Bancor Protocol is a standard for a new generation of cryptocurrencies called Smart Tokens
The Bancor protocol enables built-in price discovery and a liquidity mechanism for tokens on smart contract blockchains. These “smart tokens” hold one or more other tokens in reserve and enable any party to instantly purchase or liquidate the smart token in exchange for any of its reserve tokens, directly through the smart token’s contract, at a continuously calculated price, according to a formula which balances buy and sell volumes.
The Bancor protocol is named in honour of the Keynesian proposal to introduce a supranational reserve currency called Bancor to systematise international currency conversion after WWII.
Introducing Smart Tokens
A Solution to the Liquidity Problem Smart tokens are standard ERC20 tokens which implement the Bancor protocol, providing continuous liquidity while automatically facilitating price-discovery. The smart token’s contract instantly processes buy and sell orders, which drive the price-discovery process. Due to this capability, smart tokens do not need to be traded in an exchange in order to become liquid.
A smart token holds a balance of least one other reserve token, which (currently) can be a different smart token, any ERC20 standard token or Ether. Smart tokens are issued when purchased and destroyed when liquidated, therefore it is always possible to purchase a smart token with its reserve token, as well as to liquidate a smart token to its reserve token, at the current price.
- Continuous Liquidity
- Backward Compatible
- No Spread
- No Counterparty Risk
- Lower Volatility
- Predictable Price Slippage
BANCOR SMART CONTRACTS
Bancor smart tokens are implemented using smart contracts, initially deployed on the Ethereum network.
Smart tokens are compatible with ERC20 and EIP228. The protocol will evolve to include additional standards to allow more flexibility, cross-blockchain compatibility and increased security for smart tokens.
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