Is Bancor the fractional reserve banking system of cryptocurrencies?
Firstly I hope you will comment on my question, since I don't have the complete answer and have had to quote others.
I thought about joining in the ICO today as soon as it opened.
We all had about 1 hour by all reckoning to get in with ETH to 'fundraise', in Bancor protocols own words.
This and their name already worried me whilst I was waiting the days to pass before the release. It also smacked of something unique to the current banking world model. Today I am voicing that thought, it is #fractionalreservebanking.
Fortunately, since I'm neither an economist nor too great at explaining and writing blogs, someone on Reddit has written a thing or two about FRACTIONAL RESERVE BANKING, and they are by no means alone. Another Reddit users questioned the honesty of today's release and how it had been extended, you can see that link at the end.
Apparently under attack after 1 hour, they extended the time for the release and the matter raises many questions about the ethics , but like the DAO it's open to free market speculative investors all the way, funded and built on the Ethereum network.
These were the terms of the ICO (nb. for those whose ETH were lost in the Ether today... sadly people outside the US might find using the Bancor Protocol a lost cause)
Terms Summary:
50/20/20/10 Token Distribution: 50% of BNT will be issued to the contributors in the fundraiser, 20% allocated to partnerships, community grants and public bounties, 20% to the Foundation’s long-term operating budget, 10% to founders, team members, advisors and early contributors. Founders and team contributors will be subject to a three year vesting schedule.
Fixed Price: 0.01 ETH per 1 BNT (i.e. 100 BNT per 1 ETH)
Hidden ETH Cap: revealed if 80% of the cap is reached.
Duration: The fundraiser will run for 14 days or until the hidden cap is reached, with a 1 hour minimum time.
How minimum time works? Read this: https://goo.gl/1lL0NY
Token Availability: BNT for ETH contributions will be distributed immediately. The ability to transfer, purchase and liquidate BNT through the smart token’s contract will be enabled gradually during a time span estimated at 7 days following the fundraiser closing.
Security: Funds will be held using multi-sig wallets according to industry best practices.
They argue that the ICO is not the same as their fundraising. Which mostly make sense to me.
So, once BNT gets on an exchange I will be looking for the day that it crashes back to the release price.
I missed it today because of my precaution taking, and opted out at the last with my sceptical mind saying to me, whilst ETH was riding high, that I should not give up any ETH/gas up at any cost.
There might be another chance at 1 ETH to 100 BNT, as perhaps, just perhaps this creation acting like a reset of the banking model may, in taking into consideration the attacks on Ethereum, that brought about its split because of the robbery from ETC and the DAO, go further. I it goes on beyond to resist others robbers, and and crooks to create a world bank open to all across the internet, benefiting them with (to quote miketout a Reddit user)..
..."(Some have called fractional reserve banking) a PONZI scheme.....
".... and some have argued that it's not because it's a managed system. While everything Bancor is doing with their technology makes sense to me, it seems that everyone being able to mint fractional reserve coins brings back the risk of widespread ponzi schemes that victimize interested people as cryptocurrency grows through the creation of highly volatile, low-reserve, low-balance tokens. For example, if I create a new token, FlyCoin, give it $1000 of reserve and a 1% reserve ratio, then buy more after it's created, I could make the price move with not a great deal of purchase. I could use a rising graph to show that this is a hot cryptocurrency, and I might even convince some people to put their money in. If I can pump the coin through generating purchases besides my own, it's a classic ponzi scheme, and I'm guaranteed that the price will go up with all additional reserves. I don't even need to find a final buyer, I just sell with a blockchain operation, converting to the reserve when I'm done pumping, and I walk away with a lot more than I started. The problem I see here is that everyone has access to a fully functional, liquid, fractional reserve system with no regulation. This is not a problem with the technology, but how I expect people to use it."
I hope to to chip in, and of course benefit but how? SO if we each had a Ponzi scheme or a way in which we set our own value to money even if it is constantly changing, then by using different coins we each create with our work, we can get them converted into something acceptable.
Mmmm, sounds hard to grasp, but then why are we using crytpotcurrency anyway? Should money ever be used as a currency, and if anything can it be made into a currency can we trust on an exchange like Bancor's to handle it all for us? There are likely to be alternatives just like any exchange, whether Kraken, or Bittrex etc to do the same...upon which we have Golem and others.
And, finally wasn't it great back in 2103 when Bitcoin flew into the face of the world financial markets and went over $1000, only for Mt Gox to rob account holders of 850,000 BTc. Once bitten twice shy, so just as I turned away from DAO, I sense something is wrong with Bancor, so please don't ANYONE feel disappointed.
The creators of Bancor, have argued - well who is using Augur after 8 years (what about Bitcoin though for that matter, how many years, and who uses it? So, you can argue against this to say give it more time), however with driving a big investment (BNT ICO fundraise) at the time of a huge spike in ETH prices suggests a) possible manipulation b) coincidence of want, and the drive to see this project succeed, since people have heard so much hype and committed themselves now their hype is translated into a price.
I prefer a)
Further information you may find useful:
Bancor looks like a PonziScheme
Very good blog. I was about to start a similair discussion. Icos have zero obligations to their token holders, they can just run away at any time they want. That's why we have to do very proper research before we invest in them. Besides coinmarketcap.com there is: https://www.coincheckup.com Every single coin can be analysed here based on: the team, the product, advisors, community, the business and the business model and much more. Go to: https://www.coincheckup.com/coins/Bancor#analysis For the Bancor Detailed analysis.
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