What Is Blockchain and How Can You Invest in It?

While blockchain was first created for cryptocurrency, it has expanded to many other uses and is seen as the technology that will disrupt industries. So what makes blockchain unique?

So you've heard of blockchain, but maybe you're not quite sure how it works, other than being used to power cryptocurrencies such as Bitcoin and Ethereum. 

While that’s true, its uses extend beyond just cryptocurrency. 

In this article, we’ll explain what blockchain is, how it's being utilised, and how you can invest in blockchain technology. 

What is blockchain?

Simply put, a blockchain is a distributed digital ledger that stores information about cryptocurrency transactions, non-fungible tokens (NFTs), and important records.   

As the name suggests, a blockchain is a chain made up of several blocks of data. These blocks are linked chronologically in a continuous line by a chain. When fresh data is added, it is entered into a new block, and the block will be chained to the previous block.

What makes blockchain unique from other databases is that it’s decentralised. So, instead of being stored and maintained by a centralised administrator, the data is distributed across several networks. This means no one person or body has control over the information. 

This design also makes it unhackable. Since data isn't stored in a single, centralised location but distributed across the network, hackers would need to hack every computer on the network.

The architecture of blockchain also means that data cannot be easily changed. Instead, new changes will be recorded in a new block, which details the changes made, including the person who made the changes and the exact date and time. 

Any changes made must also be cross-referenced by everyone on the network before the system can update the information. This makes it more challenging to alter or falsify records stored in blockchain, thus making it more secure. 

Another benefit of having a decentralised system is that it prevents data from being corrupted or lost should the server collapse. Imagine if a company stores all its clients' account information on a server farm in a building. 

But if the power supply is cut or if the internet is cut off? The data would be lost or corrupted.

With blockchain, the data is shared on every computer on the network, so it will still continue to work even if multiple computers break down.

Think of it like editing a Google Document: everyone who has access to the document can see any changes made in real-time, the history of changes, as well as who made those changes and at what time. Moreover, you can also make edits to the document.

But instead of storing it on Google Drive, each contributor has their own copy. And every copy is in sync so there's no loss of information.

What is blockchain used for?

As a new technology, blockchain is touted as the future. Many believe that it will disrupt industries, just like how the internet did in the 90s.

Aside from being the backbone for cryptocurrency, it is already being used for a myriad of different purposes, from financial transactions to recording supply chain records, and even filing life insurance claims.

1. Cryptocurrency

Most associate blockchain with cryptocurrency. But as we’ve pointed out earlier, they aren’t one or the same thing. 

Cryptocurrency is an encrypted virtual currency that can be used to make digital payments, or to pay for goods and services. It uses blockchain technology to record transactions and make secure online payments.

Crypto is also decentralised, so the value isn’t maintained or managed by a central authority, such as a bank.

Instead, a cryptocurrency’s value is determined by current demand, which makes it prone to speculation. 

This is why cryptocurrency is highly volatile; in the past few months, we’ve seen several meltdowns in the crypto space. Most notably, the Terra Luna crash saw investors losing billions of dollars.

That said, many crypto investors have also seen insane returns. So before investing in crypto, it’s important to evaluate your risk tolerance. 

2. Banking and financial services

The most efficient use of blockchain is in the banking and finance industry. Without going through a bank or financial institution, the validation process becomes much more efficient. This is especially true for international transfers. Blockchain also provides a fast and secure way to process fiat currency transactions.

Decentralised finance (DeFi), which offers peer-to-peer financial services, also runs on blockchain. DeFi allows you to do what banks offer (earn interest, take a loan, buy insurance plans, buy financial products. etc.) except much faster and without requiring any paperwork.

3. Healthcare

Blockchain can also offer secure safekeeping of patients' medical records. When a patient’s medical record is created, it cannot be altered or changed.

Furthermore, the record could also be encoded so that it can only be accessed with a private key that is possessed by the patient. This ensures that the patient’s privacy is protected and the patient has control over who can access these records. 

4. Food safety

Another interesting use of blockchain is to trace food supply. IBM and Walmart are working on improving Walmart’s food tracking system to trace the journey of food, starting from the food’s origin through each supply chain, including the supplier, distributor, supermarket, and restaurant.

For example, say that there’s a foodborne outbreak in a restaurant. By using blockchain, the restaurant would immediately be able to track and trace the origins of the affected food by looking at the food’s product route. 

This will allow the restaurant to identify the source of contamination quickly, so that they can alert others on the blockchain, and anyone who has sourced their food from the same supplier will be aware of the danger.

5. Creation of digital assets/technologies

Aside from cryptocurrency, blockchain also helps in the creation of digital assets such as non-fungible tokens (NFTs), which allow you to create and own a unique digital item such as a work of art or games, and trade or sell it. 

Blockchain is also the backbone of new technologies such as the metaverse, which allow people to interact with one another in a virtual world in their own avatars. 

How you can invest in blockchain

• Invest in cryptocurrencies. While Bitcoins and Ethereum are two of the most cryptocurrencies around, there are thousands of cryptocurrencies in existence. To start trading cryptocurrency in Singapore, you would need open an account with a cryptocurrency exchange. If you’re unsure about how to open one, this article will help you to get started!

• Invest in blockchain exchange-traded funds (ETFs) that own stocks in companies that are involved in blockchain. This allows you to invest in blockchain without buying actual cryptocurrency
   
• You can also keep a portion of your crypto for a specified amount of time. This allows you to earn rewards rather than collecting dust in your crypto wallets. This is also known as crypto staking. Think of it like keeping money in the bank and not withdrawing it so that you can earn interest

• Aside from interacting as your own avatar, you can also invest in the metaverse. This includes building, owning, buying, and selling virtual items, such as virtual land, NFTs, and even cryptocurrency used in the metaverse. 

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