With millions of Americans suddenly forced to work from home due to the still-raging pandemic, many turned to trading platforms like Robinhood for a crash course in investing. That right there bodes very well for so-called blockchain stocks, or companies levered to the technology that underlines cryptocurrencies. But to understand the potential of this sector, one needs to have a basic understanding of this advanced digital architecture.
Look up the definition of a blockchain and you’ll come across something like this: a distributed, decentralized, public ledger. To truly appreciate blockchain stocks, it’s easier to think about what this innovation isn’t. For instance, take a look at a central bank, which has three distinct characteristics:
- Non-distributed: central banks make monetary policy decisions internally and do not distribute their authority to the public.
- Centralized: all authority is ultimately given to a governing leader or entity.
- Private: all transactional information is privately held for security and privacy reasons.
While we’re accustomed to centralized infrastructures, this format has one glaring problem: corruption. Anyone with authorization can manipulate data for their own nefarious benefit. In some cases, such as government bailouts during the Great Recession, this manipulation is out in the open supposedly for “the greater good.”
Coincidentally, bitcoin was born amid the chaos that stemmed from the 2008 financial crisis. And with it, the idea of the blockchain was born.
In this digital ecosystem, the rules of the game are determined by public consensus (distribution). Further, transaction data within a blockchain is verified through “mining,” or a competition among networked nodes (computers) to solve complex problems to gain the right to verify data into the target blockchain, typically accruing a reward (cryptocurrency) for doing so (decentralization).
Finally, all transactional information is available for public assessment without compromising personal information (public ledger). In this manner, corruption is limited, thereby facilitating a paradigm shift in our monetary system. Hence, these blockchain stocks have significant potential:
- Square (NYSE:SQ)
- Intel (NASDAQ:INTC)
- IBM (NYSE:IBM)
- Nvidia (NASDAQ:NVDA)
- Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL)
- Marathon Patent Group (NASDAQ:MARA)
- Virtual Medical International (OTCMKTS:QEBR)
While discussions about blockchain technology focus largely on cryptocurrencies, imagine the bigger implications. For instance, what would happen if we decentralized real estate transactions? Theoretically, we could immediately eliminate or reduce the influence of middlemen entities, like attorneys and brokers. Therefore, the potential of blockchain stocks go well beyond bitcoin, which is why you’ll want to keep close tabs on this sector!
One of the hottest names in financial technology, or fintech, Square is a long-term buy for the forward-thinking investor. At its core, the underlying platform allows small businesses to compete with the bigger dogs, providing easy-to-use and intuitive payment processors. As well, Square offers an entire accounting ecosystem that allows entrepreneurs to streamline their transactional data. Thus, small-business owners can focus on growing their companies, driving the bull case for SQ stock.
However, SQ is also one of the most compelling blockchain stocks that you can buy. Square CEO Jack Dorsey – who also heads social media firm Twitter (NYSE:TWTR) – has long been an advocate for innovative technologies. Thus, I wasn’t surprised at all that he backed cryptocurrency integration at a time when such a notion seemed laughable. Well, not too many folks are laughing now, especially judging from the rise of SQ stock.
Square is one of a growing number of mainstream platforms where users can buy and sell bitcoin. Additionally, earlier this year, the U.S. Patent and Trademark Office granted the company a patent for “a new network that enables seamless crypto-to-fiat transactions.” Clearly, Dorsey and his team have big ambitions for the groundbreaking architecture, making SQ one of the best blockchain stocks to buy.
At present, very few people want to hear about Intel and for completely understandable reasons. In recent years, the company has lagged rival Advanced Micro Devices (NASDAQ:AMD). But then came the bombshell: Intel has been forced to delay its next-generation chips to 2022. Now, we face a very real prospect where Intel will be known as the poor man’s AMD.
Naturally, this spooked many stakeholders and INTC stock crumbled on the devastating disclosure. Plus, it’s hard to blame them as Intel has demonstrated a recent track record of disappointments.
Still, for those who are interested in comeback stories and particularly blockchain stocks, you may want to give another look at INTC stock. As I explained above, the blockchain appeals to many people because it is a public ledger. However, anytime something is known to the world, it can be used for nefarious purposes.
This is particularly important as blockchain technology improves other segments, such as healthcare. For instance, Fetch.AI combines artificial intelligence and the blockchain to create a system where healthcare facilities autonomously share medical data without compromising patient privacy. Potentially, this will improve broader health outcomes.
But as the blockchain becomes more mainstream, there will be demand to secure certain information (such as patient’s medical records). This is where Intel’s Software Guard Extensions (SGX) comes into play. Basically, SGX is a hardware-based memory encryption platform which adds another layer of protection for valuable information.
While it may not be appreciated now, it likely will be in the future. Therefore, keep INTC in your list of blockchain stocks to buy for the long haul.
Another legacy tech firm that has seen better days is IBM. A promising recovery narrative in the aftermath of the 2008 financial crisis, IBM stock made good on its speculative potential. However, this feel-good story peaked in 2013. Unfortunately for “Big Blue,” the organization was saddled with legacy businesses that were rapidly becoming irrelevant. Part of the reason why was the sharp and accelerated pivot to the cloud, which Amazon (NASDAQ:AMZN) has dominated.
Nevertheless, I like IBM stock as an undervalued sentiment play. With so many sexy tech names crowding the headlines, IBM is presently flying under the radar. However, as one of the more compelling blockchain stocks, I don’t expect this circumstance to last indefinitely.
Here’s the deal with the tech icon: this has always been an organization with big ideas, hence it’s long list of enterprise clients. And while the blockchain centers on cryptocurrencies for now, eventually, investors will recognize the potential for the innovation to solve large-scale problems.
A great example of course is the global food supply chain. So much of our…
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