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Blockchain technology, according to a report issued by PricewaterhouseCoopers last year, has the potential to increase the global gross domestic product (GDP) by $1.76 trillion by 2030.
It is natural for investors of all sorts to want to get a piece of this growth in blockchain technology, the digital record-keeping systems that evolved first to support cryptocurrencies, but that have found many other applications. What is the best way to go about it?
We will assume here that you have looked at the major existing cryptocurrencies and decided that none is for you. You want to invest in the technologies, not the coins.
First, Payment Software
First, you could simply invest in companies that offer payment apps and that have made the decision to allow for payment with cryptocurrencies. Consider Square and Paypal in this regard. Square (NYSE: SQ), made the first move. It announced back in March 2014, years before it became a public company, that it would be accepting bitcoin, and in the process protecting the buyers from risks that might otherwise have arisen for them from bitcoin fluctuations. That, of course, put it in the bitcoin business, and it has gotten deeper in ever since.
But you don’t have to be in the bitcoin business to express confidence in Square’s decision, or Paypal’s analogous decisions. You can use traditional currencies to buy their stocks.
Paypal (NASDAQ: PYPL) has followed Square’s lead, but in an important sense it has gone further. It supports transactions that use bitcoin, bitcoin cash, ethereum, or litecoin.
The Companies that Make the Hardware
Second, you can invest in the companies that make the hardware that keeps blockchains growing. Nvidia (NASDAQ: NVDA) markets its graphics processing units (GPUs) specifically to crypto miners, and it offers specs on, for example, its Ethereum hash rate. NVDA has been doing quite well over the last five years: a period in which it has gone from a price of $46.66 to $801.50.
Not So Coin Adjacent
Investing in any of the above mentioned companies may seem like a cheat. If you really want to invest in the underlying blockchain technology as distinct from the coins you may want an option less … coin adjacent.
If so, then thirdly, you can invest in retail companies that use blockchain to address issues of provenance. There are several retail fields where provenance (defined as a record of ownership, when used as a guide to quality or authenticity) is of great importance, and betting on certain firms in those fields amounts to a bet that blockchain is indeed the best way to address them.
Blockchains and Provenance
Obviously with regard to art and antiques, and luxury brands victimized by knockoffs. establishing a provenance is critical to establishing authenticity. To the extent blockchains take over from dusty paper records in poorly kept files they do a great service to businesses in those markets.
Perhaps less obvious, the pharmaceutical industry has to be able to track the provenance of its raw materials as evidence of their quality. Contamination, in the words of the PwC report cited above,”can be pinpointed immediately, ensuring customer safety and enhancing efforts to be socially and ethically responsible.”
ETFs and a Final Thought
Finally, you can invest in ETFs that have exposure in blockchain. There are some ETFs that will offer you a basket of investments in several cutting edge technologies: combining blockchain for example, with artificial intelligence and big data.
Husen Kapasi, blockchain leader of PwC Europe, says that blockchain “works best when companies come together even with industry competitors and lay the groundwork for blockchain in terms of processes, sharing data and required automation via smart contracts. Once they understand the value that comes out of it, blockchain will become an integral part of business technology.”