Blockchain is the underlying technology that powers cryptocurrencies on a daily basis. It is not out of the ordinary for “newbies” to believe that Blockchain and cryptocurrencies are the same thing. As a matter of fact, the Blockchain in itself is significantly different than cryptocurrency. With cryptocurrency exchanges being the primary spot to invest in digital assets, many people forget about the importance of Blockchain. In this article we will briefly differentiate the two topics, and further explain how to invest in blockchain technology.
Blockchain Vs Cryptocurrency
Blockchain Technology
Many people that are entering the crypto markets for the first time make the false interpretation that blockchain and cryptocurrency are the same thing. This is far from the truth, as blockchain technology is significantly different. Blockchain is the underlying infrastructure that cryptocurrencies run on. This tends to be the technical layer that many investors never learn about unless they read a whitepaper. It is important to note that cryptocurrencies run on their own blockchains. For example, Bitcoins blockchain is different than Ethereums blockchain.
In its simplest form, blockchain technology is a protocol for recording data that makes it virtually impossible to hack, change, or manipulate a system. This all comes to fruition through a “digital ledger” of transactions that are distributed across a network of computers on the blockchain opposed to just one centralized party. In todays environment, many companies operate in a “centralized” manner meaning their data is prone to security issues or manipulation.
Blockchain technology operates as a DLT ( distributed ledger technology ) where transactions are accounted for through immutable cryptographic signatures. Blockchains are programmable, distributed, secure, immutable, unanimous, and time-stamped.
Blockchain is one of the fastest growing sectors, as companies around the globe are understanding its ultimate potential. In an environment where transparency has never been more important, Blockchain use cases are emerging in various sectors such as:
- Supply Chain Logistics
- Banking & Finance
- Media & Advertising
- Healthcare
- Government
Cryptocurrencies
As discussed above, a blockchain is completely different than a cryptocurrency. With the brief overview above, we now know that blockchain is the technology layer that powers distributed databases across the globe.
Individual cryptocurrencies are built on top of blockchains. What this means is that a cryptocurrency can not operate without its blockchain. If we look at a home for example, a home would not be built without its foundation. This is no different in the digital asset space. A cryptocurrency like Bitcoin would not operate without its blockchain layer. According to CoinMarketCap, there are 7,282 different crypto projects. This simply means that a lot of different blockchains are operating on a daily basis. As we know by now, some cryptocurrencies are more popular than others. A crypto asset is essentially a economic incentive to participate in a certain blockchain.
How to invest in blockchain – people know how to purchase cryptocurrencies on exchanges, but what if they want to invest in the underlying tech?
Untraditional Methods
Investing in blockchain specifically can technically be easier than investing in cryptocurrencies. The reason for this is because many people unfamiliar with cryptocurrencies have a difficult time navigating exchanges, or knowing what protocols to use to deploy capital into the market. Traditional Wall Street firms do not let their clients invests in cryptocurrencies, but their platforms will most likely offer support for blockchain exposure.
Blockchain Stocks
Various publicly traded companies are deploying a lot of resources into blockchain, as they see the long-term value it could provide their clients and shareholders.
IMB ( IBM )
Over the years, IBM has locked in hundreds of different blockchain based patents. Additionally, the tech giant is known to be working alongside 500+ blockchain companies. In a report by Visionary Financial, it was outlined that IBM was working with blockchain in the supply chain management sector.
Bank of America ( BAC )
Similar to IBM, Bank of America has onboarded a ton of patents in the blockchain space, compared to competitors in the financial markets. As the world progresses into a digital economy, BAC is well equipped to lead that push. Aside from Bank of America focusing on blockchain based wallet support for cryptocurrencies, there have also been rumors surrounding a potential Ripple and Bank of America partnership.
BTCS ( OTCQB: BTCS )
BTCS made headlines when it was officially the 1st publicly traded blockchain company in the U.S. The company is building a digital asset data analytics platform and provides investors with indirect ownership to various cryptocurrencies.
Hive Blockchain ( TSX.V: HIVE )
Hive blockchain’s ultimate goal is to interconnect blockchain markets with traditional capital markets. Hive focuses on crypto mining, with mining facilities in Canada.
Square ( SQ )
The payments app has scaled into digital assets by introducing Bitcoin support. Jack Dorsey the CEO of Twitter and Square has shown great interest in Bitcoin looking forward. Square even rolled out their own “Square Crypto” team to further enhance the underlying infrastructure that powers crypto transactions. With Square processing over $100B in payments volume, it has the opportunity to bring crypto and blockchain to the masses.
Broadridge Financial Solutions (BR)
Broadridge has deployed a lot of resources into blockchain. They have been known to be working alongside JPMorgan and Northern Trust in this space. With the affiliations Broadridge has to mainstream finance, it could be a company that really helps blockchain penetrate the masses.
Other notable publicly traded companies making a splash into the future of blockchain include Grayscale Investment Trust, BitFarms, AMD, NVIDIA, PayPal, and MasterCard.
Exchange Traded Funds ( ETF’s )
Unlike individual stocks that have much higher market risk, exposure to ETF’s helps investors diversify their risk in a product that invests in many different companies at once. With these products, investors lower their risk if a couple companies in the fund have down years.
BLCN ( Reality Shares Nasdaq NexGen Economy )
This fund invest in global companies that are focused on the researching, utilization, and development of blockchain technologies. The fund currently invests in 73 different holdings, with exposure in stocks like Overstock, Square, Microsoft, Intel, Accenture, Alibaba, and many others.
BLOK ( Amplify Transformational Data Sharing )
This fund invests in companies focusing on transformational data sharing technologies focusing on blockchain tech. The fund currently has 58 holdings, and invests in companies such as Square, SBI Holdings, Galaxy Digital, NVIDIA, JD.com, and many more.
LEGR ( First Trust Indxx Innovative Transaction & Process )
This fund invests in companies that are also deploying a significant amount of resources to blockchain technology. LEGR has 100 different holdings with companies such as NVIDIA, Infosys, Micron, Xilinx, and many others.
KOIN ( Innovative Shares NextGen Protocol )
This fund offers 45 different holdings that have current or future interest in blockchain technology. Some of these companies include Microsoft, Amazon, Visa, Salesforce, PayPal, Intel, and others.
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