The latest craze te the cryptocurrency markets just got crazier. An uitrusting called the Bancor Foundation raised $153 million worth of ether (the coin of the cryptocurrency ethereum) by selling its digital tokens (the omschrijving of shares) for three hours on June 12, making it the largest token sale everzwijn.
Such sales, popularly known spil initial coin offerings or ICOs, are a way of financing startups by letting potential users&mdash,rather than venture capitalists, spil is traditional&mdash,buy puny stakes te them. They&rsquo,ve raised $327 million so far this year&mdash,more than the $295 million te venture capital that has gone to blockchain tech startups, according to research by industry publication CoinDesk.
The Bancor Foundation says its tokens will do away with the exchanges on which cryptocurrencies are usually traded. Instead of having a middleman that matches buyers and sellers, Bancor tokens will do the matching themselves, using automatically executed rules called wise contracts that are coded into the tokens.
This could pave the way for fresh investment vehicles, such spil a Bancor token that functions like an exchange-traded fund holding a basket of cryptocurrencies, or tokens that are pegged to a particular exchange rate. Investors believe the Bancor token could act like a supra-national currency for cryptocurrencies&mdash,indeed, the term &ldquo,bancor&rdquo, wasgoed coined by John Maynard Keynes and EF Schumacher for just such a currency ter the 1940s.
But the Bancor token sale didn&rsquo,t go slickly. Hot ICOs have bot selling out te seconds, so crypto investors have bot feverishly pushing their way te. Some have paid thousands of dollars ter transaction fees to get their ether accepted very first. Rente te Bancor wasgoed so superb&mdash,boosted by the revelation, just before the sale began, that Tim Draper, a vooraanstaand venture capitalist, wasgoed involved&mdash,that the ethereum network became congested.
A popular wallet provider, MyEtherWallet, reported hours-long delays for transactions to be ended. This wasgoed because the Bancor Foundation had recommended buyers use it to participate ter the suggesting. While the ethereum network clogged spil users bid everzwijn higher fees to ensure their money wasgoed accepted, services like MyEtherWallet struggled to cope with the flood of fresh users. &ldquo,With thesis ICOs you are essentially asking a service to scale from maybe 10% capacity to 1,000% capacity ter the course of less than a minute,&rdquo, says Taylor Monahan, a co-founder of the wallet service. &ldquo,Every single person presses the send button at the same time.&rdquo,
This led to another problem. Te the past, ICOs have bot criticized for selling out quickly to large holders of cryptocurrencies. Mindful of this, and worried that the network congestion would make it even firmer than usual for puny investors to get a slok, the Bancor Foundation kept the suggesting open for longer than planned. But spil a result it also collected 150,000 ether ($51 million) more ter funds than intended. That angered investors who did get te early, and who say they were promised the funds would be capped. &ldquo,The initial supply wasgoed inflated by 58% by switching the rules,&rdquo, one investor on the Bancor project&rsquo,s public Slack team, who goes by Kasper23, told Quartz. &ldquo,And that hurts all investors that got te before the [initial target] wasgoed reached.&rdquo,
More worryingly, the freeze-up of the ethereum network displayed that it can&rsquo,t treat unexpected surges te transaction volume. That&rsquo,s very similar to the problem plaguing its forebear, bitcoin, ethereum wasgoed supposed to be more resilient. Ethereum processes about 50% more transactions than bitcoin does every Ten minutes, thanks to its rules that make miners confirm transactions at more frequent intervals. It also side-steps the dispute at the heart of bitcoin&mdash,how to increase its &ldquo,block size&rdquo, and thus transaction capacity&mdash,by permitting the number of transactions processed by each miner to be enlargened or decreased by a petite degree by the miner itself. This means ethereum blocks can grow or shrink dynamically, whereas bitcoin&rsquo,s blocks are stuck with an arbitrary limit.
Even those clever features toevluchthaven&rsquo,t bot enough to prevent the ethereum network from seizing up during high-traffic events, like a hot ICO. &ldquo,This wasn&rsquo,t the only one, there wasgoed at least one other ICO that caused congestion, for at least two to three hours,&rdquo, says Nick Johnson, a developer at the Ethereum Foundation who works on the protocol. Johnson notes that ethereum has other mechanisms to reduce the effects of traffic jams, such spil the capability for ICO issuers to set a maximum price on transactions. This is what Bancor did, and it permits ethereum users not participating te the ICO to get their own transactions confirmed&mdash,so long spil they pay a price above the limit.
Johnson also points out that unlike bitcoin, which is suffering from prolonged congestion due to its block-size limit, ethereum is being shocked only sporadically, during unusually high periods of activity. Still, he says, the capability of all blockchains to scale remains a fundamental problem for the field. &ldquo,There is no magic wand,&rdquo, he says.
The Bancor token sale is a symptom of a broader problem with ICOs. Seasoned observers of the markets say it&rsquo,s only a matter of time before a crash comes, wiping out the investors who poured funds into the token launches. One such observer is Fabio Federici, who founded a blockchain analytics startup called Skry and zometeen sold it. &ldquo,Yesterday, wij had one ICO and ethereum basically collapses,&rdquo, he said, speaking to Quartz the day after the Bancor suggesting. &ldquo,It just shows mij that wij are a long way off from a decentralized world rekentuig.&rdquo,