Bancor Is FlawedsteemCreated with Sketch.

in cryptocurrency •  last year

Bancor

Bancor peeked my interest because upon first glance what they were claiming to achieve seemed impossible. After reading the whitepaper and failing to understand how Bancor could possible work (reading technical whitepapers usually ends in this result for me but the Bancor whitepaper was far from technical) I Inquired with a developer or representative on Telegram about the mechanics and theory behind their system. I had recently learned about how Bitshares allows users to create "smart tokens" which are backed by a reserve of BTS and wanted to know if Bancor was the same or similar - I was assured that it was not.

Failing to understand the economics or benefit behind the Bancor Protocol I decided not to invest - And boy am I glad!

Emin Gün Sirer and Phil Daian (who discovered the Ethereum DAO vulnerability) have written a consise and lengthy critique of the Bancor Protocol which you can find here.

The following is a summary of their points. Please go to the blog to read more in depth.

  1. Bancor uses lots of mumbo jumbo terminology.
  2. The core problem they want to address, "Double Coincidence of Wants" is not a real problem.
  3. One can always use ether as a medium of exchange.
  4. Bancor is essentially a central bank strategy for automatically setting a dynamic peg for new coins.
  5. Everything Bancor can do for you on chain, you can do by yourself off chain.
  6. It is much better to manage the reserves manually than to commit to the Bancor strategy.
  7. The Bancor strategy fails to capitalize on excess value
  8. The algorithmic dampening provided by Bancor isn't desirable for already liquid assets whose value is unstable.
  9. The Bancor strategy will not do anything to find or maintain the true equilibrium value of an asset.
  10. Bancor thus acts like a dynamically adjusted currency peg.
  11. Bancor presents an arbitrage opportunity. It does not lead the market towards equilibrium, it trails the market, always and by definition.
  12. Bancor does not "eliminate labor" in price discovery.
  13. There is no indication that the Bancor strategy is an optimal, or even good, use of reserves to discover the price.
  14. Bancor is a net negative in markets with substantial liquidity.
  15. Bancor claims to provide liquidity, but does not.
  16. Bancor is open to front-running. – basically you get scammed.
  17. Bancor's suggested fix to front-running is broken.
  18. Bancor reimplemented math. – they wrote code wrong.
  19. Bancor did not test their own math.
  20. Arithmetic errors can be fatal.
  21. Bancor does not support the notion of supply caps for Bancor-based tokens.
  22. Bancor does not scale.
  23. Bancor shortchanges its users.
  24. Bancor code is "difficult to prove correct."
  25. Bancor code has a reentrancy problem in the sell() function.
  26. Bancor code has a different reentrancy problem in the change() function.
  27. Bancor code assumes that ERC20 tokens based on Bancor are cooperative. – ERC20 tokens can contain malicious code.

Dump Bancor if you own it.

Please visit the blog and reward their hard work with traffic.

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I will admit there are compelling arguments on both sides and trusted individuals arguing for different points of view. Debate is healthy. However, my personal view leans heavily to the side that this economic experiment will not work as intended, will be easily gamed and people will loose interest. There is a reason small shitcoins have no liquidity and manufacturing it with an algorithmic based pricing system will only result in mismatched pricing when compared to the actual market.

Ultimately we will see.

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Explain why "mismatched pricing".
Also, are you an economist?

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Also, do you understand what an Exponential Moving Average is?

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great. you are right

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Notice how there isn't a single economist on the Bancor team

its seems ICOs are either a total hit or total miss. a lot of risk/reward

A lot of the articles you read which are promoting these ICO's are sponsored. It's a million dollar business and Tezos, which I wrote about today, is an example of the founders making big questionable money on their ICO. I'm writing an article about a new ICO every day. Hope we can get some discussions going about them.

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It's also easy to get fooled when you see dollar signs!

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Exactly, that in combination with FOMO (fear of missing out) got a lot of coins/ICO money.
A promise of gold and your neighbor believing in it is all it takes sometimes.

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Speculators are in it for a quick profit. I am writing these for long term investors

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I'm a long term investor myself. Therefore it is very important to distinguish the good coins from the bad as there is a change to make quick money on bad coins but on the long term you won't.

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The trick is to think of them as companies rather than coins.

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Yes, so when its a crap company that won't make a profit you share/coin will be worthless when the hype for that company surpasses.

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exactly, and Ideas are not profitable until they are implemented.

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very good conversation, agreed 100%, coins are just brand logo, companys people are important behind. :) still i think we dont know exactly how blockchain technology will evolve. that makes it so risky imo

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When I dicovered PeerPlays I was litterally shaking for a week. The implications of the application of that technology were astounding. And now bitshares, guided by @stan is reaching even higher. I'm heavily invested (all in) in crypto projects I believe in. I used to think that this was too good to be true, these opportunities too sweet- too much potential for reward, but I have come to realize people don't see the world like I do, and are not willing to take a leap of faith in their own judgement and invest in what could consevably be the litteral future.

could you do the same thing with IOTA?
i think IOTA is a scam!

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Hmm I will look into it. I don't think iota is a scam, they just raised a lot of money for an idea. Idk if they will be able to achieve what they are trying to...

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ummm very smart u are

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Yeah. Even I am thinking the same. IOTA had ICO last year. they released the token this year for trading. In between they were selling token whole year. thats why I am not preferring IOTA

Upvoted/followed/impressed! Nice work. Very articulate. Got my interest peaked!

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waaaaaaaaaat

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does steemit
works

This is some great reading material. I've been a bit skeptical about Bancor myself. Decided against participating in the ICO, mainly because I just don't know if the team has the skillsets to pull of such a major feat to begin with. The concept is interesting in managing liquidity and allowing for anyone to create their own unique coins. And I'm all for giving it a shot, but when somthing like this can raise $150M without proof of anything really running today, without any real users, with no real use case, it just doesn't provide me with any confidence.

Could be wrong entirely, but it's nice to see an article like this written considering how much positive energy and coverage has been given to it. Thanks for sharing

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I own some Ubiq in my portfolio, I agree with you on the blog you've written. I know that Ubiq is a modified version of Ethereum Blockchain, and the team and the community is strong. But question is, market. How is Ubiq fared up so far in terms of market adoption... have you any idea? Of course I would love to see Ubiq succeed.

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I think we're still very early in the adoption phase. Think Ethereum a year ago. Sure the technology may be farther developed but as far as attracting investors, basically haven't even scratched the surface. $80M market cap is basically nothing compared to the total crypto market cap.

Drop it, you heard him.

In my opinion the lack of a cap for token supply is really the fatal flaw for Bancor. Essentially this limits its usefulness to reserve currencies and ETF-like baskets, which do not have a liquidity problem in the first place.

Follow @ herman2141 hai kawan steemit wherever you are and vote on steem okay

Follow @ herman2141 hai kawan steemit wherever you are and vote on steem okay

Follow @ herman2141 hai kawan steemit wherever you are and vote on steem okay

yes i would say Bancor is one of these EPIC MEGA SCAMS maybe ^^

These large ICOs are really off putting. They now have quite so pressure to deliver since they've raised so much money. That's exactly why the regulations are coming to this space.#blockchain

good to know - i followed you and appreciate the advice

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Luckily i dont posses Bancor :D 💪🏻 💪🏼 💪🏽 💪🏾 💪🏿

Too little ETH that I got to support this ICO ! I hope my Dogecoin are ETH :)

I didn't understand how this bancor works, do you have a post with video about that, step by step, I joined with facebook and begin to talk with a robot then I didn't understand what to do after, I am stock

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@clixmoney you can read how it works in my article here https://steemit.com/bancor/@paulcoman/why-bancor-will-work

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Basically they have a smart contract that controls a reserve token that acts like a market maker. When you buy a token from it the price goes up. When you sell to it and take from the reserve the price goes down.

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I didn't understand this also, why we have to use ethereum to buy there ?

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So they don't have to create their own blockchain. Basically it's a market like an exchange, but instead of people buying and selling setting the price, the price is set by an algorithm.

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is there some good video about how to use bancor ? or some good website ?

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You can try the bancor website.

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That is why it is suggested to all investors for future ICOs, to dig all the information well to finally have a clearer vision of the purpose of that ICO, do not think only to make a personal profit, think of our future that we both want to get rid of capitalism . Generally the answer is in the "Source Code", so go straight there. I wrote a little about it in my blog, I hope it will be very helpful.
https://steemit.com/bancor/@robertovelasquez/bancor

The irony of it all is that Bancor is a Keynesian idea closely related to the IMF's SDR of today. These are debt based systems whereas crypto currencies are equity based monetary systems. Also remember the people behind Bancor are Israelis.

How much Bancor costed in the ICO ?

Interesting point of view about Bancor. @pawnuts

I dont know much about bancor. What I know is that they are solving a quite complex problem. And I looked at the formula on the white paper. For me this formula is way too simple. I like simple, sure. But this ICO did not convince me. I just have a feeling there is smth. not working.

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Well talking to people on the Bancor Telegram there are people who believe this pricing model will be more accurate at finding value than a traditional bid/ask market system. I disagree because pricing is dependent on outside influences, none of which their algorithm takes into account.

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I agree.

Guess i got lucky when i missed out on the ico.

Regarding BANCOR at least I found someone who agrees with me, but in a blog of mine I add an additional note. https://steemit.com/bancor/@robertovelasquez/bancor

I kinda feel the same way about Bancor and I did write about it as well

Nice article. Nice to see I'm not the only one who thinks like this. 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. An interesting website I found: https://www.coincheckup.com The best crypto analysis site by far. Complete in depth investment analysis.

I think bancor was to hype to begin with. any thoughts on tenx?

thanks for the info > :)

Wow. More than enough reasons for me to not look into Bancor. lol. Appreciate the analysis!

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Yigx not my analysism. follow the links in the blog to get to the full detailed analysis.

Thanks for the info. Good to know. I saw it dipping so I got some.

If you have questions about how it works in theory, I wrote an article about a podcast that had the co-founder on discussing it:
https://steemit.com/bancor/@veritees/bancor-what-is-it-what-does-it-do-and-why-is-it-so-ground-breaking

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I understand how it works in theory now and I find it far from impressive.

Wow! This is very informative. Thanks for sharing!

Valuable insights here. Thanks @pawnuts I invested in a couple of hundred tokens myself. Let´s see how it plays out

I don't think I know enough about these arguments to fully understand them but I must admit this one got me caught up in the FOMO and I'm wondering why now. Just hope I didn't waste my money. I suppose the lesson is don't invest in something unless you really understand the concepts behind it - even if other people who seem to know what they are talking about do!

lol.... you miss the real problem with that ICOs.

Poor beta ETH code what never should be tested with $100m like we saw. Of course a gamechanger when see crowdinvesting worldwide but the tech is way not at that stage - the companies and teams anyway never worth that money.

When people pay large sums in whitepapers with teams what know each other a few weeks you can clearly see in what hype we are now. Nobody of them could valuate that codes - even not the contracts, lol.

Hearing about Bancor

Esperando___.jpg

I feel that a lot of these ICOs are are just scams and there is so much dumb money flowing in that is just trying to catch a ride but don't realize a lot of this stuff is just vaporware.

I had written about Bancor a little bit in one of my cryptos in finance articles. I did not invest but I thought it was interesting because of some of the ideas presented..such as baskets of cryptocurrency or reserve tokens (even though BTS has similar functions) I think it is important to write about a lot of projects in the sector, many will fail but hopefully in doing so we can learn and let the cream rise to the top so to speak. It is interesting to see how diverse crypto tokens are becoming.

Thanks for your post and analysis, I appreciate your thoughts and the info.

What is scary for the investors is this article is the second Google hit when you search for bancor!

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It's good to have all the information for and against so you can make an educated descision.

cryptopreneurs gonna have to be careful around Bancor.

It's 40 lines of code. When I first saw this ICO, I asked why we couldnt just use Ethereum as the reserve currency and I got slammed hard by all the cryptoinvestors out there.

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@superskillz Why don't all the other Dapps on Ethereum just use ETH?
Answer here: https://steemit.com/bancor/@paulcoman/why-bancor-will-work

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The answer they give is to reward Bancor investors.

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That makes each line of code worth about 3.5 million dollars. :)

I find it amazing how Bancor has dropped from over $24 to less that $3 since this article was posted.

Similar to Bancor, I also do not believe in IOTA.

I feel they are half assed competitors of Ethereum.

really awesome post full of the right stuff and we upvoted it 😁

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Thank you for reading!

Totally agree , stay away!

Interesting! Upvoted.