Bancor Will Boost Ethereum

Summary

Bancor is an Ethereum-based application that recently ICOed and initiated trading.

Trading volume is Bancor is healthy and there is strong investor demand for the tokens.

Demand for Bancor helps drive up the price of Ethereum.

International prices for Ethereum have recovered to around $342 according to Coinmarketcap.com, a site that averages the prices for Ethereum across multiple exchanges. This brings Ethereum's market cap to $31.78 million. Over the next week, trading in the recently ICOed Ethereum-based tokens, Bancor "BNT" and Status "SNT" will drive the market for Ethereum for better or worse. So far, the Bancor ICO has been a success and is likely to boost the market.

The Next Internet

Ethereum is a programmable network, and this means decentralized applications called "DAaps" can be built on top of the platform. These projects are crowd-funded through initial coin offerings where interested investors send Ethereum to the developers in exchange for newly minted tokens that represent the new project. These tokens are based on Ethereum, and to my knowledge, their value remains within Ethereum's market-cap.

It is not possible to value these tokens based on traditional financial valuation metrics because they have no intrinsic value. Prices for these tokens are mostly subjective, and this introduces the possibility of speculative bubbles forming in the network. The majority of investors seem to buy DAap tokens for no other reason than to sell them at a higher price later. Some of these tokens pay a proverbial "dividend" in the form of more tokens. But this token, like the token it came from, has no intrinsic value.

Despite the difficulty in valuing Ethereum-based tokens, there is undeniably value being created by this activity, albeit difficult to put in dollar terms. Ethereum has been likened to another internet, and it, like the actual internet, will be difficult to monetize in its early stages.

It is fair to say that these new DAaps are 2017's version of Pets.com, Garden.com, and TheGlobe.com - flashy, exciting projects with little monetizable value. And needless to say, most of Ethereum's DAaps will probably fail. But this is a necessary process in the evolution of a new technology, especially one with theoretically limitless potential. Investor demand for these DAaps, however irrational it may be, is a key fundamental support for the market cap of Ethereum. Ethereum's success will depend on demand for these tokens.