Liquidity in crypto is shit.
But, not anymore!
Bancor is a fascinating project that is trying to get rid of the liquidity issue entirely. Basically acting as a Shapeshift on steroids.
Let’s dig in…
Bancor (ticker: BNT)
Wtf is Bancor?
The Bancor network is a project which allows users to convert ERC-20 tokens instantly without an exchange.
Bancor solves the liquidity issue through a system of “Smart Tokens” (which are smart contracts). Smart Tokens are ERC-20 compliant tokens, with added functionality. Each Smart Token is tied to a traditional ERC-20 token via a “connector” and holds reserves of that token. For example, if there is an OMG Smart Token, then the Smart Token contract is holding actual OMG to back it.
How does this provide liquidity to the market? Well, there’s another type of Smart Token called a Relay Token. These have TWO connectors, one to BNT and one to another ERC-20 token with a 50/50 weight. Relay Tokens can convert between any of their connected tokens. This works to create a network that can convert between any two given ERC-20 tokens.
So, how are conversion rates handled and how does any of this actually guarantee liquidity? The Bancor Protocol calculates exchange rates in real time using a proprietary formula (that can be found in their whitepaper). It factors supply, demand, volume, the token’s total value, and available connector balances. Liquidity is guaranteed through Bancor’s Constant Reserve Ratio which ensures that the connector for a given token does not deplete its reserve entirely.
Different tokens can connect to other connectors to other tokens, create a large network of tokens all interconnected. Pretty cool shit.
Highly recommended getting deeper in how this works with this link: https://support.bancor.network/hc/en-us/articles/360000472072-How-does-a-Smart-Token-work-
Real quick - we want to note that they are not really solving a ‘liquidity issue’. They are not bringing in new money or investors, they are creating a new exchange mechanism. To clear that up, as their branding and messages is about solving liquidity issues - we disagree.
Who tf is behind this shit?
They have a few head honchos, but most notably is Bernard Lietar. He serves as their Foundation Council President and Monetary Architect. He is an economist that has been following the emergence of local, community currencies for decades. He has a good mind for this type of project in our opinion, considering Bancor is a network to liquidate various currencies serving large or small communities. This project definitely needs a top notch economist.
Overall, Mid-Tier shitcoin. Let’s see how they do.
Hope you learned some shit.
- Mike and Aaron