Official Response to “Bancor Is Flawed”
blog.bancor.network
blog.bancor.network
It brushes over Sirer's points by making note of irrelevant 'achievements' they have managed. The format also reads like a high school teacher nitpicking your paper, where most of his arguments boil down to 'yeah but that doesn't really matter, because...'
I read the whitepaper (a cryptocurrency-fanatic friend pointed it out to me) just a few days before Sirer's post was published, and I noted a few of Sirer's main arguments immediately after reading it. It's not hard to understand the essential problems regarding limited reserves and market-trailing, and this response addresses nothing. It's wishy-washy investor-rubbing talk, not the legitimate debate and discourse they say the want.
It reminds me of those people who ask for feedback on something they wrote and then get upset when you give it to them. They didn't actually want feedback; they wanted compliments and ego-boosting. That's also a valid thing to want and ask for from friends when you're struggling through the writing process. But once you publish, the warm fuzzies end. Critics are not there for authors; they're working for readers.
I am mostly seeing a mild corporate language about how they want to build the future, how their team has credentials, how they opened up for feedback on many places (in the past, not now, convenient isn't it?), and there was zero substance on the article up until the first quotes, and it doesn't get better from there on as well.
I see nothing they defend their current business with. They mostly appeal to the past.
And not even that, they admit they've been doing other cryptocurrencies in the past. To me that doesn't you mean you're experienced in the area and you have what to offer. To me that means you're now a seasoned veteran who can swindle people with a smile while wearing a suit and using soft language.
Sorry, Bancor. You need to write a substantive article to be taken seriously.
First, they start off as many "responses" in crypto currency seem to start that is - saying this is all FUD and the critic should stop spreading FUD. They also take the Trump route, not a great choice of words - "fake news".
Where I lost them was when they equated themselves as being so important to crypto currency space that critiquing them can be used to tag the whole space as being a giant ponzi scheme.
On still persisting, I found their clarification on "asynchronous price discovery" very funny. The point of a market making algo is to "make the market" ie they have to act as counter parties to each trade irrespective of whether there is a buyer or a seller (ie not a price matching algo). The price discovery in that process happens on how the market making algo is written.
Though I guess being programmers and writing a document for programmers they had to go with a technical term. But with someone who understands economics on their team, they should have done away with it.
All said, the most important part of a market making algo is not to provide liquidity or smooth prices. As Sirer put it, smoothing prices is a bad idea. If something is volatile it is because the market deems it to be so. Going against the market is not good.
I hope these guys watch this video carefully to understand how trading works: https://www.youtube.com/watch?v=RLySXTIBS3c
Yeah, as somebody who used to work for market makers, the Bancor notion of markets struck me as... I guess "utopian" is the kindest word I can come up with.
The reason we as market makers got a special deal was that the market wanted us to provide liquidity, which sometimes can smooth prices a bit. But we personally didn't give a fuck about that. We were there to make money while avoiding getting crushed by market movements.
That was honestly a grim mindset, and I'm glad I don't do that anymore. But I appreciate the way a lot of individually self-serving actions can sometimes balance out to something socially useful. To make that work, though, I think requires you to be extraordinarily cynical. From what I've seen, utopians get eaten alive.
To be fair, the whole ICO scene of the past few months largely is a bubble phenomenon: an incoherent idea, incompetent code, and really obviously just creators who see easy money selling to buyers who see easy money. The critique is widely applicable. There are non-bogus ICOs, but mostly it's complete air.
One of the bigger problems I see with these ICOs is they that they don't offer much in terms of business viability other than maybe "cool" tech. I have been thinking of a purely profit focused contract(coin) on top of ethereum network. Something which provides value to people and the investors as well. Unfortunately not a programmer so it has to remain a plan forever.
The same cannot be said about VC money going to unicorns. Those companies provide in-demand services that people use and enjoy, even if the business model is tenuous, there is clear value created by the services. Not true of ICOs which create no value.
I am just pointing out that - No company is an island. Criticizing one doesn't implicate the whole industry as the Bancor guys try to portray.
> The EOS.IO software introduces a new blockchain architecture designed to enable vertical and horizontal scaling of decentralized applications. This is achieved by creating an operating system-like construct upon which applications can be built. The software provides accounts, authentication, databases, asynchronous communication and the scheduling of applications across hundreds of CPU cores or clusters. The resulting technology is a blockchain architecture that scales to millions of transactions per second, eliminates user fees, and allows for quick and easy deployment of decentralized applications.
No, that doesn’t end "and a pony."
Sounds great! So I buy some tokens, and I get ... from the FAQ:
> The EOS Tokens do not have any rights, uses, purpose, attributes, functionalities or features, express or implied, including, without limitation, any uses, purpose, attributes, functionalities or features on the EOS Platform.
The legal EOS Token Purchase Agreement is a frankly amazing document that you need to read all 15 pages of. US citizens or residents are not to buy the tokens (though EOS is sure they don’t constitute a security, honest SEC); the tokens are defined as not being useful in any manner; forty-eight hours after the end of the distribution period, the tokens will no longer be transferable; the buyer is not buying them for speculation or investment.
https://eos.io/purchaseagreement/EOS%20Token%20Purchase%20Ag...
They're doing one billion tokens, dribbled out slowly over a year, at a price of "how much money do you have to throw at us". Really, that's the price.
'Coiners are still lining up to buy them. "Whatever these people do, I'm going all in. Nuff said." https://bitcointalk.org/index.php?topic=1904415.0
Where?
I can not speak for every jurisdiction of the world, but I believe any lawyer would advise against marketing non-securities as investment if you want to stay out of jail.
Civic specifically has absolutely no use for a token. The service they offer would look completely identical without the token. I believe the official explanation why they did anyway it was to "harness the enthusiasm of the community" or something like it.
Since the Civic token is completely dysfunctional without Civic the company providing the underlying service, it is also unnecessarily expensive and complicated to use a blockchain for storage. That they have a procedure where they can restore your keys should you lose them should be enough to raise questions.
While the public blockchain is an innovation that I believe will have important use cases going forward, it is absolutely clear to me that this is a golddigger era for scams, and the shift from altcoins to tokens have lowered the signal-to-noise ratio even further. I have yet to see an ICO that was not useless, bordering on fraudulent (which is a word that should not get used too lightly), so I would be genuinely curious to see one that is not.
Fun fact, that's not true! It's called "the barter myth", and was put forward by Adam Smith in The Wealth of Nations.
But anthropologists everywhere have looked for 'pre-money' societies in their field research and haven't really found any. Bartering today happens in systems like prison where people are used to using money, but they aren't allowed to have (or there isn't) any. Everywhere we've looked, we find complex systems of credit, debt and/or quid pro quo.
Read it in a book called "Debt: The first 5000 years".
As for Graeber's book, I'll excerpt from a comment I made a while ago: he is frequently wrong about easily verifiable facts in such a way that it supports his world view. There's no reason to trust a liar when he tries to tell you something you don't know about. One particularly remarkable Graeberism is where he describes the founding of Apple:
> Apple Computers is a famous example: it was founded by (mostly Republican) computer engineers who broke from IBM in Silicon Valley in the 1980s, forming little democratic circles of twenty to forty people with their laptops in each other's garages
but there are plenty others, an exhaustive list of which would be too long for this comment. He's also a somewhat unhinged and deeply horrible person. All this is discussed here by leftist economist Brad DeLong: http://delong.typepad.com/sdj/2013/04/david-graeber-april-fo....
Umm...Apple was found in '77. Laptops didn't exist then. Steve Wozniak worked for HP and Steve Jobs worked for Atari when Apple was founded. And IBM didn't even have a facility in Silicon Valley back then. Am I missing something?
(I have no expertise on the economics side of things, but I did notice that his quotation of Tyndale's translation of the lord's prayer does not match what I've seen elsewhere)
[1] https://www.theatlantic.com/business/archive/2016/02/barter-...
[1]There are long lists of mostly-trivial stuff various bloggers have pointed out Graeber got obviously wrong, which afaik don't include the apparent Tyndale translation error you've spotted or the claim that Keynes' Treatise on Money was his most famous work that stuck out like a sore thumb to me...
The Inca system of communal labour could be seen as being based on a debt of work owed to the community.
Not everything is debt. I mean, debt may be the cornerstone of our current financial system, but that doesn't mean it always was so. This just seems like grasping at straws to fit the argument.
Well the validity of that comparison would be whether the woods would be annoyed if the pope shat somewhere else.
- Their clients tell them the message is not clear so they make a video.
- "Bancor is Flawed" says too many buzzwords make it unclear and fluffy.
- You have to Google to understand the words according to Bancor themselves.
- They even have to add parenthesis in this article to explain some words!
But they still think their message is clear. While I have no idea about this world, I do care about communicating my products/ideas. So just simplify the message, make it so people can just understand it.
The only place where an over-engineered message works IMO is with hyped products as everyone puts a lot of effort to understand it.
PS, I got lost in the article mid-way with so many acronyms while I could read "Bancor is Flawed" perfectly...
The cliche adage here is that "if you can't explain your product in one or two sentences then I'm not interested". This is why the "Hollywood pitch" developed organically because people love to overcomplicate everything. VCs look for this as well.
This is why PhDs such as the author make bad people for communicating products. They love abstract terms and advanced hand wavy generalizations. Same with how corporate marketing people are similarily bad because they love buzz words and trends.
Ethereum is full of these companies that are hyper complex and I'm convinced that it's correlated to the number of academics behind all of them. They all have great website designs, they should spend similar time and money on good copywriting - which starts with the founders understanding their own product/service.
They all have a problem with communicating anything of substance. Ethereum has the same problem.
A) explain what problem they are solving (what pain point they address)
B) have an obvious target user.
In this case: Why do I need a bank when using Ethereum? Is it a bank in the context of retail bank consumers as a storage/transfer mechanism or a bank for businesses? If I'm a business building a decentralized service building on top of Ethereum can I use Bancor to address a set of particular problems that are common among decentralized services?
There's more to this than choosing a generic analogy.
Their response to the "BNT is pointless" thing seems to say that BNT has a point because... they made the service require it. I still don't understand why, apart from the founders wanting something to sell to investors.
My understanding is that the main things one looks for in a reserve currency are liquidity in the international market and (relative) stability of value, hence the popularity of the US Dollar and Euro as reserve currencies as opposed to, say, the Zimbabwe Dollar. If that's true, it seems deeply counterintuitive to create a new currency to use as a reserve currency. This sparks a suspicion that the point is not for BNT to add value to Bancor, but rather the reverse.
Am I just misunderstanding something here?
> At time of raise its was $153M within 2:25, this has been covered widely including a formal statement on our blog.
I think you missed the point the article was making.
As someone who isn't very familiar with economics, the original article was clear and concise with very clear Gedankenerfahrung which encapsulated individual problems with the Bancor protocol. While writing technical pieces like that is difficult, this reads more like a bad teacher trying to save face when a clever student shows them up. You're just hurting your own credibility.
If they replaced (arguably superior) with (real if possibly flawed) I might be tempted to take them seriously. But this belief in perfectly efficient market is hilarious, especially in the face of all the people getting rich out of market inefficiencies...
I think of markets as a technology. You have problem X, you can solve it with a market structured with A, B, and C. So it's really weird to me the extent to which markets have become a religion. In some quarters, a fundamentalist one.
I have similar concerns with Bitcoin. The technology is really neat. But it doesn't have users so much as it has adherent, devotees, and apostles.
I just watched one of their intro videos[1] and can confirm "mumbo jumbo".
Disclaimer: I don't know whether this makes Bancor great.
How does Crypto currency, Bancor or other, improve the management/new creation issues?
We want to keep the number of scam artists to a minimum, and especially to reduce the number of training grounds where novice would-be scammers become practiced experts.
Even if we have zero compassion for people who get rooked, there are a bunch of negative externalities to scams. A giant one is that trust is the lubricant of the machinery of the marketplace. The busiest and most efficient financial marketplaces are the ones that are the most effectively regulated. E.g., many foreign companies list in the US because people trust US regulators better than the home-country regulators, meaning they can raise money more effectively here.
A good analogy is restaurant health and safety inspections. If they didn't happen, more people would get sick. If people were often getting sick at restaurants, they'd go out to eat a lot less. That harms the whole industry, resulting in sub-optimal outcomes for both businesses and consumers.
I know that it isn't very popular in the cryptocurrency world but I really don't think all regulations are absolutely evil. Unfortunately I think some of them are going to figure it out the hard way.
I don't understand. If everyone wants to buy, nobody will trade and price discovery will not occur. Can someone please help me understand this?
I haven't read the Bancor paper or code so I am not sure if this is implemented but every market maker's another objective is to make money. So they normally don't trade on a fair price, rather fair price - x/2 to buy and fair price + x/2 to sell where x is the spread to collect money. So effectively they buy low and sell high for a minute difference.
As for a scenario where they have only buyers, the algos or people on the floor tend to take stock of the existing orders and start moving the ask higher to compensate. This happens until it becomes untenable to buy and some sellers start entering the market to make a quick buck.
A good video on how trading works from Trading Places: https://www.youtube.com/watch?v=RLySXTIBS3c
Also, nitpick, a market maker has to actually trade for price discovery to have occurred. I can run around quoting "bid AAPL 2 at 10 billion" all day long, if nobody bites I didn't promote price discovery.
TL; DR You can't asymmetrically discover prices.
OT - Thanks for your illuminating posts. I am a software engineer by profession so most of my learning have been from trying to trade stocks at my country's local exchange so it is interesting to learn things from someone who worked in that field. I was checking your profile and had a question - What is a PE/VC trader? We can talk offline if you want :)
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.
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.
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.
That's called market making [1]. The money made is the spread [2]. People have been doing this for centuries.
[1] https://www.sec.gov/fast-answers/answersmktmakerhtm.html
[2] http://www.investopedia.com/terms/m/marketmakerspread.asp
"This hack job, like the FUD you intentionally spread right before the fundraiser with NO ATTEMPT to contact the team will not age well Emin"
(the responses go into his attempts to contact them ahead of time)
'Offical Response to the flawed "Bancor Is Flawed" Official Response'
Then I think "well, let's see what this startup getting founded wants to produce". And then invariably it's some super "high concept" ultra-virtual "product" that is directly related to ethereum itself.
It's not a new google, facebook, uber or dyson. No it's a protocol that "enables built-in price discovery and a liquidity mechanism for tokens on smart contract blockchains" or sometimes "an open source messaging platform and mobile browser to interact with decentralized applications that run on the Ethereum Network" or even "a new exchange that facilitates secure trades between people from bank accounts to CryptoCurrency".
I'm a coder, I think I have a good general knowledge of how a blockchain works, I even have a passing knowledge of what those smart contracts are and how they're implemented (not enough to, say, implement them correctly myself but definitely more than 99.99% of the general population). Then I read about those innovative products and I'm simply drowning in a see of virtual concepts built on top of other virtual concepts. A concept of a concept of a concept.
See this for instance: https://www.youtube.com/watch?v=P8EoAvWfFnY (avoid the comments at all possible cost).
I've watched the video, perused their website and I'm still not clear at all about:
#1 who needs this? #2 why do they need it? #3 how will bancor make money from this? #4 why do they need $144M to do it? #5 what prevents anybody else from just using the same algorithm and providing the same service at a lower cost?
The video even ends with the CEO admitting "we're only beginning to discover the different use cases". Well, looks like you have over a hundred million dollars to finish your homework now.
It's true for that bancor project, it's also true of https://status.im/ and a few other big ICOs I've seen in the past few weeks. Projects coming out of nowhere and raising a ridiculous amount of money. And then I google for those projects to see what others think about them and 99% of the hits are only talking about... the ridiculous amount of money they raised and nothing else.
I'm not saying that I'm certain that ethereum and those ICOs are scams but I think the ethereum community should work a lot harder to better explain what they're building exactly, because I'm pretentious enough to believe that I'm not dumber than all of those folks who've just collectively pumped millions in those ICOs. I'm willing to bet that many of those people are not betting on the products (or even that they understand those products), rather they see the insane valuations of cryptocurrencies and they want a piece of that.
Bitcoin was created because it isn't possible to do Bitcoin with USD.
Ethereum was created because it isn't possible to do Ethereum with BTC.
Bancor was created because you want to make fat stacks of cash. It would work just as well (or better) if it was using ETH directly instead of having its own token.
Disclaimer: I am almost completely uninformed about Bancor.
Te idea is more than intriguing, what I would like to know is if JMK expected the US to go with it or knew it was a dead-end but had to pursue it anyway.
I believe that it was one of the most obscure and important mewtings of post WWII.
The governor of the Chinese central bank publicly expressed interest (and explicitly invoked Bretton-Woods) a few months ago. And other 'mainstream' central banking authorities seem to be acknowledging that there are big deficiencies with the current model (e.g http://www.bis.org/speeches/sp160210_slides.pdf)
I think the problem is that it's such a huge issue. It makes sense the original agreement was hammered out towards the end of WWII: people were 'thinking big' at the time. I worry that we are only capable of making such big and forward-thinking moves in the wake of some catastrophe or war...
EDIT: The 'renewed interest' is actually mentioned in the Wikipedia article on Keynes' Bancor proposal, and it looks like the governor of the Chinese central bank has been talking about this for some time now: https://en.wikipedia.org/wiki/Bancor#Proposed_revival
Also Keynes' ideas on handling imbalances goes in the face of what politicians have been saying for decades: "Deficits are bad, and surpluses are good." So neither the public nor the politicians are ready to even acknowledge that there might be problems with this logic.
I don't think that is true. You can absolutely reuse BTC for your so called "smart contracts".
I think the jury is still out on that question but I personally lean towards no. If and when there are profitable applications of this technology, ones that wouldn't have been possible without ethereum scripts then I will be glad to change my mind.
It is (in my opinion) no question that the feature has theoretical value. I think the only question is whether that feature's value will outweigh the considerable costs of using a blockchain.
I think there are definitely cases where it will be profitable, but think blockchain tech in general is probably overhyped right now.
We have had about a year of dapp development gone by so far and there isn't a single dapp with any meaningful userbase.
I think if another year goes by and we are 2 years in the dapp development cycle and there is no successful dapp that will probably mean it's not a successful model.
I am also concerned about these dapps having insane valuations and raising huge sums of money just by releasing a vague whitepaper, without having a working product with users.
Normal startups would usually start with a seed round of hundreds of thousands USD but raising 50 millions or more is just obscene, that's a series B or C round for a fast growing startup with tens of millions real users and hundreds of employees usually.
I am interested how this whole situation plays out but remain skeptical for now.
I've seen so many technologies hyped, fail to live up to expectations, and then disappear. Etheruem has some interesting ideas, I'm worried that they have grossly over-stated its potential and it will soon fall off the hype cliff.
I've been looking into this question. Szabo first proposed "smart contracts" in 1994, but Ethereum is basically the first practical smart contracts platform ever - the first one that people actually use a whole lot.
(You can squint at things and say "well that's a bit like a smart contract", but that's retrospectively applying a label - like calling Git a "blockchain". I'm speaking of things that were expressly labeled "smart contracts".)
As a professor you should use exclusively rational arguments, and under NO circumstances emotional manipulation. It seems you've been paid enough to do the opposite. Shame on you!