Bancor…The next DAO?

When Ethereum launched it was the largest crowd funded project of all time raising over 18 million USD. Since then six of the top ten crowd funded projects are all run on the Ethereum network. Each of them raising far more then Ethereum.

The DAO is #3 raising 150 million USD. It infamously was liquidated by hackers through code. Funds were rescued controversially and ultimately caused the Ethereum Classic split.

We now have a new project in the #1 spot. Raising over 150 million USD. It’s called Bancor. Its central idea is a “Smart-Token” that changes its price as it’s bought and is always convertible back to some multiple of the original purchasing currency.

Bancor represents the state-of-the-art crowd-fund and it’s terrifying

A developer from the Ethereum foundation wrote a very critical article about the system just days after the crowdfund ended. Not great timing.

I’ve read their technical white papers and contract source code but I won’t write about that now. I want to talk a little about their hastiness and lack of dog fooding their own ideas.

Bang. Magic.

The tokens that they sold for thousands of Ether are not Smart Tokens. They don’t have any of the properties that they are claiming to be so important. The Ether from the crowd-fund is stored in various centrally controlled Ethereum wallets all over the network and don’t intrinsically (or cryptographically) back the tokens. Just try to find the Ether is on Etherscan.

Now that Ethereum exists Bancor has everything it needs to fund it’s self with its own ideas and smart tokens. But they didn’t. They claim this is because they learned from The DAO. A small time investment could have moved their project along to do this properly. After all they had a huge investor on board already. Now they have $150 million to manage through obscure and mysterious security practices. The costs and risks of securing this is much greater then running their crowd fund on the ideas from their whitepaper…which in its 1.0 form are not that complex.

At best Bancor is using bad judgement. At worst Bancor could become a bigger disaster then the DAO. I don’t see a way to rescue investors this time.

Some of the new crypto-token ideas are fascinating. However they might not be realized if people supporting them don’t carefully measure them…after all that should be the best way to determine value.

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