cryptocurrencies

Bancor - A Complete Beginners Guide

Daksh Murkute | | |

In the era of cryptocurrencies, Bancor (BNT) was the first project made on the Ethereum blockchain, and based on an automatic market-making mechanism, it is the first platform related to token exchange.

 

It was the torchbearer for many subsequent projects in the cryptocurrency market.

 

This is similar to the Uniswap exchange but some tokens can only be allowed in Bancor only.

 

In the last three years, Bancor has processed transactions worth hundreds of millions of dollars.

 

s everything about Bancor and its token BNT, a permissionless decentralized trading platform.

Contents

What is a Bancor and how it works?

History

Advantages of smart tokens

Problems in Bancor

Current market Capitalization

Conclusion

 

What is a Bancor and how it works?

 

Bancor cryptocurrency?

    

 

Suppose, you’ve decided to make your own cryptocurrency, let’s say Orange Coin, and you’ve decided to come into the crypto market to trade Orange Coin, but the problem is

 

  1. Your currency is relatively new,

  2. It is still not that powerful,

  3. It has low members,

  4. Low selling and buying capacity.

 

Overall your coin doesn’t provide any liquidity to the market.

 

So what will you do? One option is, you can choose a better and strong currency like the US dollar, and come to an understanding that

 

  1. If you want to sell an orange coin you’re going to sell it with US dollars and

  2. If you want to buy orange coins you can use US dollars to buy them. 

 

This is what Bancor do, it provides a platform where you can convert your tokens into some other tokens, but there is one problem, 

 

What if the value of the Orange coin is suddenly dropping off? Because of such incidents, it will create chaos among your members and coin holders. Eventually, your members are not able to get rid of that low-value coins,

 

Right!

 

So to rescue you from all this drama,


Bancor came with a platform in which you can trade your currency Orange Coin with some other more powerful currency like the US dollar, and in such incidents, you can always take help from liquidity providers of Bancor to get rid of that low-value coins.

 

“Bancor provides a platform that allows its users to convert their coins in permission-less manner.”

 

Liquidity providers are a very important part of the Bancor platform, they have an enormous amount of a particular coin, and they put their coin in a pool called liquidity pools with BNT in pairs.

 

and

 

Liquidity pool in bancor is like a big bank that consists of both the coins (BNT and another respective coin) in very large numbers so that.

 

  1. You can purchase your coins from it whenever you want and,

  2. You can sell your coins whenever you want.

 

You just have to pay a little extra money as a fee to use their services, and this little fee is the earning of those liquidity providers

 

To maintain liquidity in its pool Bancor uses something called smart tokens.

 

“Bancor’s smart tokens are being specially made to provide liquidity into the pool continuously and side by side also maintain the price of the token.”

 

We’ve discussed one pair of coins i.e. Orange coin and US dollar for the sake of our example, but in real-world Bancor consists of approximately 280 pairs of such coins or in other words 280 liquidity pools. 

 

"Anyone can become liquidity providers in the Bancor and can earn some money."

 

Bancor is currently working on the Ethereum and EOS blockchain, but it is designed to work on any other blockchain networks as well.

BNT is an ERC-20 token of Bancor built on Ethereum Blockchain and you can buy BNT from major cryptocurrency exchanges, including Binance, Coinbase, etc. You don't have to use Bancor's Exchange to buy a BNT token.

 

History

 

History of Bancor?

 

Bancor was founded in 2016 by Bancor Foundation, located in Zug, Switzerland. It was first introduced on February 13, 2017, by an Israeli group, some of them are: 

 

  1. Eyal Hertzog is the cheif architector of Bancor. He is very famous in the crypto industry and has experience of 20+ years. He previously founded a video sharing site in Israel named MetaCafe,
     

  2. Guy Benartzi is the CEO at Bancor. He is the co-founder of Mytopia, a company that develops cross-platform games on social networks.
     

  3. Galia Benartzi- She is the co-founder and business developer at Bancor. She also has technological experience of many years. 
     

  4. Yudi Levi is the Chief Technical Officer at Bancor. He is also the co-founder of AppCoin, an app that allows communities to create their own currencies.

 

They have taken their company’s name Bancor from John Maynard Keynes’s concept of currency. In 1940 John was trying to develop a system of trade and he had mentioned the name Bancor in his paper.

 

Well, people know about Bancor BNT because it conducted the first successful ICO ever in 2017 when people didn’t even know much about blockchain technologies.

 

"In that ICO Bancor rose over $153M in less than 3 hours, and set a world record. After that, there was no turning back. Currently, it has over 280 liquidity providers and $1 Billion dollars of total liquidity."

 

Bancor is owned and operated by its community as DAO. (decentralized Autonomous Organization). It is governed by a democratic and transparent voting system that allows all investors to get involved and shape Bancor's future.

 

In July 2020,

  1. They have released a new version known as Bancor V2.
     

  2. In that version, they’ve introduced a new method DAMM (Dynamic Automated Market Maker).
     

  3. It is an advanced version of AMM (we’ve discussed earlier).
     

  4. it also uses price prediction methods to check if the balance between various tokens should be change or not.

 

Advantages of smart tokens
 

  1. There is a very small amount of fees involved in it.
     

  2. It depends on a mathematical formula to calculate the price of a token; by that characteristic, it pre-calculates the price slippage before execution.
     

  3. The price of tokens is always the same whether it is purchasing price or liquidating price because all the prices are done by smart tokens.
     

  4. Bancor provides liquidity irrespective of the trading volume of tokens because its liquidity is always done through smart contracts.
     

Problems in Bancor

Advantages of Bancor
?

  1. In 2018, it suffered a “security breach” and about $13.5 million worth of digital token stolen, Bancor said that it was able to prevent $10 million of its BNT token by freezing the fund but the rest of the money is still missing.

 

  1. Professor Emin Gun Sirer and Phil Daian, both have presented a 29 point analysis in detail, if you want you can read it here https://hackingdistributed.com/2017/06/19/bancor-is-flawed/ or can google it, and to counter that Eyal the co-founder of Bancor also published an article.

 

  1. All and all, there are various articles published regarding Bancor, some of them are positive and some of them are negative but overall people are trusting Bancor and in the long run that is more important.
     

Current market Capitalization
 

  1. The total liquidity in Bancor at the time of writing is around $1 billion dollars, and approximately 83.77% of BNT were on stakes.
     

  2. The Bancor BNT price is around $2.79 USD at the time of writing with a 24-hour trading volume of $18M USD.
     

  3. The current CoinMarketCap ranking is around #86, with a live market cap of $648M USD. It has a circulating supply of 223M BNT coins and the max. supply is not available.
     

Conclusion

Conclusion
 

Bancor is fully decentralized and allows its users to exchange tokens over 200 different trading pairs.”

 

  1. It solves major problems like liquidity, price discovery, etc but it also has some challenges ahead for example mass adoption, verification of token creators, etc.

 

  1. There are many controversies regarding Bancor,  but it has overcome all the controversies, and slowly it is gaining respect in the market.

 

  1. The market is still learning about cryptocurrencies and there is enough room to grow in the market. Personally, I am very hopeful about Bancor.

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