Tips for Understanding the Risks of Investing in Blockchain Projects

Blockchain is starting to have a stage in Indonesia, although its implementation is still in its early stages. On the one hand, the presence of blockchain-based startups provides an alternative type of investment that investors can choose from, namely: Initial Coin Offering (ICO). But as always, the risk of investing lurks in blockchain projects, so it's important to understand before getting involved.

ICO is the initiation of project funding using the method of sharing ownership of crypto coins (same as IPOs for publicly traded companies on a stock exchange). Crypto coins are provided in limited quantities, so it is expected that their value will increase as the product matures and becomes popular. The increase in value is an advantage for investors.

This issue was warmly discussed in a panel discussion session held by the Jakarta Blockchain Meetup, Monday (27/8). The discussion brought together blockchain and non-blockchain industry players, namely Jordan Kang (Tomochain), Pang Xue Jie (Whaleblocks), and Rama Mamuaya (DailySocial).

Basically investing in ICOs has advantages and disadvantages. The advantage is, from the company's point of view, it can execute projects more quickly so that the results can be seen whether it is successful or not. As well as encouraging technological development through ideas born from new startups.

However, the drawback is that there is no specific body or organization that regulates it. So if any supported project is not successful, it is certain that the tokens that have been purchased are of no value. Plus potential scam/fraud, because there is a risk of involvement of irresponsible parties who simply want to take advantage of the ICO phenomenon.

For that, there are at least two main tips that investors need to pay attention to before investing in an ICO.

Do some research on the project

Jordan explained that potential investors should be more observant before buying tokens. Pay attention to how the product is, see what the practice looks like in the field, and see if there are already case study examples.

"The other important thing is that it should be easy to invest, so that people are more interested in participating," he said.

Also see who the people in the project are. As an investor, you also need to find out the background of each individual who is part of the blockchain project. This is intended so that investors can be more confident in considering whether the ICO has a solid team or not.

Check idea validation

There are so many blockchain projects that have sprung up in cyberspace, vying to attract investors to raise funds for their projects through ICOs. Since projects like this do not yet have clear legal protections, especially in Indonesia, it is better to remain cautious.

According to Rama, because ICOs are classified as high risk and high return, then investors should check the validation of the project idea in order to minimize risk. It could be that the idea offered by the company does not need to be carried out in the form of a token.

"Not all projects have to betokenize. The point is to re-check whether the project can solve the existing problems or not. The problem can be solved in a conventional way," said Rama.

He gave an example of one of the reputable blockchain projects is HARA. HARA is a blockchain company whose initial focus is on solving farmers' production efficiency problems. To fund the project, the company is holding an ICO with the ERC20 token.

"Investors want to go into blockchain projects because there is an element of trust in the project itself. But now there are those who want to be able to quickmoney from the ICO because of the circulating speculation that blows so that people are less careful," concluded Rama.