Topic: [ANN] Bancor | Protocol for Smart-tokens, solving the liquidity problem - page 474. (Read 375656 times)

did you maybe run a simulation that determines its not a correct input? they might be doing things differently than how trade and liquidity works now but that doesn't mean its not a valid way of doing it in their system.
if you do have some way of proving its not a valid way i'd like to have a look been following them for a while now, seems solid so far.

I pointed out this concern above. The problem is a lack of data about the value of the altcoin in question, due to low liquidity. I contend that it is impossible for a formula to determine a reasonable value. It says in the white paper the input to the formula is historical trade information, but that is not a correct input to use, in fact there is no input that makes sense.

We will disagree as we are too fundamentally opposed on this issue and I wish you the best of luck.  You are trying to improve liquidity in altcoins which i believe is admirable.  I just believe that in altcoins the illiquidity stems from the lack of demand and your mechanism cannot solve for that.  If I want to purchase almost any altcoin I can find off market liquidity very easily, there is just no demand for most if I try and sell.

Bid/Ask is not a "Function", rather, it is a mechanism for liquidity and price-discovery. The point we are making is that this is not the only single possible mechanism, and definitely not the best one for every use-case.


This is incorrect. How can you buy a token which doesn't trade on major exchanges? Your ability to buy the token is a function of the ask orders in the exchanges, just as your ability to sell it is a functions of the bid orders. The asymmetry your describe here simply does not reflect the reality.


Illiquidity is a direct result of the double coincidence of wants problem. Just imagine a token, for which there is on average a single buyer and a single seller per week. The chances for the coincidence of matching the two are slim, and the only option would be for buyers/sellers to wait for days until a match is found, which would also result in a very poor price-discovery process. Using Bancor's reserve mechanism, the buyers and sellers would be able to instantly convert their token, and the price will be adjusted over time, by the contract, toward an equilibrium between buys and sells of the token.


This is also incorrect. The supply in the exchanges is not the same as the money-supply. Even if there are millions of coins which are issued, it does not automatically translate to ask orders in the exchanges. Additionally, Bancor-compatible tokens are self-issued according to their demand, so the arguments that "millions of coins issues" simply does not apply here.


We are not "trying to create demand", as the demand is organically created by the market. The difference is that using the Bancor-protocol, a low demand (or lack there of) is reflected in the price, which may drop to near-zero for token with no intrinsic value, however, liquidity -- which is purely a function of the chances to match two "bartering" parties -- would cease be a challenge.

I disagree with this completely.  Bid/Ask is a function of the market's supply/demand and it is the current price one can buy/sell at.  If I want to buy a coin/token that has very few holders and doesn't trade on major exchanges I can do so, selling is difficult, but that is the nature of buying something that does not have much demand and is thinly traded.  Your are trying to solve for illiquid assets, but are phrasing it in terms of coincidence of wants which is incorrect.  And with altcoins/tokens it typically is not supply which is an issue as there are millions of coins issued in each instance.  The issue is purely demand.  You are trying to create demand via a derivative mechanism.  This will only be useful though to those coins/tokens that can't support demand on their own and as there is no real demand for the coins/tokens themselves you are creating a way for those who own them to extract some value out of the derivative portion (i.e. reserves) which almost everyone will do as the coins/tokens cannot stand on their own.

Congratulations guys - was great to meet in Tel Aviv and look forward to your successful ICO! This is a killer project, long tail all the way baby!

Best

Richard Kastelein
Blockchain News

Any news when more details will come out about the specification and what you are offering in bounty. Still nothing at OP?

Hello Spyder12,

Thank you for your comment. As this is a new concept, it can sometimes be confusing, which is exactly why we appreciate feedback such as yours as it helps us to improve the system and our messaging.

Firstly, we are most certainly not trying give coins/tokens an artificial value by simply making them a derivative of something that has market value. Rather, we are leveraging the new reality of decentralized smart-contract enabled blockchains, in which for the first time in history, software agents can hold money in a trust-less environment. This enables us to address the "Double Coincidence of Wants Problem" in currency/asset exchange in a new and novel way. If a token created using the Bancor Protocol has no utility or value in and of itself, the reserve will not provide value, in fact it will very quickly be drained and the price of the token vis-a-vis the reserve currency will collapse to near zero.

As a background analogy, before the advent of writing, a Double Coincidence of Wants problem existed in the domain of information exchange between humans. You needed to be in the same place, at the same time, to share information. You could solve this problem with labor (passing information by word of mouth) but eventually writing provided a technological solution separating the moment information is produced and consumed. The same Double Coincidence of Wants exists in Barter, where the chances of finding someone with exact opposite wants in real-time is low. Money provided a technological solution, enabling the buying and selling to happen at different times with the money acting as a tool enabling barter over time and space.

However, in the domain of currency exchange, we still have a Double Coincidence of Wants, where a bid/ask is required. Exchanges/orderbooks/speculators providing matchmaking/liquidity have been the mechanism ("labor") to address this issue for the past few hundred years. However, with the advent of the Computers -> Internet -> Blockchain -> Smart-Contracts, we can now for the first time, provide an alternative, technological, solution to the Double Coincidence of Wants in the domain of currency exchange. That is the purpose of the Bancor Protocol, which proposes an alternative mechanism for real-time matching of bids and asks, while preserving basic market fundamentals of supply and demand. Essentially, each token created with the Bancor Protocol has a built-in (intrinsic) automated market maker in the form of the Smart-Contract which operates in a transparent, predictable and immutable fashion.


The price is not simply set by a mathematical formula, rather, a mathematical formula is being utilized in order to adjust the price, based on the buying and selling activity of the token, reaching an equilibrium where the two are balanced. When a buy/sell order for the token is made, the formula performs a continuous calculation that is essentially like breaking up the order into infinitely small pieces, each resulting in a new price, similar to how continuously compounded interest is computed.

For coins and tokens that have no market value you are trying to give them value by making them a derivative of something that has a market value.  Then you are trying to set price via a mathematical formula which is incorrect and not real price discovery.  Too many things wrong with this for my liking.  Best of luck to all involved.

The liquidity on the exchanges is not just a function of the utility of a coin, but also of its scale. A local currency, for example, may incentivize local commerce and be useful as well as beneficial for its users, however, it might not have the scale required for achieving continuous liquidity in the current bid/ask matching model.

Using Bancor, the demand generated by the utility of a token would definitely be reflected in its price, but not in its liquidity (or lack thereof). The removal of the critical mass barrier to liquidity is important not just for the long-tail of currencies, but also for the newly issued that are still in their early growth phases.

It is clear that both liquidity and price-discovery can be achieved for large-scale tokens using the existing solutions, which would be like saying that true talent would eventually be discovered and featured on TV. Still, YouTube not only reduce the barrier for a talent to be discovered, but also enables us to enjoy a significantly larger variety of talents.

if you look at the math equation it seems like the more people pull the reserve the harder it will get because the reserve token will get more expensive, so at some point it wont be very helpful to pull it.

if you need german translation, pm me.

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if the coin using bancor is good, liquidity will be there on the exchanges.  if the coin is bad, the reserves are going to be eaten up pretty fast as instead of selling into bad liquidity everyone will convert their holdings into the reserve. 

We've launched a new version of the website, check it out when you have a chance and let us know what we can improve or add.

https://bancor.network

There will be escrow either with multi-sig trusted parties or using smart contracts in the case of ETH.  More details will be part of the announcement which is coming soon.

Very interesting conception.
The dev looks responsible for any kind of questions.
I will keep my eye on this.

It looks like a good project, do you plan to use escrow? Please tell us more information soon, I am interested in your campaign.

We will make an announcement about this in the next few weeks.

ah nice updated post very informative!