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My guess is you talking about arbitrage[1]. As Sirer pointed out tokens on Bancor present a huge opportunity for arbitragers and it is bad. As time is an unknow

My guess is you talking about arbitrage[1]. As Sirer pointed out tokens on Bancor present a huge opportunity for arbitragers and it is bad. As time is an unknown risk factor, the speculator will simply buy on Bancor, take the token out and sell it on exchange immediately to make a profit. [1]http://www.investopedia.com/terms/a/arbitrage.asp http://www.investopedia.com/terms/a/arbitrage.asp

JumpCrisscross 9y ago
Arbitrage transports price information between places, e.g if a stock is trading for 360 in Chicago and 370 in New York (after accounting for transportation ). Market making transports price information across time, i.e. I buy a sheep at 9am and sell it at Noon. Arbitrage is classically riskless while market making involves significant risk.
- Bartweiss 9y ago
  Yeah - in theory Bancor is market making. In practice, I'm not so sure. They don't seem to have answer the 'market trailing' claim, and if they (for instance) trail during crashes, they offer arbitrage to everyone else, paid out of the reserve.
- thisisit 9y ago
  Not really. The word you are looking for your second example about sheep is simply - speculator. Not market maker and not even arbitrage. From [1]:The most common type of market maker is a brokerage house that provides purchase and sale solutions for investors in order to keep the financial markets liquid. A market maker can also be an individual intermediary, but due to the size of securities needed to facilitate the volume of purchases and sales, almost all market makers are large institutions. The keywords being "provides purchase and sale solution". So a better example will be you staying at the same place buying and selling sheep as they come about, specially if there is no one to take up a buyer or seller on their offers or bids. [1]:http://www.investopedia.com/terms/m/marketmaker.asp http://www.investopedia.com/terms/m/marketmaker.asp
  - JumpCrisscross 9y ago
    > Not really. The word you are looking for...is simply - speculator Market making necessarily involves speculating. They're one and the same. Modern market making has many conventions extraneous to the definition, but there are still markets where market makers only quote one side of the market at a time. For over-the-counter stocks in the United States, you are even allowed to offer soft quotes, i.e. the market maker can renege on a posted quote if they want. The sheep example is resolutely a market maker. Just in an illiquid market. Source: I used to be a designated market maker.
Bartweiss 9y ago
I think "is it arbitrage" is a major part of the issue. Bancor is claiming to be a market maker offering a spread (basically, taking a cut for insuring liquidity). Sirer is suggesting that without being able to react to real-world changes, Bancor will burn reserves to offer up something like arbitrage whenever the market changes. Well, arbitrage or "just giving away money", depending on how you count it. I'm hardly qualified to judge the question, but it's disturbing that Bancor basically dodged the main complaint in this response.

JumpCrisscross 9y ago

Arbitrage transports price information between places, e.g if a stock is trading for 360 in Chicago and 370 in New York (after accounting for transportation ). Market making transports price information across time, i.e. I buy a sheep at 9am and sell it at Noon. Arbitrage is classically riskless while market making involves significant risk.

Bartweiss 9y ago
Yeah - in theory Bancor is market making. In practice, I'm not so sure. They don't seem to have answer the 'market trailing' claim, and if they (for instance) trail during crashes, they offer arbitrage to everyone else, paid out of the reserve.
thisisit 9y ago
Not really. The word you are looking for your second example about sheep is simply - speculator. Not market maker and not even arbitrage. From [1]:The most common type of market maker is a brokerage house that provides purchase and sale solutions for investors in order to keep the financial markets liquid. A market maker can also be an individual intermediary, but due to the size of securities needed to facilitate the volume of purchases and sales, almost all market makers are large institutions. The keywords being "provides purchase and sale solution". So a better example will be you staying at the same place buying and selling sheep as they come about, specially if there is no one to take up a buyer or seller on their offers or bids. [1]:http://www.investopedia.com/terms/m/marketmaker.asp http://www.investopedia.com/terms/m/marketmaker.asp
- JumpCrisscross 9y ago
  > Not really. The word you are looking for...is simply - speculator Market making necessarily involves speculating. They're one and the same. Modern market making has many conventions extraneous to the definition, but there are still markets where market makers only quote one side of the market at a time. For over-the-counter stocks in the United States, you are even allowed to offer soft quotes, i.e. the market maker can renege on a posted quote if they want. The sheep example is resolutely a market maker. Just in an illiquid market. Source: I used to be a designated market maker.

Bartweiss 9y ago

I think "is it arbitrage" is a major part of the issue. Bancor is claiming to be a market maker offering a spread (basically, taking a cut for insuring liquidity). Sirer is suggesting that without being able to react to real-world changes, Bancor will burn reserves to offer up something like arbitrage whenever the market changes. Well, arbitrage or "just giving away money", depending on how you count it. I'm hardly qualified to judge the question, but it's disturbing that Bancor basically dodged the main complaint in this response.