If you’re looking to jump on the train and invest in different blockchain long-term, make sure you do your thorough due diligence beforehand. Whilst investing early in great opportunities like the internet of blockchains, it can be overwhelming for keen blockchain investors that there are around 6000 tokens currently in existence.
What is Blockchain?
For those that don’t yet know, the blockchain is a computerised public ledger that keeps track of transactions. Each “block” of data is digitally authenticated, then published to the public ledger and given a unique hash/identity. For blockchain-based cryptocurrencies, adding this new block results in the creation of a new unit (or coin) of currency.
Blockchain can, however, be used for more than only the creation of new currencies. For example, a lot of companies are using blockchains to improve their operations, which is especially useful for those using complicated and dispersed systems.
For more information, read our guide to 4 types of blockchain
Why Should You Invest in Blockchain Technology?
As a novel technology, blockchain is of course attracting interest from the investment community with the potential to change the commercial world. Here are some reasons why it is so appealing:
- It helps companies become more efficient and offers increased profits over time.
- Big internet companies like Amazon and Salesforce.com are paying close attention to blockchain.
- Since the onset of the COVID-19 pandemic, the world has rapidly digitised as much as possible. Technologies, such as cloud computing, e-commerce, and artificial intelligence, partner nicely with blockchain.
Even top blockchains have disadvantages
- There are a lot of new cryptocurrencies out there with blockchain initiatives behind them, and many of them don’t work out.
- Cryptocurrency values can be extremely volatile, and investing in them might result in a loss of capital.
- Blockchain tokens can be confusing and difficult to understand for beginners.
How to Become Part of the Blockchain Revolution?
Here are some methods you can use to invest:
- You can directly purchase cryptocurrencies, such as Bitcoin or Ethereum, or purchase shares in a cryptocurrency trust.
- Purchase an ETF (exchange-traded fund) that is entirely dedicated to investing in shares of blockchain-related companies. Amplify Transformational Data Sharing ETF and Reality Shares Nasdaq NextGen Economy ETF are two significant instances.
- Participate in an ICO (initial coin offering) and support a new cryptocurrency by purchasing a new cryptocurrency issued by a developer working on a new project.
- Buy shares in public companies that are investing long-term, such as Paypal or Amazon.
The Number-One Rule
Amit says: “The golden rule of investing is to only invest in what you understand. Investing and taking risks go hand-in-hand, but don’t take risks on things you haven’t yet fully grasped!”
The number one rule of investing, whether in blockchain, real estate, or stocks, is to fully understand what you’re investing into. This may require a lot of thorough research and discussions with experts or knowledgeable persons in order to reach a ‘safety level’ of your knowledge in that area. This ‘safety level’ differs from person to person, and will depend on how comfortable you are investing in areas you don’t have a deep understanding of. However, if you’d really like to invest in different blockchains but don’t have the time to acquaint yourself with the ins and outs, you could buy shares in companies that are taking that time and employing it wisely. This is an easier, roundabout way to invest in top blockchains.
Amit has 18 years of experience in the industry and an MBA. He supports entrepreneurs with every aspect of their business including concept and product development, investor presentations, and fundraising. Amit & 7startup assist startups in the pre due-diligence process and help connect them to our vast network of investors. Reach out to us today and see if we’re a fit! For more information on a different style of investing/trading, read our post on stocks and options for your startup.