When Bancor held its offering this summer, it was widely received by investors. So hyped up were crypto enthusiasts about the offering that Bancor set a record, raising roughly $153 million.
At the time, ICO pundits were sounding the alarm that most ICOs would fail. Likely, those who piled into Bancor’s ICO thought the fate was not in store for them. However, it was.
Bloomberg reports that Bancor, one of the most successful initial coin offerings in the short history of digital tokens, is” proving to be a dud for investors.”
When Bancor held its ICO, it did so with much fanfare. Investors were drawn to it because of Bancor’s unique protocol that enables anyone to be able to create their own digital tokens called smart tokens. These smart tokens are based on smart contracts, and they run on Blockchain.
The idea was to set out to lay the groundwork that could help the varying cryptocurrencies being unleashed reach masses.
Based on its structure, some have likened Bancor to an exchange, however, Bancor does not fancy itself as an exchange. Instead, it promotes itself as providing a protocol that helps anyone create new types of cryptocurrencies.
Bancor boasts its network being able to allow users to hold any Ethereum token, and convert it to any other token in the network. There is no need for a counter party, and the conversion is supposed to occur at an automatically calculated price, using a simple web wallet.
Bancor argues that existing exchanges rely on market makers to provide liquidity, which can create cause liquidity problems. Small cap, custom, and lightly traded currencies can be negatively affected by traditional exchange models.
Bancorp found that this was an inherent barrier that makes it “nearly impossible” for the generators of these small-scale currencies to be linked to other popular currencies using a market-determined exchange rate.
The idea seemed to be a good one to many investors. In fact, Bancor managed to raise $153 million during its ICO, which at that time, was a record.
Since its ICO, the price of Bancor’s tokens is down 56%. Bloomberg calls it one of the worst performances among the 10 largest crowd-funding sales.
Bloomberg talked to an adviser for Tezos, Cornell University’s Emin Gun Sirer. He’s been one of the most outspoken critics of Bancor, penning a report over the summer called “Bancor is Flawed.”
He told Bloomberg told Bloomberg last week that he had questions about Bancor’s application, and said Bancor’s formula is less efficient than simply making the market manually. He also raised concerns that the technology Bancor uses could be vulnerable to front running, where people make money off of the visibility of others’ transactions, explained Bloomberg.
Questions also surround the need for people to buy Bancor coins just to use the market maker. Sirer, and others, wonder why people can’t simply use ether since the application runs on the Ethereum Blockchain, according to Bloomberg.
Bancor officials haven’t just sat back and taken Sirer’s comments. Its officials seem to believe that Sirer’s constant attacks are rooted in his bias against it. Bancor’s CEO Guy Benartzi told Bloomberg:
"Sirer is making his claims because he is advising another company. Tezos, which claims to be building a super-secure Blockchain, has had its own issues, such as management infighting, which has slowed development."