How to Invest in Blockchain 

Over the 13 years of its existence, blockchain has revolutionized not only finance, but also many other industries – medicine, logistics, and energy.

Like many promising innovations, blockchain is attracting interest from investors. And there are reasons for this: companies directly or indirectly associated with this technology show good results. For example, PayPal grew 25% in a year by enabling customers to use advanced blockchain-based financial solutions.

In this article, we will tell you how the blockchain works, where it is effectively used, as well as what ideas can bring you to the list of businessmen who successfully invested in the blockchain applications.

What is blockchain in plain language?

Blockchain is a distributed database that stores information about all transactions of system participants. It consists of a chain of blocks combined according to certain rules. The technology is based on the principle of decentralization. Check this page to see the difference of DLT and blockchain. This means that the database is located not on any one server, but on the computers of all participants in the system that form the network. Thanks to this distribution, the information in the blocks cannot be replaced or deleted – for this it would be necessary to hack all the computers on the network at once, and there are millions of them.

Hashing helps protect information from hacking, that is, converting data into a unique code. Each new block of data in the blockchain is not only hashed but also contains the hash of the previous block. This means that if we change the data in the first block, its hash will also change and no longer match the hash that was written to the second block. The system will notice this discrepancy and block the changes.

What is the future of blockchain technology for?

The main advantage of the blockchain lies in the combination of openness and security. Any person with Internet access can view data on all operations performed with its help, and no one can change or fake this data. Blockchain provides complete transparency, high speed, and security of any transactions. With it, you can, for example:

• store and verify personal information,
• certify documents,
• track the origin and movement of goods,
• automate processes and get rid of complex workflow,
• check counterparties and secure transactions,
• protect intellectual property and much more.

In fact, the blockchain allows you to get rid of intermediaries in areas where the participants in the process do not have trust in each other. For example, when making money transfers, blockchain replaces a bank, guaranteeing the security of transactions, and when concluding contracts, it eliminates the need to contact a notary.

Where is blockchain technology used

Distributed database technology has proven itself in banking, payment services, logistics and transport, healthcare, energy, and many other industries. Here are some examples of the use of blockchain in various sectors of the economy.

Financial sector

Blockchain allows you to eliminate intermediaries in financial transactions, reduce costs and optimize many processes. For example, with its help, banks can speed up the reconciliation of documents during factoring, gain access to a common database of fraudsters, and prevent money laundering.

Retail

In the field of commerce, blockchain capabilities are widely used to track supply chains. With this technology, retail chains can control the origin of any goods and in just a few seconds identify counterfeit, stolen, or falsified products.

For example, Nestle uses the IBM Food Trust blockchain technology to track the production and supply of Zoegas coffee. Thanks to the development, everyone can get complete information about coffee beans – from the place of collection to the time of roasting.

Healthcare

Just like in retail, in healthcare, blockchain helps track pharmaceutical supply chains and track their authenticity and provenance. In addition, this technology can help biotech experts to securely store electronic health records, control the distribution of donor organs, remotely monitor patients, optimize insurance and billing procedures, and conduct various studies.

Energy

Blockchain is also in demand in such a conservative industry as energy. The introduction of the technology makes it possible to simplify the system, which consists of electricity producers, distribution network operators, banks, traders, and consumers. Thanks to the blockchain, all transactions for the purchase of electricity can be carried out on the network, and producers and consumers can interact directly. Eliminating intermediaries reduce the cost of electricity and increases the transparency of transactions.

Choosing to invest in the technology of the future

Blockchain use cases confirm that this technology has great potential and can benefit companies from any industry. According to PwC forecasts, over the next decade, 10-15% of the world’s infrastructure will run on the blockchain. All this makes investments in blockchain projects a promising direction.

Among the advantages of investing in blockchain, experts also highlight the pro-cyclical dynamics of the industry. This means that its ups and downs follow the business cycle. Considering that the global economy is on the verge of the next stage of growth associated with gradual recovery from the pandemic, we can expect high results from blockchain projects. In addition, investments in the blockchain show a low correlation with other asset classes (bonds, gold, etc.), due to which they improve diversification and other portfolio characteristics.

There are several ways to invest in distributed database technology. Here are some of them:

• Buying shares of companies related to the blockchain. To participate in the dynamics of the industry, you can invest in enterprises that create, implement or use blockchain technologies. These include, for example, GPU developer Nvidia, payment company Square, contract signing software provider DocuSign, and others. But this approach has a disadvantage: in order to select really promising companies, you need to deeply analyze their business and have a good understanding of the blockchain.
• Investments in ETFs on a blockchain company. If you don’t have the time and desire to choose securities yourself, you can immediately invest in many blockchain projects using exchange-traded funds – ETFs. This opportunity is provided, for example, by the Siren NASDAQ NexGen Economy ETF. But it is important to consider that the status of a qualified investor may be required to purchase shares of foreign funds.

Conclusions: to invest in blockchain or not

1. Blockchain is a promising technology that is used in many industries: from finance to energy.
2. Experts expect that over the next ten years, the introduction of blockchain can bring $1.76 trillion to the global economy, which confirms the high potential of the technology.
3. The rapid development of the blockchain makes it an interesting object for investment. Investments in blockchain technologies are possible through the purchase of shares of companies working in this direction, as well as specialized ETFs.
4. To invest in blockchain companies directly, you need to have a good understanding of the industry, correctly assess risks, have access to foreign exchanges, and, often, the status of a qualified investor.
5. If you do not have the time and desire to choose the securities yourself, you may be suitable for ways to collectively invest in the blockchain.