Bancor is a blockchain project that recently concluded a historic crowdsale for its Bancor Network Token. Find out everything you need to know about Bancor today in our review.
What is Bancor?
Bancor is a standardized system built to manage “a new generation of cryptocurrencies” – smart tokens (i.e. tokens built on smart contract blockchains like Ethereum). The standard enables built-in price discovery and has a liquidity mechanism for tokens on smart contract blockchains. Basically, it makes smart contract-based cryptocurrencies more usable and practical.
How does it work? The Bancor Protocl’s “smart tokens” hold one or more other tokens in reserve, enabling 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 that balances buy and sell volumes.
Bancor concluded its crowdsale on June 12. That historic crowdsale made headlines worldwide. It attracted the attention of investors like Tim Draper. It also set an industry record by raising about $153 million in Ether. That’s a new industry record – it finishes just ahead of the notorious crowdsale for The DAO, which lost $152 million raised by investors.
Ultimately, the Bancor Protocol makes it easy for anyone to create a token and launch a crowdsale. It vastly enhances the usability of smart contract-based blockchains like Ethereum and the currencies that use it. It allows for the creation of things like complementary currencies, crypto ETFs, and highly-liquid cryptocurrencies (even new or less popular cryptocurrencies).
With that in mind, let’s take a closer look at some of the features behind the ambitious project.
As mentioned above, Bancor is a protocol designed to maximize the efficiency and usability of tokens on smart contract blockchains. Some of the key features of the platform include:
Continuous Liquidity: Smart tokens can be purchased or liquidated by anyone, anytime, through their smart contract.
Backwards Compatibility: Bancor enables liquidity and asynchronous price discovery for any existing ERC20 standard token.
No Spread: Prices are calculated by the smart token, which means buys and sells use the same current price (yes, you read that right).
No Counterparty Risk: There’s no need to deposit your money in an exchange in order to convert it between smart tokens.
Lower Volatility: Reserves give smart tokens significant market depth, which means lower volatility across cryptocurrency markets.
Predictable Price Slippage: Price slippage “is pre-calculated relative to transaction size and incorporated into current price.”
What is the Bancor Network Token?
The Bancor Network Token is a key part of the ecosystem. The token will hold a single reserve in Ether. Other smart tokens connect to the Bancor network by using Bancor as their reserve – or as one of their reserves.
The smart tokens are implemented using smart contracts, which will initially be deployed on the Ethereum network. Bancor Network Tokens are compatible with ERC20 and EIP228. Over time, the protocol will evolve to include additional standards with the goal of allowing more flexibility, better blockchain compatibility, and increased security for smart tokens.
You can view more technical details about the Bancor Protocol and its Bancor Network Token here.
Practical Uses for the Bancor Protocol
Some of the proposed uses for the Bancor Protocol include all of the following:
Token Changers: Token Changers are smart tokens that can be used to exchange between other standard ERC20 tokens that are held in reserve. The system will keep prices in sync with the outside world using arbitrageurs that are incentivized to restore market equilibrium when the calculated exchange prices drift in external exchanges.
ETFs (Token Baskets): Token Baskets are smart tokens that hold a number of standard ERC20 tokens in their reserve. This allows you to hold a portfolio of tokens by holding a single smart token. ETFs, like Token Changers, have an equilibrium system in place to keep prices in sync with the outside world.
Project and Protocol Tokens: Smart tokens can be used for crypto-funding initiatives, where participants receive tokens that are liquid and automatically market-priced.
Complementary Currencies: You can use smart tokens to issue new, liquid currencies for a group. Some of the examples of this (some we’re already seeing in the world today) include complementary currencies, loyalty points, B2B barter, and blockchain protocol tokens. All of these token types can benefit from the Bancor Protocol.
The Bancor Crowdsale
Bancor’s crowdsale set a new industry record on June 12 when it raised $153 million in Ether. By the time the crowdsale ended at 18:00 UTC, a single smart contract connected to the sale had collected 390,000 Ether – which works out to $152.3 million at current prices.
Overall, 79,323,978 Bancor Network Tokens (BNTs) were created for the ICO. The top token holders now hold 83.96% of all BNTs. 50% of the total supply of BNTs were sold to the public, while 50% were set aside for future use.
A total of 10,885 buyers took part in the ICO, making up a total of 15,000 transactions. A single buyer purchased 6.9 million BNTs, worth roughly $27 million.
The ICO also made headlines for its notable investors: among those who announced they’d be buying tokens were investor Tim Draper, known for his VC fund Draper Fisher Jurvetson. This was Draper’s first ICO, although he previously backed the Tezos project. He has also been outspoken about his support for bitcoin and has invested in a number of cryptocurrency projects throughout the year.
Many described the ICO as “insane” speculation. Coindesk has some good quotes in their writeup here. One analyst was asked if the amount raised was related to the project’s fundamentals. He simply responded with “no”.
Many took issue with the amount of hype surrounding the project, saying that it exceeded the substance of the project. Some pointed to the fact that the ICO world is booming right now – and Bancor is launching its ICO at a time that appears to be the height.
The crowdsale was scheduled to last until July 15, 2017.
Bancor was created by the Bprotocol Foundation in 2017. The goal of the foundation is to promote the development and adoption of the Bancor protocol.
The company is led by Eyal Hertzog, Guy Banartzi, Guido Schmitz-Krummacher, and Bernard Lietaer.
Another key contributor to the Bancor ecosystem is a company called LocalCoin Ltd., which is currently working full-time to develop software that promotes the Bancor protocol.
Smart contracts were a huge innovation in the world of blockchain. Projects like the Bancor Protocol aim to take full advantage of smart contracts by making it easier to launch cryptocurrencies on smart contract-based blockchains. The hype around the project is significant – especially considering the company just has an Alpha release at this point. The ICO blew away expectations on June 12 by attracting over $150 million in just a few hours, shattering the previous record held by The DAO.
Watch for the Bancor Protocol to continue making headlines over the coming months as more details of the project continue to be released.