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Tag #Decentralization

Wales on ICOs

You might think that Jimmy Wales, founder of the world’s largest and most famous open-source encyclopedia, might be a fan on bitcoin and blockchain. Not so.

Wales is well known as a crypto critic. Back in 2014, Wikipedia started accepting the virtual currency, as it still does today. Bitcoin is one of many ways supporters can donate to the Wikimedia Foundation. As an open-source initiative without obvious revenues, the platform is constantly soliciting donations to cover its costs.

But Wales himself is a skeptic.

I have reservations about blockchain,’

he said after a recent conference.

It’s a super-interesting technology, but it’s clearly a bubble with a lot of mania and hype around it.

ICOs in particular have come under Wales’ fire. Wikipedia itself will never hold an ICO and never issue a virtual currency, he says. He sees no need.

 

Maybe he has a point. There’s a reason that Wikipedia is the fifth most popular site on the web. And so far, its army of volunteer editors have been happy to give up their time for free to add value to the site for the benefit of all.

 

Legitimate and genuine kudos goes to Wales for building such a massive, open and valuable community with so little funding. But you have to wonder whether that approach is sustainable. Newer wiki-style platforms are arising, which pay contributors in crypto – Lunyr being an obvious example. If the market functions as it should, why would someone write for free when the same effort could earn them a reward? Sure, some people will do it out of public spirit. But many will want to reap the financial benefit of that work.

There is definitely room in this world for a ‘public service’ resource like Wikipedia, and the anti-fake news WikiTribute that Wales also set up. News without the distortions of financial interests is vital to free speech. But the landscape of open source platforms is shifting with the rise of blockchain, and it’s anybody’s guess whether such resources can survive in the long run.

 

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How ‘decentralised’ is Bancor, anyway?

TL;DR Bancor was hacked but the team were able to freeze BNT tokens, suggesting there’s more to this platform than first meets the eye.

Bancor was one of 2017’s most successful ICO, raising $153 million in crypto for a decentralised exchange. More than that, it’s a particular kind of exchange: instead of trading peer-to-peer with other users, you trade with a smart contract. You send one token to the Bancor contract, and it sends back another token from its reserve. That means you’re not restricted by the offers being made by other traders — in other words, liquidity is guaranteed. It’s a brilliant idea.

Bancor was recently hacked (see https://twitter.com/Bancor/status/1016420621666963457). One of the wallets used to upgrade the project’s smart contracts was compromised, which enabled the hacker to transfer out just under $13 million in ETH from the reserve, plus another $10 million in BNT, Bancor’s native currency. No customer funds were stolen.

It’s not a huge amount by the staggering scale of previous crypto hacks (here at Inferno, we don’t raise an eyebrow at anything under $50 million any more). But the interesting development here is that the Bancor team were able to freeze the stolen BNT to prevent them being cashed out, as the ETH already has been.

This is a feature built into the BNT smart contract, and the creators make no apology for it. In fact, they advocate it for other tokens. ‘We firmly believe that this ability is a preventative measure essential to most tokens and necessary to protect the network and token holders in a state of emergency.’

This has shocked a few crypto purists, who have rightly drawn attention to the fact that Bancor have influence over all BNT trading. There is centralised control of BNT, and a single point of failure. No other tokens can be controlled in this way, of course, hence the reason they couldn’t freeze the stolen ETH.

As a result of the measures built into its smart contracts, Bancor was able to freeze $10 million of BNT. But at the same time, they showed that they cannot be considered decentralised, and that there is therefore a major vulnerability in their platform.

Did they win the battle but lose the war?

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