Blockchain technology is steadily creating an evolution in the world of technology. Many argue that this is the biggest innovation since the inception of the internet. Bitcoin and other cryptocurrencies are the bi-products based on this core fundamental technology.
Could this mean that publicly traded companies utilizing blockchain technology are a wise choice for investment? That depends! The first step for most people/retail investors is overcoming the idea of understanding what exactly is blockchain? What is Bitcoin? What is Ethereum? How can a business benefit by using blockchain technology?
Foreseeing the Rising Potential of Blockchain
The best way to understand this technology is to compare it with the internet. When early internet-based technologies were first launched, they allowed for things such as long distant communication through emails, audio/video calls, and many more technologies that we now use on a daily basis. To complete the analogy, bitcoin is the first product using blockchain technology, which allows for assets to be transferred over the Internet.
Increasing Use Cases of Blockchain in Various Industries
This is a profound technology which will ultimately find its applications in many business sectors. Most of the giant stock exchanges have slowly started adopting blockchain technology in their system to improve trading efficiency, reduce market risks, eliminate third party involvement for the trading and settlement cycle, etc. Banks have also realized their future risk with the invasion of blockchain Technology which may eliminate bank as an intermediary. Hence major banks are gradually (shifting to)/ (investing in) Blockchain technology. Also, supply chain companies like Walmart and Nestle are using blockchain to improve efficiencies in their existing supply chains. With more use cases coming forward every day, things are gradually looking more-and-more like the early beginnings of the Internet.
Need for an ETF like KOIN
If blockchain technology is going to be a vital technology to humanity, it becomes important to understand what businesses are involves and how to later invest in them. For retail investors who are less experienced in this concept, they will definitely feel like scratching their head.
With such developing potential, there always comes several fraud firms which may append “Blockchain” to its company name to make people believe that they are into this technology. Filtering out the frauds and wrongs, from the legitimate, remains the major task. Fund managers, sector specialists, Blockchain domain experts, and peer participants come here for rescue with a Blockchain ETF. This ETF spots out potential investments in businesses running blockchain technology, with expert analysis.
Let’s see what KOIN has to Offer for Investors
Many ETFs are launched with many an inception in the month of January 2018. Innovation Shares NextGen Protocol ETF (KOIN) is one of such remarkable ETFs launched this year.
As of 9/25/2018, KOIN has holdings in 48 Blockchain related stocks. Here are the Top 10 Index Constituents:
As we can see from the top 10 list, the ETF has 8/10 investments in US firms, the other two are Taiwan and Germany.
The Index may suffer deviation if there is volatility observed in those US stocks. When we observe all its 48 Holdings, we can clearly see a vast diversification aiming to mitigate future individual stock losses.
The Rebalance of the Holdings is performed Quarterly with Semi-Annual Review.
The Current maximum holdings of the KOIN ETF is in Software & Services (45%) and the least in Consumer Services Sector (<1%). The ETF is aiming at the Blockchain Service providers/developers rather the Industry which may use it from such Software firms.
When the KOIN ETF sets up for the hunt for its potential blockchain investment, they follow a particular discipline. Below are the categories /choices they look for:
1. Cryptocurrency as Payment
Companies that accept cryptocurrency as payment for goods or services or are developing blockchain payment solutions.
2. Mining Enablers
Companies that either create equipment and/or tools to enable the creation of new blockchains or are mining blockchains as their main business.
3. Solutions Providers
Companies engaged as Blockchain as Service providers. They assist businesses & organizations in the creation and implementation of blockchain applications.
Companies that primarily use blockchain technology to increase operational efficiencies, optimize settlement processes, enhance the customer experience and/or increase data security/integrity.