Bancor is a specialized platform based on Ethereum, where a unique technology of Smart tokens is implemented. Smart tokens interact through smart contracts and facilitate conversions of coins and tokens listed on the Bancor exchange. The coins are converted into each other with the help of Bancor protocol through the internal BNT token, bypassing the cryptocurrency exchanges.
Bancor was created by the Swiss Fund Bprotocol. On June 12, 2017, the Bancor ICO was launched, and in the first 3 hours, the project raised ~ $140 mln which indicates huge demand for this kind of technology.
The name of the project has come from the English economist J.M. Keynes. In 1944, Keynes suggested using special Bancor currency for international settlements. The idea was that the Bancor rate should be pegged to gold, and the exchange rates of all national currencies would be measured in Bancors.
How does it work?
Keynes' idea was implemented in the Bancor protocol which radically simplifies the exchange of various tokens, not only popular coins. Bancor network supports all ERC20 tokens. Our token TBX is also listed on the Bancor exchange. For example, you need to exchange TBX tokens for ZNK tokens. You don't need to search for a buyer for TBX, it is enough to run them into the Bancor network, and TBX will be converted into Smart token. Each Smart token holds a certain ratio of other ERC20 tokens in reserve. Then a chain of conversions takes place, and you get ZNK tokens required. The “basic” Smart token is BNT, which provides continuous liquidity for all types of tokens. Relay Tokens are the kind of Smart tokens configured only with two connector balances, one comprises BNT and another can comprise any ERC20 token. Cumulative balance of connectors is 100%. Relay Tokens enable to integrate external ERC20 tokens in the Bancor Protocol and ensure conversions between BNT and another connected token. The continuous token conversions are due to the automatic non-commercial market maker based on formulas and rates described in the Bancor White Paper. They ensure an optimal balance between all ERC20 tokens in the network.
As a result, the network has built-in liquidity which doesn't depend on the number of token sellers and token buyers and exchange liquidity.
Significant milestones of Bancor
On July 9, 2017, Bancor was hacked. ETH, BNT, and NPXS totaling about $23 mln were stolen. As Bancor officially stated, “A wallet used to upgrade some smart contracts was compromised. This wallet was then used to withdraw ETH, BNT and NPXS”. Nowever, users didn't lose their tokens; the tokens were stolen only from the Bancor reserve storage. Banсor froze BNT to limit the damage to the platform and initiated an investigation into the theft of the rest tokens. This event had a negative impact on the BNT rate, which immediately dropped by 15%. In addition, the founder of Litecoin, the high-profile crypto-influencer Charlie Lee expressed doubt that Bancor is really decentralized: “A Bancor wallet got hacked and that wallet has the ability to steal coins out of their own smart contracts. *facepalm* An exchange is not decentralized if it can lose customer funds OR if it can freeze customer funds. Bancor can do BOTH. It's a false sense of decentralization.”
On Sep 20, 2018, the BancorX test platform on EOS was launched. This was the next step in the platform expansion beyond the Ethereum network. BancorX will provide a liquidity network for EOS tokens. For the first time, BancorX will support 10 EOS-based tokens. The functionality of BancorX will be the same, but transaction time will be significantly reduced (1 sec instead of 10 on Ethereum), and there will be no transaction fees (unlike “gas” on Ethereum).
Bancor advantages over other crypto exchanges
- Bancor is convenient for local tokens of limited use which are difficult to list on crypto-exchanges. Such tokens are able to build their market value;
- Token interchanges don't depend on the coincidence of wants of sellers and buyers;
- The built-in liquidity mechanism solves the problem of liquidity lack for niche tokens;
- Automatic pricing mechanism excludes spreads and commissions;
- All conversions are carried out from a crypto-user wallet;
- By default, Smart tokens don't charge conversion fees. The only fees are the ones required for transactions with the underlying blockchain (for example, gas on Ethereum). Also, each creator of a Smart token can set a fee for its use when converting tokens. But the user can choose the one where the fee is the lowest.
Market characteristics of Bancor and BNT token
According to Coinmarketcap, the Bancor daily trading volume is ~ $ 1 mln (as of Oct 2018). Approximately the half of trading volume accounts for BNT. 78 460 156 BNT were issued; around 70% are in circulation.
BNT price depends on the value of all ERC20 tokens traded - the higher the value of the coins included in Smart tokens, the higher BNT price which is similar to DJ index reflecting the common situation in the stock market. Also, BNT price is affected by the demand for the Bancor network.
At the launch, BNT jumped up to $23, then dropped to $2-3 and remained at this level for several months. At the end of 2017 - in early 2018, BNT repeated the spike of the main cryptocurrencies, and since then BNT price fluctuated within $1-1.5 .