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Blockchain sector holds out scope for the next big tech revolution


While there has been massive investor interest in Big Tech stocks this year, including the so-called Magnificent Seven – the blockchain sector still holds the potential to re-write the rule book when it comes to tech stock investing.

We are currently living in an environment where Big Tech companies have become the effective gatekeepers of what will succeed online. Can that change?

Big Tech has the capability to step on creators and entrepreneurs through interference with application programming interfaces, algorithms, content ranking and other policies. The use of free tools helps them to draw in innovators from whom they can subsequently extract value. Some investors worry that they are stifling innovation in the sector.

Can the blockchain space shake up tech investing?

While some commentators are demanding more government level regulation of Big Tech, this holds out the danger that existing power structures could be further cemented. When it comes to revitalising the Internet, blockchains hold out the prospect of more openness, with transparent rules and a more democratic approach to how networks are run.

Blockchains represent a new class of virtual computing that can establish inviolable rules in software. They can invert the relationship between hardware and software, meaning that there is no scope for whoever controls a central server to change or dictate the rules. Blockchain does indeed hold out the exciting potential to alter the Internet’s power dynamics.

Who are the leading public companies in blockchain?

There are already a number of companies active in this space, some of which are more recognisable than others. Coinbase NASDAQ:COIN, for example, is getting a lot of attention at the moment, as it is being chosen by a number of spot Bitcoin ETF providers to serve as the trusted custodian of their assets. PayPal Holdings NASDAQ:PYPL is another firm regarded as a potential strong beneficiary of the blockchain revolution.

Right now investors are focused on the potential benefits of cryptocurrency paving the way to alternative payments solutions. Bitcoin miner CleanSpark Inc NASDAQ:CLSK has been getting a lot of attention. The Nasdaq-listed firm, which touts itself as ‘America’s Bitcoin Miner’ saw its quarterly revenue jump 165% against the same quarter last year, with adjusted EBITA increasing to USD 69m from negative USD 2m over the same period last year.

CleanSpark stock has been soaring – up 177% in the last six months and hitting new 52 week highs. Other miners are also likely to benefit from more widespread acceptance of crypto, like Bitfarms TSX:BITF.

Outside crypto mining, there are companies worth paying attention to within the payments revolution, including traditional incumbents like Visa and Mastercard. While there have been new entrants – e.g. Block Inc – who made money during the pandemic lockdown, there is something of an infrastructure revolution going on behind the scenes with the larger and more established players as well.

PayPal has already demonstrated that it is still possible to break into the payments space and become an established competitor. Other fintechs are breaking into the space to compete on fees, and there is scope for some consolidation in what has become quite a fragmented space.

For larger and dominant players like Visa NYSE:V, this process also offers the prospect to acquire more technology and talent at a knockdown price while stock valuations are so low.

Related WisdomTree ETFs

Product Name Exchange Ticker Listing Currency
WisdomTree Blockchain
Hargreaves Lansdown | Interactive Investor AJ Bell Youinvest | EQi

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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