Bancor is the world’s first decentralized trading system, allowing traders, liquidity providers, and developers to engage in a free and open financial market. The open-source Bancor Protocol does not require permission to use.
What is Bancor?
Bancor is a software program that tries to encourage users to pool their crypto assets in exchange for a part of the fees paid by traders when they buy and sell them.
Bancor is seeking to make the functioning of an automated market maker (AMM) easier by doing so. An AMM is a well-established mechanism that provides liquidity to markets without needing a financial institution to operate it directly.
Simply said, AMMs like Bancor attempt to increase the liquidity of specialized crypto-asset markets by incentivizing users to build and manage pools of assets.
Tokens are converted into BNT as an intermediate step whenever a trade is completed on its platform. The liquidity providers who deposit the assets receive a share of the fees paid by traders as a return on their funds.
While Bancor may seem similar to other popular DeFi systems such as Balancer or Uniswap, it is designed to work with both EOS and Ethereum. In the future, it is possible that other blockchains may be compatible with its platform.
Bancor is also one of the older AMMs, having begun in 2017 at a time when platforms utilizing several cryptocurrencies were less widespread than they are now.
Bancor: roots and history
Eyal Hertzog, Yudi Levi, and Galia and Guy Benartzi created Bancor in 2017. It was given the name Bancor in honor of John Maynard Keynes, who coined the term “supranational currency” 76 years ago.
Galia Benartzi is a co-founder of the Bancor protocol and has been a technology entrepreneur for many years. She works as a business developer for Bancor.
Particle Code is her company, and she is the CEO and founder.
Bancor’s Chief Technology Officer is Yudi Levi. He has almost 20 years of experience as a technology entrepreneur. He previously co-founded AppCoin, a platform that allows anyone to build their own currencies.
Eyal Hertzog is the protocol’s, BNT’s, and other network-based products’ product architect. He has been a technology entrepreneur for over 20 years and is a well-known voice in the crypto business. He previously developed MetaCafe, Israel’s most popular video-sharing website, with over 50 million members.
Guy Benartzi is the president and CEO of Bancor. In 2005, he co-founded Mytopia, which creates cross-platform games for social media users.
How does Bancor work?
Bancor wants to entice consumers to deposit funds into pools in order to automate its AMM service. Each pool has a pair of tokens as well as a BNT coin reserve.
When a user puts money into a pool, they are rewarded with a new token. This token is referred to as a pool token, and it allows the user to retrieve the amount they originally locked in the protocol.
When each token is traded, BNT tokens are utilized as an intermediate currency.
Unlike others, Bancor lets customers lock a single token in one of its pools. In some AMMs, for example, a user may be required to lock up pairs of tokens in specific proportions in order to gain access to the pool.
On Bancor, a user could deposit only ETH or DAI into a pool of both ETH and DAI. A user would have to deposit both ETH and DAI on Uniswap as an alternative.
Users must, however, deposit BNT into any Bancor pool.
Bancor must make certain that liquidity providers may get the proper price for the coins they’ve locked on the platform.
Bancor V2 asserts to have a solution called an oracle, which is meant to transmit a price from an external source into a system that already exists.
Bancor’s pools alter the percentage of tokens in relation to their pricing using oracle, allowing a liquidity provider to withdraw the same amount of tokens they invested.
Why choose Bancor?
Bancor allows for the frictionless conversion of network tokens. This eliminates the requirement for a third-party platform or an exchange. The protocol also supports a number of self-governing pools for the network’s supported coins.
Bancor is unusual in that it aims to promote liquidity for cryptocurrencies while also compensating liquidity providers.
Without the intervention of a third party, the protocol transforms certain cryptocurrencies into other tokens, even those operating on other blockchains.
All smart tokens produced on the network start with BNT, i.e., the protocol’s primary token. Bancor’s smart tokens are the first of their type to be created using blockchain technology.
The protocol’s major goal in developing smart tokens is to give a long-term solution to liquidity issues, distinguishing it from other market makers.