Investing in Companies Involved With Blockchain Tech
Learn more about investing in companies using and developing blockchain technology with our investment guide.
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Here’s what you’ll learn in this guide:
- Blockchain technology is primarily used as a distributed, auditable record-keeping system.
- Companies are using blockchains in several ways, including storing sensitive data and improving supply chains.
- Many large companies, including Microsoft and IBM, are incorporating blockchain into their business operations.
Learn more about investing in companies using and developing blockchain technology.
What is blockchain, and how do companies use it?
It seems like everyone is excited about blockchain. But what is it?
For those who aren’t familiar with the technology, blockchain can be difficult to conceptualize. But you can try thinking of it this way:
Think of blockchain like an Excel spreadsheet, and each cell in the spreadsheet is a block. The information contained within each cell is linked, or otherwise embedded in the spreadsheet, much like a single encrypted block is embedded in a blockchain.
You can also think of blockchain as a distributed ledger or digital database that stores encrypted information in encrypted blocks. The information can never be changed once it’s entered. What’s more, the ledger doesn’t exist on a single computer or hard-drive, like an Excel file you might use to keep track of your spending.
Where do you find a blockchain?
Blockchains are distributed among a network–hundreds or even thousands of servers that can be anywhere in the world. And the network continually updates the blocks in the database, confirming to the rest of the network that a transaction or alteration has taken place.
The distributed nature of the ledger may make it much more secure against hacking, altering, or destroying the data it contains, as the entire network must validate any changes. Someone could, for example, get into your computer and delete transactions from your single Excel spreadsheet, changing the data. The same feat would be almost impossible when the data is encrypted and simultaneously updated on thousands of computers.
Each entry in this ledger is called a “block”, containing stored information. These blocks are linked, or chained together, creating an ongoing “blockchain.”
How do companies use blockchain?
There are currently two primary ways individuals and organizations are currently using the technology: As a record-keeping system, and as a transactional platform for digital currency.
Some companies are using blockchains to create encrypted systems to store sensitive data, like medical records. Others are using the technology as an anti-counterfeiting measure, sniffing out counterfeit goods with detailed, unalterable tracking records in supply chains. Several governments are also using blockchain in a number of ways, including preserving public records and even administering payment systems.
These are the primary reasons why individuals and organizations opt to use blockchain over a traditional database:
- Decentralization (data is stored across a network)
- Data security
- Auditability and transparency
Which companies are using and developing blockchain technology?
Because blockchain is more of a technology than an industry, there are currently no public companies that work solely and strictly within the blockchain universe. Instead, many companies are either using it, finding ways to adopt and scale it to their needs, or otherwise putting resources toward pushing the technology forward.
Some companies in the financial sector, for example, have started using and adopting blockchain in an effort to gain access to the cryptocurrency markets, which operate on a blockchain backbone. This includes companies like Goldman Sachs, Bank of America, and Barclays.
Tech companies, too, are getting in on the action. Some of the biggest players in the tech industry—both old and new alike—are finding ways to adopt blockchain to their particular business needs, including companies like Microsoft, IBM, NVIDIA, Square, and Intel.
What’s happening with blockchain?
Blockchain is still in its infancy as a technology and platform. Because it’s still a misunderstood and confusing technology to many people, it’s probably going to take some time to permeate the social, corporate, and political strata.
But blockchain is becoming more mainstream. As much as 10% of the world’s GDP will be stored on blockchain by 2027, according to the World Economic Forum.
Working out the kinks
While there are some clear advantages to using blockchain to store information and conduct transactions, there are possible downsides, too.
Blockchains are slow, for example, compared to their database brothers because they are both distributing data and relying on distributed processing power. The increasing popularity of crypto and digital currencies, which typically run on blockchains, can also bog down networks.
Another concern, going forward, will be the specter of increased rules and governance over blockchains. Currently, it’s like the wild west, as the platform has embraced the allure of transparency and auditability. But, as with many other technologies and platforms, regulators may want to stick their noses in and lay down some rules, especially for financial transactions.
Right now, blockchain is being used by a somewhat small subset of the world’s businesses and governments. But that could change in coming years as the technology becomes more widespread and recognizable.
Governments may find ways to use blockchains during elections, for instance, and we could also find ourselves using blockchain to buy books, movies, and music. Real estate agents could adopt it to search and store contracts and titles, too.
Blockchain can be adapted and utilized in the future, in a number of ways, many of which will likely surprise us all.
Investing in Companies Pushing Blockchain Tech
If you think blockchain is a promising technology worth investing in, you can add companies that are using and developing it into your portfolio, and there are several ways to do it.
Investors in the U.S. can buy shares of stock in companies working with or developing blockchain tech on a publicly-traded exchange, or buy shares of a fund—such as an exchange-traded fund, or ETF—that offers exposure to these companies.
Buying Blockchain-Related Stocks
A single stock is just that, a share of ownership of a company. And you can purchase single stocks of companies using and developing blockchain. For example, investors can purchase shares in companies like NVIDIA, IBM, Square, AMD, Microsoft, and Intel .*
Investing in Blockchain-Related ETFs (Exchange-traded funds)
You can also invest in companies that are using and developing blockchain technology through exchange-traded funds (ETFs), which are baskets of investments bundled together as a single investment and then traded on an exchange such as the Nasdaq or NYSE.
When you invest in an ETF, you are effectively buying fractions of the companies within that ETF. The fraction size depends on the weight of the stock held in that fund. ETFs generally track an index–or group of investments that represent part of an industry or investment category.
ETFs vs Stocks
ETFs have become popular in recent years as they can give investors the opportunity to invest in the performance of a group of stocks, without having to buy every single stock in the fund or handpicking single stocks. They also may tend to be cheaper than actively managed funds.
ETFs can also offer diversification, which many consider to be an essential investing strategy.
Investing in blockchain-related companies on Stash
Want to invest in companies that use and develop blockchain technology? You can check out the themed investments offered on Stash, as well as single stocks.
Investing with Stash
What is Stash?
Stash is a financial services platform that makes saving and investing available to everyone through education, personalized guidance, and mobile-first technology. Stash speaks to a tech-friendly audience, providing user-friendly education, and personalized guidance.
Stash is for everyone
Stash is for the millions of Americans who have been overcharged and underserved by traditional banks, brokers, and investment advisors. Stash is for people who want to take charge of their financial future but need a helping hand to get them started and see them on their journey.
If you are a U.S. citizen, permanent resident, or a certain visa holder, and are 18 years of age or older, you can sign-up for Stash here.
What are the fees?
Stash charges its customers $1 a month to maintain an investment portfolio for accounts with an average monthly balance below $5,000. For average monthly balances of $5,000 or more, the fee adjusts to 0.25% of the total balance you have in the account per year, charged on a monthly basis.
If you decide that a retirement account like a traditional or Roth IRA is suitable for your investing goals, you can open a tax-advantaged account with as little as $5. The fee is $2 a month for accounts with an average monthly balance of less than $5,000 or 0.25% per year, charged monthly, for accounts with an average monthly balance of $5,000 or more.
How is Stash Regulated?
Stash is as an investment adviser registered with the U.S. Securities and Exchange Commission (SEC). The SEC is a federal agency that regulates the financial securities market, including exchanges, brokerage firms, and investment funds.
The SEC requires investment advisers, including Stash, to act in the best interests of their customers. It also regulates other financial services companies and requires them to provide customers with clear information about potential investments. It also guards against fraud and deception by financial services firms. (Note: Registration with the SEC does not imply a certain level of skill or training.)
You can find out more about Stash on the SEC’s website and its registration with the SEC.
What if Stash goes out of business?
Stash has every intention of sticking around for the long term. However, if anything were to happen to Stash that required us to close up shop, you would maintain complete control of your brokerage account. All the investments in your Stash portfolio are owned by you. Your account will not face any penalties if anything happens to us.
That’s because your investments are held at a federally regulated broker-dealer called Apex Clearing Corporation. This company acts as a custodian for all the investments Stash customers purchase. Apex is regulated by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA). Apex is also a member of the Securities Investor Protection Corporation (SIPC), which together protects your investments in case of bankruptcy of the company holding your investments.
Your current investments are covered up to a maximum of $500,000 total, including $250,000 in cash balances through the Securities Investors Protection Corporation (SIPC). SIPC coverage does not insure against the potential loss of market value. For uninvested funds, your Stash account is enrolled in something called the Apex FDIC-insured Sweep Program. And here are the details:
Stash accounts are enrolled in an interest-bearing Federal Deposit Insurance Corporation (FDIC) insured Sweep Program (“Sweep Program”) offered through our clearing firm, Apex Clearing Corp. Uninvested Cash in your Stash account will automatically be transferred into the Sweep Program and will earn interest based on the amount and duration of deposits and applicable interest rates. Deposits to the Sweep Program are covered by FDIC insurance up to the $250,000 limit per customer at each FDIC-insured bank that participates in the Sweep Program.
Once your cash balances are deposited with the participating banks under the Sweep Program, they will no longer be covered by SIPC.
Please ensure that you read the Terms and Conditions of the Sweep Program carefully. As with all investments, you should consider carefully if the Sweep Program meets your investment objectives.
Stash uses 256-bit encryption to secure your information, including personal data and fund purchase history. Stash further secures your account with Secure Socket Layer (SSL) technology, which ensures any and all information sent between Stash and its servers is protected.
Stash will never withdraw funds from your checking or savings account without your consent. In order to purchase any of the investments offered through Stash, you need to link a bank account to transfer funds and to make your desired investment purchase.
If you have more questions about whether it’s safe to link your bank account to Stash, send us an email. You can also read more about Stash’s security protocols here.
The Stash Team
You can reach out with any questions at [email protected] or simply call (800) 205-5164.
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*Listed investments currently available on Stash but not necessarily representative of all investments.
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