Blockchain ETFs

[financiallymint]

I hope I'm in the right section to post this.

I find crypto fascinating - I can't stop reading about it. Although I'm interested in the technical process behind it, I'm also constantly looking for ways I could invest in it or simply make a profit. I know it's high risk and it not very reliable at the moment, don't worry - my ISA is currently with Vanguard and I'm investing in index funds. However, I recently discovered a new possible way to invest in crypto without getting your hands dirty and wanted to see if anyone has experience with this:

Investing in Blockchain ETFs.

So basically means putting money into funds that only invest in companies dealing with blockchain or cryptocurrencies. So far I know of two companies who offer funds like this: Reality Shares and Amplify.

Has anyone got experience investing in these types of funds? Any thoughts of trying it out?

[IanSmithISA]

Good morning,

It is unclear from your post whether or not you fully understand the pros and cons of any process that uses a public blockchain, I personally would run a mile from any fund that invests in companies only because they have a blockchain based product.

Any such system is vulnerable as its security model is "It is too expensive for crooks to manipulate, the cost of the hardware and the power to run that hardware means that only honest businesses can ever verify transactions".

This is inherently problematical for two reasons

It ignores the possibility of the crooks finding it worth their while to invest in or piggy back on other peoples hardware to verify transactions that they recognise and know to be false and States deciding to validate known bad transactions just out of spite.

A highly resourced spiteful verifier will always have to cope with legitimate verfiers saying that the transcations that they approved are rejected later on but this is dependent upon the honest verifiers being able to get blocks into the chain faster than the dishonest ones.

At some point in time a seller has to accept that a number of miners have approved the transaction and release the goods. If 2 days later honest miners start rejecting transactions against those already used coins that the seller received then it is too late for the seller.

Unlike most systems where cost saving are possible in the future a normal user he has to accept that the cost of processing a transaction must remain high,as the cost is the security system.

There is another problem, it is believed that the Proof Of Work calculation is not soluble except by brute force, keep on doing a complex calculation until you get the desired result. Many times we have seen such apparently insoluble problems showing weaknesses MD5,SHA1 etc.

With good intent someone who can bypass the brute force approach will become a major verifier of transactions, this would be a short term advantage as the calculation would be changed but in the mean time this would hit miners using the brute force with power bills and no income. Depending upon how long it takes for the calculation to be changed many miners may suddenly become commercially unviable.

With bad intent they may be able to verify enough false transactions to make the whole system unviable as there would be so many verified events that would be later rejected by honest verifiers.

Certainly up until recently there has been no motivation for anyone processing cryptocurrencies to be dishonest as it is very difficult to buy things with a cyrpto currency and exchanging it for real money has also been difficult in any quantity.

Once the chain contains transactions accepted by dishonest miners and later rejected by honest miners user confidence will disappear.

Bye

Ian

[gbjbaanb]

Has anyone got experience investing in these types of funds? Any thoughts of trying it out?

Look in the "othe rinvesting" section, particularly:
viewtopic.php?f=78&t=9368