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Decentralised exchanges; 'polluted rivers'

Decentralised exchanges; 'polluted rivers'

Fabric Token concluded their ICO on Sunday, raising c. 2,600 ETH (c. $1m at current prices) in a sale that was impacted by the worsening market conditions and a general lack of awareness across the wider community.

The raise fell short of the target of c. 9,000 ETH, but following a presale to Wolf Crypto and Swissborg which raised $787,500 (as ETH was north of $1,000 at the time) and the likelihood that ETH prices will not remain at over 70% from its ATH for long, the team should have enough to proceed with development.

Although I contributed to the ICO, one of the issues I took umbrage with is the team’s determination to keep all tokens locked until they secure a deal with – in their own words – a ‘decent’ exchange. They went further than that, endorsing another user’s comment that releasing Fabric onto a ‘sub-par’ exchange would be like releasing a trophy fish into a polluted river.

Firstly, whilst Fabric is a decent enough project, it’s hardly worthy of speaking in such exalted terms. It scraped $1m in a six week long ICO, speaking to the lack of present demand for the project. Furthermore, describing a very functional exchange such as IDEX, the most popular DAPP by most metrics most days at present, as a polluted river is to discount the very good work and development decentralised exchanges have done to enable users to bypass centralised exchanges altogether.

From an investment perspective it also runs the very real risk (as Verify are finding out) that you destroy the value of your own project by not achieving an exchange listing. As more and more exchange listings become out of reach, investors worry more and more. What if the team cannot deliver an exchange, which can be a fickle business where you at the mercy of unscrupulous and disinterested parties? They would then be eventually forced to resort to just allowing token transfers so that the actual product – which is what these tokens are for, lest we forget – can be used? The price will nosedive.

As a sidepoint, a ‘decent’ exchange is also highly subjective and is what provides the team with an out. I would argue there are at most five exchanges that could be classed as decent for western audiences. I suspect Fabric, a small project, will be unlikely to launch on any of them. The best investors can hope for is an exchange like Bibox which would then allow the token to be unlocked.

From a non investment perspective, it is also bemusing that a team who has as their mission statement “Building a Decentralised World” would deride a decentralised alternative in such a way that few (if any) other teams have.

 Decentralise everything! Apart from exchanges, we only want centralised ones that already exert an undue power over all of crypto

Decentralise everything! Apart from exchanges, we only want centralised ones that already exert an undue power over all of crypto

The rationale behind such a move is also unjustified. The team believe that launching on a decentralised exchange will lead to the token price dumping, because that is apparently what has happened to every other single project that have launched on DEXs (note: it hasn’t). This just doesn’t make sense. Why would any form of exchange lead to tokens dumping (bar perhaps bot manipulation, which is by no means confined to DEXs)? An exchange is by its very nature a means to discover the ‘correct’ market price of an asset. If a token dumps, that just means no-one wants to buy it. Is it not more likely that only the least popular projects launch onto DEX’s only – as the more publicised and anticipated projects can get listed easier on big exchanges - and as such there might be less interest and therefore less buy pressure more generally for smaller projects?

As to the COO’s argument below that loads of projects have performed badly on DEX’s in the last couple months – what a huge surprise. The entire market has nosedived. Should we blame centralised exchanges such as GDAX or Binance for Bitcoin being 70% off its ATH? Of course not.

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And the team know this, because as the ICO commenced they publicly queried the exact same points raised above before running a survey of which only a handful of people responded to and then changed their minds.

RecDAO: When decentralisation isn't the answer

RecDAO: When decentralisation isn't the answer

Odds and Ends

Odds and Ends