Bancor is a blockchain platform that provides users with an easy, low-cost way to buy and sell different crypto tokens. It aims to bring more liquidity to tokens that have low trade volume in exchanges. Liquidity is a significant impediment when it comes to buying and selling small-scale tokens or new tokens that have low adoption.
In traditional financial markets, market makers solve the liquidity problem by always offering to both buy or sell a financial asset, even when there is low interest in the asset on the market. In the blockchain world, traditional market makers can’t be used to solve the liquidity problem without violating the blockchain movement’s spirit of decentralization.
Currently, 10% of existing cryptocurrencies make up 95% of the whole crypto market cap and represent 99% of all trading volume. The remaining 90% are practically insignificant and this problem is further exacerbated by poor liquidity. The Bancor Network wants to become the solution to this problem by providing a protocol built on smart contracts that serve as an alternative mechanism for trading. A well-defined smart contract can act as a middleman and manage the buying and selling of tokens.
BNT Pricing, Market Cap and Volume
BNT was launched in a token generation event held on June 12, 2017. The funds collected in that event will be used as follows:
– 20% is held by the ETH connector balance of the BNT Smart Token
– 40% will be used to continue the development of the Bancor Protocol
– 18% is set aside for operational costs
– 12% will be used for marketing and to develop Bancor’s ecosystem by supporting innovative smart token projects
– 10% is set aide for developing relay tokens, array tokens, and proxy tokens on Ethereum
The total supply of BNT tokens is capped at 76 million. Two thirds of the available supply of BNT (51 million) was distributed to contributors of the token generation event. The remaining tokens are held by the Bprotocol Foundation and will be used to finance the project’s long-term budget, partnerships, and community grants to aid the adoption of the Bancor protocol.
The price of BNT was listed at ~$4.41 USD after its launch, but it experienced a post-ICO dip and remained in the $1-$3 range for the next several months. Its price didn’t experience any significant changes until January 2018, when it jumped to an all-time high of over $10 with a market cap of ~$300 million USD.
How Bancor Works
The Bancor protocol uses smart contracts to build liquidity directly into tokens. Bancor’s “smart tokens” are a new type of cryptocurrency that function as regular ERC20 tokens, but are built on smart contracts with “connectors” to other tokens. Smart tokens are essentially money that hold money. The smart contract that operates a smart token “owns” units of at least one other token in the same way a country’s central bank has foreign currency reserves.
Anyone can buy a smart token using its reserve or connected token(s) by simply transferring the reserve token to the smart token’s contract. The contract will issue a buyer new units of the smart token, and does the reverse for sellers. When a seller trades their smart tokens for a reserve token, the smart token units are removed from circulation. Basically, a smart token’s supply increases and decreases with demand.
A smart token continuously recalculates its price in relation to each of its connected tokens to determine what amount to issue to a buyer or withdraw from a seller. The fixed ratio between the value of a smart token and the value of its connector balances is maintained by the Bancor Formula, but the creator of a smart token defines the desired ratio for each connector token.
Read the project’s whitepaper for technical details on the algorithms used to calculate the prices of conversion.
Bancor Network Tokens (BNT)
In addition to the smart tokens and their connector tokens, the Bancor Network also has a utility token called the Bancor Network Token (BNT) that links all the different tokens on the network together. BNT functions as a “token for tokens” by making all smart tokens in the network inter-changeable with each other.
Bancor vs. Other Decentralized Exchanges
A decentralized exchange for crypto tokens is nothing new. There are several blockchain projects that offer similar services, such as Blocknet, Kyber Network, and Komodo. Bancor’s smart tokens have several advantages:
Continuous Liquidity – Users can always buy or sell tokens on the network directly through their smart contracts, even when there are only few or no other buyers or sellers in the market.
No Fees – Smart tokens don’t charge fees for conversions. Smart token creators may set an optional usage charge for a conversion, but the fees will have to be minimal because another user can easily launch a competing smart token and offer the same conversion for less.
No Spread – The Bancor Formula applies the same price calculation when handling both buy and sell orders. In contrast, on traditional exchanges the buy price is usually lower than the sell price. The spread is how they earn a profit.
Predictable Prices – The price algorithm of a smart token is completely transparent and users can use it to calculate the effective price of their desired conversion before they initiate the exchange. This contrasts with traditional order-book based exchanges where a large order can cause a price to unpredictably slip to a significantly different level.
ERC20 Compliant Tokens – Smart tokens are ERC20 complaint and can easily integrate with existing applications like Dapps or Wallets. Any existing ERC20 standard token can connect to the Bancor Network via a smart token using connector modules.
Buying, Storing and Selling BNT
BNT can be acquired from Binance, Bittrex, HitBTC, Liqui, OKEx, LATOKEN, and Gate.io, but the most efficient way is to buy them direct from Bancor Network. Bancor Network naturally carries the largest trading volume of BNT.
Bancor has a mobile-friendly web wallet that allows users to buy, store, and manage any ERC20 token and easily convert tokens on the Bancor Network. The wallet has fiat-to-crypto integration and can be used to purchase ETH, which is convertible to any token on the network, using any major credit or debit card.
As an ERC20 token, BNT can also be stored in any wallet that supports that token standard, including MyEtherWallet (MEW), Mist, and MetaMask. Hardware wallets like Trezor and the Ledger Nano S should also work Use the contract address listed here to display BNT in your chosen wallet.
Liquidity of BNT
Over 60 projects have announced integration with the Bancor Protocol and the Bancor Network already supports more than 70 different tokens. The daily volume of Bancor Network reached over $17,000,000 USD in April 2018, making it the most used decentralized solution for token conversions by volume.
The Bancor Network wants to provide a liquid market for every token regardless of its volume. It’s going to become a valuable service in the coming years as more small-scale, user-generated tokens emerge. As the network continues to grow, so will the value of BNT.
All of this has naturally translated to excellent market liquidity for BNT.