Between utopia and reality there is the same relationship as that between Marlon Brando’s scream in A Streetcar Named Desire and Brando’s coconut-sized prostate in Last Tango in Paris. In other words, the concretization of our desires must take reality into account. So, even if we blockchainers are all in favor of Hayek’s utopian views on the unfettered competition about all conceivable currencies, we accept the reality principle that monetary change comes gradually. Or at least, those of us who have occasionally, and more often than not unproductively, screamed as ferociously as Brando, come sooner or later to accept that utopia is best left to academics, and monetary progress takes time and patience.

A Scream of Brando’s but not THE Scream

This is to say that I do not disapprove, in principle, of Bancor’s partiality toward Keynes’s homonymous concept. Bancor’s token, called BNT, is a blockchain-tethered version of Keynes’s own Bancor, which had been conceived (but never realized) as the supranational currency to be used as unit of account in a multilateral clearing system. Bancor’s BNT is meant to serve the analogous role of unit of account within a multicrypto clearing system.

Given this historical ancestry, it can’t be a huge surprise to learn that, in agreement with canonical banking orthodoxy, Bancor emits and withdraws BNTs based on diverging principles. In one word, it sells BNTs high and buys them back low. It’s not a surprise, procedurally speaking, but it deserves the brief reflection of this article.

It’s just like opening a line of credit at your neighborhood bank. Having relinquished partial control of collaterals of proportional value, you bring home from the bank the promise that you’ll be entitled to cash your credit according to this or that temporal pattern. In some cases, you cash it all at once, in the form of a check, and transfer the promise, i.e., the check, to a creditor of yours. But in sum, you know perfectly well that, when it comes to real money (a theological notion, I know, but I won’t get into it) — as I was saying, when it comes to real money instead of a check, when it comes, say, to the banknotes and coins symbolized by that check, you understand that your credit is only worth a slim portion of its nominal value, namely the portion held on reserve by the bank itself.

The proof of the cake of what I just said is always the same and, be it real or virtual money, fiat or crypto, it comes down to the run-to-the-bank. Nobody can squeeze out of a bank more than they find inside it.

That’s the way things are since we stopped using a piece of gold for money. That’s the way things were even earlier, when the Medicis coined their own golden florin and then let its value gradually inflate. To us, money has become that theological, ethereal notion I mentioned above (which I won’t go into, I promise). Money is good till it’s not good anymore, and not a minute longer. But as long as the good lasts, why complain?

I declared above that Bancor sells BNTs high and buys them back low. This is no secret, this is no discovery of mine. It’s amply and clearly codified in the white paper. All of the contributors to the initial crowdsale (I’m one of them) were told about it, in clear words and clearer equations. Supposedly, when we traded ETHs for BNTs, we all knew what we were doing. (Did I really, I wonder? More about it presently.)

Let us take a closer look at the manifest evidence. I’ll spare you the math (it’s all in the APPENDIX), and ask you to glance at the plot “Parent-Currency Cost/Revenue Versus BNT”.

Parent-Currency ETH Cost or Revenue versus BNT

First, the superimposed red and blue curves. They coincide because they tell the same story. If I trade a certain amount of the parent currency, say ETH, for BNT, I obtain a certain amount of BNT (red curve); and if I want to bring home that very amount of BNT, I pay that very same amount of ETH (blue curve). Both curves are convex: the greater the amount of BNT I seek, the more-than-proportionally fast grows my payment in ETH.

The exact opposite occurs with the green and concave curve, whose first derivative (see APPENDIX) tells me that the greater the amount of BNT I trade back at the token changer, the more-then-proportionally slowly grows the payment I receive in ETH. But don’t even bother to look at the derivatives in the APPENDIX: the growing gap between the red and green curves tells the whole sad story. The top limit of the green curve is equal to the quantity of ETH held on reserve (in the case of BNT, a paltry 10% of total supply).

The beauty of the Bancor project is that prompt liquidity is always available at the token changer, regardless of whether there is a warm-blooded buyer for you BNTs or a warm-blooded seller for your ETHs. Yet, it’s safe to say that the token changer is an exchange of last resort, to be used only when you are in dire need.

Even Bancor’s arbitrageurs, whose mission is vital to the Bancor project, ought to tread these waters cautiously. It is the arbitrageurs’ task to bring the token changer’s BNT price and the crypto-exchanges’ BNT price back to market equilibrium. Yet, as I just showed, it’s not that a plain comparison of the token changer’s price and the crypto-exchanges’ price may give the arbitrageurs, price-wise, a reliable cross-section of the current state of things. Their very act of feeding the token changer with the BNT amount they want to buy or sell changes the BNT price they’ll pay or will be paid; and this price changes in different proportions according to whether they are buyers or sellers.

In sum, nothing new on the crypto front: banking-wise, Banco’s multicrypto clearing system is a sober reminder of the reality principle, of the apologetic murmur that must follow Brando’s shout — its everyday prose clashing against the poetry of the blockchain we are all eager to listen to.

Full-disclosure time: I still hodl my stash of BNTs. I acquired them in stages, at prices increasingly lower. Every time it looked like a bargain, and every time, soon, the price went even lower. (I’ve lost track of the pattern, I confess.) Yet, I’m reluctant to liquidate my stash. Why? I am not sure, just as I am not sure why I kept squandering my small savings onto this project. Was I succumbing to Galia’s siren’s chant? More likely, it was because I tend to feel deep sympathy for all those who, like Galia, like Eyal, like Guy, undertake original and innovative, blockchain-based projects with evidently well-meaning intentions. So, here I am, hoping against hope.

And talking of paltry savings… My Polish math tutor at York University is amazing. He must pay his bills too, though. So, Autumn is here, and with the season comes my student fees’ deadline. That’s why, as usual, I give you here that other musical me, the one in keys:

ETH: 0x61515EA460fa100a901d0Bb435A9d84698BDE74A

BCH:12ukKi64AwXDeFkhCN1LmWEQRLCs1ddMP1

BTC: 131t1fX5g2K6qYkg97yLwJJ2HLVqrY3ztP

APPENDIX