11 ms·

Bancor Is Flawed

265 points by sidko 9y ago

isubkhankulov 9y ago
Bancor's initial response isn't great: https://twitter.com/bancornetwork/status/876934646344404992 https://twitter.com/bancornetwork/status/876934646344404992 since they mentioned FUD, it sounds like they're afraid Gun's post may affect trading of their token.
- topynate 9y ago
  >it sounds like they're afraid Gun's post may affect trading of their token. Yes, it works out quite nicely all round. They, by taking his ability to move the market so seriously, grant him social proof that can't be obtained any other way. He, very magnanimously, walks back his most serious attacks, to wit: their team are not credible, and the problem they want to address "is not a real problem". And anyone else who wants their token to pop* will know who they'd better have inside the tent. * Bancor's token becomes tradeable shortly, see https://blog.bancor.network/token-activation-update-285ba81995b1 https://blog.bancor.network/token-activation-update-285ba819.... It would have been tradeable today, but they have some last minute debugging before their smart contract is ready to "automate Yellen", as Sirer puts it. It's hard to begrudge them this, having seen how Yellen performs in the unpatched 1.0 release.
  - el33th40r 9y ago
    For the record: I have not walked back any criticism. I saw a brigade forming, and the last thing I want to be is the kind of person who, wittingly or unwittingly, creates a social media brigade. My own blog has been brigaded countless times, and I know how it feels. So do allow me to walk a nuanced line, if you will -- we're all better off if we can diffuse tension instead of getting entrenched in all out assault mode.
    - asymmetric 9y ago
      I really appreciate your stance, but I have a question: if your goal is to walk a nuanced line, why use Twitter to walk it?
RichardHeart 9y ago
Is there a way to fix no one being able to short these things? The counter party risk and irrational exuberance outlasting ones solvency should be solvable somehow?
- isubkhankulov 9y ago
  the only way to short these ICO's is to not buy them. shorting anything requires borrowing the asset, usually paying interest (as an incentive to the lender), selling them and later buying them back. the other option is a betting platform where people just take side bets, but counter party risk is substantial and your short is limited by the trade collateral and vice versa for your counterparty taking the opposite bet.
  - abrkn 9y ago
    I doubt you'd even find a counterparty to bet against
- sidko 9y ago
  Remember the market can remain irrational longer than you can remain solvent. It is seldom a good idea to short an asset just because you think it is a bubble, unless you're able to call the peak.
  - Bartweiss 9y ago
    True, but even so. Most bubbles see at least a few players stake long bets against them (e.g. housing), usually whoever is rich enough to eat months or years of margin calls. Letting pessimists enter the market rationalizes things that much faster. For something like BTC, the market is actively pressured to stay irrational because any non-holder who expects prices to drop can't enter - you only play if you're bullish.
tronreg 9y ago
Just wondering how those of you who have known about Ethereum for a while but didn't buy it feel about missing out on >3000% returns this year. I didn't buy any and dislike knowing I could've been rich.
- williamscales 9y ago
  Very grumpy.
- JohnJamesRambo 9y ago
  I got in as soon as I realized what it was capable of, my only wish is it had been sooner.
- wmf 9y ago
  It's no different than missing out on AAPL or AMZN. You can't see the future and it makes no sense to judge yourself against an expectation of seeing the future. (Cryptocurrency price movements aren't based on fundamentals, so no amount of research can accurately predict them.) Also, Bitcoin had a roughly three-year lull; it's entirely possible that another such lull could happen after you buy.
- mabbo 9y ago
  I used to go to these Wednesday night Bitcoin meetups at "Bitcoin Decentral" in Toronto. Half the people who attended these were idiots looking to make easy money for no work. A quarter were guys who had gotten into bitcoins when they were cheap and had decided that they were geniuses, and not simply fortunate. The first half loved listening to these guys. The last quarter were actually interesting people, into crypto and crypto-currencies, doing cool stuff. And some of them were into this thing called ethereum. Sometimes there were talks with that Vitalik guy. And I did not buy even a single coin. It was a bad investment. It was some random guy at that weird house on Spadina Ave who said he was making a better Bitcoin. Sane people do not give money to schemes like that. Those crazy idiots who wanted to get rich for no effort, let them throw their money at this ethereum thing, just like they'll throw money at every pyramid scheme and the Toronto housing market.
  - 9y ago
nextstep 9y ago
> There already exists a common currency through which we can trade. It's called ether, and we can use it no matter which token pairs we want to trade... Exactly. For every ICO that pops up, ask does this use case require a special token? Often ether would be sufficient or even preferable because of greater liquidity. Exchange between digital assets can be easily facilitated with something simple like Prism: https://info.shapeshift.io/blog/2017/05/21/introducing-prism-worlds-first-trustless-portfolio-market-platform https://info.shapeshift.io/blog/2017/05/21/introducing-prism...
- isubkhankulov 9y ago
  if you cut through the hype, Prism is an ethereum hosted CFD (contract for difference) platform. They claim that they will be taking the other side of customer bets on portfolios initially, and hedging by buying the underlying. later, they envision other market participants will short coin portfolios. With CFD's upside and downside is capped. so neither party is investing, just betting.
  - Animats 9y ago
    Prism is an ethereum hosted CFD (contract for difference) platform. Is the Tel Aviv binary option crowd somehow involved with this? Having been closed down in binary options, they've been pushing "contracts for difference" and "ladders".[1] [1] https://www.spotoption.com/products https://www.spotoption.com/products
    - isubkhankulov 9y ago
      this is aimed at cryptocurrencies and designed to not have counter-party risk. self executing smart contracts. one problem is that they may be relatively expensive because they require "gas" to execute but on the plus side they can't be shut down.
  - runeks 9y ago
    What's the point of a supposedly decentralized CFD market when asset prices need to be looked up outside the chain? The reason a decentralized CFD market hasn't been built on top of Bitcoin already is that the challenge is agreeing on the market price of the assets in question, in order to calculate a difference, and this process is inherently centralized. Creating a smart contract for this makes as much sense as a smart contract for betting on the next US president: we decide the outcome of the contract by the result we feed into the contract, since the contract has no way of knowing this itself. Of course, we can always use a group of trusted intermediaries, but when doing so the decentralized property is lost, and we might as well ditch the underlying blockchain, since it doesn't provide any security benefits.
burke 9y ago
The underlying problem here is that the ICO model as most-frequently implemented is pretty broken. It's kind of a like a hybrid between an IPO and a Kickstarter, but: 1. With kickstarter, the reward has roughly constant value with respect to the total funds raised; 2. With an IPO, the supply is predetermined. While the cost per share may be astronomical by the time you get around to buying in, it's clear what fraction of the offering you're purchasing. ICOs tokens typically have: 1. value inversely proportional to the total funds raised; and 2. (since supply is not determined until the end of the ICO in many cases) no clarity around what fraction of the offering an investment actually purchases until the offering is complete. This leads to some pretty crazy situations, Bancor being the most recent and most notable example, but in general, it just doesn't really lead to very sane practices. --- This is precisely why IPOs are conducted the way they are, with investment banks pre-purchasing a predetermined number of shares just shy of what they expect to be a fair market value, handing that money to the company, and then selling those shares on the open market.
- laser 9y ago
  ICOs implementations have varied, such that while your points about inverse value and transparency of fraction of offering may hold for some, ex. Bancor w/ it's "hidden ETH cap" announced at 80% full [1], it does not hold for many others, ex. SONM capping at 331,360,000 SNM for 117,337 ETH for a pre-determined max ~$42 million ICO [2]. Whether or not the SONM-style, Bancor-style, or some other style of ICO has "most frequently" been done is an open question? [1] http://www.newsbtc.com/2017/06/06/bancor-ico-starting-june-12th-participation-terms/ http://www.newsbtc.com/2017/06/06/bancor-ico-starting-june-1... [2] https://ico.sonm.io/ https://ico.sonm.io/
simplehuman 9y ago
Wow, 144M. As a crypto n00b, can someone clarify if this is "real" money? Just wondering since I have never heard of Bancor before and this amount of funding is incredible.
- isubkhankulov 9y ago
  its in ETH, not dollars, so it would be quite difficult to convert without slippage because the markets are quite illiquid. Basically, people trading their ETH paper gains as a diverisification play.
  - Animats 9y ago
    Its in ETH, not dollars. Oh. This suggests that ETH is way overvalued and illiquid. We're about to find out how liquid Bitcoin really is. The Mt. Gox bankruptcy trustee has 202,185 Bitcoins and may have to convert them to yen.
  - dna_polymerase 9y ago
    ETH is not illiquid per se. Those ICOs just happen to collect 0.1% of all the circulating ETH, imagine you would go to a stock broker with 0.1% of all USD circulating...
- gnarcoregrizz 9y ago
  I think a lot of money going to these ICOs are people that got into bitcoin/ethereum early trying to diversify their gains with more crypto tokens. Like, the BAT token consisted of 4 whales
- jcfrei 9y ago
  If a lot of companies who performed an ICO would actually cash out ether prices would tank pretty fast. There are a couple of paragraphs in the very recommendable Crypto Trader Digest (written by the people of BitMEX) which goes into a little more detail. Liquidity is still very low on all these exchanges so it doesn't take much for panic selling to set in.
sushid 9y ago
I feel like the article definitely has some merit but the timing of it (days before a TBD announcement on token trading), the inclusion of very obvious non-unique points (i.e. not scalable, anything Bancor can do Ethereum can do - uh, why not include the definition of Turing complete here) and the false assumption that Bancor's use case is for a groundbreaking ERC20 token that's going to be traded on every exchange makes the author's claim dubious. A more likely use case for Bancor is some SMB (store/restaurant) or content creator issuing tokens to be used for membership reward/points or for voting on a new video/project idea, not for Augur/Steem/Gnosis 2.0 to issue an ICO. If you take this gross assumption of the equation, his whole argument about slippage or "trailing the market", etc are gone. You're issuing some small time tokens. There no reason to always buy back from the market and there are no big players trying to "deplete your reserve." The author makes it sound like I'm selling some popular cryptocurrency at a fixed price and am being left to bleed dry when in actuality, I'm issuing my_random_token for friends and customers. I didn't review the code but if what he's saying is correct, there is a reason for alarm regarding their reimplementation of basic arithmetic functions(!!!) and user overpaying. By trying to make this into a laundry list, it comes more off as a FUD argument, very similar to what Bitcoin maximalists were doing post the DAO hack to Ethereum. (Disclaimer: my Bancor holding is about 0.5% of my total Crypto portfolio).
- MichaelGG 9y ago
  >(store/restaurant) or content creator issuing tokens to be used for membership reward/points Why would a restaurant use this for membership point when a glorified Access db would work just as well?
  - Noxchi 9y ago
    We are witnessing the dotcom bubble version 2: crypto bugaloo
    - edoceo 9y ago
      We're gonna rock down to electric revenue. And then we'll take it higher!!
seoseokho 9y ago
Dumb question: does anyone know if any of the ICO-ing companies have "cashed out" to actual hard currency?
- ac29 9y ago
  Its a reasonable question: a lot of these articles (which I dont necessarily disagree with otherwise) uses phrases like this one does: "raised a record $144M" and "raising 9-digits cash" Which isn't true. They raised 0 USD, and selling whatever the equivalent of ETH they did raise would likely crash the value significantly, such that they'd never see $100M+. If they sold slowly, and if ETH value stayed relatively stable during that time, and if the exchanges were reliable for large, frequent withdrawls, and if all of this didn't raise huge red flags with the banks and governments in their jurisdictions, there might be something to it. That's a lot of ifs.
  - sremani 9y ago
    They raised about 3 million in USD and 2 million or so in Euro. So, there is cash involved, but most is BTC ETH LTC.
  - h1d 9y ago
    And if people do not start questioning why they have to keep dumping eth for cash continously until emptied.
- lambdadmitry 9y ago
  Another question: how can they even "cash out" from the legal standpoint? Surely tax authorities will be interested in those millions of dollars "out of nowhere". It's possible to "stay under the radar" with small sums (e.g. buying your groceries with "BTC credit card"), but surely not with millions, right?
  - DennisP 9y ago
    Just pay taxes on it like any business. Hire a CPA and CFO.
Radim 9y ago
Jesus christ. I read that as "bacon is flawed" for a second and nearly got a heart attack. Bacon is perfect.
jnordwick 9y ago
We need a futures market for crypto currencies. It would massively aid in hedging and price discovery. It would be easier for the price to adjust down to since there would be an easy way to short them too.
- kcanini 9y ago
  Possibly dumb question: What is the point of a futures market for a currency? I understand why futures markets exist for e.g. oranges (seasonal production cycles) and jet fuel (to avoid storing a years' worth yourself). But currencies are available 24/7/365 and have zero storage cost.
  - dfabulich 9y ago
    1) You may not be aware that there are futures markets for all fiat currencies, e.g. the USDX for dollars. 2) Currency futures markets exist to allow you to bet that the value of the currency will decrease, by offering to sell you the currency at price below the current market rate in the future. In markets where there's no easy/legal way to bet that prices will decrease, asset bubbles are common, as "bulls" bid up the price, and "bears" just sit on the outside waiting for the bubble to pop. If bears could bet that the value would decrease, this would lower the price of the asset today. In this way, price signaling can allow the market to reach an optimal shared opinion about the "true value" of an asset. There are a lot of cryptocurrency bears who think that the long-term value of Bitcoin and Ether are approximately zero, that cryptocurrencies are in an asset bubble, and that this is wasting valuable time and money that the economy should spend on other things. By betting against cryptocurrency, bears could help to end the bubble in a safer and slower way. (Or so they say. Sometimes future markets can exacerbate price instability when the whole market behaves irrationally.) (The other reason futures markets exist is to allow people holding the currency to reduce ("hedge") the risk that the value of the currency will decrease. Thus they can make small bets against the currency, and if it rises, they'll still make money, and if the value falls, well, at least they'll win their bet.)
    - kcanini 9y ago
glorious 9y ago
All you have to do is throw a rock at the button on the wall, and a gate will drop on its head. Wait, that's Rancor.
dna_polymerase 9y ago
Great great great great article. Never seen so much facts and analysis in an Ethereum/ICO post (aside from Vitaliks maybe). This whole ICO craze is going to hurt Eth in the long run, just like fraudulent campaigns hurt Kickstarter. People need to realize those ICOs are completely overhyped right now, lacking anything worth investing in the most cases.
- Roritharr 9y ago
  The problem is, even if you know this its still a Keynesian Beauty Contest, as you can make money by following the hype along for a while.
- roemerb 9y ago
  Oh my God... A positive comment on HN? Is this reality? I agree with you wholeheartedly though sir. Great article. It's just like the crazy funding rounds Silicon Valley startups have these days!
zby 9y ago
I would like to know if anyone reading Hacker News invested in BNT. Or any other token. They look so obviously overpriced - it is difficult for me to understand why people are buying into this.
Angostura 9y ago
I wish I knew what an ICO was https://en.wikipedia.org/wiki/ICO https://en.wikipedia.org/wiki/ICO
digi_owl 9y ago
Of all the names they could have used...
dahoramanodoceu 9y ago
As an experienced trader in FX and us stocks, and as a bit of a budding technologist, how can I best get into speculating Ethereum? I've tried getting into ethereum, and am super interested in programming numerous smart contracts, but have showed up late to the party, so all the docs are in varying levels of accuracy (out of date) and it seems like i have to download a million and a half heavy applications just to participate. Red flag. It seems weird that company with so much interest and participation doesn't have proper documentation. Is there a way to go short; are there options markets; is it currently possible to bet against the price of a smart-contract like Bancor?
- csomar 9y ago
  Yes but the size of your position will be important. Bitmex is a real derivatives exchanges but for some contracts they are not liquid enough.
- flaviuspopan 9y ago
  IMHO, I wouldn't consider yourself late to the party. There's a ton of work being done on the EVM (Ethereum Virtual Machine) and new languages are coming out for it (like Viper). The biggest challenge at the moment is knowing which resources are still relevant and worth grokking. As long as you stay curious, I'd say there's a great chance your future in the market will be mildly prosperous at worst.
- stefek99 9y ago
  Going short in crypto = assymetrical risk reward ratio. Poloniex has margin trading and shorting. Bitmex - up to 100x leverage.
ex3ndr 9y ago
I hope hard fork is not going to happen in the future because of them.
riffraff 9y ago
how did this thing even get 140M? Is this "funny money" ?
Razaberry 9y ago
Official response https://blog.bancor.network/this-analysis-of-bancor-is-flawed-18ab8a000d43 https://blog.bancor.network/this-analysis-of-bancor-is-flawe...
momo36 9y ago
I bought some BNT... Now the price is only 2.72$ :[ (http://bancorprice.org/ http://bancorprice.org/)
momo36 9y ago
I bought some BNT... Now the price is only 2.72$ :[ (http://bancorprice.org/ http://bancorprice.org/)

265 points by sidko 9y ago

Bancor's initial response isn't great: https://twitter.com/bancornetwork/status/876934646344404992 https://twitter.com/bancornetwork/status/876934646344404992 since they mentioned FUD, it sounds like they're afraid Gun's post may affect trading of their token.

topynate 9y ago
>it sounds like they're afraid Gun's post may affect trading of their token. Yes, it works out quite nicely all round. They, by taking his ability to move the market so seriously, grant him social proof that can't be obtained any other way. He, very magnanimously, walks back his most serious attacks, to wit: their team are not credible, and the problem they want to address "is not a real problem". And anyone else who wants their token to pop* will know who they'd better have inside the tent. * Bancor's token becomes tradeable shortly, see https://blog.bancor.network/token-activation-update-285ba81995b1 https://blog.bancor.network/token-activation-update-285ba819.... It would have been tradeable today, but they have some last minute debugging before their smart contract is ready to "automate Yellen", as Sirer puts it. It's hard to begrudge them this, having seen how Yellen performs in the unpatched 1.0 release.
- el33th40r 9y ago
  For the record: I have not walked back any criticism. I saw a brigade forming, and the last thing I want to be is the kind of person who, wittingly or unwittingly, creates a social media brigade. My own blog has been brigaded countless times, and I know how it feels. So do allow me to walk a nuanced line, if you will -- we're all better off if we can diffuse tension instead of getting entrenched in all out assault mode.
  - asymmetric 9y ago
    I really appreciate your stance, but I have a question: if your goal is to walk a nuanced line, why use Twitter to walk it?

RichardHeart 9y ago

Is there a way to fix no one being able to short these things? The counter party risk and irrational exuberance outlasting ones solvency should be solvable somehow?

isubkhankulov 9y ago
the only way to short these ICO's is to not buy them. shorting anything requires borrowing the asset, usually paying interest (as an incentive to the lender), selling them and later buying them back. the other option is a betting platform where people just take side bets, but counter party risk is substantial and your short is limited by the trade collateral and vice versa for your counterparty taking the opposite bet.
- abrkn 9y ago
  I doubt you'd even find a counterparty to bet against
sidko 9y ago
Remember the market can remain irrational longer than you can remain solvent. It is seldom a good idea to short an asset just because you think it is a bubble, unless you're able to call the peak.
- Bartweiss 9y ago
  True, but even so. Most bubbles see at least a few players stake long bets against them (e.g. housing), usually whoever is rich enough to eat months or years of margin calls. Letting pessimists enter the market rationalizes things that much faster. For something like BTC, the market is actively pressured to stay irrational because any non-holder who expects prices to drop can't enter - you only play if you're bullish.

tronreg 9y ago

Just wondering how those of you who have known about Ethereum for a while but didn't buy it feel about missing out on >3000% returns this year. I didn't buy any and dislike knowing I could've been rich.

williamscales 9y ago
Very grumpy.
JohnJamesRambo 9y ago
I got in as soon as I realized what it was capable of, my only wish is it had been sooner.
wmf 9y ago
It's no different than missing out on AAPL or AMZN. You can't see the future and it makes no sense to judge yourself against an expectation of seeing the future. (Cryptocurrency price movements aren't based on fundamentals, so no amount of research can accurately predict them.) Also, Bitcoin had a roughly three-year lull; it's entirely possible that another such lull could happen after you buy.
mabbo 9y ago
I used to go to these Wednesday night Bitcoin meetups at "Bitcoin Decentral" in Toronto. Half the people who attended these were idiots looking to make easy money for no work. A quarter were guys who had gotten into bitcoins when they were cheap and had decided that they were geniuses, and not simply fortunate. The first half loved listening to these guys. The last quarter were actually interesting people, into crypto and crypto-currencies, doing cool stuff. And some of them were into this thing called ethereum. Sometimes there were talks with that Vitalik guy. And I did not buy even a single coin. It was a bad investment. It was some random guy at that weird house on Spadina Ave who said he was making a better Bitcoin. Sane people do not give money to schemes like that. Those crazy idiots who wanted to get rich for no effort, let them throw their money at this ethereum thing, just like they'll throw money at every pyramid scheme and the Toronto housing market.
- 9y ago

nextstep 9y ago

> There already exists a common currency through which we can trade. It's called ether, and we can use it no matter which token pairs we want to trade... Exactly. For every ICO that pops up, ask does this use case require a special token? Often ether would be sufficient or even preferable because of greater liquidity. Exchange between digital assets can be easily facilitated with something simple like Prism: https://info.shapeshift.io/blog/2017/05/21/introducing-prism-worlds-first-trustless-portfolio-market-platform https://info.shapeshift.io/blog/2017/05/21/introducing-prism...

isubkhankulov 9y ago
if you cut through the hype, Prism is an ethereum hosted CFD (contract for difference) platform. They claim that they will be taking the other side of customer bets on portfolios initially, and hedging by buying the underlying. later, they envision other market participants will short coin portfolios. With CFD's upside and downside is capped. so neither party is investing, just betting.
- Animats 9y ago
  Prism is an ethereum hosted CFD (contract for difference) platform. Is the Tel Aviv binary option crowd somehow involved with this? Having been closed down in binary options, they've been pushing "contracts for difference" and "ladders".[1] [1] https://www.spotoption.com/products https://www.spotoption.com/products
  - isubkhankulov 9y ago
    this is aimed at cryptocurrencies and designed to not have counter-party risk. self executing smart contracts. one problem is that they may be relatively expensive because they require "gas" to execute but on the plus side they can't be shut down.
- runeks 9y ago
  What's the point of a supposedly decentralized CFD market when asset prices need to be looked up outside the chain? The reason a decentralized CFD market hasn't been built on top of Bitcoin already is that the challenge is agreeing on the market price of the assets in question, in order to calculate a difference, and this process is inherently centralized. Creating a smart contract for this makes as much sense as a smart contract for betting on the next US president: we decide the outcome of the contract by the result we feed into the contract, since the contract has no way of knowing this itself. Of course, we can always use a group of trusted intermediaries, but when doing so the decentralized property is lost, and we might as well ditch the underlying blockchain, since it doesn't provide any security benefits.

burke 9y ago

The underlying problem here is that the ICO model as most-frequently implemented is pretty broken. It's kind of a like a hybrid between an IPO and a Kickstarter, but: 1. With kickstarter, the reward has roughly constant value with respect to the total funds raised; 2. With an IPO, the supply is predetermined. While the cost per share may be astronomical by the time you get around to buying in, it's clear what fraction of the offering you're purchasing. ICOs tokens typically have: 1. value inversely proportional to the total funds raised; and 2. (since supply is not determined until the end of the ICO in many cases) no clarity around what fraction of the offering an investment actually purchases until the offering is complete. This leads to some pretty crazy situations, Bancor being the most recent and most notable example, but in general, it just doesn't really lead to very sane practices. --- This is precisely why IPOs are conducted the way they are, with investment banks pre-purchasing a predetermined number of shares just shy of what they expect to be a fair market value, handing that money to the company, and then selling those shares on the open market.

laser 9y ago
ICOs implementations have varied, such that while your points about inverse value and transparency of fraction of offering may hold for some, ex. Bancor w/ it's "hidden ETH cap" announced at 80% full [1], it does not hold for many others, ex. SONM capping at 331,360,000 SNM for 117,337 ETH for a pre-determined max ~$42 million ICO [2]. Whether or not the SONM-style, Bancor-style, or some other style of ICO has "most frequently" been done is an open question? [1] http://www.newsbtc.com/2017/06/06/bancor-ico-starting-june-12th-participation-terms/ http://www.newsbtc.com/2017/06/06/bancor-ico-starting-june-1... [2] https://ico.sonm.io/ https://ico.sonm.io/

simplehuman 9y ago

Wow, 144M. As a crypto n00b, can someone clarify if this is "real" money? Just wondering since I have never heard of Bancor before and this amount of funding is incredible.

isubkhankulov 9y ago
its in ETH, not dollars, so it would be quite difficult to convert without slippage because the markets are quite illiquid. Basically, people trading their ETH paper gains as a diverisification play.
- Animats 9y ago
  Its in ETH, not dollars. Oh. This suggests that ETH is way overvalued and illiquid. We're about to find out how liquid Bitcoin really is. The Mt. Gox bankruptcy trustee has 202,185 Bitcoins and may have to convert them to yen.
- dna_polymerase 9y ago
  ETH is not illiquid per se. Those ICOs just happen to collect 0.1% of all the circulating ETH, imagine you would go to a stock broker with 0.1% of all USD circulating...
gnarcoregrizz 9y ago
I think a lot of money going to these ICOs are people that got into bitcoin/ethereum early trying to diversify their gains with more crypto tokens. Like, the BAT token consisted of 4 whales
jcfrei 9y ago
If a lot of companies who performed an ICO would actually cash out ether prices would tank pretty fast. There are a couple of paragraphs in the very recommendable Crypto Trader Digest (written by the people of BitMEX) which goes into a little more detail. Liquidity is still very low on all these exchanges so it doesn't take much for panic selling to set in.

sushid 9y ago

I feel like the article definitely has some merit but the timing of it (days before a TBD announcement on token trading), the inclusion of very obvious non-unique points (i.e. not scalable, anything Bancor can do Ethereum can do - uh, why not include the definition of Turing complete here) and the false assumption that Bancor's use case is for a groundbreaking ERC20 token that's going to be traded on every exchange makes the author's claim dubious. A more likely use case for Bancor is some SMB (store/restaurant) or content creator issuing tokens to be used for membership reward/points or for voting on a new video/project idea, not for Augur/Steem/Gnosis 2.0 to issue an ICO. If you take this gross assumption of the equation, his whole argument about slippage or "trailing the market", etc are gone. You're issuing some small time tokens. There no reason to always buy back from the market and there are no big players trying to "deplete your reserve." The author makes it sound like I'm selling some popular cryptocurrency at a fixed price and am being left to bleed dry when in actuality, I'm issuing my_random_token for friends and customers. I didn't review the code but if what he's saying is correct, there is a reason for alarm regarding their reimplementation of basic arithmetic functions(!!!) and user overpaying. By trying to make this into a laundry list, it comes more off as a FUD argument, very similar to what Bitcoin maximalists were doing post the DAO hack to Ethereum. (Disclaimer: my Bancor holding is about 0.5% of my total Crypto portfolio).

MichaelGG 9y ago
>(store/restaurant) or content creator issuing tokens to be used for membership reward/points Why would a restaurant use this for membership point when a glorified Access db would work just as well?
- Noxchi 9y ago
  We are witnessing the dotcom bubble version 2: crypto bugaloo
  - edoceo 9y ago
    We're gonna rock down to electric revenue. And then we'll take it higher!!

seoseokho 9y ago

Dumb question: does anyone know if any of the ICO-ing companies have "cashed out" to actual hard currency?

ac29 9y ago
Its a reasonable question: a lot of these articles (which I dont necessarily disagree with otherwise) uses phrases like this one does: "raised a record $144M" and "raising 9-digits cash" Which isn't true. They raised 0 USD, and selling whatever the equivalent of ETH they did raise would likely crash the value significantly, such that they'd never see $100M+. If they sold slowly, and if ETH value stayed relatively stable during that time, and if the exchanges were reliable for large, frequent withdrawls, and if all of this didn't raise huge red flags with the banks and governments in their jurisdictions, there might be something to it. That's a lot of ifs.
- sremani 9y ago
  They raised about 3 million in USD and 2 million or so in Euro. So, there is cash involved, but most is BTC ETH LTC.
- h1d 9y ago
  And if people do not start questioning why they have to keep dumping eth for cash continously until emptied.
lambdadmitry 9y ago
Another question: how can they even "cash out" from the legal standpoint? Surely tax authorities will be interested in those millions of dollars "out of nowhere". It's possible to "stay under the radar" with small sums (e.g. buying your groceries with "BTC credit card"), but surely not with millions, right?
- DennisP 9y ago
  Just pay taxes on it like any business. Hire a CPA and CFO.

Radim 9y ago

Jesus christ. I read that as "bacon is flawed" for a second and nearly got a heart attack. Bacon is perfect.

jnordwick 9y ago

We need a futures market for crypto currencies. It would massively aid in hedging and price discovery. It would be easier for the price to adjust down to since there would be an easy way to short them too.

kcanini 9y ago
Possibly dumb question: What is the point of a futures market for a currency? I understand why futures markets exist for e.g. oranges (seasonal production cycles) and jet fuel (to avoid storing a years' worth yourself). But currencies are available 24/7/365 and have zero storage cost.
- dfabulich 9y ago
  1) You may not be aware that there are futures markets for all fiat currencies, e.g. the USDX for dollars. 2) Currency futures markets exist to allow you to bet that the value of the currency will decrease, by offering to sell you the currency at price below the current market rate in the future. In markets where there's no easy/legal way to bet that prices will decrease, asset bubbles are common, as "bulls" bid up the price, and "bears" just sit on the outside waiting for the bubble to pop. If bears could bet that the value would decrease, this would lower the price of the asset today. In this way, price signaling can allow the market to reach an optimal shared opinion about the "true value" of an asset. There are a lot of cryptocurrency bears who think that the long-term value of Bitcoin and Ether are approximately zero, that cryptocurrencies are in an asset bubble, and that this is wasting valuable time and money that the economy should spend on other things. By betting against cryptocurrency, bears could help to end the bubble in a safer and slower way. (Or so they say. Sometimes future markets can exacerbate price instability when the whole market behaves irrationally.) (The other reason futures markets exist is to allow people holding the currency to reduce ("hedge") the risk that the value of the currency will decrease. Thus they can make small bets against the currency, and if it rises, they'll still make money, and if the value falls, well, at least they'll win their bet.)
  - kcanini 9y ago

glorious 9y ago

All you have to do is throw a rock at the button on the wall, and a gate will drop on its head. Wait, that's Rancor.

dna_polymerase 9y ago

Great great great great article. Never seen so much facts and analysis in an Ethereum/ICO post (aside from Vitaliks maybe). This whole ICO craze is going to hurt Eth in the long run, just like fraudulent campaigns hurt Kickstarter. People need to realize those ICOs are completely overhyped right now, lacking anything worth investing in the most cases.

Roritharr 9y ago
The problem is, even if you know this its still a Keynesian Beauty Contest, as you can make money by following the hype along for a while.
roemerb 9y ago
Oh my God... A positive comment on HN? Is this reality? I agree with you wholeheartedly though sir. Great article. It's just like the crazy funding rounds Silicon Valley startups have these days!

zby 9y ago

I would like to know if anyone reading Hacker News invested in BNT. Or any other token. They look so obviously overpriced - it is difficult for me to understand why people are buying into this.

Angostura 9y ago

I wish I knew what an ICO was https://en.wikipedia.org/wiki/ICO https://en.wikipedia.org/wiki/ICO

digi_owl 9y ago

Of all the names they could have used...

dahoramanodoceu 9y ago

As an experienced trader in FX and us stocks, and as a bit of a budding technologist, how can I best get into speculating Ethereum? I've tried getting into ethereum, and am super interested in programming numerous smart contracts, but have showed up late to the party, so all the docs are in varying levels of accuracy (out of date) and it seems like i have to download a million and a half heavy applications just to participate. Red flag. It seems weird that company with so much interest and participation doesn't have proper documentation. Is there a way to go short; are there options markets; is it currently possible to bet against the price of a smart-contract like Bancor?

csomar 9y ago
Yes but the size of your position will be important. Bitmex is a real derivatives exchanges but for some contracts they are not liquid enough.
flaviuspopan 9y ago
IMHO, I wouldn't consider yourself late to the party. There's a ton of work being done on the EVM (Ethereum Virtual Machine) and new languages are coming out for it (like Viper). The biggest challenge at the moment is knowing which resources are still relevant and worth grokking. As long as you stay curious, I'd say there's a great chance your future in the market will be mildly prosperous at worst.
stefek99 9y ago
Going short in crypto = assymetrical risk reward ratio. Poloniex has margin trading and shorting. Bitmex - up to 100x leverage.

ex3ndr 9y ago

I hope hard fork is not going to happen in the future because of them.

riffraff 9y ago

how did this thing even get 140M? Is this "funny money" ?

Razaberry 9y ago

Official response https://blog.bancor.network/this-analysis-of-bancor-is-flawed-18ab8a000d43 https://blog.bancor.network/this-analysis-of-bancor-is-flawe...

momo36 9y ago

I bought some BNT... Now the price is only 2.72$ :[ (http://bancorprice.org/ http://bancorprice.org/)

momo36 9y ago

I bought some BNT... Now the price is only 2.72$ :[ (http://bancorprice.org/ http://bancorprice.org/)