THE INCONVENIENT TRUTH ABOUT ICO INVESTMENT

Written by: Junda Huang

The blockchain industry is inevitably related to cryptocurrencies operating the whole ecosystem, especially in financial markets. It seems like investors concentrate too much on the returns of digital currencies and initial coin offerings, instead of the ideas and originality of the blockchain technology itself. Demonstrably, the decentralisation and tamper-proof attributes are often neglected by rookie start-ups and investors alike. Having witnessed some fraudulent or poorly operated ICO projects in which investors lose a huge amount of their investment in the token market, some even deem all ICOs as an analogy to pyramid schemes. This is not entirely fair as the potential of blockchain is, to some extent, shadowed by this misled judgment.

Nevertheless, cryptocurrencies, featured mainly by Bitcoin and Ethereum, have been shaking financial markets, with their applications focussing on foreign currency exchange and trans-border and multinational trade. I believe blockchain technology, being the backbone of many touted ICO projects, should play a more significant role in market making. I have seen companies applying the blockchain to its supply chain management and data analytics services, which provides an insight into its products, customers, and costs. The reliable and prompt data sources facilitated through the decentralisation and trustless aspect of the Blockchain give the company the edge on customer behaviour analysis and cost management, as they would have a hard time making these outcomes and competing with other similar service providers without blockchain.

Investors should be learners of ideas and applications, not merely followers of the highest return.

Blockchain ICO

This indeed is the real strength of blockchain, while token trading should be merely a by-product of this process.

Despite all this, investors see the return and invest in a project without knowing what it is about, envisioning ‘pump and dump’ scenarios. This could easily form the distrust between investors and the cryptocurrency market, ultimately leading to its demise. Investors should be learners of the ideas and their applications, but not merely followers of the highest return. Currently, trading platforms are the judge of what tokens they allow to list and trade on their platforms. Instead, investors should also be able to decide which cryptocurrencies are profitable, on the basis of their knowledge of the technical aspect of ICO projects so that irrational investment decisions are less likely to made. I strongly believe that this mechanism has to be achieved and maintained in the near future in order for blockchain technologies and, thereby, the cryptocurrency market as a whole to evolve.