Fri. Oct 22nd, 2021


The world is talking about investing in cryptocurrencies and about the blockchain technology that is behind them. 

However, what we should notice is that blockchain technology has far more applications than just allowing crypto trading. The tech can be employed to transform industries such as banking, pharmaceuticals, insurance, forecasting, etc. In case of a retail investor, you can use blockchain ETFs to diversify your portfolio.

This article will serve as a guide to help you understand blockchain ETFs and invest in the same. But before we delve into knowing the investing basics, let us know a little more about blockchain technology.

What is Blockchain Technology?

Blockchain technology is a digital record of transactions that is replicated and distributed throughout the blockchain’s complete network of computer systems. 

Each block on the chain is composed of several transactions, and whenever a new transaction takes place on the blockchain, a record of that transaction is added to the ledger of every participant. This is what we refer to as the Distributed Ledger Technology or DLT – a decentralised database controlled by numerous members.

The transactions are accessible to all nodes but can’t be altered as they are encrypted and stored in an orderly way. Blockchain technology is revamping such transactions for future use.

Some corporations that employ blockchain technology are Microsoft(MSFT), Starbucks(SBUX), IBM, PayPal(PYPL) and more.

properties of distributed ledger technology

What are blockchain ETF funds?

As we all know, an ETF is an investment instrument or a product that has some underlying value. In the same manner, a blockchain ETF is an investment instrument that specializes in investing in blockchain ETF stocks of companies involved in virtual currencies, blockchain,  or crypto trading activity. 

One interesting thing to note here is that a blockchain ETF doesn’t need to invest in companies dealing with cryptocurrencies such as ethereum or Bitcoin.

When a person buys a blockchain ETF, he/she is buying into the assets. This implies that as an investor they have the right to gain from the growth of the blockchain ETFs. Just like it happens if they owned stocks. Blockchain technology ETFs are traded in regular ETF markets just like stocks.

How the Top Blockchain ETFs Work?

The BLCN ETF is an ETF that is passively managed and aims at tracking how the Reality Shares Nasdaq Blockchain Economy Index works. This index is made up of firms active in research, development, support or use of blockchain technology ETF and related blockchain technology companies.

Each possible corporate stock that may be an acceptable candidate for inclusion in this index is assigned a “Blockchain Score” by the index methodology. 

This score builds on various criteria for how the firm contributes to the ecosystem, its blockchain product maturity and associated economic impact, investments and expenses in R&D activities, corporate results and innovations.

This factor-based technique guarantees that a blockchain development company’s potential and its business are more accurately measured for actual economic gains, renewed business possibilities and operating expertise. 

To eliminate the traditional approach blockchain has brought a new approach for startups. The top 50 to 100 businesses with the highest Blockchain Scores are eligible for inclusion in this index, and the same equities are duplicated in the BLCN ETF. Every six months, the index is rebalanced.

blockchain ETFRA

How To Invest In the Best Blockchain ETF?

Mentioned below are some of the ways on how you can start investing in the best blockchain ETFs:

  • You can purchase cryptocurrencies directly or buy cryptocurrency trust.
  • You can purchase ETFs of the firms that invest in shares of firms exposed to blockchain ETF and blockchain crypto ETFs such as Reality Shares Nasdaq NextGen Economy ETF  and Amplify Transformational Data Sharing ETF.
  • You can participate in crowdfunding a new cryptocurrency via an initial coin offering ICO.

Blockchain ETFs vs Cryptocurrency ETFs

Blockchain ETFs keep a track of the stock market prices of companies that have invested in blockchain technology and because blockchain is a technology, it is not related to a particular product or company.

To simply put” Bitcoin needs blockchain but blockchain doesn’t need bitcoin”. Mentioned below are some points that throw light on the difference between Blockchain ETFs and Cryptocurrency ETFs

  • While Cryptocurrency ETFs are not yet a reality, blockchain ETFs are already in the mainstream markets.
  • While cryptocurrencies have been involved in a lot of controversies, blockchain technology is neither banned nor under scrutiny by regulatory agencies.