Blockchain Technology Explained
It’s a loaded question that I’m sure many of you have pondered. We hear the word blockchain thrown around more and more these days, but what does it actually mean? Well, I won’t bore you with the technical aspect of it. Think of blockchain technology as a shared and digital ledger that is composed of different nodes across a network of computers. It’s an immutable, decentralized database of transactions that can never be changed or deleted.
Is Blockchain Technology the Future?
Some believe that the blockchain will be the great mover behind the next evolution of digital services.
Everything in the future, whether it is the Metaverse or whether it is Web3.0, will be powered and tracked through the blockchain.
The blockchain revolution will bring with it transparency as well as the ability to decentralize major systems. If you haven’t already, it’s time you familiarize yourself with everything the blockchain can do.
Is Blockchain Another Word for Cryptocurrency?
You’ve probably heard the word blockchain used in conversations about cryptocurrencies.
The two words aren’t interchangeable, but they are very much related.
All cryptocurrencies are powered by blockchain technology.
This is why cryptocurrencies are considered digital assets, as they live exclusively within their native blockchain. Of course, as technology has progressed there are exceptions. But for the most part, Bitcoin stays on the Bitcoin blockchain and Ethereum stays on the Ethereum blockchain.
Each crypto token is seen as the native token for that blockchain. It’s why the token often has a different name from the blockchain itself. The tokens are the currency and the blockchains are the systems that use these tokens. This is where the true intrinsic value of cryptocurrencies lies.
Since they are tied to the blockchain, every transaction is forever imprinted on the ledger. We always know exactly how many of each token is in circulation, and we can see exactly when each wallet makes a buy or sell order.
Many people who don’t fully understand cryptocurrencies believe them to be volatile and untrustworthy. While the markets can be volatile at times, blockchain technology lends to full transparency on every transaction.
A lot of cryptos are also deflationary in that they burn their token supply to battle rising inflation which lowers the price of the token. It’s all basic economics but these decentralized finance systems are getting a lot of things right. The blockchain isn’t perfect. But it is safe and more trustworthy than any human-tracked ledger. That’s the best part: you can’t trick or fudge a blockchain.
So How Do I Invest in Blockchains?
The most obvious way would be to invest in the cryptocurrencies themselves.
There’s no better way to support a blockchain and its community, than by buying tokens and holding them.
But for a lot of people, cryptos are much too volatile to invest significant money into. It’s not just that the markets are turbulent, but most of us don’t have the time to read about the tens of thousands of cryptos on the market.
There are new ways to invest in cryptos that don’t necessarily require you to put money into a crypto exchange. There are several notable ETFs that feature cryptos as the primary asset. One notable investment firm is Grayscale which is often the GBTC or Grayscale Bitcoin Trust.
This trades like any other security but tracks the price of Bitcoin. There are other ETFs that follow crypto mining companies, and even ones that track crypto futures.
Of course, the way that most people will want to invest in the blockchain is through stocks. There’s a long list of publicly traded companies that deal directly with the blockchain these days.
As you’ll see, it’s not just through cryptos where companies get exposure to the blockchain either. Let’s take a look at some of the top blockchain stocks to add to your watchlist!
Top Blockchain Technology Stocks
Since we’re really into trading, it’d make sense that we’d want to know what blockchain technology stocks we can trade. These are really good stocks you can put into an investment portfolio and really diversify it.
Coinbase (NASDAQ: COIN)
Let’s start off with a no-brainer. Coinbase is the largest US-based cryptocurrency exchange and the second largest in the world after Binance. This is a relatively new stock to the market.
So if you’d like a bit more of a history as to how the stock performs, you might want to skip over Coinbase. The stock started trading on the NASDAQ exchange in April of 2021. And unfortunately for early investors, the stock is down more than 45% since its IPO.
Coinbase was founded in 2012 by Brian Anderson, a former engineer at Airbnb. He received some major funding early from Y Combinator, as well as other tech venture capitalists like Andreessen Horowitz.
Today, Coinbase operates in over 100 countries around the world and is getting ready to launch its own NFT Marketplace. Be warned that for now, Coinbase’s prices tend to move higher or lower in relation to the crypto markets. This cyclical action could eventually lead to buying in bearish cycles and selling in bullish ones.
Block (NYSE: SQ)
It helps that the company is run by noted Bitcoin bull, Jack Dorsey. Block recently changed its name from Square, as many believe its long-term future of it will reside on the blockchain.
The company already offers Bitcoin trading through its popular Cash App. Bitcoin trading was added to the ecosystem before stock investing was, so you can imagine how strongly Dorsey feels about it.
Earlier this year, Dorsey announced that the company was investing in new Bitcoin mining technology. It is attempting to create a network of Bitcoin miners where people can actually mine from their houses.
Dorsey believes that a more distributed mining network will add to the overall resiliency of the Bitcoin network. It wouldn’t be surprising if Dorsey wanted the Cash App to be a decentralized finance system in the future. Keep an eye on Block as it attempts to change the financial industry forever.
NVIDIA (NASDAQ: NVDA)
A chip company? NVIDIA is probably more known for its gaming and graphics processors. But one of its bestsellers over the past few years has been its GPU processors that are used for crypto mining.
In fact, the demand for them was so high at one point, gamers complained they couldn’t find any. So NVIDIA did what any great company would do: they made a mining-specific GPU.
NVIDIA is also a major player in the Metaverse discussion. It is creating an Omniverse that will have enterprise services and other tools to help get businesses into the Metaverse.
What powers the Metaverse? Blockchain technology. NVIDIA isn’t always the first company you think of when you hear of blockchain. But its hardware is powering many of the crypto miners that are in action around the clock in all corners of the world.
PayPal (NASDAQ: PYPL)
With PayPal, we see our second financial services app on this list along with Block. PayPal has gone a little further than Block with its crypto trading. While the Cash App only allows Bitcoin trading, PayPal offers users Bitcoin, Ethereum, Bitcoin Cash, and Litecoin.
These are often considered four of the original cryptos, despite Bitcoin Cash and Litecoin having significantly smaller market caps.
Once users have invested in crypto inside PayPal’s ecosystem, they can then use this as a direct payment. PayPal has over 29 million merchants that will accept payments via crypto through its app.
Now, this doesn’t mean that all 29 million merchants accept cryptos. Rather, PayPal will actually convert the cryptos to fiat currencies for the merchants. It’s a bit of a process, but it does show PayPal’s commitment to cryptocurrencies.
Blockchain Technology: Silvergate Capital (NYSE: SI)
This company usually isn’t at the top of many investor watchlists. On the surface, Silvergate Capital is like any other small bank. But a few years ago, Silvergate made a strong commitment to digital assets, specifically cryptocurrencies. Today, it’s one of the leading centralized banks taking cryptocurrency investments from its users.
Normally banks are considered value stocks that steadily rise in value over time. Silvergate’s stock has gained 786% over the past five years and traded at all-time high prices of over $220 per share.
Silvergate doesn’t actually own any cryptocurrencies. But investors have seen the value in a bank that’s going against the grain from the traditional systems. Silvergate offers trading and investing infrastructure for its users, and is revolutionizing how banks think of digital assets.
Is Blockchain Technology Here to Stay?
Without a doubt. Currently, it’s hard to argue if any system is as secure and transparent as blockchain technology. So much so that companies are utilizing it in day-to-day operations. But it’s not just cryptocurrencies where blockchain is making its mark.
Some creative ways that companies are using it include art verification and organizing supply and logistics chains. We haven’t even really discussed NFTs or Non-Fungible Tokens. These are revolutionizing the collectibles markets, but are also changing the game for things like event tickets and gaming.
As we move into the Metaverse and the next evolution of the internet, blockchain will be what is powering us towards a decentralized future.