How to Invest in Blockchain Stocks in 2019
A blockchain is a digital, decentralized public ledger that stores records of all transactions carried out on the network it supports. Its structure can be described as a chain of blocks holding information, hence its name. Usually, as more transactions are added to it in chronological order, the chain grows.
Blockchains are also immutable, ensuring that information recorded cannot be manipulated. Instead, any changes can be appended to it. This is a useful technology for applications that require proof of authenticity, such as recording particular points in a supply chain or issuing certificates for the purchase of precious metals such as gold.
Blockchain technology first emerged as the underpinning system for Bitcoin, the pioneer cryptocurrency. Since then, it has come a long way and has become the underlying technology behind most digital currencies, including Ethereum, Ripple, Stellar Lumens, TRON and EOS. As continuous adoption of the technology has occurred, modifications have been made to the original Bitcoin blockchain.
These modifications center around how users record data within the system, governed by rules known as consensus protocols. Since the basic blockchain does not require a central authority to preside over it, members of its network are tasked with securing it and recording those transactions themselves. Consensus protocols ensure that the process is secure and fair to the users of that specific network.
Tech industry giants, as well as corporations in other sectors, have begun to see the positive applications of blockchain. In its basic form, the technology makes several processes a lot more efficient. For example, in real estate, scams have been a huge issue due to the absence of a comprehensive digital land registry. Buyers cannot always confirm the authenticity of the properties they are interested in purchasing.
A blockchain would make it easier to authenticate property since their history would be recorded. The same goes for the art industry. From the finance to logistics and education sectors, corporations are investing in the development of blockchain infrastructure. Several companies like Mastercard and IBM have secured several blockchain patents while others like Amazon, in partnership with blockchain startups, have created systems that run on the technology,
Universities like Johns Hopkins and MIT have also added the study of the subject, to their programs while countries like India and Turkey have created dedicated blockchain districts, incubators, and research centers. The list of developments within the field goes on, and one thing is indeed clear: Blockchain is at a point where investing in its development can be rewarding.
How to Invest in Blockchain
Unlike bonds, penny stocks and other traditional commodities, blockchain is not a physical asset that can be bought. However, there are different ways to cash in on the action. The technology has created a trickle-down effect leading to the development of other systems which investors can take advantage of. The main options include:
An excellent way for anyone to jump into blockchain investing is through crowdfunding. It works like this: A couple of people come together with an excellent idea for a blockchain application. They lay down their plans of making this idea a reality, usually within a white paper on their website. After this, they create a cryptocurrency which will power their monetary operations.
Unfortunately, such ideas typically cost millions of dollars to actualize, so these startups offer their cryptocurrency tokens which act as shares, to investors. This crowdfunding effort known as an initial coin offering (ICO), allows such companies to raise enough funds to develop their products while investors can watch the value of their tokens appreciate over time.
Investing in stocks is one of the most obvious places to start, especially for investors who are already familiar with how the stock market works. Several companies, including banks, are investing heavily in blockchain and are showing potential within the space. Most of these companies are listed on the stock exchange, and their shares can be bought easily. Our list of top 5 blockchain stocks is a great place to start.
Some top companies that have incorporated blockchain into their operations include:
- IBM: Blockchain cloud service and partnerships with Stellar Lumens, VERDE by Veridium labs, Batavia by international bank consortium and the food safety alliance
- Microsoft: Azure cloud service which integrates blockchain with Microsoft apps
- Oracle: Blockchain cloud service
- Red Hat: Blockchain-as-a-Service (Baas)
- VMWare: Enterprise Blockchain-as-a-Service
- Salesforce.com: Blockchain in transport alliance, enterprise solutions
- Nasdaq: Linq, Partnership with Citigroup, Blockchain mutual funds
Some other ways to start investing in blockchain are:
- Buying and holding coins and tokens: It is a known fact that early Bitcoin investors such as the Winklevoss twins, made millions when the price of BTC soared to $20,000 in December 2017. While it may seem like those days are never coming back due to the currency’s recent performance, there is reason to believe that they will come back even bigger, according to recent predictions. Buying and holding cryptocurrencies that show potential for growth is a great way to invest in blockchain.
- Investing in startups that exploit blockchain technology: Apart from ICOs, some blockchain startups allow investors to buy their stock using fiat currency. This is a safer option for those who feel that cryptocurrency is too risky to touch.
- Buying into publicly traded blockchain ETFs: Exchange-Traded Funds (ETFs) have been a hot topic within the blockchain ecosystem for a while. They provide a more convenient and less-risky way to invest in blockchain companies. Traditionally, ETFs allow investors to track particular assets without necessarily buying them. They usually have baskets containing several holdings which are being tracked. Exchange-traded funds are publicly traded on an exchange and can be purchased in the form of stocks. Currently, the top blockchain ETFs track companies like Alibaba, Microsoft, and Paypal among others.
- Invest in learning blockchain development: The field of blockchain has unlocked various career opportunities, including software development, cybersecurity, accounting, financial advisory, marketing, and journalism to name a few. Due to the amount of money flowing into blockchain development, companies can afford to pay highly rewarding salaries. However, most of these jobs require specialized knowledge and getting the education necessary may take a significant amount of money and time.
The Future of Blockchain
Although Bitcoin has had its fair share of ups and downs, blockchain is still showing enormous potential for the future. Finance industry experts like Jamie Dimon and George Soros have echoed this potential in their opinions.
Currently, market size estimates vary but still, it is evident that the rate of blockchain adoption is growing globally. In the last few years, many banks and large companies like HP, Tencent, Huawei, Baidu, SAP, and Deloitte have reportedly developed and deployed blockchain technologies. People are becoming more interested in how this technology can make their lives easier.
A study titled ‘The Future of Blockchain: Key Vertical Opportunities & Deployment Strategies 2018-2030’, by Juniper Research, has led to an interesting prediction. According to the market intelligence firm, the study shows that financial institutions stand to save approximately $27 billion on cross-border payments before 2030 ends.
For on-chain transactions, the costs will be cut by more than 11% as well. Some banks may also save up to 50% of their expenses. These are encouraging figures that may prompt more financial institutions to deploy the technology.
Blockchain investment is not just a great way to make a lot of money, it is also an excellent way to make so many processes and systems a lot more efficient. By investing, the field receives the funds needed to develop infrastructure that will prove valuable in the long term.
According to a study by IHS Markit, the business value of blockchain will increase from $2.5 billion USD in 2017 to about $2 trillion USD in 2030. These figures show that there is a tremendous opportunity to earn a lot within the space. However, investors must note that contrary to popular belief, blockchain investments are not a way to get rich quick, since profit is usually generated over a long-term period.