Bancor is a decentralised financial network that aims to provide liquidity to small and micro-cap currencies while also rewarding liquidity providers. Bancor’s liquidity pools and functionality are supported by two token tiers: BNT and ETHBNT. Bancor and its competitor Uniswap are at the forefront of a new wave of decentralised financial systems.
The two projects are already well on their way to implementing a new method of trading cryptocurrencies and tokens. To clarify, Bancor is a decentralised financial network that aims to provide liquidity to small and micro-cap currencies while also rewarding liquidity providers. BNT is the standard token that will be used for all transactions on the Bancor Network.
The reserve token, ETHBNT, will be used within smart contracts to make ETH payments. The reserves can only be used by smart contracts that have been approved by Bancor’s network administrators.
It is important to note that all reserve tokens are locked in the reserve pool until they are needed for payments; thus, those who hold ETHBNT need not worry about how their coins may be used during this time.
Bancor will act as an intermediary between buyers and sellers of tokens in this scenario. The Bancor Network allows you to create a liquidity pool that acts as a reserve for any token traded on the Bancor Network.
The reserve price is a formula based on the current price of each token in the network. This way, buyers have a guaranteed amount of liquidity, and sellers receive their fair market price.
What Is Bancor?
Bancor is a decentralised network that aims to provide liquidity to small and micro-cap currencies while also rewarding liquidity providers. The BNT (Bancor Network Token) is one of two currency tokens used within the Bancor Protocol and serves as an access token to purchase or sell any other cryptocurrency listed in the Bancor Network’s Smart Token Listing.
The reserve price formula is based on the current price of each token in the network. This way, buyers have a guaranteed amount of liquidity and sellers receive their fair market price at all times, giving buyers more options and better prices for all parties involved.
The Bancor Protocol operates by establishing a new type of market in which buyers and sellers can interact directly with one another without the need for an exchange.
Buyers and sellers can directly negotiate with one another, allowing for instant trading. The protocol also allows users to create their own unique liquidity pool that serves as a reserve for any token traded on the network.
This means that buyers have a guaranteed amount of liquidity and sellers receive their fair market price at all times, giving buyers more options and better prices for all parties involved.
“Bancor is an on-chain liquidity protocol that enables automatic, decentralised trade on Ethereum and between blockchains,” according to the Bancor website. In 2017, Eyal Hertzog, Galia Benartzi, and Guy Benartzi founded the protocol in Israel.
According to the whitepaper, Bancor “enables automated price determination and an independent liquidity mechanism for tokens on smart contract blockchains” (dated March 18, 2018).
Bancor was named after John Maynard Keynes, who proposed the term “Bancor” for a supranational reserve currency during the Bretton Woods conference in 1944.
Bancor’s Crypto Liquidity Pools
Bancor’s Crypto Liquidity Pools are used to generate liquidity for multiple tokens in the Bancor network. They are built with a reserve price formula that allows buyers to buy any token at the reserve price and sellers to sell their tokens at the reserve price.
The BNT (Bancor Network Token) is one of two currency tokens used within the Bancor Protocol and serves as an access token to purchase or sell any other cryptocurrency listed in the Bancor Network’s Smart Token Listing.
The other is the Smart Token Listing. The Smart Token Listing includes all cryptocurrency tokens that have been approved by the Bancor community and added to the Bancor Network Liquidity Pools.
Each token is also given a unique ID that can be used by anyone who wants to trade with it, whether they are inside or outside of the network. This includes people who want to buy or sell it on exchanges, those who want to create their own liquidity pool for it, and anyone else who wants to use it as an access token for any other purpose that isn’t prohibited by its code.
Tokens can be added to a specific liquidity pool if they meet the following criteria: They must be ERC20 compliant and have passed a formal audit process with at least one independent third party auditor (audit results will be published.
Tokens must also be listed on at least three exchanges that allow trading. The Bancor Network Token (BNT) is the only coin that can be purchased through the Bancor Network Liquidity Pools. It can be purchased with ETH, BTC, or any ERC20-compliant token.
Bancor Network Token (BNT)
The Bancor Network Token is the currency used within the Bancor Protocol and serves as an access token to purchase or sell any other cryptocurrency listed in the Bancor Network’s Smart Token Listing. The other is the Smart Token Listing.
The Smart Token Listing includes all cryptocurrency tokens that have been approved by the Bancor community and added to the Bancor Network Liquidity Pools. This list will be updated every 24 hours and can be found here:
BNT is a utility token that allows users to buy or sell any other cryptocurrency listed on the Bancor Network Liquidity Pools, including tokens that are not yet listed on exchanges (i.e., they are not tradeable on markets).
Once a user has purchased or sold a token through one of these liquidity pools, they can use their BNT balance to buy or sell any other token available in their account simply by holding their own tokens in reserve.
This allows buyers and sellers to convert between cryptocurrencies quickly, easily, and at an agreed-upon price at all times. It also ensures that buyers do not have to hold funds in multiple exchanges at the same time.
Bancor has faced a number of criticisms from the cryptocurrency community. Among these are:
The Bancor network is centralised. This means that the BNT is a reserve currency, which means it can be sold and purchased at any time by the Bancor team, and that the reserve price can be set for any token, not just BNT. Other tokens may lose liquidity as a result of this.
The reserve price is opaque, and there are no safeguards in place to prevent market price manipulation. There are also no mechanisms for adding or removing tokens from Bancor’s pools. This could result in unneeded value losses for users who want to sell their tokens at the reserve price or buy them at a lower price than what they were listed with (a common complaint among investors).
The Bancor developer community is not open with their code, making it difficult for third-party auditors to verify its stability and security. The lack of transparency in the development process makes it difficult for users to verify its integrity.
Bancor responded by saying, “All protocols have flaws,” and that “every protocol has issues with centralization or censorship.” They have also stated that their goal is not only to make cryptocurrencies more liquid, but also to keep them liquid through innovative new solutions such as smart contracts, which allow users to exchange directly without the use of middlemen such as banks or exchanges.
In response to criticism, Bancor stated, “The Bancor Protocol is a protocol for exchange,” adding, “It is not a currency.” The Bancor network’s software developers have also stated that the code is open and that anyone can audit it.
Bancor has also stated that they do not want to be a currency, but rather to provide liquidity for all digital currencies. They have also stated that there is no need for any other digital currency because the BNT token can be traded on its own.
Bancor has shown great promise in its ability to reduce the cost of liquidity for cryptocurrencies, which means users will have access to more tokens at a lower cost than previously. However, if the BNT reserve price is not transparent and no mechanisms are in place to prevent it, Bancor may be vulnerable to manipulation. With these issues, Bancor still has a lot of room for improvement and can be a useful tool for users in 2018.