getting exposure. Here’s a look at the three main options for how to invest in blockchain.
Stocks — Investing in blockchain stock is the obvious place to start when thinking of ways to invest in blockchain. Below are just a few for investors to choose from. For a more exhaustive list, click here.
- BTCS (OTCQB:BTCS) — This company was the first publicly traded blockchain company in the US.
- Riot Blockchain (NASDAQ:RIOT) — This bitcoin-mining company is supporting the bitcoin blockchain through rapid expansion of large-scale mining in the US.
- HIVE Blockchain (TSXV:HIVE,OTCQX:HVBTF) — A firm that is looking to create a bridge between the blockchain market and traditional capital markets. It is strategically partnered with Genesis Mining, a cryptocurrency-mining hashrate provider.
Exchange-traded funds (ETFs) — ETFs offer a lower-fee alternative to stocks, and provide access to a basket of blockchain companies to invest in. Here are a handful of blockchain ETFs available in the market. For a more extensive overview, click here.
- Amplify Transformational Data Sharing ETF (ARCA:BLOK) — This actively managed ETF was launched in January 2018. Its holdings include companies involved in the blockchain sector.
- Siren NASDAQ NexGen Economy ETF (NASDAQ:BLCN) — Established via a partnership with the NASDAQ, this ETF is focused on long-term growth with a focus on blockchain-related companies.
- First Trust Indxx Innovative Transaction & Process ETF (NASDAQ:LEGR) — A fund that tracks the Indxx Blockchain Index. This index is comprised of international publicly listed companies that are involved in blockchain.
- Blockchain Technologies ETF (TSX:HBLK,OTC Pink:BKKCF) — Harvest Portfolios Group issues the Blockchain Technologies ETF, which was the first Canadian blockchain ETF on the market. The fund is focused on securities involved in blockchain, as well as instruments that could include preferred shares, convertible debt and warrants. The fund is listed on the Toronto Stock Exchange.
- Capital Link NextGen Protocol ETF (ARCA:KOIN) — An ETF with holdings that were selected by an artificial intelligence-powered algorithm based on textual analysis. The ETF invests in companies that are related to blockchain across four main categories.
Crowdfunding — While it might not be an immediate choice on how to invest in blockchain, crowdfunding platforms are an attractive way for investors to jump into blockchain investing. As Ameer Rosic, CEO of Blockgeeks, has said, crowdfunding is an easy way for innovative projects to obtain money.
This is where blockchain steps in. Rosic noted that blockchain crowdfunding allows startups to come up with their own digital currencies to sell. Examples of blockchain crowdfunding platforms include:
- BnkToTheFuture — A platform that allows investors to invest in fintech companies and funds.
- QTUM — QTUM permits the execution of “smart contracts and decentralized applications.” It also provides easy ways for standardizing workflow for business and smart contract development.
- Waves — A crypto platform for token assurance, transfer and blockchain trading.
Blockchain market outlook
Uncoupled from bitcoin, blockchain’s future outlook is fascinating and promising. While estimates for market size vary wildly, the consensus seems to be that growth in the blockchain space is inevitable once the needed technological infrastructure is in place.
Research conducted by Market and Markets suggests that the blockchain market will be worth US$39.7 billion by 2025. Grand View Research, another firm, suggests the market will grow to US$394.6 billion by 2028 as various sectors continue to adapt this new technology. For its part, Meticulous Research forecasts that the fintech segment of the blockchain market will reach US$36.04 billion by 2028.
What’s more, in the last few years, 40 central banks have reportedly deployed blockchain solutions, according to the World Economic Forum, and it’s expected that this number will increase dramatically in the coming years. Aside from that, a research report by the Bank of America (NYSE:BAC) found that 21 percent of banks covered have integrated blockchain technology into their businesses, including JPMorgan Chase (NYSE:JPM) and Citi (NYSE:C).
In short, it’s clear that blockchain solutions are here for the long haul, which should ease the minds of those who have been wondering how to invest in blockchain.
This is an updated version of an article originally published by the Investing News Network in 2016.
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Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.