Frequently Asked Questions
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Background information: key concepts
What is the long tail and how does it relate to cryptocurrencies?
In business, the ‘long tail’ describes content and products in low demand or with low sales/view volume that, collectively, make up a market share exceeding that of the current top performers combined.
Internet history shows us that with the digital long tail, the accumulation of all niche contributions can be 2–3 orders of magnitude greater than the hits. Think of all the Instagram accounts after the 1000 most followed, or all the status updates beyond the most viral. The most popular YouTube videos with millions of views each, collectively, account for less than 1% of total views on the site.

In cryptocurrency, the potential long tail could point to trillions of dollars in user-generated value when combining all small and niche currencies beyond the few largest. However, for a long tail to emerge in cryptocurrency, the liquidity problem must be solved and technical barriers to creating and managing a currency must be reduced.
What is the ‘Double Coincidence of Wants Problem’?
The Double Coincidence of Wants Problem is a known mathematical challenge which states that it is difficult to find two parties with opposite wants at the same time in order to complete an exchange.

A common example: the inefficiency of barter, in which two sides need to want exactly what the other side is offering. Money was invented as a technological solution to enable barter over time and space, so for example one party can now sell their tomatoes today and come back tomorrow to buy carrots, rather than both parties having to find an exact match of opposite wants simultaneously. Even in the domain of human communication, before the invention of writing, there existed a double coincidence of wants. People needed to meet face to face to share information, whereas writing enables one party to communicate their thoughts on paper and another to read those thoughts even thousands of years later.

Why is there a Double Coincidence of Wants Problem in Asset Exchange?
In the domain of asset exchange, there still exists a Double Coincidence of Wants Problem, as there is no ‘money for money’. Every currency that is exchanged requires two parties with opposite wants to “meet” (even digitally) in real-time, thus requiring speculators and market makers to provide liquidity and facilitate transactions, taking fees along the way and leading to inefficiencies.

Exchanges are an example of a labor-based solution to the Double Coincidence of Wants, as opposed to a technological solution like writing and currency provide for human communication and barter. As an analogy, it would be as if instead of writing, we had messengers passing the information from one person to another in order to transfer information verbally. Or if instead of money, we had a global marketplace where people directly exchanged their goods & services.

However, with the invention of smart contracts, a new paradigm is possible. Now immutable, decentralized software code can itself hold programmable money, meaning money that holds money. By standardizing smart contracts for exchanging digital assets, Bancor protocol offers the first technological solution to the Double Coincidence of Wants Problem in the domain of asset exchange.
What are Smart Contracts and why are they significant?
Smart contract enabled blockchains, starting with Ethereum, offer the first decentralized software systems in which currencies can be governed by programmable code. This opens the door to diverse customization opportunities previously unimaginable in monetary policy and management.