What could the BAT token sale have raised and what can we infer about the upcoming Bancor token sale? LedByReason Follow Jun 9, 2017 · 3 min read

I decided to calculate how much ether BAT would have received had all transactions gone through so that we have an idea of what to expect of the upcoming Bancor token sale. Had every transaction to the BAT contract gone through, 869,163.44 ether would have been raised. At today’s prices, that would be approximately $240,000,000 USD; a number that is startlingly close what was raised by the DAO.

I think that it is likely that Bancor will raise an amount in that ballpark.

Before this token sale is held, the community should ask itself some questions.

Are smart contracts safe enough at this point to hold that much value? What would the consequences to the Ethereum ecosystem be if this or another token sale became a replay of the DAO or something worse? What if all of the funds were stolen or burned? Would the community be up for another hard fork? To what degree does the structure of this token sale allow for price discovery?

I would ask representatives of the Ethereum Foundation and any other experts on Ethereum smart contract safety to weigh in on the first question.

We can all speculate on the second question, but those of us who lived through the DAO can testify to how ugly things can get.

The third question is also important and just as pressing as the first two. Markets facilitate price discovery. Pitching VCs facilitates price discovery. Even capped token sales facilitate price discovery as the buyers of the token know the minimum portion of tokens their ether will purchase.

In an uncapped token sale, the buyer has little idea what portion of tokens her ether will purchase. Is 1,000 ether going to buy 10% of all tokens or 0.001% of all tokens? The buyer won’t know until the token sale period is complete. No sane person would buy anything else that way (except for health care in the US, but that’s another story).

Some will point out that ether raised in excess of Bancor’s hidden cap will be placed into a fund to help provide a floor to the token’s price. That mechanism may bring comfort to token-buyers, but will likely encourage over-investment and further diminishes price discovery during and after the sale. It also introduces a new contract that could potentially be used to drain this “excess ether” reserve fund.

Bancor representatives contend that the one-hour uncapped period was requested by community members to allow regular people (as opposed to insiders and whales) an opportunity to invest. At first glance, this appears to make a little sense, but breaks down under any degree of scrutiny. If the goal is to allow any investor who wants a piece of the token sale to get one, there are many models that would be fair and no more complicated than what Bancor proposes.

Tokens are incredible innovations that help to align the interests of people who do not even know each other. However, finding an initial value for these tokens is difficult. Until best practices for token sales have been established, we must self-regulate conservatively. I applaud those token sales which have published their caps and encourage everyone to focus on finding a model for token valuation that focuses more on price discovery than it does on FOMO.