How to Invest in Blockchain Without Buying Cryptocurrencies
There is a wealth of opportunity in the blockchain industry with demand driven by users and institutions looking to simplify business processes, increase security and transparency, speed up transactions and implement blockchain as a service. And it is only getting started and as more companies are making their way onto the scene, it also opens up opportunities for investor to yield potential returns.
The purpose of this article is to provide you with an idea of listed corporates and organisations who have made an investment in blockchain deveopment and which presents you as an investor the opportunity to gain investment exposure in the equity market. Disclaimer: It does not represent our views on the stock market or any of the stocks of companies that are mentioned in this article.
We also have not covered investment directly into the cryptocurrency market in this article. If you want to find out more about cryptocurrency investments, please refer to our Trading 101 course at http://hashreader.com/learn/trading101/
In this article, we look at two areas you can explore to discover how corporates are participating in blockchain technology development:
1. Blockchain-as-a-Service (“BaaS”)
Established technology companies with blockchain-based offerings and BaaS in their product portfolio. Some key players which fits into this category would include:
IBM (NYSE: IBM)
IBM collaborates with Hyperledger (see below) and has contributed to the Hyperledger open source business blockchain and accomplished various projects on Hyperledger Fabric. Unlike Ethereum which are based on the concept of cryptocurrency, IBM has taken a step into the area of private and permissioned-based business blockchain, where participants know each other. IBM provides blockchain solutions across a range of industries and use cases including food safety with Walmart; private equity with Northern Trust; trusted identity with SecureKey and many more.
Microsoft Corporation (NASDAQ: MSFT)
Microsoft bolstered its data centre infrastructure to support the launch of BaaS within its Azure service portfolio. Microsoft has launched BaaS for developers to build decentralised applications quickly and offers support to Ethereum.
A Quick Analysis
A point to note with the IBM Hyperledger and Microsoft Azure Ethereum comparison is to highlight the difference between two types of blockchain:
Ethereum is based on a public permissioned network with anonymous or private transactions. It relies on user generated cryptocurrencies, Ether, to ensure the operation of the network. Hyperledger Fabric is a permissioned network with public or confidential transactions.
Whilst both offer smart contract capabilities, Hyperledger Fabric blockchain is based on the “Practical Byzantine Fault Tolerant” or PBFT protocol which does not have a concept of mining in comparison to the Ethereum consensus mechanism (Proof of Work / Proof of Stake) and thus performs better in terms of computation but it lacks the scalability of Ethereum.
2. Blockchain Consortium
Organisations which has grouped together in a blockchain consortium or open source project. The two main players are:
Founded in 2016 by the Linux Foundations, Hyperledger is an open source collaborative effort created to advance cross-industry blockchain technologies. It is a global collaboration with over 30 founding corporate members including leaders in finance, banking, internet of things, supply chains, manufacturing and technology.
Hyperledger members are split into premium, general and associate members. Premium members include the likes of Intel (NASDAQ: INTC), IBM (NYSE: IBM), Baidu (NASDAQ: BIDU), American Express (NYSE: AXP), Airbus (EPA: AIR) and JP Morgan (NYSE: JPM). For the full list of members, please refer to https://www.hyperledger.org/members.
Enterprise Ethereum Alliance (“EEA”)
The EEA connects corporates, startups, academics and technology vendors with Ethereum subject matter experts. Members include BP (LON: BP), BNY Mellon (NYSE: BK), Microsoft (NASDAQ: MSFT), National Bank of Canada (TSE: NA) and Shell (AMS: RDSA). For the full list of members, please refer to https://entethalliance.org/members-2/.
There are various ways to look into gaining investment exposure to blockchain technology development.
The most direct channel is in the cryptocurrency market through the investment into security, equity or utility tokens. If you want to find out more about cryptocurrency investments, please refer to our Trading 101 course at http://hashreader.com/learn/trading101.
For those that are looking at traditional investment channels, equity still provides some exposure of those corporates which are making major financial capital and human capital investments into the area of blockchain, although investing into these stocks will also expose you to a whole range of other business drivers and factors of these global conglomerates.
Disclaimer: The purpose of this article is to provide an idea of organisations which are listed on stock exchanges which have made an investment in the blockchain space. It does not represent our views on the stock market or any of the stocks of companies that are mentioned in this article.