Bancor 101 : Solving Issues of Other Cryptocurrencies
Bancor is decentralization protocol platform and cryptocurrency, which exists to solve the issues of other cryptocurrencies. It is built to manage smart tokens – the new generation of cryptocurrencies that are built on smart contracts (like Ethereum). The platform has a built-in price mechanism and a liquidity mechanism to manage these tokens. It is especially established for smaller market cap coins that rely on the centralized and regulated exchanges for liquidity. The aim is to make cryptocurrencies easier and practical to use.
How Bancor Works?
“The Bancor protocol enables anyone to create a new type of cryptocurrency called Smart Token, which can hold and trade other cryptocurrencies.”
Bancor uses the smart contract platform of Ethereum, to provide a platform for peer-to-peer trades through a small tokens system. The Bancor protocol holds one or more smart tokens in reserve. This allows users to instantly purchase or liquidate his smart tokens in exchange for other tokens, through the smart token’s contract. The token prices are continuously calculated, according to a formula which balances the volume of sales and purchases.
It also enables users to easily make tokens on Ethereum and launch its own crowdsale. In fact, the creation of complementary currencies and highly-liquid cryptocurrencies is also possible. Bancor enhances the usability of Ethereum’s smart-contract system and the currencies used by it.
Bancor also has Bancor Network Token (BNT). It is a core part of the Bancor system, which holds a single reserve in Ether. Other smart tokens use BNT as their reserve (or as one of their reserves) to connect to the Bancor ecosystem.
Continuous liquidity and information: Anyone can purchase or liquidate smart contracts anywhere and anytime through their smart contract. The process is easy, simple and instant. The information about liquidity and price discovery is also available anytime for any existing ERC20 standard token.
Same prices: The exchange prices are calculated through a formula through transaction volumes. This allows buyers and sellers to exchange tokens at the same current price. No one pays more than the other
Lower volatility: Keeping reserves on the platform gives a certain depth to market tokens. This implies lower volatility in the cryptocurrency market. Also, prices are predictable through Price Slippage. “Price Slippage is pre-calculates relative to transaction size and incorporated current price.”
Elimination of established exchanges: Bancor eliminates the need of third-party exchange platforms, where significant risk is involved. There is no need to deposit smart tokens to these exchanges in order to carry out exchanges. It can directly be done peer-to-peer on Bancor now.
The Vision and Idea
The vision of Bancor is to resolve liquidity problems. According to its developers, it is best solved by “Double Coincidence of Wants” theory. It means that it is usually very difficult to find two people who have same demand price and supply price for a good. So, when a platform provides this virtual marketplace, it becomes easier.
Also, Bancor believes in using “Long Tail” more strongly. Long Tail refers to products that have low demand and low sales in volume. However, when these types of products are collected as one, their total share in the market exceeds the share of the top product. This means that while currencies such as Bitcoin and Bitcoin Cash have largest market volume, but smaller cryptocurrencies have more volume when they are all combined together. So, eventually, when transactions of all smaller cryptocurrencies will be carried out on Bancor, the transaction volume and market size would be greater than Bitcoin.
Bancor was created by the B-protocol Foundation in 2017. It was founded by Guy Bernartzi and his other three partners. Earlier, Bernartzi was the CEO and founder of Israel’s largest mobile social gaming company, Mytopia. He also co-founded Ecko Code with the famous Marc Ecko. After he quit these platforms, he has become more active on blockchain-related platforms. Besides blockchain, he is an active investor and advisor on digital products, fintech and life sciences.
Along with its core members, Bancor’s another key contributor is a company known as LocalCoin Ltd., which is currently developing a software that promotes Bancor.
Market Cap and Crowdsale
Bancor has especially attracted so much attention because of its huge and successful crowdsale last June. The platform set new records in the blockchain industry by raising 390,000 Ether ($153 million at that time). Over 10,000 buyers took part in the ICO, amounting to almost 15,000 transactions in a single day.
During the Initial Coin Offering (ICO), over 79 million Bancor Network Tokens (BNTs) was created. Out of this, almost 84% tokens are held by the top token holders. But this is only 50% of the market supply, which was sold to the holders. The rest is kept on hold for the future.
Every ICO makes headlines for attracting renowned investors. For Bancor, Tim Draper (known for is VC fund Draper Fisher Jurvetson) participated. He has invested in many cryptocurrencies and is very enthusiastic about the whole blockchain project. The crowdsale had too much hype surrounding it. Many argue that 2017 was the time for the bloom of ICOs, and Bancor caught the wind at right time.
Therefore, Bancor is a smartly designed and planned crypto project. It cannot even be said to invest in this coin. Because when users would need to directly exchange their tokens, they would eventually have to come here. Bancor is utilizing the smart contract service in the most efficient manner and is likely to make more headlines in the future.