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Many investors might recognize blockchain as the technology behind popular cryptocurrencies such as Bitcoin and Ethereum. But its application also extends to all sectors and services.
Blockchain is essentially a chain of information or “blocks” recorded on independent computers connected via a shared network. Each block of data is frozen in time on an open ledger that all participants can access. This feature makes blockchain technology particularly useful in industries where security is paramount, such as banking.
As a retail investor, there are multiple ways to participate in this emerging technology. But first, let’s review the basics of blockchain and why it’s becoming crucial.
What is blockchain technology?
To understand blockchain, you must first review the purpose of the technology.
At its core, blockchain reduces the risk of fraud, corruption, or data tarnishing by a central authority. By democratizing access to information in an open register accessible to all, technology makes it almost impossible for a single party to manipulate facts.
By connecting verified data and making it accessible to everyone, blockchain also simplifies and automates processes that might have previously been inefficient, such as manually recording information.
For example, Walmart (WMT) uses blockchain to ensure food safety, tracing products back to the farm. Thus, in the event of an epidemic of E. coli or salmonella, the retailer can quickly identify the source, preventing the spread of contaminated food.
Major companies such as Microsoft (MSFT), PayPal (PYPL), Starbucks (SBUX), Salesforce (CRM), and IBM (IBM) use blockchain for digital security, infrastructure, and automation, among other uses.
How to invest in blockchain
Outside of trading cryptocurrencies and individual stocks, investors can gain exposure to blockchain technology through exchange-traded funds (ETFs). A blockchain ETF holds a basket of publicly traded companies with exposure to the technology. These companies can either use blockchain directly or take advantage of their services that support the industry.
It is important to note that blockchain ETFs do not directly hold cryptocurrency assets. Instead, these funds are designed to invest in global companies, many of which are blue-chip technology names.
Best Blockchain ETFs
This niche of the ETF market remains relatively uncrowded, with only a handful of players in this space. And since there are no pure blockchain companies, most holdings in these funds tend to overlap with other large-scale ETFs.
Below we highlight the names with the most assets under management. (Data as of September 25, 2024.)
| ETF Name | Spending rate (percentage) | Assets under management |
| Amplify Transformational Data Sharing ETF (BLOK) | 0.76 | $702 million |
| Siren Nasdaq NexGen Economy ETF (BLCN) | 0.68 | $63 million |
| First Trust Indxx Innovative Transactions and Processes ETF (LEGR) | 0.65 | $105 million |
| Bit-to-Bit Cryptography (BITQ) Industry Innovators | 0.85 | $126 million |
| Global X Blockchain ETF (BKCH) | 0.50 | $151 million |
Amplify Transformational Data Sharing ETF (BLOK)
BLOK is the largest blockchain ETF on the market. This actively managed fund selects global companies to develop and apply blockchain technologies.
- Main titles: Core Scientific Inc (CORZ), Galaxy Digital Holdings (GLXY) and MicroStrategy Inc (MSTR)
- Spending rate: 0.76 percent
- Assets under management: $702 million
Siren Nasdaq NexGen Economy ETF (BLCN)
BLCN has global companies supporting the development and research of blockchain technology.
- Main titles: MicroStrategy (MSTR), Coinbase Global (COIN) and Block Inc (SQ)
- Spending rate: 0.68 percent
- Assets under management: $63 million
First Trust Indxx Innovative Transactions and Processes ETF (LEGR)
LEGR provides exposure to a global portfolio of companies with varying degrees of involvement in blockchain.
- Main titles: Intel (INTC), JD.com (JD) and Paypal Inc (PYPL)
- Spending rate: 0.65 percent
- Assets under management: $105 million
Bit-to-Bit Cryptography (BITQ) Industry Innovators
BITQ holds an index of 30 crypto companies from around the world. Some of these names derive more than 75% of their revenue from crypto assets.
- Main titles: MicroStrategy Inc (MSTR), Mara Holdings Inc (MARA) and Coinbase Global (COIN)
- Spending rate: 0.85 percent
- Assets under management: $126 million
Global X Blockchain ETF (BKCH)
BKCH invests in global companies engaged in blockchain activities such as mining and integration of digital assets.
- Main titles: TeraWulf Inc (WULF), Mara Holdings Inc (MARA) and Iris Energy LTD (IREN)
- Spending rate: 0.50 percent
- Assets under management: $151 million
Cryptocurrency and blockchain ETFs: how these investments differ
For those interested in digital currencies, Bitcoin and Ethereum ETFs offer the key way to invest through a traditional exchange, so you don’t have many options yet. And you also have other ways to own crypto directly or through futures contracts.
If you want to trade digital currencies such as Bitcoin, you can access specialist crypto exchanges such as Coinbase or Binance.
Alternatively, some of the best traditional brokers for buying and selling crypto include Charles Schwab and Interactive Brokers, which also offer Bitcoin futures.
Risks associated with emerging technologies
Like other thematic investments such as electric vehicles or artificial intelligence, blockchain ETFs tend to have additional sources of volatility. These risks may be market-related, such as valuations or sudden changes in investor sentiment. These may also include macroeconomic risks, such as additional government regulation.
Consider Bitcoin, which uses blockchain technology to store every transaction made. Digital currency has been around since 2009, but the popular crypto is not without its share of skepticism from authorities and investors. This uncertainty translates into greater volatility.
For sophisticated and retail investors alike, assessing the value of Bitcoin and other cryptocurrencies such as Ethereum, XRP and Cardano remains a challenge. Most traders seem unsure of the current or future value of these cryptocurrencies.
Nevertheless, it seems that the trend in cryptocurrency trading is not going anywhere. If anything, it appears to have gained momentum – as does blockchain adoption.
Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. Furthermore, investors are advised that past performance of investment products is not a guarantee of future price appreciation.
