How to Invest in Blockchain With Minimal Risk

According to a study of 4,800 professionals from around the world, 66% of people believe that innovation will be the biggest factor influencing economic growth over the next 30 years.

In order to thrive (or indeed, survive) in this continuously evolving economy, young professionals will need to understand the driving forces behind scientific and technological development, anticipate the new industries they will enable, and predict the extent to which they will change the jobs we take for granted today.

One of the most promising developments is the advent of blockchain technology, and the markets created to service it.

What is Blockchain?

Blockchain technology utilizes distributed ledgers to make permanent records of transactions and allow said transactions to occur, and be irreversible. With the advent of smart contracts, Blockchain Technology has gained a brand new set of applications and use-cases that extend beyond simply verifying transactions.

While most mainstream media focuses on Bitcoin and cryptocurrency as a market to invest in, that’s just the tip of the Blockchain-Iceberg. Those who have been around long enough to watch this technology evolve are now setting their sights on exciting new developments that go beyond simply buying and selling a cryptocurrency.

Use cases that have been flying completely under the radar to the general public.

There are currently more than 1,500 cryptocurrencies on the market and even though bitcoin is king, new cryptocurrencies emerge everyday. Thomas Carter, Founder of Dealbox, has raised over $3.5 billion to date via ICOs. Dealbox is a blockchain accelerator and crowdfunding platform that exists within a unique tokenized ecosystem.

This is a market that didn’t even exist a couple years ago — now we have individual companies bringing in revenues larger than some countries GDP’s.

With this in mind, we can begin to assume that there will be opportunities generated through building the infrastructure these blockchain projects will need in order to operate efficiently.

Right now, many of the projects that get media attention aren’t necessarily ground-breaking, they’re first movers.

As time progresses we’ll begin to see more and more big players enter the space to start supplying new demands. As larger players enter the market, it will become increasingly difficult to get attention for blockchain applications that aren’t legitimately disruptive — or at the very least addressing a problem that affects larger demographics than currently being served.

The question then becomes, will these large players get involved directly by creating their own blockchain projects? Or will they create ancillary services that allow them to profit from the cryptocurrency mania we’ve been seeing without exposing them to the level of risk that comes with launching a new coin.

We’ve already seen this with players like Samsung getting involved and stating that they will be manufacturing their own ASIC cryptocurrency miners. Samsung is betting on Blockchain Technology, but they’re doing so by filling a B2B need within the space.

As the cryptocurrency market grows, smart money and seasoned investors should begin looking not to the market itself, but the side markets that will emerge as a result of its growth.

1. Blockchain Services

If you don’t want to take on the same level of risk as typical investors, but know you want to get on the Blockchain-Bandwagon (hereby referred to as the “BlockTrain”), consider starting a company that:

A) Offers services to Blockchain projects.

OR

B) Offers services to make it easier for new investors to get involved.

B2C

When Sam Karagiozis founded Auscoin, it raised $1.5 million in 24 hours.

Auscoin isn’t a disruptive new use of technology, rather a project that addresses a specific need. A need that wouldn’t exist if it weren’t for the surge in popularity that blockchain has seen in the past few months. Sam noticed an opportunity to position himself ahead of the wave of new investors that want to take advantage of this market, by creating a simple and seamless way for people in Australia to acquire cryptocurrency.

He proactively sought out a gap in the marketplace and filled it.

The tattoo industry is projected to be valued at 1.1 Billion USD by 2020. Meanwhile, the Tattoo removal industry is expected to hit 82.2 Million USD by 2018 to supply the growing demand that the tattoo industry’s’ boom has created.

Smart money isn’t betting on cryptocurrency, smart money is betting on Blockchain Technology.

Being an intelligent investor isn’t about reacting to what you hear in the news. It’s about proactively creating opportunities for tomorrow based on what the general public is buzzing about today.

B2B

Blockchain services I find especially promising are ICO Accelerators and Incubators. Although, to be completely honest, I’m a little late to the party — some entrepreneurs have been offering their services to ICO’s and Token Sales for almost a year now.

For example, Brad Yasar, founder and managing partner of KrowdMentor. Brad started KrowdMentor to, “help founders design, launch and scale their blockchain startups — and investors find the right ICO/ITO investments for their portfolios”.

On the other side of the market, we have people like Shadi Paterson. Chief of Growth at The 8760, he helps ICOs gain exposure through growth hacking and digital marketing.

A blockchain solution doesn’t have to only serve other blockchain projects, the use case can expand far beyond the cryptocurrency ecosystem.

Another example of B2B blockchain solution is aXpire. They built the first blockchain based spend management system. This allows organizations like Hedge Funds to manage money coming in and out of their accounts more efficiently than ever before.

Whether or not you believe Bitcoin and other cryptocurrencies to be a “Bubble”, the demand for both B2B and B2C blockchain services is skyrocketing — and doesn’t seem to be slowing down anytime soon.

2. Masternodes

Masternodes are special nodes within a network that perform special actions for a blockchain project, and in exchange for contributing to the strength of the network — generate residual income.

To understand what a masternode is, you must first understand how cryptocurrencies increase their circulating supply.

Proof of Work (PoW) allows the supply of a coin to be increased by having users “mine” the currency by lending their computing power to verify transactions. In PoW, people who “mine” the currency are essentially acting as blockchain accountants, and being paid for their work. The coins they are paid are newly minted coins, increasing the circulating supply.

Proof of Stake (PoS) allows the supply of a coin to be increased by having users earn interest on coins that they are “staking”. The staking process can differ from project to project, but with most PoS coins, all a user needs to do is purchase coins and place them in an official wallet to begin staking. PoS then generates new coins (increasing the supply) in the form of interest on the capital that you placed in your wallet. Many factors play into how much interest you earn such as the overall network weight and your wallets individual weight (value).

PoS is considered by many to be the next logical evolution of blockchain technology. Founders like Augustas Staras, Co-Founder of Aigang, have already implemented PoS into their projects to stay ahead of the curve.

Dash was the first coin to popularize masternodes, but since their inception — the concept has caught on quite quickly.

In any given PoS framework, there are at least two types of nodes: regular nodes and masternodes.

A regular node is typically the official wallet that “mines” new coins, increasing the supply by allowing users to generate interest.

Masternodes are essentially super wallets, created to handle special transactions on the blockchain, increase the privacy of certain transactions, or even participate in voting and governance. A masternode can perform several different functions for its parent blockchain, and have relatively low barriers to entry if one wants to own their own masternode.

Think of a blockchain project like a country, and its masternodes as states. If I think that a country is going to do well compared to others, I might want to invest in that country, perhaps even buy a state. Buying that state lets me benefit from the overall economy of that country, as well as participate in forming the legislature that arises to govern the country.

To own a masternode, you have to put down a certain amount of the coin it is tied to as collateral, more often than not, that collateral is then “locked” for a duration of time. Since you have both committed collateral and agreed not to sell that collateral for a period of time, your masternode will generate more revenue than a traditional node.

Smart money is getting more and more excited about masternodes as PoS becomes more of a norm.

The real trick is determining the most profitable coins to buy masternodes for.