What is Bancor?
3 min readTable of Contents
The Bancor protocol is a platform to help create smart coins and give these coins liquidity and asynchronous price discovery.
It allows users to create smart coins which can be traded for other crypto coins right away. There is no need to look for a buyer or seller who has a matching need. Also, it lets new coins to be traded right when they are created. New coin creators don’t have to wait for them to be listed on an exchange and an interest in their coin to be generated. Bancor is paving the way for smart coin exchange.
How Bancor Works
Bancor made headlines all over the world when its ICO raised a lot of money last year. However, despite its high-profile ICO, a lot of people don’t exactly understand it yet. It is not an exchange that pits one smart coin with other coins. It is a protocol that gives new coins value and liquidity. The challenge right now is to match new coins with Bitcoin or Ethereum. The gap is so vast and the circulation of an interest in a newly created coin so low that this coin has no way to be traded right away. A steady process and strategy to develop user interest and increase circulation are required before the coin is listed on exchanges and has a value. But Bancor changes that.
Price, Balance & CRR of BNT Tokens
Price Calculation
The price is calculated by a simple formula: BALANCE/SUPPLY*CRR
Balance & CRR
The balance and CRR (Constant Reserve Ratio) are determined by the creator of the coin. So if you were to create a coin, add 10 Ether in the balance and put the CRR as 0.02; this would make the total market cap of your currency as 500 Ether. The supply is the number of coins in circulation, which means that buying and selling of the smart coin will affect the price.
To understand it better, consider the case of someone buying or selling the coin. In case someone buys the coin, the supply increases or becomes positive (+), driving the price up. In case someone sells the coin, the supply decreases of becomes negative (-), driving the price down. This makes it simple to calculate the price of new coins against Ethereum. In case someone decides to sell or the coins in circulation and sink the currency altogether, the protocol drives the price so low that selling all the coins at once becomes unfeasible.
Liquidity
It doesn’t matter how large or small the trading volume of the smart token is. It is always liquid, which makes it possible for small tokens to remain active and in circulation. Bancor takes intermediaries like exchanges away since they use synchronous price discovery. It takes away the need to match a smart token against other currencies, allowing users to start exchanging and trading with them right away.
Market History
BNT tokens currently have a daily trading volume in the region of $6.3 million and a global market cap of $154 million. BNT is an ERC20 token, so you can store it in any wallet that supports such tokens. As for buying it, you can use Ether to buy it from exchanges like Binance.
Conclusion
Bancor is a protocol that allows for the creation of smart tokens that can be exchanged for other crypto tokens the minute they are created. The formulaic relation it introduces between different cryptocurrencies gives the smallest of tokens liquidity and circulation. All coins are available to trade the minute they are created using the Bancor protocol. There’s no need to head over to exchange and find a matching offer or match the price of the new token against existing coins to make a suitable trade. The protocol takes care of all that in real time and helps you trade in any coin you wish.
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