If in recent times, you have heard about what blockchain is and how it will revolutionize the future, surely you have wondered what it consists of and how it works.
Blockchain is based on a chain encryption technology that is used, among other things, to regulate cryptocurrencies. Thus, although it can use blockchain to ensure the integrity and privacy of a series of information blocks, it is probably best known for generating millionaire profits through cryptocurrencies.
How to Invest in Blockchain?
In blockchain technology, the most notorious manifestation of blockchains is Bitcoin. Although lately, there has been a lot of talk about Ethereum, a platform based on the same technology through which smart contracts are created that supports the Ether cryptocurrency.
However, cryptocurrencies are not the only investment possibility in blockchain, which promises to be the main form of speculation of the decade.
When investing in the blockchain, one can choose between crypto assets and exchange-traded funds (ETFs). These investment tools are funds that combine the nature of shares and investment companies.
Another investment product is the initial coin offering (ICO), a form of collection used by startups and companies. So to buy blockchain and carry out a transaction with this technology, it is first important to know the characteristics of the different products :
Crypto Assets: Cryptocurrencies are the most well-known face of blockchains. Bitcoin (BTC) is the best known, followed by Ethereum (ETH). Between the two, they account for more than 75% of the world’s cryptocurrency investments.
Behind these cryptocurrencies are Bitcoin Cash, Ripple, Litecoin, and hundreds or thousands of small currencies. Choosing to invest in one cryptocurrency requires prior research. Each of them has its capitalization and security volume, as well as a transaction speed. In addition, there are with or without corporate support, which translates into a difference in offline security.
ETFs: Exchange-traded funds are traded like equity securities. They allow intraday operations, which are becoming increasingly popular and have fairly low commissions. In addition, they accept small investments, and since their profits are subject to the investment fund regime, they are not subject to withholdings.
ICO: The operation of an ICO is relatively simple. A company launches its cryptocurrency, token, or token. Later, instead of going to the traditional investment circuits, a percentage of the currencies is sold in exchange for other more consolidated currencies (legal tender, Bitcoins, or Ethereum, generally).
So this form of financing is halfway between an IPO and crowdfunding, selling the stake in the company to private sponsors. This makes ICOs generally considered Venture Capital backed by the growth of the financed project.
One thing to remember is that cryptocurrencies are not usually paid for by credit card, PayPal, or any other reversible payment method. The objective of these limitations is that the operation is not canceled after being consummated.
However, with the proliferation of the offer, more and more operators are daring with these forms of payment.
Like any investment, the blockchain presents the product’s profitability risks. For example, Bitcoin has proven to be a currency capable of multiplying its value in days and collapsing in hours. On the other hand, the Venture Capital invested through ICOs does not always generate the expected return.
Is the blockchain comparable to investing in the stock market?
Some equate investment in the stock market to investing in crypto assets. And the truth is that ETFs work like a stock market investment. However, blockchains are characterized by their avoidance of regulatory agents.
Apart from this, investment in crypto assets displaces investment in stocks due to their cost and popularity.
The problem with this form of investment is in the form of a scam or a bubble. There have been countless cases where investors realized that there was no project behind the ICO after acquiring the initial coin. So they have lost their entire investment.
As a bubble, major economic players have warned that the enthusiasm for cryptocurrencies has rubbed off on ICOs. So they expect a bubble to burst, where the last ones to jump ship might lose their investment.