The Community of the Currency
A currency is a tool for mass-collaboration. It allows communities to cooperate better and for their members to specialize. It can also be used to allow teams to collaborate with each other and with those who choose to contribute resources to realize a vision together (such as building a product, creating an experience, or other.) In doing so, everyone can share in the upside.
The value of every currency is derived from the way it is being used as a tool by its issuer(s) and by its community of holders. Cryptocurrencies and tokens are typically held by an ecosystem of holders that may include the issuing team, long & short-term holders, the product users and those who may want to engage with any of the others. Choices made by the different members of these groups ultimately determine the currency’s growth, behavior, reputation and value.
We believe that it is critical for the long-term success of Bancor that it have a diverse community that will make choices that benefit the entire community. Using the mechanism of a minimum-time for our token allocation event, we are hoping to build a strong base of long-term contributors, which are not simply seeking an opportunity to “be first” in a limited-space fundraiser that serves only a fraction of the (generated) market demand, and intending simply to profit from a “flip” before jumping to the next hit. This seems at best uninteresting and at worst predatory. We seek the kind of contributors that purchased Ether at 30c and are still holding most of it. We seek those who see the system’s success as their own, and take pride in seeding it and sharing it.
We believe it’s for the benefit of the entire community and the project at large to start with a group of hodlers, as much as we believe that anyone who wishes to be part of the token creation event should be able to do so, without having to master gas strategies, take a day off of work or otherwise experience the stress of scarcity or the waste of manipulation in order to partake.
Unlike the classic exchange model that can produce sharp (and profitable) price spikes when supply is limited, a Smart Token such as BNT can be purchased from its own contract directly, which smooths the price increases while accumulating a larger reserve balance (because that is how one buys a Smart Token, by sending any of its reserve tokens to the contract, anytime). It can be argued that the traditional buy/sell “flips” play the important role of enabling post-fundraiser newcomers to buy-in, however, Smart Tokens achieve the same goal through their contracts and with gentler on-boarding. This is what we believe the one hour minimum time achieves, by letting those who want to buy, buy. Best of all, Smart Tokens thrive when they are increasingly purchased, and issued, rather than suffer from inflation or dilution, as we are accustomed to in fixed supply currencies traded in traditional bid/ask exchanges.
We’ve heard many concerns that having no cap in the first hour (other than the 1M Ether security cap) may result in BNT dropping below its initial price after the token allocation event. Even though we’d like to think that our hodlers will not be quick to liquidate BNT they’ve purchased at its initial price, we have decided to allocate any proceeds collected in the minimum hour which exceed the hidden cap as follows:
20% will be allocated to the BNT Ether Reserve, to further improve the liquidity of BNT, which increases stability while reducing conversion costs (price slippage) for all.
80% will be locked for two years in a smart contract that will buy back BNT for 0.01 ETH (the initial price) whenever it is available, according to its calculated price. The purchased BNT will be added to the Foundation’s long-term budget, and after a 2-year period, any remaining ETH will be allocated pro-rata according to the “Use of Proceeds” chart in our Token Creation Terms.
We believe this model can create a price floor that will address these concerns from some members of the community that we’ve been hearing and listening to closely: that a large contribution event could possibly result in a post-fundraiser price drop, to below its initial price, due to fully saturated demand and evergreen supply. We like this new model even better, so thank you again community for challenging us to improve it.