Blockchain isn’t just for Crypto Anymore
As an investor, you may have some concerns about the volatility of the cryptocurrency market. The investment you should consider is the blockchain technology behind it. Blockchain was once considered an experimental technology. Now it’s embraced by major companies, like IBM and Microsoft, and applied in multiple industries.
Initial interest was in the financial services industry. That may have been driven by the success of cryptocurrency platforms. Blockchain acts as an anonymous, immutable ledger. Peer-to-peer transactions are documented in blocks, then locked into the chain. Once a block is locked, there is no way to unlock it or change its order in the chain. As a transactional record, blockchain is unparalleled.
It’s being applied in cloud computing, gaming, healthcare, and identity validation. These vendors leveraged the capabilities of the blockchain to capture and document different types of transactions. One of the most interesting options, given the current political climate, is a mobile voting blockchain. The digital ledger is incorruptible and may provide a valid option to restore faith in election integrity.
Blockchain Technology Explained
Blockchain is a different kind of database. A traditional database is built on a centralized, client-server network architecture. A user has a login and password of some type to add data to the system. The database has a designated authority – system administrator – who issues those credentials. If admin security is compromised, the information in the database can be altered.
Blockchain is decentralized. Instead of centralized tables, the system is built on multiple nodes. These nodes represent users and devices. To add someone new, there must be consensus – a majority of the nodes must agree. This provides one of the key components of blockchain – public verification. Users can verify how the historical record of any appendments. They can also be confident the data is unaltered.
A decentralized system removes the security risk of a single designated authority. A system admin can be compromised or simply make an error that opens the database to a breach. The decentralized storage model and consensus-management structure remove that risk, incorporating security in the infrastructure.
New Blockchain Applications
Blockchain is busting out of the cryptocurrency market. The technology is expected to play a big part in digital transformation across hundreds of industries worldwide. Here are a few companies going all-in on Blockchain. Most of them are still privately held. It makes sense to set up a Google alert to see if that status changes.
Hyland Credentials is a new launch from Hyland Software, Inc. Hyland is the developer of enterprise content management systems, used across a broad range of industries. The new credentialing platform is built on blockchain. The purpose is to issue digital credentials that are instantly verifiable.
The credentialing platform lets colleges and universities to issue transcripts in digital format. The reduction in turn-around time is substantial. Verified records are available on-demand, anywhere in the world.
Hyland Software Inc. is privately owned. They started an IPO in 2004 but withdrew the offering.
Oasis Labs is a cloud computing platform using blockchain to secure proprietary data. Founded in 2017, the company continues to attract the attention and funding of venture capitalists. Oasis Parcel is their solution. By decentralizing data, the system optimizes privacy and security. This creates opportunities to analyze data that was too regulated or too risky to use.
Oasis expands the cloud market space to enterprise systems with security and privacy limitations. The smart-contract platform is scalable and maintains strict privacy protocols. Parcel’s blockchain keeps an immutable audit trail as evidence of compliance. The solution is a bit more technical than some other solutions. Parcel lets clients build their own secure environments to protect data privacy.
Oasis Labs is a privately owned company.
Sharecare is a digital healthcare platform. Sharecare was founded in 2012 and is a leading digital health company, using its app to link millions of people to the healthcare system. The company acquired doc.ai, which launched in 2016. It’s an artificial intelligence platform for the healthcare industry, built on blockchain.
The Sharecare app collects data to support healthcare system stakeholders. Employers, healthcare providers and plans, patients, and pharmaceuticals all get a personalized experience. The app provides up-to-date information on medical events – think COVID. It also lets users set personal health goals and provides support to stop smoking and other lifestyle issues.
Sharecare closed a deal with the Falcon Capital Acquisition Corp. and now trades on the Nasdaq as “SHCR.”
Chronicled is the administrator of a blockchain solution for the healthcare supply chain. The MediLedger platform is a blockchain network designed to build enable automation of the medical supply chain. The MediLedger network manages rule enforcement and settlement of transactions between trading partners. Many major pharmaceutical and medical device companies are clients.
The medical supply chain is very complex. Regulatory requirements, pricing variants, and exceptions to industry-standard trading practices abound. The blockchain consensus model gives users influence over the data and transactions in the supply chain. That allows an automated process to overcome disparities between internal systems. The platform is supported by Chronicled which also develops new apps for the network.
Chronicled was founded in 2014 and is still privately owned. Its funding is VC-based.
How to Invest in Blockchain
From an investor perspective, new EFTs are popping up for blockchain investments. In 2017, The Nasdaq Blockchain Economy Index (RSBLCN) began measuring which companies use or support blockchain.
This list shows the industry breakdown of companies in the index:
- Consumer Services: 9.6%
- Finance: 38.4%
- Industrial: 11.4%
- Technology: 39.2%
- Telecom: 1.4%
Some financial services companies may include cryptocurrency or represent a crypto platform. If cryptocurrency is not your thing, make sure you review the stocks represented in the funds.
Public Company Stocks
There are more than a few companies embracing blockchain to improve their business model. If you have a brokerage account, you can purchase shares. Blockchain is transformative for many industries. The immutable digital ledger establishes verifiable transaction history.
These are stocks for companies that utilize blockchain. They are not specific to developing the blockchain itself. (These are not “stock tips”, just information regarding blockchain users.)
DocuSign’s utilization of blockchain is logical for its business model. They are the leading provider of electronic signatures. DocuSign started using a smart contracts blockchain platform in 2015. Customers could record their agreements on Ethereum.
DOCU on the NASDAQ
Square is a payment processing firm founded by Jack Dorsey, CEO of Twitter. Smaller businesses use Square to process payments in its marketplace and via mobile swipers. Square also owns Cash App, a peer-to-peer payment platform. The company added a new service. Square Store helps merchants build eCommerce stores and omnichannel capabilities.
Be aware that Cash App allows users to easily buy and sell Bitcoin, which constituted a significant part of its income in 2020. It’s unclear how the volatility in the crypto market will affect its share price and yield.
SQ on the NASDAQ
IBM has global name-value recognition. They recently acquired Red Hat, broadening their service base for enterprise customers. The company has launched IBM Blockchain with its Hyperledger Fabric platform. Red Hat OpenShift agnostic environment lets IBM build, operate, and grow blockchain solutions. Virtually any computing environment can utilize the platform. IBM Blockchain is active for multiple clients.
IBM is actively delivering blockchain solutions, not simply applying them internally.
IBM on the NASDAQ
Best EFTs for Blockchain Investors
From an investor perspective, new EFTs popping up for blockchain investments. Exchange Funded Trades accounts track to a particular index. The index includes multiple assets, including stocks, bonds, and commodities. When you invest in an EFT, you get a yield from the whole portfolio.
An EFT will have lower commissions and fees unless they are actively managed. The majority of blockchain EFTs are actively managed. Each has a portfolio manager who can buy and sell shares within the fund. This makes the expense ratio higher – make sure you check the historical expense ratio. Also, monitor the funds for changes in assets.
Here’s a list of some EFTs associated with blockchain.
Amplify Transformational Data Sharing EFT (BLOK) is an actively managed fund. BLOK’s portfolio includes companies that are either developing or using blockchain. It includes payment providers, like PayPal and Square. It also includes cryptocurrency provides like BitFarms and Hub8 Mining.
BLOK on the NASDAQ
The recent launch of VanEcks Vectors Digital Transformation EFT (DAPP) tracks to the MVIS Global Digital Assets Equity Index. Since its inception in April 2021, DAPP has pulled in $24 million. The portfolio is small at around 26 stocks. It focuses on companies utilizing digit assets and is actively managed. DAPP includes NVIDIA and Taiwan Semiconductor. It also includes RIOT Blockchain, which has taken a tumble in the past year, Coinbase Global – a crypto platform.
DAPP on the NASDAQ
The First Trust Indxx Innovative Transaction & Process EFT (LEGR) tracks the Indxx Blockchain Index. The index looks at the performance of companies as related to blockchain adoption. The portfolio includes companies that utilize, develop or have products that benefit from blockchain technology. Launched in 2018, the fund includes Oracle, IBM, and NVIDIA. The Bank of China is also included but there does not seem to be any major crypto assets.
LEGR on the NASDAQ
The Siren Nasdaq NexGen Economy ETF (BLCN) launched in 2018. The fund has consistently beat the market since its inception. It tracks the Nasdaq Blockchain Economy Index. The portfolio consists of companies that use or develop blockchain capabilities. BLCN fund includes many blue-chip stocks and steers away from the more volatile crypto market. Assets include IBM, SAP, Accenture, and Microsoft
BCLN on the NASDAQ
The Capital Link Global Fintech Leaders ETF (KOIN) tracks to the ATFI Global Fintech Leaders Index. The EFT’s name was recently changed from Capital Link NextGen Protocol ETF. The fund gives itself some leeway to invest outside the index. The portfolio builds on companies that provide digital assets or solutions to the financial services industry. Top assets include Intel, PayPal, NVIDIA, and Nestle S.A. It does not currently hold assets specific to cryptocurrency.
KOIN on the NASDAQ
Is Blockchain a Good Investment?
Blockchain is a transformation technology. According to the International Data Corporation, the technology has a CAGR of 48% between 2020 and 2024. The adoption of blockchain applications across industries should encourage investors who may have shied away from cryptocurrency.
Banking and financial services firms are the early adopters, but the field is growing. The healthcare market in particular is ripe with opportunity. The medical data in their systems is highly prized by hackers and the dark web.
The gaming industry is turning to blockchain as well. The initial adopters, like NVIDIA, introduced crypto-mining as part of their platform. They’ve recently stepped that back. But more importantly, blockchain would give gamers control over changes to the game. By decentralizing the database, the transaction history is unhackable. This increases player trust and provides an audit track in the event of disputes.
Like the healthcare industry, government systems are subject to attack. The recent Solar Winds cyberattack is evidence of their difficulty in protecting sensitive data. Blockchain technology would increase security but also include the incorruptible digital ledger that will regain trust in the systems.
Do we think this is a good time to invest in blockchain, cryptocurrency aside? Yes, we do.
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