Blockchain's Future: Investing Beyond Bitcoin

Blockchain technology is increasingly being adopted by companies across a variety of industries, and investors are looking for ways to cash in on this exciting industry without investing in Bitcoin. Blockchain is not a physical asset that can be purchased, so investors are turning to other ways of getting exposure. Here are some of the main options for how to invest in blockchain without buying Bitcoin:

- Blockchain stocks: Investing in the stocks of individual companies that are working on blockchain technology or employing it in their everyday processes. Examples include 360 Blockchain Inc, IBM, and Hive Blockchain Technologies.

- Blockchain exchange-traded funds (ETFs): ETFs offer a lower-fee alternative to stocks and provide access to a basket of blockchain companies. Examples include the Amplify Transformational Data Sharing ETF (BLOK) and the Siren NASDAQ NexGen Economy ETF (BLCN).

- Blockchain crowdfunding platforms: These allow investors to fund innovative blockchain projects directly. Examples include Gitcoin, RealBlocks, and Tecra Space.

Exchange-traded funds (ETFs)

Amplify Transformational Data Sharing ETF (ARCA:BLOK)

This actively managed ETF was launched in January 2018 and focuses on companies involved in the blockchain sector. BLOK's investments are aimed at giving investors "indirect crypto exposure" rather than investing directly in cryptocurrencies. The fund follows a blended strategy, investing in a mix of value and growth stocks of varied market capitalizations. The biggest three industry allocations are IT services, software, and capital markets, which together comprise more than two-thirds of the fund's holdings. Some of BLOK's biggest holdings include International Business Machines Corp. (IBM), an Irish information technology services company Accenture Plc (ACN), and Overstock.com Inc. (OSTK), an e-commerce retailer.

Siren NASDAQ NexGen Economy ETF (NASDAQ:BLCN)

The Siren NASDAQ NexGen Economy ETF was established in partnership with NASDAQ and is focused on long-term growth and blockchain-related companies. The fund tracks the Nasdaq Blockchain Economy Index, which includes companies involved in developing, researching, innovating, or using blockchain technology. BLCN owns primarily large-cap stocks from developed markets and follows a blended strategy, investing in growth and value stocks. Some of the fund's biggest holdings include JPMorgan Chase & Co. (JPM), the investment bank and financial services company; Class A shares of Mastercard Inc. (MA), a payment processing company; and GMO Internet Group Inc. (9449:TKS), a Japanese internet infrastructure, media, and advertising company.

First Trust Indxx Innovative Transaction & Process ETF (NASDAQ:LEGR)

The First Trust Indxx Innovative Transaction & Process ETF tracks the Indxx Blockchain Index, which includes companies that are using, investing in, or developing blockchain technology, or that have products that are positioned to benefit from the technology. The ETF normally invests a minimum of 90% of its net assets in equities that comprise the index. Financial stocks make up the largest portion of the portfolio at 36%, followed by information technology (IT) and communication services. Some of the ETF's three biggest holdings are Infineon Technologies AG (IFX:ETR), a German semiconductor manufacturer; SAP SE (SAP:ETR), a German enterprise management software company; and NVIDIA Corp. (NVDA), a maker of graphics processing units and other hardware.

Global X Blockchain ETF (NASDAQ:BKCH)

The Global X Blockchain ETF tracks the price and yield performance of the Solactive Blockchain Index, focusing on companies whose activities involve digital asset mining, blockchain, and digital asset transactions, blockchain applications, blockchain and digital asset hardware, and blockchain and digital asset integration.

Blockchain Technologies ETF (TSX:HBLK, OTC Pink:BKKCF)

The Blockchain Technologies ETF, issued by Harvest Portfolios Group, 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.

Blockchain stocks

Blockchain technology is an ever-growing list of information that is made out of blocks. These blocks are linked together with each other using cryptography and contain various information, such as timestamps, specific codings, and transaction details. Blockchain allows two parties to avoid a third party, such as a bank, when making transactions.

There are three main ways to invest in blockchain: stocks, cryptocurrencies, and startups.

Stocks are a good place to start when thinking about blockchain investments. Here are some companies to consider:

• 360 Blockchain Inc: This company is based in Canada and is one of the few CSE-based companies that post their annual revenue for public display. 360 Blockchain invests exclusively in blockchain and focuses on investing in technologies that use blockchain in innovative ways. While their stock is currently in a slump, it's worth keeping an eye on them as the market recovers.
• IBM: IBM has developed its own blockchain technology and joined the Hyperledger Project to advance blockchain-based ledgers. They believe in the future of blockchain and are serious about their business model. Their stock has been performing well, as seen in the chart below.
• Hive Blockchain Technologies: Hive operates four sectors, primarily used to mine Ethereum, and is dedicated to building and developing the blockchain infrastructure. They have major investors and advisors on their side, making them a stable investment option. However, their stock prices have been down, possibly due to the recent Ethereum price drop.
• Infosys (NYSE: INFY): Infosys is often named to the Constellation ShortList for Blockchain Technology Services, making it a solid choice for investors.
• Block (NYSE: SQ): Formerly known as Square, Block has rebranded to emphasize its focus on blockchain technologies, including cryptocurrencies.
• HIVE Blockchain Technologies (TSXV: HIVE, NASDAQ: HIVE): HIVE aims to build a bridge between the blockchain market and traditional capital markets. It has a strategic partnership with Genesis Mining, a cryptocurrency mining hashrate provider.
• Robinhood Markets (HOOD): Robinhood Markets is one of the most trending stocks in the blockchain sector.
• Riot Platforms (RIOT): Riot Platforms is a Bitcoin mining company in North America. However, it has been struggling lately, missing revenue and earnings expectations.
• Coinbase (COIN): Coinbase operates a cryptocurrency exchange platform and recently reported strong Q2 2024 earnings. However, it is heavily reliant on crypto trading volume, making it vulnerable to market downturns.
• MicroStrategy (MSTR): MicroStrategy provides enterprise analytics and mobility software but is known for its massive Bitcoin holdings. While it has been on a wild ride, the company's software business is deteriorating, and it reported a Q2 net loss.

Blockchain Exchange-Traded Funds (ETFs)

Exchange-traded funds (ETFs) offer a lower-fee alternative to stocks and provide access to a basket of blockchain companies. Here are some blockchain ETFs to consider:

• Amplify Transformational Data Sharing ETF (ARCA: BLOK): This actively managed ETF was launched in January 2018 and holds companies involved in the blockchain sector.
• Siren NASDAQ NexGen Economy ETF (NASDAQ: BLCN): This ETF is established in partnership with NASDAQ and focuses on long-term growth and blockchain-related companies.
• First Trust Indxx Innovative Transaction & Process ETF (NASDAQ: LEGR): This ETF tracks the Indxx Blockchain Index, which includes international publicly listed companies involved in blockchain.
• Blockchain Technologies ETF (TSX: HBLK, OTC Pink: BKKCF): The first Canadian blockchain ETF on the market, focusing on securities involved in blockchain and related instruments.
• Global X Blockchain ETF (NASDAQ: BKCH): This ETF tracks the Solactive Blockchain Index, focusing on companies involved in digital asset mining, blockchain applications, hardware, and integration.

Outlook for Blockchain

The future outlook for blockchain is promising, and growth in the blockchain space is expected to continue. Research suggests that the blockchain market will reach a significant size by 2027 or 2030, with various sectors adapting this technology. Central banks and financial institutions are increasingly deploying blockchain solutions, indicating that blockchain is here to stay.

Cryptocurrencies

If you're thinking about blockchain investments but stocks aren't your thing, you might consider buying cryptocurrencies. This method is often overlooked by people who are thinking about how to invest in blockchain, but it is a very popular one. While folks from the cryptocurrency communities usually buy cryptos for other reasons (i.e. trading), it is a pretty famous way to invest in blockchain.

Bitcoin

Bitcoin is probably the most well-known cryptocurrency. It is considered the OG coin, having been around longer than any other coin in the business. Bitcoin has thousands of enthusiasts and investors alike. This crypto has made a huge following over the years, thanks to its notoriety and what seems like an overnight burst into the mainstream.

Ethereum

Ethereum takes second place in the market position next to Bitcoin. Just like Bitcoin, Ethereum has a very popular and well-known cryptocurrency in the crypto world. A strong quality that ETH has is that many of the new startups and ideas are based on its network. Because of this, a lot of people think that Ethereum will one day overtake Bitcoin in the market position ranking.

Ripple

Ripple has managed to keep up with the bigger, more well-known cryptos in the market. One of the main reasons why people who look to invest in blockchain turn their sights to Ripple is its market price. As of writing, the price of one XRP is $0.28, making the coin very popular among people who might not have the funds to go big but still want to pitch into the crypto investment world.

Blockchain startups

Due Diligence

Before investing in any blockchain startup, it is essential to conduct thorough research and due diligence. This includes understanding the business model, the technology, the team behind the project, and the competitive landscape. It is also crucial to review the whitepaper, roadmap, and other relevant documentation to gauge the credibility and potential of the project.

Diversification

Diversifying your investments across multiple startups can help mitigate risk. As with any investment, it is wise to spread your capital across several projects to reduce the impact of any single investment on your overall portfolio. This strategy can be particularly beneficial in the volatile blockchain and cryptocurrency markets.

Long-Term Potential

Blockchain technology is still in its early stages, and the full potential of many use cases is yet to be realized. When investing in blockchain startups, it is important to take a long-term view. Many blockchain projects are working on innovative solutions that may take time to develop and gain traction.

Risk Assessment

Investing in blockchain startups carries a higher risk than investing in more established companies. It is crucial to assess the risks associated with each investment opportunity. Consider factors such as the regulatory environment, market competition, and the maturity of the technology when evaluating potential investments.

Industry Focus

Blockchain technology has the potential to revolutionize numerous industries, including finance, supply chain management, healthcare, and more. When considering blockchain startups to invest in, look for companies focusing on specific industries and use cases. This focused approach can help you better understand the potential impact and viability of the project.

Team and Partnerships

The team behind a blockchain startup plays a crucial role in its success. Look for startups with a strong team that has a diverse set of skills and experience relevant to the project. Additionally, consider the partnerships and collaborations the startup has established. Strong industry connections and strategic alliances can significantly enhance the credibility and potential of a blockchain project.

• 360 Blockchain Inc: A Canadian company that invests exclusively in blockchain technologies and innovative uses of blockchain.
• IBM: A well-known technology company that has developed its own blockchain technology and joined the Hyperledger Project to advance blockchain-based ledgers.
• Hive Blockchain Technologies: A company focused on building and developing blockchain infrastructure by partnering with Genesis Mining Ltd. and mining cryptocurrencies 24/7.
• BlockCypher: Provides blockchain web services and APIs, enabling companies to build blockchain applications easily.
• Blockstream: Specializes in creating sidechains and issuing new digital assets to make financial markets more efficient and reduce reliance on trust.
• CipherTrace: Develops blockchain threat intelligence solutions, cryptocurrency anti-money laundering services, and cryptocurrency forensics.
• MakerDAO: A decentralized autonomous organization on the Ethereum blockchain with its own coin, Dai, offering a stable and controllable currency for users worldwide.

Blockchain crowdfunding

Blockchain technology has the potential to revolutionize crowdfunding, making it more secure, transparent, and efficient. By leveraging the decentralized nature of blockchain, crowdfunding platforms can reduce the need for intermediaries, lower costs, and provide greater flexibility for fundraisers and donors alike. This technology also addresses some of the challenges faced by traditional crowdfunding, such as high fees, fraud risk, and lack of transparency.

One of the key advantages of blockchain in crowdfunding is the removal of intermediaries. Blockchain's decentralized system eliminates the need for middlemen in financial transactions, reducing costs for fundraisers and simplifying the process. This also increases accessibility, as fundraisers are no longer limited by strict requirements imposed by centralized platforms.

Blockchain technology also enhances security and transparency. The distributed ledger technology ensures that transactions are secure and tamper-proof, protecting the interests of both creators and donors. The traceability and verifiability of information on a blockchain platform allow for real-time tracking and monitoring of data, fostering greater trust among all parties involved.

Additionally, blockchain-based crowdfunding can attract a wider pool of investors by providing tokenization opportunities. Potential investors may be enticed to contribute to a project if they can obtain a small ownership stake, giving them a sense of involvement and loyalty to the initiative. This can be achieved through asset tokenization, where tokens represent ownership in the company or project.

Smart contracts are another powerful tool offered by blockchain technology. These customizable contracts define the terms of the agreement between creators and donors, ensuring secure and efficient transactions. Smart contracts also eliminate the need for intermediaries, making the process faster and reducing the risk of fraud.

The impact of blockchain on crowdfunding extends beyond efficiency and security. It also enables greater flexibility and universal opportunity. With blockchain, any project can seek funding, and anyone with an internet connection can contribute. This democratization of fundraising empowers entrepreneurs and innovators to pursue their visions without the constraints of traditional financing methods.

In conclusion, blockchain crowdfunding holds the potential to transform the way we fund projects and causes. By leveraging the strengths of blockchain technology, including decentralization, security, and transparency, crowdfunding platforms can create a more accessible, efficient, and secure environment for fundraisers and donors alike. As blockchain continues to evolve and gain traction, we can expect to see even more innovative applications in the crowdfunding space.

Frequently asked questions