A Visual Guide to Investing in the Blockchain Ecosystem
Many technologies are coined as “disruptive”, but only a select few can be considered transformational.
One such technology is blockchain, because it has the potential to permanently change our economic, legal, and political systems.
In this infographic from Global X ETFs, we provide an overview of the entire blockchain ecosystem, and look at some different ways investors can gain access to it.
Blockchain: A Decentralized Network
In its most basic sense, a blockchain is a type of database with several unique properties.
One of these is decentralization, which means no single party has control over the data. To see why this matters, consider a traditional database where users store their data on a central server. The server is ultimately controlled by a single entity with the authority to modify or delete data.
In the event that this authority is compromised, users of the database can be left at great risk. A blockchain, on the other hand, is distributed across many participants in a peer-to-peer network. This means that all users play a role in verifying the integrity of the database, as well as verifying new additions.
Furthermore, blockchains are designed with an append-only structure. This means that users can only A) search and retrieve data from the blockchain; and B) add more data onto the blockchain.
A blockchain is made up of “blocks” which contain three items.
First, there’s the data itself. In the case of Bitcoin, this includes all of the relevant information for a given transaction such as date and quantity. Second is the block’s hash, a unique value that identifies the block and its contents.
For Bitcoin, a hash takes the form of a 64-digit hexadecimal number, though this can be different for other blockchains. The following table provides a simple example of how hashes are generated.
|Input (the block’s data)||Hash function||Hash|
|Car||-->||AW94 42RZ 66TZ|
|The blue car was speeding||-->||85ZU I9Y2 RTH2|
|The red car was speeding||-->||5RT8 U1IY 148H|
On any given blockchain, the hash values will share the same format. Modifying a block’s data will also result in an entirely different hash.
The third and final item is the hash of the previous block, and is what contributes to the “chain” part of blockchain. This feature makes it nearly impossible for someone to tamper with the blockchain’s data, because their copy of the chain would then conflict with all other users.
The Blockchain Ecosystem
Holding cryptocurrency is one way to gain exposure to blockchain, but as companies continue to study it, new use cases are emerging. Here’s an explanation of the four segments of the blockchain ecosystem.
1. Digital Asset Mining
Digital asset mining consists of companies that process transactions on blockchain ledgers, including Bitcoin. Processing transactions is known as “mining” because participants can receive cryptocurrency as compensation.
From an operations perspective, cryptominers are relatively simple when compared to other businesses. The following table lists the components a cryptominer needs.
|Network infrastructure||Equipment that allows a miner to connect to various blockchain networks.|
|Mining computers||These computers run 24/7 to update and verify blockchain ledgers.|
|Internet connection||Cryptominers require an internet connection because blockchains are network-based.|
|HVAC||Mining computers must be kept cool for optimal performance. Some miners will locate in colder parts of the world to minimize costs.|
|Electricity||Electricity is one of the biggest costs for a cryptominer. Many companies locate in countries where electricity is cheap.|
Digital asset mining requires a significant amount of electricity and has sparked debate in recent years over its environmental impact.
2. Blockchain Hardware
Blockchain hardware consists of companies that produce blockchain-related equipment.
This includes graphic processing units (GPUs), which are used in computing applications such as rendering and animation. GPUs were not originally intended for blockchain use (and have been around for much longer), but their high processing speeds makes them suitable for mining.
Today, cryptominers are transitioning to application-specific integrated circuit (ASIC) chips that are solely designed for cryptomining. Using these chips is critical for maximizing hash rate and profitability.
3. Blockchain Transactions
The blockchain transactions category includes companies that operate digital asset trading platforms. The segment is quickly evolving as new and existing businesses enter the space.
|Company (year founded)||Blockchain Involvement|
|Visa (1958)||Visa aims to make cryptocurrency more usable through its crypto-linked credit cards.|
|PayPal (1998)||PayPal’s widely-used platform began offering cryptocurrency trading in 2020.|
|Square (2009)||Square added Bitcoin trading to its Cash App platform in 2018.|
|Coinbase (2012)||Coinbase is America’s largest crypto exchange with over 43 million retail users.|
4. Blockchain Applications & Integration
This segment is the broadest of the four, and includes any software or service that uses blockchain.
In many cases, blockchain can be used to improve our existing industries. Consider IBM Food Trust, a blockchain designed to create a more efficient and sustainable food supply chain.
Blockchain can also be used for more ambitious projects, such as creating a metaverse. While still largely conceptual, a metaverse is a digital world which would be accessed via virtual reality. In it, people would be able to work, play, socialize, and consume media.
These virtual worlds would also need their own economies—something blockchain could play a big role in. It’s reported that several companies, including the recently-named Meta, are investing billions each year in metaverse development.
Introducing: The Global X Blockchain ETF
The Global X Blockchain ETF (Ticker: BKCH) seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of the Solactive Blockchain Index.
|Segment of Solactive Blockchain Index||Index Weight|
|Digital asset mining||47.7%|
|Blockchain & digital asset transactions||24.7%|
|Blockchain & digital asset hardware||13.2%|
|Blockchain & digital asset integrations||4.3%|
Figures rounded. Source: Solactive AG, as of September 30th, 2021.
Investors can use this passively managed solution to gain diversified exposure to the blockchain ecosystem.
Ranked: Emissions per Capita of the Top 30 U.S. Investor-Owned Utilities
Roughly 25% of all GHG emissions come from electricity production. See how the top 30 IOUs rank by emissions per capita.
Emissions per Capita of the Top 30 U.S. Investor-Owned Utilities
Approximately 25% of all U.S. greenhouse gas emissions (GHG) come from electricity generation.
Subsequently, this means investor-owned utilities (IOUs) will have a crucial role to play around carbon reduction initiatives. This is particularly true for the top 30 IOUs, where almost 75% of utility customers get their electricity from.
This infographic from the National Public Utilities Council ranks the largest IOUs by emissions per capita. By accounting for the varying customer bases they serve, we get a more accurate look at their green energy practices. Here’s how they line up.
Per Capita Rankings
The emissions per capita rankings for the top 30 investor-owned utilities have large disparities from one another.
Totals range from a high of 25.8 tons of CO2 per customer annually to a low of 0.5 tons.
|Utility||Emissions Per Capita (CO2 tons per year)||Total Emissions (M)|
|Berkshire Hathaway Energy||14.0||57.2|
|American Electric Power||9.2||50.9|
|Florida Power and Light||8.0||41.0|
|Portland General Electric||7.6||6.9|
|Pacific Gas and Electric||0.5||2.6|
|Next Era Energy Resources||0||1.1|
PNM Resources data is from 2019, all other data is as of 2020
Let’s start by looking at the higher scoring IOUs.
TransAlta emits 25.8 tons of CO2 emissions per customer, the largest of any utility on a per capita basis. Altogether, the company’s 630,000 customers emit 16.3 million metric tons. On a recent earnings call, its management discussed clear intent to phase out coal and grow their renewables mix by doubling their renewables fleet. And so far it appears they’ve been making good on their promise, having shut down the Canadian Highvale coal mine recently.
Vistra had the highest total emissions at 97 million tons of CO2 per year and is almost exclusively a coal and gas generator. However, the company announced plans for 60% reductions in CO2 emissions by 2030 and is striving to be carbon neutral by 2050. As the highest total emitter, this transition would make a noticeable impact on total utility emissions if successful.
Currently, based on their 4.3 million customers, Vistra sees per capita emissions of 22.4 tons a year. The utility is a key electricity provider for Texas, ad here’s how their electricity mix compares to that of the state as a whole:
|Energy Source||Vistra||State of Texas|
Despite their ambitious green energy pledges, for now only 1% of Vistra’s electricity comes from renewables compared to 24% for Texas, where wind energy is prospering.
Based on those scores, the average customer from some of the highest emitting utility groups emit about the same as a customer from each of the bottom seven, who clearly have greener energy practices. Let’s take a closer look at emissions for some of the bottom scoring entities.
Utilities With The Greenest Energy Practices
Groups with the lowest carbon emission scores are in many ways leaders on the path towards a greener future.
Exelon emits only 3.8 tons of CO2 emissions per capita annually and is one of the top clean power generators across the Americas. In the last decade they’ve reduced their GHG emissions by 18 million metric tons, and have recently teamed up with the state of Illinois through the Clean Energy Jobs Act. Through this, Exelon will receive $700 million in subsidies as it phases out coal and gas plants to meet 2030 and 2045 targets.
Consolidated Edison serves nearly 4 million customers with a large chunk coming from New York state. Altogether, they emit 1.6 tons of CO2 emissions per capita from their electricity generation.
The utility group is making notable strides towards a sustainable future by expanding its renewable projects and testing higher capacity limits. In addition, they are often praised for their financial management and carry the title of dividend aristocrat, having increased their dividend for 47 years and counting. In fact, this is the longest out of any utility company in the S&P 500.
A Sustainable Tomorrow
Altogether, utilities will have a pivotal role to play in decarbonization efforts. This is particularly true for the top 30 U.S. IOUs, who serve millions of Americans.
Ultimately, this means a unique moment for utilities is emerging. As the transition toward cleaner energy continues and various groups push to achieve their goals, all eyes will be on utilities to deliver.
The National Public Utilities Council is the go-to resource to learn how utilities can lead in the path towards decarbonization.
The Road to Decarbonization: How Asphalt is Affecting the Planet
The U.S. alone generates ∼12 million tons of asphalt shingles tear-off waste and installation scrap every year and more than 90% of it is dumped into landfills.
The Road to Decarbonization: How Asphalt is Affecting the Planet
Asphalt, also known as bitumen, has various applications in the modern economy, with annual demand reaching 110 million tons globally.
Until the 20th century, natural asphalt made from decomposed plants accounted for the majority of asphalt production. Today, most asphalt is refined from crude oil.
This graphic, sponsored by Northstar Clean Technologies, shows how new technologies to reuse and recycle asphalt can help protect the environment.
The Impact of Climate Change
Pollution from vehicles is expected to decline as electric vehicles replace internal combustion engines.
But pollution from asphalt could actually increase in the next decades because of rising temperatures in some parts of the Earth. When subjected to extreme temperatures, asphalt releases harmful greenhouse gases (GHG) into the atmosphere.
|Emissions from Road Construction (Source)||CO2 equivalent (%)|
|Excavators and Haulers||16%|
Asphalt paved surfaces and roofs make up approximately 45% and 20% of surfaces in U.S. cities, respectively. Furthermore, 75% of single-family detached homes in Canada and the U.S. have asphalt shingles on their roofs.
Reducing the Environmental Impact of Asphalt
Similar to roads, asphalt shingles have oil as the primary component, which is especially harmful to the environment.
Shingles do not decompose or biodegrade. The U.S. alone generates ∼12 million tons of asphalt shingles tear-off waste and installation scrap every year and more than 90% of it is dumped into landfills, the equivalent of 20 million barrels of oil.
But most of it can be reused, rather than taking up valuable landfill space.
Using technology, the primary components in shingles can be repurposed into liquid asphalt, aggregate, and fiber, for use in road construction, embankments, and new shingles.
Providing the construction industry with clean, sustainable processing solutions is also a big business opportunity. Canada alone is a $1.3 billion market for recovering and reprocessing shingles.
Northstar Clean Technologies is the only public company that repurposes 99% of asphalt shingles components that otherwise go to landfills.
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