How To Invest in Blockchain

Blockchain startups include any company that uses blockchain technology to create new products or services. Over the last few years, they’ve been gaining popularity as the technology has advanced and shown massive potential to disrupt many traditional industries.

In 2021 alone, venture capitalists poured a record $25.2B into blockchain companies, representing an eight times increase from the previous year.

Let’s take a look at some of the most notable examples of how blockchain is innovating and improving various sectors—from finance to healthcare to supply chain management and more.

What is a blockchain technology startup?

Startups that focus on blockchain technology are typically working on developing new applications or platforms that utilize the distributed ledger technology, or on improving existing blockchain platforms. Think of a distributed ledger as a database that is maintained across a wide network of computers. 

While blockchain technology is most known for being the building blocks that enable cryptocurrencies, there are a number of other industries beginning to explore its potential uses, including healthcare, supply chain management, the Internet of Things ("IoT"), and more. 

As the technology continues to develop, it is likely that we will see even more innovative applications down the road.

How to invest in crypto without buying it directly

If you’re new to the crypto industry, it can be challenging tounderstand how to evaluate the value and utility of cryptocurrencies—because there are so many, and the technology is so new. Fortunately, there are ways you can dip a toe into the world of crypto without actually buying a single token.

The simplest approach to gain exposure to the market is to invest in a stock that has a financial interest in the future of digital assets. For example, when crypto exchange Coinbase went public in 2021 ($COIN), public investors quickly gobbled up their shares to gain exposure to the company that currently holds around 30% of total exchange market share. 

If individual stocks seem too risky, investors can also take a more diversified approach and put their money into exchange-traded funds (ETFs). These funds pool investors' money into crypto-adjacent companies that are in the business of developing new products and services, mining, and other blockchain-related activities. 

Lastly, if you want to get involved with companies that are using blockchain technology in new and innovative ways across a diverse number of industries, you might want to take a look at early-stage startups. 

While the future of these companies is uncertain, and their inherent risks are high, their growth potential is much higher than publicly-traded companies since investors are essentially getting in on the ground floor. Should one of these companies eventually go public or get acquired, early investors stand the chance of being rewarded with outsized returns.

Why are blockchain startups gaining popularity?

One reason blockchain startups are so popular is the public's increased interest in cryptocurrency. Bitcoin, the first and most well-known cryptocurrency, has gained mainstream attention over the past several years, along with dozens of other cryptocurrencies. According to CoinMarketCap, there are currently over 22,000 cryptocurrencies in circulation. 

Blockchain startups offer a variety of services related to crypto, from cryptocurrency exchanges to storage solutions. In addition, many people believe that blockchain has the potential to revolutionize a number of industries, from banking to supply chain management, and beyond. 

As a result, there is a lot of excitement around the possibility of what blockchain can do, and startups are well positioned to capitalize on this buzz.

What are some examples of successful blockchain companies?

Blockchain technology is so new that most companies operating in the space can be considered “startups.” However, at the rapid pace the industry is moving, some of these companies have turned into successful unicorns virtually overnight.

Two examples of successful blockchain companies that “made it” include Coinbase and Circle. These companies have successfully used blockchain technology to create new products and services that have improved several industries. 

Let’s take a look at their use cases:

Coinbase: Founded in 2012, Coinbase is best known as a cryptocurrency exchange platform. Started by Brian Armstrong, a former Airbnb engineer, and incubated by Y Combinator. The company started with the Coinbase app that allows customers to buy, store, and trade different cryptocurrencies. 

Over the years, Coinbase has added products for both retail and institutional crypto investors, as well as other cryptocurrency related products. These products include the Coinbase Wallet, Coinbase Card, and Coinbase Earn. 

In April 2021, Coinbase went public on NASDAQ, initially listing at $250 a share but closed their first day of trading at $328.28 per share. 

Circle: Founded in 2013, Circle began as a peer-to-peer payment company that co-created USDC, the stablecoin pegged to the U.S. dollar. Circle continues to manage the USDC stablecoin and built the EUROC, european stablecoin. 

How are blockchain startups improving the world?

Blockchain startups are providing new and innovative solutions to existing problems, increasing transparency and accountability in various industries, and empowering individuals and communities through decentralization. Some of the specific ways in which blockchain startups are making a positive impact include:

1. Improving access to financial services: One of the most impactful ways that blockchain startups are improving the world is by increasing access to financial services. According to a World Bank report, there are roughly 2 billion adults worldwide who do not have access to formal financial services. This lack of access can stifle the growth of underdeveloped communities

Blockchain startups are working to solve this problem by providing new and innovative financial services that are accessible to everyone. For example, blockchain-based mobile money platforms like BitPesa are making it possible for people in Africa to send and receive money without needing a bank account. They provide a critical service to the roughly 57% of African citizens that do not have a traditional bank account.

2. Increasing transparency and accountability: Blockchain technology creates transparent and tamper-proof systems that can be used to track data and information. This is particularly important in industries where corruption is endemic, such as in the supply chain industry. By tracking goods and product origins using blockchain, startups like Everledger are working to increase transparency and reduce corruption.

3. Empowering individuals and communities: By giving people access to decentralized platforms and applications, blockchain startups are enabling them to take control of their own data and information. For example, the platform Decentralized Social is a decentralized social media network that gives users complete control over their data by automatically storing all of their users’ followers and content on the DeSo blockchain.

4. Improving efficiency across industries: Blockchain startups are also working to improve the efficiency of various industries. One area where this is particularly evident is in the energy sector. Blockchain startups like Power Ledger are working on solutions that will enable consumers to trade energy directly with each other on a peer-to-peer basis. This will improve the efficiency of the energy industry by eliminating the need for energy middlemen.

5. Improving governance: Blockchain startups are also working to improve governance (control). One way they are doing this is by creating platforms that can be used to track votes and election results. For example, the startup Votem is a blockchain-based voting platform that aims to reinstitute trust in elections that are largely controlled by powerful commissions.

What challenges do blockchain technology startups face?

Blockchain startups face a number of challenges, from attracting funding to building a user base. One of the biggest challenges is finding the right team to develop and implement the technology. 

With blockchain still in its early stages of development, there is a limited pool of experienced developers. As the industry continues to grow, it will inherently attract more engineering talent.

Another challenge is regulatory uncertainty. Because blockchain technology is so new, governments are still figuring out how to regulate it. This can create a lot of uncertainty for startups, who may not be sure if their business model is (or will be) compliant with current regulations. 

Despite these challenges, the industry continues to grow at a rapid rate—a sign that it isn’t going anywhere.

What does the future hold for blockchain startups?

There's no doubt that blockchain technology is here to stay. With its ability to provide a secure, decentralized platform for transactions and data storage, blockchain technology has the potential to revolutionize many industries. And while the technology is still in its early stages, there are already numerous startups developing innovative on-chain applications.

We hope this primer on technology startups has given you a firm understanding of the potential this sector has to continue to disrupt the largest industries in the world.

While the startups mentioned in this post are already past the initial funding stages, Republic has a few blockchain offerings that are gaining traction right now. If you want to invest in blockchain technology startups, check out these companies.