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Bancor Protocol Token – Detailed Review
When investing in virtual currency, you need to do your research. We provide you with reviews of each world top cryptocurrency out there, so that you can find the best crypto coins to invest in for you. This is a review of Bancor.
Bancor is creating new a decentralized crypto exchange protocol for ERC-20 tokens that does not match buyers and sellers for trades. Instead, designated suppliers store coins in “reserves” on the Bancor platform and prices adjust based on how much is left in the reserves.
The secure and fluid exchange of tokens has always been an issue within the crypto community. Most exchanges are centralized, meaning that tokens must be stored on the exchange first and trusted with the company. However, there have been many instances of exchanges getting hacked and users losing their funds. With Bancor, coins remain in the user’s wallet until traded. With all transactions being on-chain, the user does not need to worry about trusting the exchange.
The Bancor algorithm uses a system of “reserves” to fulfill buy and sell orders for any coin. When an order is submitted on Bancor, the coins in the reserves are used to fill that order. The price of the coin is based on the demand and the amount left in the reserves. Although the price may fluctuate, liquidity is guaranteed.
Example of Bancor Reserve System
For example: a new ERC-20 token called X token is created. However, this token was only distributed among a small group of early adopters and liquidity for the token is very poor. Instead of listing on a centralized exchange, the founder can create a custom reserve on the Bancor platform. The founder needs to fill this reserve with both tokens and ETH.
Once the reserve is set up, anyone can interact with it. If users want to purchase X token, they must send ETH to the reserve. When users want to sell X token, they will receive ETH from the reserve. Transactions either decrease or increase the amount of X tokens left in the reserve. The ratio of X token to ETH left in the reserves is what determines the price of the coin.
Bancor raised one of the largest ICOs at the time, taking in over $150M in an hour. The ICO was structured so that in the first hour, there would be no cap on how much money Bancor could accept.
Bancor was considered quite a groundbreaking innovation in the cryptocurrency space at the time. Renowned venture capital investor Tim Draper was also on the advisory board. This led to Bancor’s ICO being massively successful.
Bancor tokens (BNT) is the original token that will be used to establish the BANCOR network and function as a native currency. To create a new reserve for a token, users must lock in a certain amount of Bancor. Bancor is also used to buy and sell tokens.
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