Last month, we reported that the world’s largest ICO was imploding after just three months as its developers admitted they wouldn’t be able to deliver the tokens purchased during a $230 million July “presale” by the end of the year, as they had promised, causing an understandable furor among its investors.

Now, in the latest sign that the $3 billion ICO market is imploding, Bloomberg report’s that the value of formerly high flying Bancor, the world’s fifth-largest ICO by funds raised, has plunged by more than 50% since the company’s June ICO as investors have become disillusioned with its obscure product.

Bancor attracted big name venture capitalists like Tim Draper this year when it published a white paper proposing to create a kind of decentralized digital currency exchange that would allow holders of the Bancor tokens to exchange them for other digital currencies listed on their market-making platform - a functionality, its creators insisted, that would one day render digital currency exchanges obsolete.

But while it’s founders delivered a compelling pitch, beneath the surface was a product that was, at best, needless complex, and at worst, downright nonsensical.

Of course, the obliqueness of Bancor's plan showcases a common trope in the ICO market whereby companies say they’re “improving” on the “user experience” of a product that most users are already satisfied with - except instead of creating a more streamlined solution, they propose to make it needlessly more complex by involving “decentralized” systems and monetizable tokens.

The result is a soup of hypertechnical gibberish, and a use-case that, tellingly, only the people building the product seem to understand. For many investors, that should trigger nightmarish flashbacks to synthetic CDOs (which are themselves experiencing something of a renaissance led by Citigroup) and other arcane credit derivatives that helped crash the economy and market in 2008.

Cornell professor Emin Gun Sirer, in a takedown of Bancor published shortly after the ICO, validated this view, arguing that Bancor’s formula is less efficient than simply making the market manually, Sirer says. And they say the technology could also be vulnerable to front running, where people make money off of the visibility of others’ transactions.

Here’s Bancor’s explanation of its functionality from its white paper:

Abstract: The Bancor Protocol enables the creation of networks of smart contract-based “Smart Token.” Smart Token hold balances of one or more other tokens--“Connectors”--and have a builtin autonomous conversion mechanism that allows any party to instantly purchase or sell the Smart Toke for one of its Connectors, directly through the Smart Toke contract, at a price calculated by a formula which balances buy and sell volumes. Bancor believes that Smart Token can address the challenge of liquidity faced by conventional tokens, cryptocurrencies, and community currencies on three levels. First, and most fundamentally, by being autonomously convertible for their Connectors, and with an unconstrained supply that grows in response to purchases, each individual Smart Token has built-in liquidity that does not depend on counterparties or exchanges. Second, Bancor has developed specialized Smart Token that enable inter-convertibility between any two other Smart Token or, with an added step, between any Smart Token and any conventional Ethereum network token. Third, Bancor’s ultimate vision is that users will create their own tokens and community currencies in the form of Smart Tokens™ that hold a common Connector, enabling any Smart Token™ in the network to be converted into any other. Bancor’s own Smart Token, BNT, is the common Connector in the first such network, which we call the Bancor Network.

And here's Bloomberg's translation.

Bancor protocol enables anyone to create a new type of digital coin called a Smart Token, which can hold and trade other tokens. This allows the Smart Token contract to serve as its own market maker, automatically providing so-called price discovery, and liquidity to other coins. So effectively, Bancor has created an exchange that will automatically price and trade any cryptocurrency that wants to list with it, as well as a token. The company says it will always have enough liquidity to make the market because the currencies have to build a reserve in Bancor tokens.

Initially, the notion that Bancor - which is named after the universal curency proposed by John Maynard Keynes - can “guarantee liquidity” for ICO tokens that have been shunned by major digital currency exchanges sounds like a vaguely useful market nich. And one could argue that there might be a niche. Today, the FT reported that GDAX, one of the largest cryptocurrency exchanges, said it wouldn’t list most ICOs because of doubts about their viability. But as one trader explains, when exchanges refuse to list a token, there's generally a good reason.

Kyle Samani, managing partner at Austin, Texas-based hedge fund Multicoin Capital, said the functionality Bancor provides isn’t needed. Tokens that can’t list on exchanges may simply not be good enough, he said.

"For assets that actually have value, there will be a market," Samani said. "For assets that people don’t want to buy... why should there be some pity-based programmatic market maker to provide liquidity? My inner capitalist is just dumbfounded by the concept of Bancor."

Even the venture capitalists don’t get it.

"I’m a big fan of what they’re building and think they are the most qualified team around to do it," Brock Pierce, co-founder of Blockchain Capital, an investor in Bancor’s tokens, said in an email. "Not everyone understands it."

In defending Bancor, one adviser had the temerity to argue that consumers don’t understand how exchanges work, and that Bancor’s concept is somehow more straightforward, which is an obviously absurd thing to say.

But even if Bancor tokens did have a clearly defined use-case, it wouldn’t make a difference if the company couldn’t implement it, or if nobody used their product ( the network effect is obviously crucial for these tokens to thrive). Right now, Bancor tokens are - to borrow a conspicuously apt analogy from Cornell Professor Gun Sirer - “like a child’s swimming pool placed in an ocean.” Essentially a less liquid, more volatile version of Ether. Bancor was built on top of the Ethereum protocol, and Gun Sirer said buyers needed ethereum to purchase Bancor during the crowdsale - a claim Bancor disputed.

However, while Gun Sirer’s criticisms appear thoughtful, his perspective is automatically rendered suspect by the fact that he’s an adviser to Tezos, an ICO that raised more than $230 - the largest haul so far - but has been plagued by missed deadlines and internal strife, as we noted above.

Bancor, which penned a thorough - but glib - rebuttal to Gun Sirer’s comments, claims its product is already in demand. To wit, thirty tokens are already using, or planning to use, its platform, it says. But given the performance of the tokens, vanishingly few people are trading on it.

Still, Draper, the project's most visible backer says it’s only a matter of time before the tech blossoms and the value of Bancor tokens soars.

Backed by billionaire venture capitalist Tim Draper, Bancor is the fifth-largest ICO by amount raised by startups, which totals more than $3 billion this year. "All of these projects are in development," Draper said in an email. "Wait two years, and I believe we will all be blown away by what these people can do for the world.”

But let us stop you right there.

As many of our long-time readers are probably aware, venture capitalists and entrepreneurs talking about how their (in this case, nonexistent) tech will ‘change the world’ is a red flag that a given venture might be headed for the rocks.

And most crucially, large digital-currency traders agree that the functionality isn’t needed. At best, Bancor is what some in the digital currency and blockchain communities would call “a solution in search of a problem.”

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When Bancor raised an astonishing $153 million during its coin offering in June, it instantly transformed its creators into millionaires.