Why Bancor is a bad investment

The fact that Bancor could raise more than $150M in their ICO was enough to motivate me to go through their (very short) white paper and come to the conclusion that It was wise to pass this ICO.

Actually don’t get me wrong the idea behind Banco is great. Market making is a very useful service and it is as old as human civilization. Middle men storing assets in order to increase liquidity is at the source of any market. This is what your local store is doing! So yes automating market making with blockchain technology is a good idea.

However the problem is that you don’t need a new cryptocurrency for this service. Just replace Bancor token by Ethereum token in their white paper and everything works fine. There is no intrinsic value in their token. With Ethereum you can already create a smart token that will hold reserves of 2 ERC20 tokens and use it as a currency exchange token. You will have to include a fee big enough to cover the slippage cost and the risk that your reserve currencies lose value.

They also don’t solve the main issue of liquidity which is how to link different protocols together like USD with BTC, USD with ETH or BTC with ETH which is actually done by traditional market exchanges.

So $150M for this is at least 100x too much. Hopefully when people start to lose their money they will think twice before making their next ICO investment.