Bitcoin is a type of digital money known as cryptocurrency.

Cryptocurrencies are digital assets designed to work as a medium of exchange. There are thousands of types of cryptocurrencies, such as Bitcoin, Ethereum, Litecoin, and Zcash. While unique, they are all using blockchain technology to facilitate the transfer of money without a central bank.

Bitcoin is the most widely adopted cryptocurrency as of today.

That alone does not mean Bitcoin will be the dominant cryptocurrency in the future. Digital money is still in its nascent stage. Google is the leading search engine today, but before Google, there was Excite, Lycos, and many more that did not catch on. Given that perspective, it is reasonable to assume that many of today's cryptocurrencies will not last another 10 years, falling by the wayside to a single cryptocurrency that may not have been invented yet.

Like all speculative assets, Bitcoin is extremely volatile.

Bitcoin was created in 2009 but did not start catching on until 2017. Since then, it has been unpredictable. For example, if you purchased 1 bitcoin at its height at about $20,000, it would now be worth about $11,000 (as of July 2, 2019) and it has been a bumpy ride along the way. Facebook's new cryptocurrency, Libra, will be backed by U.S. Government bills and other safe assets. That will make it much more stable than other cryptocurrencies that are untethered. Governments themselves are looking into creating a cryptocurrency. It is too early to make a big bet on cryptocurrency in general, nevermind one specific type, such as Bitcoin.

Blockchain is a different story.

Blockchain is the technology that is driving cryptocurrencies. Companies in every industry are just beginning to understand how blockchain technology can integrate into their businesses. For example, IBM and Walmart are using blockchain for inventory management. The next time there is an e-coli outbreak from romaine lettuce, the source of the outbreak can be determined in seconds, instead of weeks. It would prevent consumers from having to throw out perfectly safe lettuce, and it will save Walmart time and money. Overstock, Kodak, and Accenture are all dedicating resources to blockchain technology. In other words, companies you may already be invested in are exposing you to blockchain technology indirectly.

What exactly is blockchain?

It is a distributed, decentralized, public ledger. The blocks that make up the chain consist of information about a transaction, who is participating in the transaction, and a unique identifying code, called a "hash". One block can hold a few thousand verified transactions. A block gets added to the chain once it receives a hash. Anyone can connect to the blockchain network and therefore, receive a copy of the blockchain that will be updated automatically. Spreading the ledger across millions of computers makes it very difficult to manipulate the data - a hacker would need to change every copy on the network.

Blockchain initiatives can impact a company's ESG rating.

MSCI's ESG (environmental, social, and governance) ratings consider how blockchain technology is being integrated if it is relevant to the company's core business. Back to the Walmart example, blockchain is making it easier to trace where every product originates from in the supply chain. This improves product safety, quality and Walmart's reputation. MSCI's ESG report for Walmart, dated June 17, 2017, mentions this and more in the "S" or "Social" component. MSCI's ESG ratings are the backbone of their ESG indexes.

Cryptocurrency is interesting, but blockchain may be the real game-changer.

Bitcoin, and digital money in general, get a lot of attention in the media, but direct investments in Bitcoin don't have a place in your long-term investment portfolio. If you want to buy bitcoin, limit it to 1% or less of your total assets and keep it in your "play" account.

To learn more about blockchain, ESG, or how to invest your money:

Linda Rogers, CFP®, EA, MSBA is the owner and founder of Planning Within Reach, LLC (PWR). Originally from New Jersey, Linda services clients throughout San Diego county and nationwide. She leads the design of PWR's investment portfolios which utilize broad, low-cost investments that integrate environmentally, socially, and governance (ESG) factors.

Planning Within Reach, LLC (PWR) is a fee-only and fiduciary wealth management firm offering one-time comprehensive financial planning, ongoing impact-focused investment management and tax preparation services in San Diego and nationwide. PWR is a woman-owned firm that specializes in busy professionals and impact investors. Planning Within Reach, LLC and their advisors do not receive commissions and do not hold any insurance licenses or brokerage relationships.