Blockchain is the underlying technology that powers Bitcoin and a slew of other digital currencies. Blockchain is an exciting new tech trend, but many investors lack a clear understanding of the technology or the best strategies to participate in this emerging market.
Here's a brief introduction to blockchain technology, followed by some of our top blockchain stocks and one crucial guideline for investors to bear in mind when it comes to the blockchain.
What is Blockchain?
As a distributed ledger technology (DLT), blockchain records transactions in a decentralized manner. It is possible to record information (say, payment transactions) on a bank's internal computers (for example), but blockchain technology allows for the establishment of an unalterable public ledger that is visible to everyone. Data stored in blockchain ledgers is very secure since they cannot easily be changed after the fact, and they may be utilized anonymously to safeguard the privacy of its users.
A distinction should be made between blockchain and cryptocurrencies. Even if Bitcoin (CRYPTO:BTC) or any other digital currency uses blockchain technology, there are many additional uses for the technology that have nothing to do with cryptocurrencies.
In addition to decentralized finance, international payments, auditing, and regulatory compliance, blockchain technology has many more uses. It is becoming more and more common for enterprises to specialize in the use of blockchain technology or to incorporate blockchain into their operations.
Consider bitcoins to be a vehicle, with the blockchain serving as the engine. In order to drive a car, you obviously need an engine, but engine may also be used for a plethora of other things. The following are only a handful of the examples of the blockchain: Digital IDs, Rewards and loyalty programs, Digital voting, Real estate transfers and Medical records.
At this point, hundreds of publicly traded corporations are either utilizing blockchain technology in some way or are actively involved in the cryptocurrency market. Others employ blockchain-related products and services to enhance an already successful firm rather than focusing solely on blockchain innovation or cryptocurrency.
With that in mind, we've compiled a list of nine of the best blockchain firms to consider if you're looking to diversify your stock portfolio.
When it comes to graphics processing units, such as those used in artificial intelligence, driverless vehicles, and video games, Nvidia (NASDAQ:NVDA) is the industry leader.
In addition, GPUs are essential gear for bitcoin mining. Miners are those who process transactions on the blockchain and receive fresh digital currency in exchange for using specialized graphics processing units (GPUs). Nvidia's crypto-targeted CMP chip sales have slowed, but they still earn more than $100 million in revenue each quarter.
In addition to its payment-processing ecosystem for small businesses and its Cash App personal banking platform, Block (NYSE:SQ), formerly known as Square, has two other major components to its operation. Apart from those core companies, Square also runs a stock trading platform and numerous other spinoffs, including the recently launched Square Online Store, which aids retailers in developing omnichannel and e-commerce capabilities.
There are two ways to express Block as a blockchain stock. The most obvious is using Cash App which is the easy and fast method for customers to buy and sell bitcoin. A substantial portion of the company's revenue comes from the acquisition of $1.8 billion in bitcoin in the third quarter of 2021 alone. Then Block team of bitcoin engineers, Square Crypto, is also working on a number of interesting projects. The change in the company's name reflects the company's new direction toward blockchain-based solutions.
There have been some significant efforts made by IBM (NYSE:IBM) recently to jump-start growth despite the company's recent lackluster performance. The $34 billion purchase of open-source software firm Red Hat, for example, provides it with lots of cross-selling prospects with its enterprise clients.
For companies such as Kroger (NYSE:KR), True Ticket (a ticket authentication provider), and others, IBM Blockchain has already delivered disruptive solutions. In the future, if blockchain-based solutions gain widespread adoption, they could have a long-term growth potential. When it comes to the COVID-19 epidemic, IBM Blockchain is focused on helping businesses construct more reliable supply chains.
Online retail giant Amazon (NASDAQ:AMZN) also runs Amazon Web Services (AWS), the world's most popular cloud computing business. Using Amazon Managed Blockchain, customers may build and administer their own blockchain networks on the AWS platform.
Amazon's vast e-commerce operation has the potential to use blockchain technology in the future. A small percentage of Amazon's revenue currently comes from blockchain, but as the technology progresses, there is the potential for considerably more.
One of the world's leading cryptocurrency exchanges, Coinbase (NASDAQ: COIN) features more than 100 different digital assets for trading. Over $1 trillion worth of cryptocurrencies is traded on the company's platform each year, with 73 million verified users from over 100 countries.
As a blockchain investor, one of the best things about Coinbase is that no matter whether cryptocurrency takes the lead, the company stands to profit from the technology's growth.
GlobalX Blockchain ETF
One stock, however, may not be the ideal method for you to invest in blockchain technology. Investment in a diversified portfolio of blockchain stocks may now be accomplished with a single investment in the GlobalX Blockchain ETF (NASDAQ:BKCH).
In terms of yearly fees, the GlobalX Blockchain ETF charges 0.50 percent of assets, which is appropriate given the fund's goal. It makes investments in 25 different firms, some of which we've already mentioned and others which aren't listed on any United States stock market at all. ETF is perfect option if you believe in blockchain technology's long-term potential but aren't good at making investment decisions based on who you think will succeed or fail in the industry.
Mastercard (NYSE:MA), the world's largest payment processing company, has seen its number of debit and credit card transactions rise steadily in recent years. When it comes to cross-border money transfers, blockchain technology has the potential to revolutionize the cashless payment market.
With the help of blockchain technology company R3, Mastercard has announced a partnership to establish a new cross-border payment system that could give the corporation a huge advantage in the industry by eliminating major impediments to transmitting money worldwide.
Several top Asia-Pacific bitcoin startups have recently joined together with Mastercard to develop payment cards backed by cryptocurrency.
Bioptix, a medical equipment company that went bankrupt, was a former of Riot. It adopted its new name in late 2017 and converted into a Bitcoin mining company by purchasing thousands of miners.
Riot already has a fleet of around 29,593 miners, and it wants to extend its fleet to 133,000 miners by the middle of this year. Because of its enhanced processing power, it will be able to mine more Bitcoins, increasing its monetary value.
Riot's fleet mined 3,812 Bitcoins in 2021 and concluded the year with 4,889 Bitcoins, which are valued around $209.7 million. It gets nearly all of its revenue from its Bitcoin mining operations.
Derivative securities are offered for a wide range of assets at the world's largest futures and options market, CME Group (NASDAQ:CME). Although competitor exchange CBOE (NASDAQ: CBOE) plans to return to the cryptocurrency futures market in the future, it is the only exchange that does so.
As the popularity of cryptocurrencies grows, so does the potential revenue for CME Group, which receives a tiny fee for every transaction on its exchanges. As interest in cryptocurrencies grows, CME Group may add more futures products, such as Bitcoin cash and Ethereum (CRYPTO:ETH) futures.
Notice that none of these nine companies are only focused on the blockchain or cryptocurrency industry. All of these companies are either well-established or industry leaders.
A decade after its invention, blockchain technology is still in its infancy. With or without a lot of hype, blockchain technology has the potential to revolutionize a variety of industries in the coming years. There are many companies that will benefit from the rise of blockchain technology, but there are also many more who will be fine even if their blockchain goals fail.