Over the past couple of years, blockchain technology has emerged as a wide-ranging tool that can be deployed in a vast array of different sectors, making processes safer, more efficient and more effective.
It has only entered into the mainstream in the last year or so and organizations are only now finally getting to grips what can be achieved through blockchain technology. Many sectors can be transformed, with the banking sector set to be rocked with blockchain adoption that will see payments being processed almost instantly and for minimal fees.
As a result of this massive upward potential, many companies are looking to invest in blockchain technology. However, as it is still in the very early stages, it can be hard to know what the best way to navigate the sector may be.
This article talks through some key strategies that could prove useful in your efforts.
- Initial Coin Offerings (ICOs)
The ICO has been a revelation in the world of funding. It was in 2017 that ICOs exploded in popularity as they allowed companies to bypass the traditional routes of venture capital when looking to obtain funds for their operations and instead they could issue their own digital token whereby individual investors could contribute to the cause in exchange for these tokens. There has been $10 billion invested in ICOs to date in 2018 and this number is ever growing.
ICOs allow blockchain-related projects to quickly scale their operations and investors have been rewarded in staggering ways in certain cases, with many people seeing a 10,000% return on their investments.
Cryptocurrency in itself is not blockchain technology, but it utilizes it. Therefore, ICOs allow you a way to invest in its application. There is of course a lot of risk investing in these offerings, as you are betting on the future success of the given project from an early stage.
You will have to obtain some Ethereum and then set up a cryptocurrency wallet if you want to invest in an ICO. Then you simply participate in the offering through the token sale website by contributing as much as you want. There have been ICOs that have run into serious legal issues as a result of their non-compliance with the regulators, so it is always preferable to only invest in offerings that are fully compliant in this manner.
- Startup Investment
With blockchain being a technology that could have massive benefits to a diverse number of industries, it has great potential for growth.
Blockchain is not linked with Bitcoin or any other cryptocurrency it is its own technology. Therefore, when you are investing in a blockchain-related startup, it is not going to be as risky as investing in a given cryptocurrency.
Of course, it can be hard to identify a startup that has a lot of potential and has a solid team behind it, which means that just like with any other investment, you need to do your due diligence.
Ensure that they are utilizing blockchain technology for the right reasons and that they are attempting to create a solution to a problem that is difficult and currently exists, rather than looking for a problem in which a lucrative and temporary solution that can be applied.
As with most forms of startup funding, there is usually a minimum required initial investment required and these companies. The process is very similar to that of investing in regular types of startups – usually there is a funding round in which you can get involved in.
- Investing in Blockchain Exchange Traded Funds (ETFs)
Making an investment in blockchain ETFs that are traded publicly is another option for you. ETFs are a way that an investor can make an investment in a given sector without having to put their money into just one or two participants. Instead, the shares of any number of companies in the space are bundled together and rolled into a singular investment product. Therefore, if you believe that a given industry as a whole is going to grow but you don’t want to put all of your eggs into one basket with an individual company, you can bet on the success of the industry as a whole by using an ETF.
The risk factor associated with this method is a lot less than the first two options. Blockchain-related ETFs are still a relatively fresh idea.
These ETFs track companies in the blockchain space, with no links to cryptocurrency investing being part of these funds. There are constantly new ETFs hitting the market so it is worthwhile doing your homework to ensure that you go with the one best suited for your needs.
- Get Involved in your own Blockchain Development
One of the lowest risk ways in which you can get involved in blockchain is by investing your own time and energy into the sector. This has potentially high returns on investment and is completely within your control. There is so much potential in this space that it is important that you conduct adequate research, learn how the technology works, identify a problem that can be solved and go after it.
- Investing in established companies with blockchain departments
Finally, you can go down the route of traditional individual stock investing whereby you look at industries which are set to be dramatically improved through the adoption of blockchain technology.
Within a given sector, you can look at what companies appear to be most open to change and those which are looking to embrace blockchain rather than shun it. Therefore, as the blockchain-related gains are seen in terms of stock price appreciation, you will be well positioned to profit handsomely.