Very few things have radically changed the history of mankind, such as the Turing machine in the 40s which was the first hypothetical device representing a computing machine, the ARPANET initiative in the 60s that assembled a network that later became the internet, the world wide web created by Tim Berners-Lee in the 90s that allowed access to online data in the form of websites and hyperlinks, the iPhone created by Steve Jobs in the 2000s that revolutionized the interface of applications, and the blockchain in 2008 that is a system in which a record of transactions made, for instance Bitcoin, are maintained across several computers that are linked in a peer-to-peer network..
Blockchain is a distributed database that maintains continuously a growing list of ordered records called blocks. This idea started in the 90s with various initiatives leveraged by cryptoanalysis, one of them called HashCash. When talking about blockchain, it is nearly impossible not to refer to Bitcoin, which was introduced in 2008 by Satoshi Nakamoto’s white paper publication and in January 2009 had its first transaction made.
Bitcoin emerged as a digital alternative to fiat currencies arguing a combination between economic “freedom”, by not being backed by any government, and anonymity. Today Bitcoin is considered a cryptocurrency; that is, a digital asset that stores value and can be traded in the market. In 2011, the price of a Bitcoin oscillated around USD$20, two years later, in December 2013, it reached about USD$1,150, and at the end of 2017 it was close to USD$20k. The last two years the price has fluctuated dramatically and today it is at the same level as it was by the end of 2017.
There is a belief that investing in blockchain is investing in Bitcoin. However, there is a wide range of opportunities to invest in this technology, which are listed below:
- Crypto assets: It is a digital asset that is based in cryptography and is used as a mean of payment and store of value. The main crypto assets are the cryptocurrencies led by Bitcoin. Today there are more than 7,800 coins with a market capitalization greater than USD$500bn, of which bitcoin represents 63%. To invest in crypto assets, you can open an account in a regulated market such as Coinbase, Binance, Bittrex, Bitso, among others; or invest buying the asset directly from another person.
- Equity: There are companies listed on the stock exchanges that have direct or indirect exposure to blockchain technology. For example, Hive (TSXV: HIVE) earns income by mining assets. Another case is investing in IBM (NYSE: IBM), a technology company that creates business software and provides consulting services. You could also invest in companies like Nvidia (NASDAQ: NVDA) that create hardware used in data processing and crypto-asset mining or in Microstrategy (NASDAQ: MSTR) which now holds about 41k bitcoins in its Treasury You just need an account in a traditional exchange to start trading.
- Exchange Traded Funds (ETFs): Another investment alternative can be in funds of companies involved in the transformation of commercial applications through the development and use of blockchain, or in index funds that track the performance of Bitcoin or other cryptocurrencies through futures contracts or through exposure to underlying assets. For example, Coinbase Index Fund, Crypto20, Greyscale, among others.
- Venture Capital: It supports the creation of new companies that have a disruptive idea based on innovation and technological development. In recent years, we have seen the formation of new Venture Capital funds specialized in investments of startups based on blockchain technology. By mid 2019, the top VC Funds investing in blockchain were DCG (127 investments), Blockchain Capital (57), Pantera Capital (56), Digital Horizon (38), Fenbushi (36), among others. In 2016, Andreessen Horowitz closed his second crypto fund with a hard-cap of USD$515mm. The main areas of investment are next generation of payments, modern storage of value, decentralized finance, new ways to monetize and Web 3.0.
Breakthrough technologies, such as the Turing Machine, ARPANET, WWW, the iPhone and the Blockchain, remind us that the only constant in life is change, to which usually humanity resists to embrace. We are facing the next great breakthrough innovation. Individuals and organizations must choose between facing the change considering alternative ways to create value or to keep living in the past and face extinction. Without a doubt, blockchain is a unique and unrepeatable technology, and investors must renew their beliefs and knowledge by taking time to learn and invest in this technologyas the future is in their hands.
Fear is temporary, success is forever.
ACV is an international Corporate Venture Capital (CVC) fund investing globally in Startups & VC funds.
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