ruletheworld

Sep 102017
 

Promote Your ICO

This is a guide on how to promote ICOs for creators. ICOs are all the rage at the moment, and there are many promising projects out there. However, good ICO projects tend to get drowned out in a lot of noise, which makes it hard for the crypto investors to take a serious look at your project. To promote your ICO to the crypto investor community, you will need to stand out from the crowd and do things differently. This guide will help you to learn how to promote your ICO and run a successful ICO campaign. The information comes from observing several scores of ICOs go through the process. We then distilled down the components of a successful raise versus an unsuccessful one, and figured out the key components of what makes an ICO successful. Here are the tips to help market your ICO to crypto investors.

Tip-1: Have a genuinely good value proposition for investors

This seems like a no-brainer, but you’ll be surprised by how many ICO teams don’t think about what’s in it for the investors. Remember, like any investing, the people are putting money into your idea and they may lose it all. The crypto investors know this all too well. However, as the creator of the ICO, it is your duty and responsibility to minimize the chances of failure, and provide investors a way to increase their chances of success. In case the product is successful, then the investors who put money into the ICO should be rewarded.

Don’t create unnecessarily large incentives for the team and advisers. You should aim to give away more than 50% and usually up to 80% of your tokens to the ICO investors because they are taking a huge risk. If you have inflation, make sure it makes sense and is used sensibly to improve chances of a successful product.

Make sure that if the protocol is successful, then the value flows to the ICO investors, i.e. they share in the project success.

Tip-2: Fill in the essentials: Whitepaper, Roadmap, and Team

Don’t skimp on this aspect. Think of what a venture capitalist would look at – team, vision, future of the industry and market dynamics, team dynamics, etc. These are all the elements that crypto investors look for as well. Therefore before you promote your ICO, you should get the basics right. Make sure your whitepaper is thorough. Whitepapers are not marketing documents. You need to provide all the technical details of the project in this document.

There needs to be a clear roadmap on where you see the product and protocol and how it evolves over time. This needs to be commensurate with your ask from investors, i.e. how much you’re looking to raise in the ICO. Make sure these are congruent and not ridiculous money grabs.

Finally, make sure the team is solid and that you have at least one serious blockchain developer. You also need members of your team to be proficient in your market/industry with experience. Highlight these experiences. Have a bio for each member of the team and what they bring to the table.

Tip-3: Use Bounties to Reach the Community

Now let’s get into the strategic aspects of how to promote ICOs. You will need to reach the community, and one proven way is via bounties. This almost always happens on Bitcointalk forum’s bounty section. It is usually better to hire a bounty manager and pay him a decent amount to manage and run the bounty on your behalf.

Also, you need to structure the bounty correctly. You should allocate a minimum of 2% for all the bounties. The most returns are obtained for Bitcointalk signature campaigns and articles/blog campaigns. After that come the social media campaigns like Twitter and Facebook. Pay more attention to Twitter than Facebook because that’s where the community really engages. Finally, have decent bounties for translations and community engagement in those threads. You can also use the Viral Exchange for running your ICO bounties.

Tip-4: Advertise on Authoritative Sources

Advertising is another way to reach the community. There are several ad networks you can use. CoinURL is perhaps the oldest ad network in the crypto space. There’s also BitMedia and CoinTraffic that are coming up now. CoinTraffic has pop-under ads on some of the most prominent sites like Coinmarketcap.

Tip-5: Engage with the Community

There’s no substitute for engaging with the community. Your best bet to promote your ICO to the crypto community is via Slack, Reddit, and Twitter. Focus on these three and other platforms like Facebook can take a back seat. You should reply to community questions and concerns promptly. Hire a crypto social media manager if you need to. If you do this, make sure the person is well versed in the crypto space. This is essential, as regular social media folks don’t tend to understand just how unique crypto communities are.

Photo Credit: mkfeeney

Aug 312017
 

This is a sponsored post by HydroMiner

A new day, a new initial coin offering. But this time one that looks very prospective: HydroMiner.org; mining in the Austrian Alps! They are already listed on various ICO lists. So let us begin:

What is HydroMiner?

HydroMiner is a crypto currency mining company using green energy drawn from hydro power stations in the Alpine region of Europe. Hydropower is generally thought to be one of the most effective and lowest-cost renewable energy resources. It is environmentally friendly, carbon-neutral and natural. Hydro power allows them to manage resources sustainably and enables low-emission production.

Not only is hydro power mining ecologically friendly, but it is also profitable.
Expected ROI = 8 months.

What is the current status?

The mining roots of the Damblon sisters go back to 2015, when they built their first rig. Since then they have managed to scale the operation by renting out two hydro power plants and connecting more than 1000 GPUs in sea fright containers.

Why an ICO?

This initial coin offering is about scaling the mining operation by acquiring more hydro-power-plants and thus enabling eco-friendly mining and profits for investors.

So the token created out of the ICO will be used to generate a % for the token holders. On the same time the HydroMiner team will get a 10% of this profit. For this to be fair, the team behind HydroMiner will be:

  • Ordering Equipment
  • Assembling hardware
  • Maintaining and renewing the hardware
  • Identifying and leasing new hydro power stations

H2O Tokens

Token Price
Normal (none discounted Price): 0.01 ETH

Presale
Start: Monday, September 25, 2017 at 10:00 UTC
How Long: 1 week.
Minimum participation: $10.000
Discount for the Pre-Sale: 25%
Token Cap: 500.000 H2O Tokens (1.500 ETH)

Their Initial Coin Offering (ICO)
Start: Tuesday, October 3, 2017 at 10:00 UTC
How Long: 5 weeks
Minimum participation: 1 Token
Discount for the ICO: From 20% to 0%

  • Week one: 20%
  • Week two: 15%
  • Week three: 10%
  • Week four: 5%
  • Week five: 0%
    Token Cap: 25.500.000 H2O

Timeline

To get posted upon news, subscribe on their form over at their website https://www.hydrominer.org/token-sale/

Aug 312017
 

This is a paid press release.

SRG

SRG is planning to redefine the online gaming loyalty platform powered by the Blockchain technology. The company announced its ICO launching on 04th of October 2017. SRG tokens will be issued exclusively during the ICO period, entitling contributors to receive a share of the distributable profit of the SRG Community.

The volume of the global e-commerce market in the online games segment was 95.2 billion USD in 2016 and is growing rapidly. It will sound so sweet if percentages of the budget go to developers’ or gamers’ pocket instead of being spent in costly marketing activities. SRG is determined to make this happen by introducing the first decentralized intra-gaming platform with a loyalty program and a referral system using Ethereum smart contracts.

Customer loyalty and engagement can make or break companies and SRG understands the need of creating new ways of attracting and retaining players. SRG is  here to help game developers to save marketing costs and players to get extra income, it is going to be a real deal in the online gaming industry.

SRG is innovative by taking advantage of Blockchain technology to redefine gaming loyalty programs, it is absolutely different than other existing reward programs and it is going to be evolutional. It uses crypto to reward referrals and increase engagement with the platform and it unifies all programs for an interlinked loyalty network across online games.

The company is already working with Mail.Ru Group, an international technology company with a portfolio in online games and with other game developers like Saber, T-bull and Lucky Kat.

As the Ethereum blockchain improves, we will actively use the emerging capabilities of the network. This will allow us to make SRG the most reliable and large-scale decentralized referral system in the world of online games. Today we give you the opportunity to join the SRG Community during the ICO period and share our success.” – SRG CEO Nikita Petrov

SRG also contributes to the growth of the Ethereum community, since all payment operations will be done via Ethereum network and all referrals will create their own Ethereum Wallet. According to SRG forecasts, more than 11 Mln new wallets will be created by SRG Community members by 2019.

ICO

SRG  ICO is going to run on 4th of October 2017. The SRG token is a token issued exclusively during the ICO period, which entitles token holders to receive 50% of SRG’s profits every six months. In total, 12,000,000 tokens will be launched and will be sold for USD $2 each.

Raised funds will be used for releasing the complete platform, attract new game developers into the SRG Community and developing the worldwide market. For more details visit srg.io.

About SRG

The SRG team is led  by professionals who have had extensive experiences in the marketing industry. CEO Nikita Petrov is an expert in developing loyalty programs and analytics of the mobile applications market. BDO  Sergey Cheshunas is the director and founder of a large Moscow digital agency. Project Manager Alexander Fominykh has extensive experience in managing and conducting IT projects.

SRG’s mission is to unite a target stream of players by connecting small gaming communities so no one will be left alone. Developers can devote their energy to improve on the games instead of attracting the traffic, good games will earn their own reputation with this new system. The SRG Community project is an application that will be integrated with both PC and mobile games. The development began in August 2017.

 

Learn more about SRG at – https://srg.io

Follow on Twitter at – @srgcommunity
Follow on Facebook at – @communitySRG
SRG on Medium – @srgcommunity
Media Contact
Contact Name: Petrov Nikita
Contact Email: nikitavaisberg@gmail.com
Company: SRG Limited

Aug 312017
 

This is a paid press release.

29 Aug 2017, Singapore and Kyiv, Ukraine – Hacken, the cybersecurity marketplace for bug bounties, announces its token sale, scheduled for 12 October, 2017. The project aims to create a collaborative defense ecosystem for  White Hat Hackers and the Blockchain community.

Cybersecurity and cryptocurrencies are some of the hottest topics right now. According to CyberSeek there are more than 348,000 open cybersecurity positions in 2017, and this number will be up to 1.8M by 2022. However,  there is not enough supply to meet the high demand in the market for penetration testing and bug bounty programs.

HACKEN ECOSYSTEM

HACKEN is building a sound regional cyber defense system custom tailored for the Blockchain. One which will adjust itself to the cyber challenges that will undoubtedly appear within the next decade. The company will use Blockchain technology and smart contracts to store product data, to conduct research audits and to issue HackenProof Vulnerabilities and Countermeasures Certificates.

Hacken aims to bring cybersecurity professionals together by providing incentives for doing business with one another and for investment in cybersecurity startups. These people will need to communicate and interact with each other in order to make use of their Hackens. The more vibrant the community is, the more value it delivers to each member.

The Hacken Accelerator, is an initiative started by Hacken in collaboration with 1991 Incubator. The startups will be mentored by the pros of Ukrainian and global cybersecurity companies.The six-month, mentor-driven accelerator program hopes to address the shortage of practice and piloting, as well as sustainability of cyber startups in Ukraine.

Hacken Proof is a bug bounty marketplace platform created by white hat hackers and the blockchain community based on the principle of fair share.This is a place where the two communities can cooperate and support each other. The purposes of this cooperation are high quality penetration testing and vulnerability reports for a premium fee paid to community members submitting these reports.

HKN Token

The Hacken Token can be used within the Hacken ecosystem  to make new investments via Hacken Accelerator and orders via HackenProof, Unreported Zero-Day Remuneration Platform, Cybersecurity Analytics Center. Community members will also get rewarded in Hackens, which provides positive liquidity and low volatility.

Hacken is the first custom-tailored decentralized token for cybersecurity professionals. The Hacken is a  constellation of businesses providing services which can only be received by using HKN as a payment instrument. 20 Mln HKN tokens will be mined and available for sale at $1.00 per HKN. Purchases options will include BTC, ETH, DASH, LTC, USD and EUR. For more details visit hacken.io.

“The alternative we are promoting is launching a legitimate business and halting being dependant on the Don who pays for petty dirty jobs. Boosting expertise in this area is a matter of survival for European countries. We also want to make sure to give back to the community, by supporting HackIT Competitions and by creating a Cybersecurity Analytics Center” – Dmytro Budorin, CFO

Bright leadership together with strategic partnerships will be supporting the future of the HACKEN. It’s outstanding leadership include Dmytro Budorin (CFO and Lead Manager of Hacken)  one of the top executives within Ukraine’s military defense industry and ACCA for Deloitte for 8 years and Mykyta Knysh (Community Director), who is the cybersecurity advisor to the President of Ukraine and specialized in defense services and training.

Hacken has also teamed up with advisors experts in this field. Ambisafe is the technological advisor in the venture. Oleksii Matiiasevych, EDCC architect at Ambisafe is directly involved with White Hat Hack activities. On July 19, 2017, Oleksii discovered a critical vulnerability during the Parity Ethereum wallet Attack and together with the White Hat Group, he ended up saving $1,4 Mln worth of Ethers from the compromised wallets.

“The ultimate goal of the Hacken ecosystem, is to create a generation of hackers to whom what Oleksii did is entirely normal, the only acceptable life scenario” said Vladimir Taratushka, HackIT conference director and member of HACKEN team.

About Hacken

Hacken Ecosystem is to lay down a framework for creating a stable means of income and financial incentives for its members.

Created to stimulate the emergence of this vibrant cybersecurity industry, our mission is to develop a resourceful and ethical expert community. Our vision is to launch a movement, that in several years will become an important factor in deterring and countering international cybercrime.

Learn more about HACKEN at – https://hacken.io/
Follow on Twitter at –  @hacken_io
Follow on Facebook at – @hacken.io
Join the discussion on Telegram – @hackenio
Media Contact
Contact Name: Dmytro Budorin
Contact Email: dbudorin@gmail.com
Company: HACKEN

Aug 262017
 

This is a paid press release from Worldcore.

Worldcore announces an Initial Coin Offering (ICO), as part of their wider expansion plans. The company envisions to become a worldwide reference for the financial tomorrow, by integrating its successful payment solution into the blockchain sector of economy. WRC token will become your pass to the new world.

Worldcore ICO starts on October 14 of 2017. In total, a maximum supply of one billion WRC tokens at $0.10 USD each, will be available for purchase. WRC tokens will be backed by a Smart Contract guaranteeing annual revenue share from a well-established rapidly growing business which already passed break even point.

Since its launch, Worldcore’s notoriety has been recognized across many Fintech events in the European Union as an active participant and sponsor. The company won the “Best Fintech Newcomer” Banking Award by Business News Europe, in 2016. The same year, the company has partnered with BitPay, and is now offering crypto-currency withdrawal solutions to thousands of customers around the world.

Worldcore has also become a National Finalist of Central European Startup Awards 2017.Already a successful company, Worldcore is always on the quest to find new ways to improve.

Driven by its mission to revolutionize the fintech industry, the digital institution will gradually integrate Blockchain products to its established portfolio. Such products will include a regulated blockchain powered P2P lending platform, a Blockchain based cash transfer payment platform for easy and instant conversion of cryptocurrencies into cash and vice-versa,Worldcore TV and transformation into a Swiss bank with further IPO on London Stock Exchange.

Worldcore’s CEO Alexey Nasonov was listed in Europe 100 list of changemakers in Central and Eastern Europe by Financial Times. The founder addressed the upcoming ICO:

We became the №1 company in the Czech Republic and I am sure that in the next 2 years we will enter the top 20 in Europe. Worldcore’s ICO is a history in the making . By buying WRC tokens, you will make history and earn with us as well.

Traditional banking services are still offered today, showing impressive lack of technological innovation. Customers dealing with traditional banks still have to visit the bank to open an account, they face monthly maintenance fees. And even by offering complex banking products, they do not cater to each individual need, nor do they offer solutions for the new digital era, such as cryptocurrency conversion and biometrics authentication.
By opening the international marketplace to consumers and businesses that are not served by legacy banking and seek cost-effective, progressive financial products. Worldcore brings together technology, capital and financing acumen to become the new name of the financial tomorrow.

Worldcore’s established products portfolio for businesses and individuals can be viewed at https://worldcore.com/. Learn all about the venture and our roadmap by accessing our Whitepaper here.

ICO

Worldcore has set a goal of up to $100 million, which it’s planned to raise through the ICO, starting on October 14,2017. Presale phase with minimum purchase of 500,000 tokens starts on October 2, 2017. The funds raised during the ICO will be utilized for the development and promotion of the digital bank’s blockchain project. Users will be able to purchase tokens with Euros, US Dollars and cryptocurrencies.

About Worldcore

Worldcore is an EU-regulated payment institution, founded in 2014. The Company is headquartered in Prague, Czech Republic. The brand is owned and operated by EUPSProvider s.r.o., a company licensed by the National Bank of Czech Republic.

Worldcore an alternative to bank which combines features of modern banking with cutting-edge security and latest technological advances. The Blockchain integration project, will serve our mission of a fully digitalized ecosystem, enabling blockchain asset trading, P2P lending platform and Blockchain-based international cash money transfers.

Contacts

Learn more about Worldcore at – https://worldcore.com/
Follow on Twitter at – @worldcoresocial
Follow on Facebook at – @worldcoresocial
Join the discussion in Telegram – @worldcore
Worldcore on Medium – @worldcore
Media Contact
Contact Name: Sean Patterson
Contact Email:  pr@worldcore.eu
Telegram: @worldcore
Company: Worldcore
Location: Prague, Czech Republic

Jul 272017
 

This is a sponsored post

Normally when you hear about transaction fees, you associate them with a large national bank or banking conglomerate that attaches arbitrary fees to transactions for no real discernable reason. Bitcoin is not centralized to any one government, therefore it skates by without transactions fees being applied by the merchants and business that allow cryptocurrency transactions, such as online retail sites, travel agencies and gambling sites that accept Ethereum and bitcoin. These e-commerce markets trade goods and services for crypto and charge no fees in the transaction. The only fees that are common with Bitcoin and other digital currencies are a result of how the currency is mined and recorded into the blockchain.

First, I need to explain a little bit about how bitcoins are mined for us to really understand where these transaction fees come from. Each bitcoin transaction comes with a transaction fee that is both processed and received by the miner. The miners themselves utilize powerful computers built specifically for mining bitcoin. These computers are what makes up the network. They make the decisions on what transactions to add into the blockchain and in what order they will be included. They make those decisions based on several factors and one of the most significant ones is how big the mining fee is.

The miners themselves go through the effort of mining bitcoin because it promises financial reward. Every time a new block of transactions is recorded and included into the blockchain, the miner that was responsible for it collects a bounty in the form of new bitcoins. This is how each bitcoin is created. The miners then keep the fees and are incentivized to comprise their blocks with transactions that have higher fees. You can see the fees that have been paid out by the difference in the inputs and outputs of your transaction details. The larger the transaction, the larger the fee that should be associated with it.

Typically, it’s the sender who pays the fee and they can choose to pay as little or as much as they would like.  The bitcoin miners never have to accept and mine a transaction just because it is out there so the fees turn into a way to incentivize the miners to include these transactions into their block. This then turns into a decision for the miner that’s made based off of the time it would take to mine the block and the amount a miner would receive in fees for doing so. Larger transactions require more time to mine and are sometimes not worth the work if they have less than the recommended fees associated with them. Some people may pay a higher than average transaction fee in order to see their transactions on the block in a shorter amount of time.

Jul 112017
 

This is a guest post by Anupam.

Bitcoin has been on a wild ride since the beginning of 2017. It started the year off trading at around $900 and has since tripled in less than 6 months. With daily volumes at over $2 billion, the currency shows no sign of slowing down.

India has always been an interesting region for bitcoin. Even though people at large are still unaware about the cryptocurrency, the small number of people who do understand and are interested in Bitcoin has been growing rapidly.

According to the Economic Times (a leading Indian newspaper), there are more than 2500 Indians investing in Bitcoin every day, despite the warnings from the central bank. It is important to note that buying bitcoin in India is legal. However, it is not regulated by the central bank, the Reserve Bank of India (RBI).

On December 24, 2013, the RBI issued a press release on virtual currencies (like Bitcoins, Litecoins, Ethereum, Dogecoins, etc.) stating that creation, trade, and usage of virtual currencies as a medium for payment is not authorized by any central bank or monetary authority.

After the recent wannacry attack, Indian government finally looks serious to tackle bitcoin and other cryptocurrencies. Last month, they sought public opinion on whether or not to regulate bitcoin. It seems like the government is in the process of drafting regulations around cryptocurrencies.

Regardless of what government comes up with, there is no way they can completely ban bitcoin. People are buying bitcoins in India and will continue to do so.

Up until two years ago it wasn’t very easy for an average Joe to get hold of bitcoins in India. Today, however, there are several exchanges from where Indian citizens can legally buy bitcoins. Few exchanges outside of India also let Indians buy bitcoin.

Bitcoin Exchanges in India

Zebpay

Zebpay is the largest Indian bitcoin exchange with daily volumes hovering around 4000 bitcoins. It has Android and iPhone apps that make it easy to buy bitcoins with a connected Indian bank account. Zebpay charges a minimal amount of INR 10 on every withdrawal.

Coinsecure

Coinsecure provides an interactive trading platform along with the exchange. The transaction fee is 0.3%.

Unocoin

Unocoin is another great exchange but their prices are usually a bit higher compared to other exchanges. They charge 1% fees on every transaction.

Pocketbits

Pocketbits is a new player in the market. Founder of the exchange is very active in buying and selling bitcoins on localbitcoins. They are super quick with verifications and deposits.

Local Bitcoins

LocalBitcoins is an escrow service which helps to match buyers and sellers. In India, the most common method of making the payment is IMPS transfer. It’s easy and quick. With LocalBitcoins you don’t need to go through any KYC process. Just select a reputed seller and buy bitcoins.

You may also find people willing to meet you in person to do the transaction. These meetings are not facilitated by LocalBitcoins in India.

Bitcoin Exchanges Outside India

Coinmama

Coinmama allows customers to buy bitcoins from any country including India via debit or credit card. They charge a ~6% fee on every purchase. You don’t need to verify your identity if you’re buying less than $150 worth of bitcoins.

BTCC

BTCC is based out of Hong Kong and let’s people trade in USD. You will need to wire USD into your BTCC account in order to buy bitcoin from the exchange.

ShapeShift

Shapeshift lets you buy bitcoins with altcoins like Ethereum, Litecoin, Dogecoin etc. You never need to create an account on Shapeshift. Exchanges happen almost instantly because ShapeShift never actually controls your tokens but simply exchanges them.

Conclusion

After the demonetization scheme, there is a sudden push by the government to move towards a cashless society. The move has made people in India to look at bitcoin as an investment opportunity.

India also has one of the largest remittance markets with a total value of more than $70 billion. A user generally ends up paying up to 15% in bank charges and conversion fees. This is where bitcoin’s true potential lies – quick transfers with negligible fees.

Clearly, the adoption of bitcoin is at a steady pace in the country. Only the time will tell if it can go mainstream.

Jun 172017
 

This is a sponsored post by FunFair

Funfair.io is a decentralized Ethereum based Casino platform. We’ve created a browser-based online gaming platform that utilizes the HTML5 and WebGL standards on both mobile devices and desktop computers to provide the rich 3D graphics to deliver a highly polished fast and responsive user experience that players of app-based games are used to.

Funfair.io Website: https://www.funfair.io/

Funfair.io Crowdsale Details: http://www.funfair.io/crowdsale/
Funfair.io Slack: https://funfair-slackin.herokuapp.com/
Funfair.io Twitter: https://twitter.com/FunFairTech
Funfair.io Bitcointalk: https://bitcointalk.org/index.php?topic=1968383.new#new

Demo (Long version) https://youtu.be/rQQcyLnV28Y
Demo (short version) https://www.youtube.com/watch?v=6O3ySQSBSY8

Token Supply
Caps: 5 Billion Soft, 12.5 Billion Hard

FUN Creation will end 12 hours after 5 Billion FUN are issued or on July 7, 2017 at 14:00 UTC (2017-07-21T14:00:00Z), whichever is soonest. If 12.5 Billion FUN are issued, the creation period will end immediately.

Please note that FUN created with ERC20 contributions will not count toward the cap – many ERC20 tokens are too illiquid to provide fair pricing during a token event.

Token Creation Rate
100 FUN will be issued per 1 US Dollar equivalent received

Bitcoin, Zcash, Ether and ERC20 contribution prices will be fixed for the duration of the token event. Finalized prices will be published at or slightly before 1300:00 GMT June 22, 2017.

Accepted Currencies

  • ETH
  • BTC
  • ZCASH
  • Selected ERC20 tokens (to be announced closer to token event)
  • Fiat

Bonus Structure
Those who contribute during the first $5m USD raised will receive up to 50% in additional FUN tokens, as per the table below. Bonus Tranches will be calculated by summing only the Ethereum contributions made to the crowdsale contract. There will be five bonus tranches.

  • $0 to $1 million: 50% Bonus
  • $1 million to $2 million: 40% Bonus
  • $2 million to $3 million: 30% Bonus
  • $3 million to $4 million: 20% Bonus
  • $4 million to $5 million: 10% Bonus
  • $5 million or higher: No Bonus
Jun 042017
 

Bancor Token Exchange

This is part-2 of our series exploring the new Bancor protocol. You can find part-1 here, where we discussed how the Bancor protocol allows for the proliferation of user-generated tokens while providing the tokens liquidity at the same time through a decentralized exchange on Ethereum via the use of smart contracts (so no counterparty risk like in an exchange).

Here, we discuss how the Bancor protocol can be used for the decentralized token exchange economy not just for newer community-type tokens, but for well-established crypto-tokens on Ethereum as well. We’ll also talk about how this ties into the token asset management space that other projects like Melon and working on.

First, let’s talk about creating a decentralized exchange via the Bancor Protocol.

Decentralized Exchange via Profit Arbitrage

There have been several attempts at creating decentralized exchanges. Many of them rely on external gateways that transfer the assets on the blockchain into ‘real world’ currencies. However, these still have a counterparty risk involved. These include examples like Waves or Bitshares that have a “DEX” (Decentralized Exchange) built into their products, but with the use of external gateways.

However, what Bancor is building is something different. It has the elements of price discovery outside of the decentralized exchange, which then drive the price discovery on the blockchain. The actual exchange mechanism itself is completely decentralized, and doesn’t rely on any external third-party ‘guaranteeing’ assets on the blockchain to be a certain value.

The way this works is through simple price arbitrage. There’s a smart contract that triggers the exchange of one crypto-asset into another. If the relative prices go out of whack by a lot, then arbitrageurs enter the market, and buy the relatively undervalued asset while selling the relatively overvalued asset, while offsetting their positions with the external exchange. This is the key to how the Bancor protocol enables decentralized asset exchange. The smart contract itself has no concept of a price. Instead, the assumption is that the price is determined not by price feeds but by arbitrageurs who have an economic incentive to get the prices in balance, otherwise they can make a riskless profit.

In terms of the actual implementation, like with Token Issuance, there is a certain amount of crypto-assets in reserve. However, these are full reserve as opposed to fractional reserve, and there are two crypto-assets instead of one. Now you’ve created a trading pair. No need of any external exchange.

I believe another important characteristic of the Bancor Protocol is that it enables the creation of new asset pairs that is market determined as opposed to exchange determined. Today, say if you want to use Augur as your base trading pair, you’ll be hard pressed to find an exchange offering you Augur trading pairs. However, with Bancor, you can easily create one by keeping Augur and another crypto-asset fully backed in the smart contract. This way you’ve created an Augur trading pair.

Asset Management and Crypto-ETFs

Another less appreciated aspect of the Bancor protocol is that it enables the creation of crypto-ETF like assets, without any centralized trust component, i.e. only via smart contracts. This will become increasingly important as crypto-assets become a genuine asset class on to themselves. The way Bancor envisions ETFs is the creation of multiple reserve assets in the smart contract, with a 100% backing instead of fractional reserve.

These smart tokens will become an essential part of the portfolio from an investment point of view. Already, companies like Iconomi are working on creating crypto-index funds. However, the ICNX that is created by Iconomi is completely centralized. With the Bancor protocol you can do the same (although for now only with Ethereum-based tokens) in a decentralized manner and just hold units of account in the smart contract that contains the tokens in reserve.

I predict that ‘theme-based’ investing in crypto will become common too. For example, think prediction markets will be the next big thing? There will be a crypto-ETF with Augur’s REP and Gnosis’ GNO tokens. As the scope of projects keeps expanding, this will become more important for investors that don’t want to take chances on individual companies but instead on the market potential.

Photo Credit: normanack

Jun 012017
 

Bancor Protocol

Bancor is building a really interesting economic framework that would make it easier to obtain price discovery for thinly-traded tokens. The goal of the Bancor Protocol is to allow for the creation of whole new types of token economies that may never otherwise have a price, because exchanges aren’t interested in adding thinly traded tokens. With the implementation of the Bancor Protocol, tokens can already have a source of price discovery and liquidity without there being any need to add them on external exchanges.

Economics of Token Issuance

At the heart of the Bancor Protocol lies a smart contract that is able to exchange specific crypto-tokens (called ‘Smart Tokens’ in the whitepaper) for an underlying asset. An important point to remember is that the underlying isn’t tied one-to-one to the Smart Token. Instead, only a certain reserve ratio is in place.

If there is a token issuance that uses the Bancor protocol, the following are the key parameters –

  • Money in Reserve – this is ETH or an ERC20 token in reserve with the smart contract. It can also be a combination of one, two, or many of these tokens.
  • Reserve Ratio – this is the ratio of reserves (in the form above) held in the smart contract. For example, if a Smart Token has a supply of 100, with a total of 100 ETH priced in, and an ETH reserve ratio of 25%, it means 25 ETH will initially sit in the smart contract.
  • Smart Token Supply – this is the total supply of the smart tokens being issued. In the example above, since we issued 100 Smart Tokens, that’s the total token supply.
  • Theoretical Total Reserve – this is the theoretical limit of ETH or another ERC20 token backing the Smart Token Supply. Note that this is simply given as the actual Money in Reserve divided by the Reserve Ratio. In our example, 25 ETH is the money in reserve, and the Reserve Ratio is 25%, so the Theoretical Total Reserve is 25/0.25 = 100 ETH.

It is important to note that the Theoretical Total Reserve described above is not the amount sitting in the smart contract. The smart contract only has this amount multiplied by the Reserve Ratio. The idea is that of a fractional reserve – in efficient markets, the reserve would never go dry because the price adjusts depending on the interaction with the smart contract (we’ll discuss price discovery and price movement mechanisms below).

If the Reserve Ratio is 100%, then the token and underlying would move together, i.e. if you issue 100 tokens backed by 100 ETH in the smart contract that can be withdrawn at any point of time, then the downside is limited to 1 token per ETH. However, things start to get interesting when the Reserve Ratio is less than 1.

Pricing and Economics Between Reserve Tokens and Smart Tokens

Before we discuss pricing-specific details, let’s outline why you would like to have a Reserve Ratio of less than one in the first place. Say there’s a token sale that raised 1000 ETH. The team can announce that 25% of this will be held in reserve, and the rest 75% will be used for their operating and capital expenses. This causes the price of the Smart Token to instantly float against ETH. Say 10,000 Smart Tokens were issued, which would mean a price of 0.1 ETH. Now due to there being a reserve, although the initial price is 10 Smart Tokens per Ether, the actual price can float even without it being added to external exchanges like Poloniex or Bittrex or even decentralized exchanges like EthDelta or Waves/Bitshares DEX.

So how does it work? Simply put, each time you buy the Smart Token by paying ETH into the smart contract, the price increases. Each time you sell the Smart Token and take ETH out of the smart contract, the price decreases. The magnitude of the increase or decrease is independent of whether you do one transaction or break it up into multiple transactions. This way, if there’s demand for the Smart Token, you can simply get it by exchange ETH from the smart contract. The price the smart contract quotes you is a cumulative value calculated based on all the previous buys and sells in the past.

Things get more interesting when external exchanges also list the Smart Token. Now there is a clear arbitrage opportunity between the floating exchange rate quoted by the smart contract and the exchange rate on exchanges. People can buy the Smart Tokens from two sources, and in efficient markets, the prices would come to parity. If not, someone can exploit the arbitrage opportunity and make a profit.

Bancor has some really interesting economics and game theory behind it. We look forward to the product being released and see how it affects the token issuance market.

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