
Official Response to “Bancor Is Flawed” - asymmetric
https://blog.bancor.network/this-analysis-of-bancor-is-flawed-18ab8a000d43
======
grenoire
I went through it, and I can't say that it's any better than what your average
corporate response is like.

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.

~~~
Flenser
When they started off by saying it was going to be a "line by line response" I
knew they weren't going to be applying the principle of charity[0] and
addressing the most persuasive form of Sirer's argument and would be
dismissing and—as you say—nitpicing his argument or side stepping the real
issues.

[0]
[http://philosophy.lander.edu/oriental/charity.html](http://philosophy.lander.edu/oriental/charity.html)

------
wpietri
This is... not a good response. I've been reading Emin Gün Sirer for years,
and his analyses have been very sharp. He's not always right, but he's right
often enough that I take him seriously. I don't think it's reasonable for the
Bancor people to ask the world for millions and millions of dollars _and_ be
sad that people are not always warm and fuzzy in their responses.

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.

------
pdimitar
I can't see anything substantial in this official response.

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.

------
thisisit
If there was a bad response to a critic, this will be it. While Sirer's post
was a bit terse, this response doesn't earn brownie points by going the same
route.

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](https://www.youtube.com/watch?v=RLySXTIBS3c)

~~~
davidgerard
> 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.

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.

~~~
thisisit
Agreed but the same could be said about VC money and unicorns like Uber, Snap
Inc. etc. It will be laughable if say Uber's CEO equates bashing of Uber's
tech or business model as a threat to all unicorns.

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.

~~~
root_axis
> _but the same could be said about VC money and unicorns like Uber, Snap_

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.

~~~
thisisit
My bad. My phrasing should've been better. I am not implying anything on the
value side of ICO vs VC backed real world companies.

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.

------
rockmeamedee
> Our thinking here is that people invented money to solve the [Double
> coincidence of Wants] problem in barter, making trade asynchronous, more
> efficient and predictable.

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".

~~~
cynicalkane
The "barter myth" isn't really considered valid economic history anymore--and
I'm not sure to what extent it ever was--but it's useful to explain the
purpose of money in a society that cannot reasonably keep track of informal
debt. When modern people in modern economies no longer have access to money
(from economic collapse, or being imprisoned, among other things) they often
resort to barter. So the barter myth may not explain the economic behavior of
primitive tribes, but it might explain us.

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...](http://delong.typepad.com/sdj/2013/04/david-graeber-april-fo..).

~~~
microwavecamera
> 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

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?

------
franciscop
Well they _should_ learn though:

\- 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...

~~~
dmix
The best book for explaining your product idea is "Made to Stick" [1]. It has
a great process for breaking your idea down in the most concrete terms and has
some useful tools such as analogy to a similar product ("like dropbox for x").

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.

[1]
[https://www.amazon.com/gp/aw/d/1400064287/](https://www.amazon.com/gp/aw/d/1400064287/)

~~~
laktek
So simplest way to explain Bancor is to call them a Bank? Has reserves,
liquidates over the counter & centralized control (for better or worse).

~~~
dmix
The analogy to banks is helpful but products should:

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.

------
0xcde4c3db
Disclaimer: I'm not well-versed in these things. Maybe I'm totally misreading
the situation.

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?

~~~
tylersmith
If you are missing something it's because it wasn't present.

------
cyphar
Thanks for confirming that the original article was correct in its analysis
and that you have no substantial rebuttal other than nitpicking. Aside from
the _awful_ usage of "fake news" (almost as though you think it makes you
sound more credible), your first rebuttal is this:

> 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.

------
jwildeboer
TBH this response IMHO confirms most of the findings of the criticised
article. So thanks for the clarification, dear Bancor people. I still fail to
see how your system in any way implements the BANCOR plan that Keynes had.

------
brohee
> Every buy and sell order is an (arguably superior) source of knowledge as to
> what is happening in the real world.

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...

~~~
wpietri
Definitely.

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.

------
shusson
> It is hard to reconcile claims like “mumbo jumbo” and “blah blah blah” with
> legitimate critique

I just watched one of their intro videos[1] and can confirm "mumbo jumbo".

[1] [https://youtu.be/P8EoAvWfFnY](https://youtu.be/P8EoAvWfFnY)

------
sjcsjc
For reference:
[https://news.ycombinator.com/item?id=14591454](https://news.ycombinator.com/item?id=14591454)

------
quantdev
I'm a fan of Emin Gün Sirer and I don't like Bancor's approach in this
response, especially in criticizing his informal tone (who cares?), but it
does seem that they're right that he's misunderstood two main points: (1)
Bancor tokens are automatically created and destroyed as needed and (2) the
pool is collectively owned by all the token holders and not the issuing
company.

Disclaimer: I don't know whether this makes Bancor great.

------
asymmetric
Another very interesting response to another critique they received:
[https://blog.bancor.network/response-to-bancor-unchained-
cdb...](https://blog.bancor.network/response-to-bancor-unchained-cdb3bd2ba505)

------
irln
The Double coincidence of Wants is solved by any Medium of Exchange (MoE). The
bigger issue in my opinion is how to manage the creation of new MoE. The
current system "solves" this by empowering a group (banks) to issue new MoE
via loans. We have a significant body of history on the "efficacy" of this
approach.

How does Crypto currency, Bancor or other, improve the management/new creation
issues?

------
EternalData
You would get absolutely slaughtered in a public market setting if this
happened -- I love the idea of ICOs giving non-accredited investors the
ability to invest in risky ventures, but you have to wonder about the
diligence layer that comes with it, especially as organizations like Bancor do
not have nearly the legal requirements for transparency.

~~~
opportune
Meh, I say let the fools spend their money however they want. Soon they'll
understand why there are restrictions on investing in areas like this

~~~
wpietri
Nope. It's like feeding pigeons. Pigeon-feeding is illegal because doing it
results in an exploding pigeon population and pigeon shit everywhere. It
becomes everybody's problem.

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.

------
JumpCrisscross
> _With Bancor, there is no need for two opposite wants to exist at the same
> time in order for the price discovery (through actual trading) to function_

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?

~~~
marcosdumay
That "at the same time" is the important piece. It means there's an speculator
in the middle that will guess a price it can buy to sell later and make some
money out of the transaction.

~~~
thisisit
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
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.

~~~
thisisit
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
> _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._

------
sulam
This response boils down to a combination of ignoring critical parts of the
original post and repeatedly arguing that "yes, we're a ponzi scheme, that's
why you want to get in early!"

------
MichaelGG
Their response to the front-running issues is great. "B-b-but miners _will_
behave!" and "Hey, ya ok, so that's bad but like, someone will fix it so
whatever".

------
davidgerard
yeah, not taking Emin Gün Sirer critiques seriously is not the sort of thing
that works out well in cryptos.

~~~
Bartweiss
He's often wrong on the market (infamously told people to sell Bitcoin at like
$100), but that mostly seems to be about underestimating optimism. On tech
critiques like this... well, he predicted the DAO attack in such detail that
people accused him of being the one behind it. Seeing a non-response to Sirer
here seems very, very bad for Bancor.

~~~
davidgerard
yeah, when a computer science professor calls you out for rolling your own
math routines ...

~~~
Bartweiss
Yeah... they had a partial defense there - the simple functions like add and
subtract called existing functions with some wrappers for overflow issues,
which they claim is standard practice for Ether (I wouldn't know). But the
defense of exponentiation was just "there isn't a good one yet, so we built
our own, and according to some tests we didn't show anyone it looks fine".

------
davidgerard
The first-up response was on Twitter:
[https://twitter.com/BancorNetwork/status/876934646344404992](https://twitter.com/BancorNetwork/status/876934646344404992)
[http://archive.is/75Gqk](http://archive.is/75Gqk)

"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)

------
redm
After reading the comments on HN, this response is so flawed and disliked that
the next post may be:

'Offical Response to the flawed "Bancor Is Flawed" Official Response'

------
simias
I'm flabbergasted by these ICOs and the monetary values associated to them.
But that's just the tip of the iceberg really.

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](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/](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.

------
wbl
There is a very simple way to settle this argument. Anyone want to break the
Bancor and give Cyber Wednesday a new meaning?

------
jstanley
> Should all token development stop now that we have ETH? Should ETH never
> have been created because we had BTC? Should BTC never have been created
> when the USD was already a liquid medium of exchange?

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.

~~~
johnnydoebk
> Ethereum was created because it isn't possible to do Ethereum with BTC.

I don't think that is true. You can absolutely reuse BTC for your so called
"smart contracts".

~~~
rhart92
That's not entirely true. Bitcoin's scripting language is not Turing complete,
among other limitations that Ethereum addresses.

[https://github.com/ethereum/wiki/wiki/White-
Paper#scripting](https://github.com/ethereum/wiki/wiki/White-Paper#scripting)

~~~
BaronSamedi
It is true that Ethereum has a more powerful scripting language. The real
question, however, is if that feature has practical value.

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.

~~~
rhart92
I agree that it is still an open question whether the EVM will have profitable
applications. I lean towards yes.

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.

~~~
richardknop
I would lean towards no but perhaps I will be surprised.

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.

~~~
BaronSamedi
I agree with you. I wonder if the best use case for ethereum scripts is
actually with private block chains. For private chains the trust problem with
external input to the scripts (which is needed for any serious dapp) would be
minimized.

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.

------
Outrageous
What is wrong with the Bancor team defending themselves from unjustified, and
close to vulgar, criticism? They gave very clear arguments, and you try to
turn it into an emotional fight.

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!

