Bancor protocol’s token conversion attracts interest

It has been a hectic few months preparing Bancor protocol for launch but the period also taught product architect Eyal Hertzog a few lessons.

Mr. Hertzog described the last few months for Bancor as a “long sprint” as the platform is now live and has added 40 different tokens to its network.

Eyal Hertzog

Eyal Hertzog

“Many more will be announced,” Mr. Hertzog said. “We have been growing the network. This is putting the theory to practice and see it works.”

Those companies are attracted to a system of token conversion that is disconnected from volume, Mr. Hertzog explained.

“There is guaranteed liquidity all of the time for all tokens (on the exchange), at a predictable price. It’s a completely different system, not an order book, bid/ask system.”

Smart contracts allow users to own pieces of independent programs where no one central body controls its movements. Any company that can link to a smart contract and stake enough tokens to ensure its liquidity at all times is accepted on Bancor.

As the blockchain community debates ways to grow its use, different opinions exist about how to promote it and to whom. Do everyday people even need to know what the blockchain is, never mind how it works?

Like teaching children

They do, but only to a point, Mr. Hertzog believes. He likens it to teaching his three children, ages 18 months, six and nine, about the internet.

“I say it connects people on earth 24-7 through a network so they can communicate directly, produce videos, publish games and do other things. This is the level at which people need to understand the blockchain.”

But if someone truly understands the basic functions of distributed databases they can envision the impacts they can have, Mr. Hertzog said. Important databases usually require a central authority such as a corporation or government agency to manage.

The fate of all stakeholders hinges on the decisions that body makes. A national central bank prints more money to meet its obligations, causing inflation to skyrocket. A corporation rewards its executives with bonuses as profits sink and layoffs occur. Distribution keeps decisions transparent and encourages accountability.

Mr. Hertzog conceded steep price drops on many cryptocurrencies are an important test of how strongly adherents believe in them. While he revisited the past few weeks in his thoughts, his beliefs never changed. A friend of his with an ICO advisory firm happily bought low and did quite well.

Core appeal hasn’t changed

Beyond price fluctuations the core appeal of cryptocurrencies and the blockchain hasn’t changed, Mr. Hertzog said.

“Its significance (in many areas) is so clearly growing now that I have no worries about the price.”

Blockchain’s potential impacts are widespread, but are there threats that could keep it from getting there?

Regulation is one often cited but that too elicits different shades of a similar response. Some suggest regulators are a hands-off approach for the short-term and let the industry create a solid foundation. The time allowed to do that will depend on how bad the worst actors are and when they force regulators to act. The clock’s ticking there.

Mr. Hertzog said FINMA, Switzerland’s Financial Market Supervisory Authority recently released guidelines on ICOs. It suggests weighing each ICO on its own merits and clearly delineates between payment, security and asset tokens.

“They define what a utility token is and what it is not,” Mr. Hertzog said. “They said it is not considered a security if the token is used to access a specific product or service.”

Can’t ignore blockchain

The biggest threat may be on an individual basis for the organizations or even countries that ignore the blockchain whilst their peers happily embrace it, Mr. Hertzog suggested.

“I don’t see many forces that can stop it. Some will move forward with it and some will jump on. Some countries see potential internally and externally so it’s happening.

“It’s sad to see some countries banning it and therefore remaining in the background. It can lead to a level of economic efficiency we could not even dream of.”

Think of some the things that keep companies and countries busy such as taxes and legal issues, Mr. Hertzog said. Now imagine them powered by a free market.

“They were previously run by governments and huge monopolies. Those things can be implemented and owned by millions of stakeholders who own tokens.”

Fostering new economy

So when you invest in an ICO you are doing more than helping a company grow, you are fostering a unique new economy, Mr. Hertzog said, in comparing ICOs with venture capital.

“With an ICO it’s a new kind of entity where the money raised is not to build a company but an economy with its own online community. The standards for raising capital for a specific company typically operating within a specific economy don’t apply to building economies. It’s apples and oranges.”

Mr. Hertzog said Bancor is honoured to be one of the first companies to release a product or service following an ICO and had some advice for those still tweaking their product pre-release.

“I encourage all projects to release soon and release often. There is nothing like getting real feedback from users to develop any product. We appreciate all feedback we get.”

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