What Is Bancor (BNT)?

Beginning with Bitcoin (BTC), the world’s first and most dominant digital asset, there are now more than 2,000 different cryptocurrencies. According to Bancor’s (BNT) developers, traders and investors should be able to seamlessly convert between different crypto tokens.

The ability to easily convert between cryptocurrencies at any given time is what will make them most useful, the Bancor team notes. For example, coffee shops award points to regular customers, and they may be used as credit to purchase beverages. However, these points may only be used at the coffee shop.

The World’s First Decentralized Liquidity Network

With Bancor’s open-source token conversion system (still under development), the coffee shop points could be accepted as a form of payment by merchants throughout the world. Bancor network users might also be able to use their airline miles to pay their phone bill by simply clicking a button. 

As the world’s first decentralized liquidity network, the Bancor platform has been built for converting between different tokens without requiring exchange or an order book. The creators of Bancor have also developed the first Smart Token™, a cryptocurrency that contains an embedded converter that allows it to be “automatically exchanged” for any other token.

All Bancor Network Tokens Are Connect to the BNT Token

The Bancor network consists of many different types of crypto tokens that are all connected through the platform’s native BNT token. This allows all tokens on the Bancor network to be easily converted to any other token at any time. 

As noted on its official website, the Bancor protocol ensures “real-time” price discovery between different cryptoassets and “continuous” liquidity – without having to match buyers and sellers (like on traditional trading platforms).

“Transparent” Auto-Balancing Feature Used to Determine Token Prices

Bancor network tokens can calculate their prices by using a “transparent” auto-balancing feature. After a token’s price has been determined, it may be directly converted to any other token on the network through a smart contract.

All tokens on the Bancor network maintain a “formulaic relationship” to every other token, which is set by a basic “formula balancing” conversion. This allows all tokens to be converted to others in real-time – without requiring order matching.

Token Prices Are “Predictable” and “Resistant” to Market Manipulation

As mentioned on the project’s Github page, Bancor’s liquidity network allows users to buy and sell crypto tokens in a simple and cost-effective manner. The Bancor wallet may be used to automatically and directly convert tokens (from the wallet itself).

The Bancor team claims that the token prices on its network are “resistant” to market manipulation and are also “more predictable” than those quoted on crypto exchanges. 

The Bancor Web App lets users convert Ether (ETH), EOS, Dai, and many other tokens. 

Smart Tokens May Be Liquidated for Any of Its “Connected” Tokens 

According to its whitepaper (published on March 18, 2018), the Bancor protocol utilizes an “autonomous” liquidity mechanism and enables automatic “price determination.” These features are available for all blockchain-based token platforms that support smart contracts. 

Smart Tokens on the Bancor platform have “one or more connectors” to a network that keeps track of balances of other supported tokens. This allows users to quickly buy or liquidate (sell) a Smart Token for any other token connected to it. 

These transactions are processed by the Smart Token’s contract, and the rates are being “continuously” recalculated – in order to balance buy and sell orders.

Solving the “Double Coincidence of Wants” Problem

According to its developers, the Bancor protocol has been developed to address an economic problem called the “Double Coincidence of Wants.” This problem was solved for the barter system when money was invented. 

However, the coincidence of wants problem must also be solved for exchanges – as they still need “labor” to establish markets. For instance, exchanges have to process bid/ask orders and also trade with external parties in order to create liquidity.

Bancor’s Network Operates without a Central Authority

As explained, the Bancor protocol aims to solve this problem by using Smart Tokens to represent various financial assets including fiat currencies. Bancor’s smart contract-based ecosystem for asset exchange operates without a central authority, and it’s based on a decentralized “hierarchical” monetary system.

Currently, the Bancor network is still in its developmental stages and users must understand the risks involved with using the platform.

The Bancor protocol has been developed using mainly the SmartToken and BancorConverter contracts. These contracts allow users to convert between tokens and their connectors. As noted by the Bancor team, the SmartToken contract represents a “converter aware” ERC-20 token. 

$153 Million Raised During Bancor’s Public Token Sale

Co-founded by Galia Benartzi, a serial tech entrepreneur and international economics postgraduate from SAIS John Hopkins, the Bancor project raised 396,720 Ether (appr. $153 million at that time) during its initial coin offering (ICO). 

Held and completed on June 12, 2017, Bancor’s public token sale is one of the largest ICOs ever conducted. In February 2018, the Tel Aviv-based project’s management revealed that token exchange volume on Bancor had increased from around $3 million per week in November 2017 to about $37 million per week in January 2018.

Bancor Team Released Unified Wallet

In April 2019, the Bancor team released a progress report in which it noted that Bancor’s Ethereum and EOS-based networks had been “unified”, and were accessible through a single interface, called Bancor’s Unified Wallet.

The report also mentioned that the Bancor protocol had been integrated into the Samsung S10 smartphone through the EOS Resource Exchange (REX) and the Enjin wallet.

As noted in the report, Bancor network users may store their cryptoassets in the TREZOR hardware wallet and MetaMask (a tool that lets users run Ethereum-based dApps without downloading a full-node) support has been added as well.

A few notable milestones achieved by the Bancor network include (as of March 31, 2019):

• 138+ Tokens Supported on Bancor Network,
• 9,591 Supported Token Pairs,
• Approximately $13 million in liquidity staked to Bancor Network,
• 11,032+ active wallets, up more than 40% from Q4 2018,
• Ethereum, EOS, POA blockchains supported

Bancor’s Tokens Are “Liquid from Day One”

On April 30, 2019, the Bancor team announced the launch of Liquid Tokens. As their name implies, these tokens are “liquid from day one.” The developers of the tokens claim that traders need not be concerned about low liquidity and high price volatility.

As explained by Bancor’s technical team, a liquid token is a smart contract that “acts as an automated market maker.” The contract can regulate the process of purchasing and selling tokens along “a predetermined price curve, with a single pool of collateral to back it up.”

According to Bancor’s developers, users are ”adding” collateral when acquiring Liquid Tokens, and “reducing” collateral when selling them. The Bancor team further noted that Liquid Tokens are able to “continuously” recalculate their price “relative to their collateral token.”

This is done by maintaining a “fixed ratio” between the total value of Liquid Tokens and the total value in their reserved pool. Referred to as the “reserve ratio”, it may be used to help stabilize the price of Liquid Tokens.

Disabling Conversions for US-based Traders

As noted in Bancor’s latest Q2 2019 report, the project’s team members worked on optimizing the Bancor protocol and made improvements to BancorX, a cross-blockchain decentralized liquidity network. 
Notably, the Bancor Foundation announced that it would be disabling conversions via the Bancor Network for US residents due to regulatory uncertainty.