INITIAL COIN OFFERINGS
Bancor ICO Explodes, Cryptocurrency Networks Under Attack
by Leigh Cuen / 06/12/17
“Several blockchain networks experienced cyberattacks and outages in the past week, including the Russian cryptocurrency exchange BTC-E, as cryptocurrency prices skyrocketed. CNBC reported Ethereum’s ether tokens traded for around $400 each on Monday, up 5,000 percent since January. The blockchain startup Bancor said in a statement Monday widespread outages were caused by “overwhelming demand and traffic, and massive malicious attacks.” However, the details of Bancor’s initial coin offering glitches are unclear. A reddit user argued avoidable technical issues, not hackers, could be the driving force behind network failures.
ATTENTION: Some exchanges are currently experiencing a severe DDOS attack. Please ensure the security & safe storage of your digital assets.
— Cryptonaire (@cryptonaire_com) June 12, 2017
Either way, the hitches with Bancor’s ICO may have a silver lining. Because of it, they extended the window for investors to buy ICO tokens. Coindesk reported the Bancor ICO set a record by raising $153 million in ether from around 10,885 buyers.
Billionaire venture capitalist Tim Draper participated in the ICO and joined the Bancor advisory board, the startup’s blog said. Yet complaints about erroneous transactions still abound and some buyers are outraged. It is still unclear how, or if, the malfunction could impact the value of their tokens. “How can we trust anything Bancor says now?” a Slack user wrote on Bancor’s public channel.
BNT fundraiser live, massive attacks on network. Reports of #ethereum transactions pending. All who try 2 get in will be accepted. Stay calm
— Bancor (@BancorNetwork) June 12, 2017
Twitter users also complained one of the world’s biggest bitcoin exchange markets, Coinbase, was down again Monday after a similar outage in May. Like previous outages, the current glitches happened during a market spike as online traders rushed to cryptocurrency exchanges. CNBC reported bitcoin and ether both reached record-breaking heights this week, with bitcoin going for $3,000 at its peak.
Although blockchain currency networks are still in their infancy, they often attract hackers just like established banks and financial institutions. For example, the bitcoin exchanges Kraken and Poloniex both suffered similar denial of service cyberattacks in May. A report by the cybersecurity firm Nexusguard said the frequency of DDOS attacks by hackers increased 380 percent during the first quarter of 2017. Many cryptocurrency companies don’t have comparable security budgets to deal with hackers the way traditional financial institutions do.
— Covfefeislife (@Brians_lilLeo) June 12, 2017
However, Coinbase may prove to be the exception. CBS News reported this bitcoin exchange is eyeing a $1 billion valuation, putting it on the same tier with startups like Uber and Pinterest. Outraged Twitter users criticized Coinbase on Monday, flooding the social network with screenshots and complaints about how the company has handled this widespread network crisis so far.”
— Bancor (@BancorNetwork) June 11, 2017
USER GENERATED CURRENCIES
Israeli Blockchain Startup Bancor Raises $153 Million In Less Than Three Hours
“An initial coin offering (ICO) for an Israel-based prediction market blockchain startup called Bancor, has set a new blockchain industry record, raising a bit more than $153 million as part of a crowdsale. 10,885 buyers participated including billionaire venture capitalist Tim Draper, a long-time Bitcoinfan. Draper is contributing to Bancor and joining the Advisory Board alongside monetary and open-source technology visionaries such Bernard Lietaer and John Clippinger. Founder and CEO of eToro, Yoni Assia, joined Bancor Protocol Advisory Board last month.
According to Bancor blog, Draper has been outspoken about the challenges of liquidity in traditional venture capital. He is excited about the potential of the Bancor protocol to democratize to bring continuous liquidity to a new generation of user-generated tokens emerging in the blockchain ecosystem. The company added, “The Bancor team is humbled by the astounding support from our community. In what is now a historic Token Generation Event, 10,885 participants contributed 396,720 ETH, equivalent to $153,003,311.63, in less than three hours. To provide everyone the opportunity to invest in Bancor at an early stage, our team developed novel protocols to guarantee access to smaller contributors.”
Tim Draper said: “We are beginning to explore the possibility of issuing a VC Token for our diverse network of investors, entrepreneurs, local and global businesses. We’d like for this to be a Smart Token, so it can benefit from continuous liquidity from day 1. We look forward to a long collaboration with the Bancor team on this project, and are excited for what BNT has in store.” Said Mr. Draper, Managing Partner of Draper Associates. Galia Benartzi, Co-founder, said: “It is a dream come true for me to work with long-time Silicon Valley pioneer Tim Draper. Growing up in Palo Alto, the Draper family name has been synonymous with both the roots of venture capital in the Bay Area and also the fruits of innovation. Tim, his family, and firm, continuously forge bravely ahead, which is what we are doing at Bancor. We are humbled by this partnership to bring liquidity to all.”
Bancor enables the creation of so-called ‘smart tokens,’ which can hold one or more tokens or digital currencies in reserve. It also allows any party to instantly purchase or liquidate them directly via smart contract, without any counterparty and without relying on exchanges. Smart contracts are self-executing transactions. According to the company its protocol is a standard for the creation of intrinsically tradable tokens. “These smart tokens benefit from network effect and algorithmic pricing, enabling the long tail of user-generated tokens to emerge and democratizing value creation.” Bancor’s protocol is promoted and developed by the Bprotocol Foundation, which was established in 2017.
The website said, “We deeply regret that not everyone could participate in the Bancor TGE today. In our efforts to ensure full community participation, even after overwhelming demand and traffic, exacerbated by massive malicious attacks to our network, the Bancor team opted to extend the restriction-free hour in an effort to ensure that pending transactions were completed. When the “hidden cap” was revealed, the flood of transactions that arrived was even more overwhelming. Consequently, after an unprecedented amount of capital had been raised, the Core team conscientiously closed the fundraiser.”
BREAKING the LIQUIDITY BARRIER
$150 Million: Bancor Completes Largest-Ever ICO
by Stan Higgins, Alex Sunnarborg & Pete Rizzo / Jun 12, 2017
“An initial coin offering (ICO) for a blockchain project called Bancor has set a new industry record, raising approximately $153m in ether, the native currency on the ethereum blockchain, as part of a crowdsale that concluded today. Data shows a smart contract connected to the sale had collected more than 390,000 ether by the time it ended at 18:00 UTC, an amount worth $152.3m at current prices. As such, the figure is higher than even the funding raised by The DAO, the notorious failed fundraising project that made headlines last year when it lost the millions of the $152m in investor funds it raised in a similar sale.
Overall, 79,323,978 Bancor network tokens (BNTs) were created as part of the ICO, with the top token holders now possessing 83.96% of the tokens, or 66,601,702 BNT. Fifty percent of the total tokens, or 39,661,989 BNT, were sold to the public, while the remaining 50% were allocated for future use. The ICO attracted 10,885 buyers, according to available data, with more than 15,000 transactions sent to the address for purchases during the sale. One buyer went so far as to purchase 6.9m BNT, or roughly $27m, in the sale. Launched in 2017, Bancor, overseen by the Bprotocol Foundation, has been pitched as a platform designed to make it easier for users to launch their own blockchain tokens. Of the remaining funds, a blog post by the company states token capital will be directed toward partnerships, community grants, public bounties and project advisors.
As with past sales of this kind, the ICO was accompanied by reports that the ethereum network faced significant transaction loads, resulting in delays for buyers. However, the project itself was adversely affected by long wait times on ethereum. According to the Bancor website, an initial funding target was set at 250,000 ether, though this figure was not hard-coded into the smart contract deployed. As a result, a transaction sent on the ethereum blockchain in an effort to change the contract and limit the crowdsale in length did not work as desired. Due to network disruption and delays holding up this transaction, the company said the crowdsale ended up continuing longer than initially desired. Overall, it lasted an two additional hours as a result of the delay.
Posts on social media further suggest that at least some users saw transaction issues during the sale. One thread on Reddit drew complaints about transactions being dropped as long as 35 minutes after they were sent to the ICO address. Some participants who spoke to CoinDesk also said that they had experienced delays in transacting, including one who had issues moving their ethers off an exchange for the purposes of participating in the ICO. One exchange operator went so far as to argue that the ICO had increased transaction congestion, colorfully remarking that larger ether buyers were disrupting the sale.
Another factor contributing to the frenzy is that, as sale was getting underway, Bancor revealed it had attracted new and notable investors. Among those announced to be contributing funds was investor Tim Draper of VC fund Draper Fisher Jurvetson. Though new to the ICO space – he previously backed the Tezos project ahead of its yet-to-be-held offering – Draper has invested in a number of bitcoin startups in the past few years. In 2014, Draper made headlines when it emerged that he had bought 30,000 bitcoins during US government auction, later picking up an additional 2,000 BTC during a second sale. As part of the funding, Draper will also be joining the project as an advisor. The Bancor sale was also backed by Blockchain Capital, an investment firm that focuses on startups in the space. According to a blog post published today, Blockchain Capital is making its investment via its BCAP token, which it launched earlier this year.
In the blockchain community, the reverberations of the sale were felt far and wide among market observers, many of whom expressed disbelief at the funding totals raised. Some commentators, when reached by CoinDesk, simply responded by calling the investment ‘insane’. Likewise, when asked if the total raised was related to project’s fundamentals, Jaxx director of business and community and bitcoin entrepreneur Charlie Shrem simply responded: “No.”
Even proponents of the token sale model found fault with the sale. Nick Tomaino, a former business development manager at Coinbase and principal at Runa Capital, remarked that he hadn’t been following the project due in part to the level of hype that it had attracted. In particular, Tomaino took issue with how the project popularized news about investments in its token supply, noting the blog post that advertised investor Tim Draper’s personal contribution. “Posting that the day of a token sale is not something that many teams really building something valuable would do,” he told CoinDesk. He later added that he doesn’t rule out founding teams, though, and that Bancor could well succeed in the face of doubts about its long-term value.
Still, others took it as a positive sign of market maturity. Among those to comment on the sale was JoyStream founder Bedeho Mender, who suggested that the raise had given him some pause, stating: “As someone actually building a decentralized application on bitcoin, it really makes me think what I am giving up in terms of community support and funding by staying on the platform.” Representatives for Bancor did not immediately respond to a request for comment.
The blow-out sale follows other offerings in recent weeks that have generated significant activity, putting new attention on the token sale model as a method of project capitalization. More notable entries have included web browser startup Brave, which raised $35m at then-current ether prices in just under seconds. Gnosis, an ethereum-based prediction market, also attracted a bevy of speculators for its $12.5m sale in April.
Indeed, the ICO model has emerged as an alternative to traditional venture capital in recent months, though some observers have questioned whether the speculative frenzy taking place today is a healthy one. Others still have criticized ICOs as vehicles for scams that take advantage of an uninformed public’s thirst for big gains in emerging technology.”