In recent years, the explosion of cryptocurrencies has invaded the media due to the speed at which they have acquired value and the subsequent prosperity of the lucky few who purchased cryptocurrencies at the right time. In fact, in 2009, when they were launched, they could be bought with a few dollars. In time, they came to be worth more than US$40,000 thousand… The key and strength of these financial products are the Blockchains that we have been hearing so much about lately. Blockchains have a distant origin and characteristics so crucial that they can determine the future of many sectors. For this reason, when it comes to online trading today, we cannot fail to look at this context, and going in more depth, we see that we go far beyond the famous cryptocurrencies. Thus, to have a profitable future with strong and stable investments we must understand how they work and how to invest in them.
Blockchain and cryptocurrencies
The story of these two had mutual importance, one which led to the explosion of each other. Initially, Blockchain technology was incomplete- it had no driving force. The arrival of Cryptocurrency gave Blockchain technology the purpose it needed to become functional. In fact, as mentioned, every single coin of Cryptocurrency was soldered in a block in a completely non-modifiable way, making every transaction encrypted and thereby untraceable. Furthermore, the process is decentralized and does not need to pass under the control of a central authority (such as the ECB or the FED). This allows Cryptocurrency users to avoid intermediaries, thus saving up on the commissions that are usually charged with each money transfer. Another peculiarity of Cryptocurrency that came to light is that total confidentiality is ensured. For instance, all transactions are not linked to a name, but in the same way, every single transaction can be tracked at any time. Finally, the transfer times of the Cryptocurrency were found to be much faster than traditional methods, in fact, transactions can take from a few days in the case of the latter to just a few hours in the case of Cryptocurrency.
Other fields of application of Blockchains
Features such as traceability, transparency, non-modifiability, confidentiality, and transmission speed are applicable in many other fields in addition to that of Cryptocurrencies. A very interesting field of application is certainly that of healthcare, where a confidential, fast, and widespread transmission of data could have many virtuous implications. In fact, sharing medical records quickly and securely would result in better collaboration between various doctors and specialists with the development of a better diagnosis and treatment path for each individual patient. Furthermore, the amount of data in an anonymous form accessible to all, allows a huge database for medical research with consequent developments in the treatment of diseases and medical innovation.
Another field where the application of blockchains is beneficial is that of personal security where its own database can allow us to keep our history safe. For example, think of a security platform where you can keep documents such as your passport and identity card, education transcripts, driving license, and all other necessary information. We will no longer have the burden of having to keep paper copies, or losing the documents we need, but we could instead rely on simply accessing our block and having everything available at any time.
For all the aforementioned reasons, even fields such as insurance companies, the real estate market, and all the figures that gravitate around it could develop this technology over time.
Furthermore, when concerned with financial resources, banks could develop their own blockchain to reduce security problems and costs of international transactions. Micropayments would be fueled following a reduction in commissions and situations such as small publishing or even a simple coffee at a bar would undergo a revolution.
Blockchain and investments
When it comes to investments and Blockchain, the first thought certainly goes to Bitcoin and other cryptocurrencies that have gained popularity over the years. In fact, Bitcoin can be said to be responsible for the fortune of someone who found himself a millionaire from one month to the next. The current trend we see is that electronic money seems to be the future of our society and economy. Suffice it to see that even today many giants are betting strongly on this field. The big problem is the high volatility which leads to swings so strong that even the most experienced investors get dizzy. Going from a value of US$35 thousand to US$3 thousand and vice versa can take a few weeks. Above all, what is frightening is the almost impossibility of predicting the medium and long-term trend, making the investment a lottery.
For this reason, the most experienced investors have begun to diversify their portfolios by reducing the percentage of cryptocurrencies and sniffing out the companies that are implementing the use of Blockchain and its incredible technology.
The famous saying that circulates among experts and which explains the director’s concept well is as follows: ‘When we are in the midst of the gold rush, it is not very wise to invest in gold diggers but rather in shovels.”
To do as this saying asks there are various options depending on your abilities and needs. For example, there are dedicated mutual funds, which seek to invest in all those companies that are developing and implementing the use of Blockchain. Then there are companies that take advantage of both cryptocurrency and Blockchain markets such as Nvidia, Galaxy Digital Holdings, or CME Group. Or, there are also industry giants that are opening up to the use of these technologies and promise to expand their value further in the future such as Intel, Mastercard, Amazon, and IBM.
Bitcoin is not an investment. An investment is an opportunity that has a greater chance of success. Investing in a company or in bonds is an investment because it gives us an expected return via dividends or interest (unless there is a bankruptcy). Bitcoin is not a bet but a speculation because it has potential, yet the return is not certain, there is no cash flow. What we have is a notion that is gradually being validated over time – or at least there are pieces of the puzzle that seem to make more sense to an investor. At this point, we can stand aside and see how things go. Or, we can put a portion of our money into this asset and participate in the most important bet for our generation. I say take the risk on Blockchain!
Further reading:
https://online.stanford.edu/future-for-cryptocurrency
https://www.cnbc.com/2021/07/03/what-cryptocurrencies-will-look-like-in-50-years.html
