Sep 21, 2021
Whether you're just getting started in investing, or you've been investing for years, you need to be aware of blockchain technology. It's become the newest and most exciting way to start investing in disruptive new companies that offer something new. Here's how blockchain is changing investing, and why you should take it seriously.
The State Of The Market Before Blockchain
To understand how how blockchain has shaped investing, you need to understand what the stock market was like beforehand. Today, there are only around 3,600 American companies which have gone public. That's less than half of the numbers the US had in the 1990's.
This is partly because many companies are choosing to stay private for longer, before they go ahead and list on the market. For example, take AirBnB. The company stayed private for years, until it got its feet under it and became a huge company. In fact, it was bigger than FedEx and Cigna at this point. By the time they IPO'd, you couldn't get any of the benefits of being on the ground floor.
New Companies Are Listing Now More Than Ever
Now though, we are seeing an uptick of new businesses listing on the market. In 2020 we say 450 companies get listed, which is twice as many as there were in 2019. These companies are younger, more disruptive companies too, like AirBnB and Uber before them.
"One reason why they're listing more frequently now is down to SPACs. These are Special Purpose Acquisition Companies, and they make it a lot easier for a new company to list on the market, without having to do the regular IPO. This was all kicked off by Virgin Galactic, which was an early SPAC," says William H. Oster, a writer at Essay Services and Revieweal.
Companies are listing as regular IPOs too, with more and more listing all the time. This is most likely because businesses have seen that they do need to list earlier, so investors can see their potential.
What you may see, though, is that many companies aren't listing themselves on the stock market at all. Instead, they're still private and instead using blockchain technology.
But what is blockchain tech? This is what powers cryptocurrencies. You may have heard of them in the past, especially the most popular version, Bitcoin. Many think of them just as an alternative currency, but they can be much more than that. Right now, the blockchain is now becoming it's very own version of the stock market.
This is because savvy investors are using it to invest in up and coming tech companies. It allows them access to the best companies out there, while others using the traditional stock market can't get involved.
Why Blockchain Is Changing Things Up
Ok, so blockchain is making all the difference when it comes to investing. Why is it that using that rather than the stock market is becoming more popular?
It's all in how blockchain works. It's a complex system, but essentially it's a database that records transactions and asset ownership. This isn't all that different to a bank. Your bank account is an entry in their database. Every time you make a transaction with your bank card, that action is logged in the database.
"In much the same way, your stock broker tracks your investments in their own database. When buying and trading stocks, you have to deal with that middleman. That costs money, and so you'll never get the true value of your investments," explains Mozell D. Elamin, an expert at Assignment Help and Custom Writing. Blockchain cuts out that middleman, allowing you to record what you own yourself. That's why The Economist have referred to blockchains as 'trust machines'.
This is important to know if you're starting up a a new business, too. It helps you find investors that are on the same wavelength as you, and have the same goals. You'll be able to work with these investors, without having to pay fees every time you do so.
As you can see, there are so many reasons why blockchain is the future of investing. It's created new avenues into investing that were never before, and allows new and disruptive companies to find their feet. It lets you get the most out of every investment, so now is the time to start looking into it.