Blockchain technology is sometimes characterized as the biggest thing since the Internet, and this may arguably be the case. It has the potential to transform just about anything involving record-keeping, ownership status and transactions, and the reality that this transformation is already underway signals a potential financial revolution.  

Blockchain is the primary tool of DeFi, which refers to proponents’ goal of decentralizing global financial systems and empowering wholly new business models that will disintermediate traditional financial institutions, dissolve borders and enable 24/7 access through DIY (do-it-yourself) and P2P (peer-to-peer) functionality. The idea behind DeFi is to cut out the middlemen—centralized, intermediary companies such as banks, brokerages, insurance companies, you-name-it—and enable people to conduct transactions on their own. Many blockchain-related startups and facilitators are focused on this iconoclastic goal.

However revolutionary blockchain might turn out to be, many already view it as being highly impactful. According to a recent survey by KPMG, 48% of corporate executives expect blockchain to change their businesses in the next three years, based on their current knowledge of the rapidly expanding array of developing applications. The breadth of these applications seems limited only by the imagination.

Like the Internet, which eventually took the Netscape moment to significantly drive user adoption, blockchain’s open-source code, made available free to all online in the 1990s, at first languished largely unnoticed. It was not until blockchain became the transmission vehicle for Bitcoin, which debuted in 2009 as the first cryptocurrency, that it began to acquire renown and potential use cases for the technology started to emerge.

It has only been over the last couple years that blockchain has become an investment buzzword. As a consequence, related investment opportunities have grown apace over the same period, as startups dedicated to various applications have drawn the attention of venture capitalists.

Just as you can’t invest in the Internet directly, you can’t make direct investments in blockchain. Yet, there are a number of ways to invest in it indirectly. Here’s a snapshot of ways to invest that don’t specifically involve Bitcoin or other cryptocurrencies:  

• Buying shares of public companies that you believe will materially benefit from blockchain tech. These include:

• Various companies providing the metaphorical picks and shovels for the industry--manufacturers of ultra-high-powered computer hardware (such as Advanced Micro Devices), used by cryptocurrency miners, as well as mining firms (e.g., Hive), and emerging cryptocurrency exchanges that may go public.

• Companies that offer blockchain as a service, including providers of cloud-based services or consulting—e.g., IBM Blockchain (using private blockchain, a walled-off form of the technology); AWS’s (Amazon Web Services) services for building scalable commercial blockchain networks.

• User companies actively involved in developing blockchain for their specific purposes—e.g., Alibaba, Mastercard. Ironically, these intermediary companies (which DeFi is seeking to disrupt) are using DeFi’s chief tool to speed up processing and settlement times.

• Emerging industries using blockchain to innovate new business models or disrupt existing ones—e.g., tZero (launched by Overstock.com as an alternative trading system) and Technical Garage (a digital marketing training firm launched by Google).

• Investment vehicles. Basic types include:

• ETFs. At least five such funds are investing blockchain companies, managing a total of $241 million in assets. This may not seem like much, but these are embryonic funds in a niche that many retail investors are only just learning about. Prospective Bitcoin ETFs, champing at the regulatory bit to get rolling, await SEC approval.

• Rapidly emerging access tools for investors, such as family offices, hedge funds, endowments and private equity funds investing in blockchain-based startups that are sprouting up like mushrooms. Venture capitalists are eager to nurture the wave of startups, as the equities investors have shown heated interest in anything blockchain.

When focusing on funders of ventures dedicated to both non-crypto-related and crypto-related enterprises, one firm that comes into view is Pantera Capital, which has hundreds of millions invested in this terrain.

The tricky thing about discussing blockchain-related investments with clients is understanding what blockchain is and what impacts it may have on industry, government and the way we live, work and interact with one another. This foundation is helpful in communicating to clients potential ways to make money on this potentially disruptive technology.

Of course, this is especially tricky for advisors who don’t know much about the subject themselves. Great places to start include: Googling blockchain topics (there are plenty of websites dedicated to blockchain education), reading some of the many books published on the subject and attending various blockchain/crypto conferences and workshops. Of particular interest to advisors will be Consensus: Invest 2019 in November in New York, where speakers will include blockchain executives from IBM, SEC Chairman Jay Clayton, hedge fund and digital asset managers and various CEOs and founders of blockchain-related startups. By attending such conferences, you’ll already be ahead of most of your peers. While attending them frequently, I’ve noticed scant attendance by advisors.  

For advisors and clients alike, blockchain isn’t an investment area for the timid, any more than investing in any other nascent and emerging technology. For those who can get their heads around blockchain/crypto concepts and see their investment potential, the field could be viewable as Finance 2.0 because of DeFi’s over-arching goal of disrupting traditional institutions. If this disruption is successful, fiserve companies as we now know them will be damaged while some companies inflicting this damage may very well thrive.

Eric. C. Jansen, ChFC, is the founder, president and chief investment officer of Westborough, Mass.-based Finivi Inc., an SEC-registered investment advisor. He is the founder of BlockSocial.com, a blockchain technology media site. He is currently co-authoring a book on the future of blockchain, bitcoin, and a more decentralized world.