Review on Bancor by Benaiah A. Akinlade
Bancor: The single purpose platform designed for ERC20 holders
Bancor Protocol is a standard for a new generation of cryptocurrencies called Smart Tokens
It is a blockchain protocol that allows users to convert different cryptocurrency tokens directly and instantly instead of exchanging them on cryptocurrency exchanges. It offers a technology that allows all kinds of cryptocoins to be instantly transacted (bought and sold).
It offers a new network that is built on a new categories of cryptocurrencies known as Smart Tokens and smart contracts. Both of these are self-executing contracts.
Bancor comes with its own currency token, BNT (Bancor Network Token) which is the default currency for every token that is created on the network. This currency helps to keep the number of conversions needed to get the target token very low during the conversion. 1 BNT is exchanged for USD 1.14 with a market cap of over USD 74 million, trading volume of over USD 50 million, and a market cap rank of 127. The token had an all-time high of USD 10.27
Bancor uses an alternative trading mechanism which uses smart contracts to create smart tokens. It does not need an exchange of tokens with a second party.
It comes with a built-in mechanism that enables conversion between different ERC-20 compatible tokens. These conversions are completed on the blockchain through a set of protocols which does not involve any 3rd party such as cryptocurrency exchanges. Individual smart tokens are linked to smart contracts which holds reserves of other Ether (ERC20) tokens. Then the tokens are converted internally depending upon the volume of how much request is gotten from the user.
The protocol supports any token that is compatible with the ERC20 format, so any smart token that is created on the Bancor network is automatically compatible with ERC20.
There some benefits to using a protocol token like BNT such as:
1. When you stake on Bancor, it directly increases demand for BNT, and since every pool in the network have a share in some part of BNT’s liquidity, the more liquidity that is locked up in Bancor pools, the more liquid each pool on the network becomes. As more liquidity providers (LPs) join the network, the more value of existing LPs ownership increases.
2. Users who stake their BNT asset in Bancor pools will get BNT staking rewards through new BNT in a process known as BNT inflation. These rewards increases the profit of staking inside Bancor pools, and also serves as a strong incentive for users holding BNT so they can become LPs on the network.
Pros
- You can easily and conveniently convert your cryptocurrency without any middleman (crypto exchanges)
- There are rewards for Liquidity Providers
Cons
- The network will be difficult to use for users that are not familiar with the Ethereum ecosystem
- This platform is only suitable for those who have ERC20 tokens
- It is too complicated for beginners
- You cannot exchange Local (Fiat) currencies
