Bancor Is Flawed
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.
- Bancor uses lots of mumbo jumbo terminology.
- The core problem they want to address, "Double Coincidence of Wants" is not a real problem.
- One can always use ether as a medium of exchange.
- Bancor is essentially a central bank strategy for automatically setting a dynamic peg for new coins.
- Everything Bancor can do for you on chain, you can do by yourself off chain.
- It is much better to manage the reserves manually than to commit to the Bancor strategy.
- The Bancor strategy fails to capitalize on excess value
- The algorithmic dampening provided by Bancor isn't desirable for already liquid assets whose value is unstable.
- The Bancor strategy will not do anything to find or maintain the true equilibrium value of an asset.
- Bancor thus acts like a dynamically adjusted currency peg.
- Bancor presents an arbitrage opportunity. It does not lead the market towards equilibrium, it trails the market, always and by definition.
- Bancor does not "eliminate labor" in price discovery.
- There is no indication that the Bancor strategy is an optimal, or even good, use of reserves to discover the price.
- Bancor is a net negative in markets with substantial liquidity.
- Bancor claims to provide liquidity, but does not.
- Bancor is open to front-running. – basically you get scammed.
- Bancor's suggested fix to front-running is broken.
- Bancor reimplemented math. – they wrote code wrong.
- Bancor did not test their own math.
- Arithmetic errors can be fatal.
- Bancor does not support the notion of supply caps for Bancor-based tokens.
- Bancor does not scale.
- Bancor shortchanges its users.
- Bancor code is "difficult to prove correct."
- Bancor code has a reentrancy problem in the sell() function.
- Bancor code has a different reentrancy problem in the change() function.
- 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.
Why Bancor Will Work?
https://steemit.com/bancor/@paulcoman/why-bancor-will-work
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.
Explain why "mismatched pricing".
Also, are you an economist?
Also, do you understand what an Exponential Moving Average is?
great. you are right
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.
It's also easy to get fooled when you see dollar signs!
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.
Speculators are in it for a quick profit. I am writing these for long term investors
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.
The trick is to think of them as companies rather than coins.
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.
exactly, and Ideas are not profitable until they are implemented.
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
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!
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...
ummm very smart u are
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!
waaaaaaaaaat
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
Agreed. Invest in Ubiq: https://steemit.com/cryptocurrency/@aj49robertson/ubiq-why-i-think-it-s-the-single-most-undervalued-cryptocurrency-on-the-market-right-now
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.
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.
A respond to "bancor is flawed"
https://blog.bancor.network/this-analysis-of-bancor-is-flawed-18ab8a000d43
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.