While there are many blockchain initiatives focused on decentralized applications and token conversion, the Bancor Network and its BNT token stand out.
This initiative is, without a doubt, one of the most well-known in the cryptocurrency world. It’s had its fair share of ups and downs as well. From a spectacular ICO to legal issues, it’s everything here. From large-scale collaborations to a highly recognized hack. Is it, however, something you should think about?
We will cover all you need to know about the Bancor Network Token in this review.
What is Bancor?
Bancor is software designed 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 technique for providing liquidity to markets without requiring a financial institution to operate it directly. Simply said, AMMs like Bancor are attempting to increase the liquidity of more niche crypto-asset markets by incentivising users to create and manage asset pools.
Tokens are converted into BNT as an intermediate step whenever a trade is executed on its platform. The liquidity providers who deposited 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 platforms such as Balancer or Uniswap, it is designed to work with both EOS and Ethereum. In the future, it is possible that more blockchains will be compatible with its platform.
Bancor is also one of the older AMMs, having begun in 2016 when platforms utilizing multiple cryptocurrencies were less common than they are now.
What Makes Bancor Unique?
Bancor enables the frictionless exchange 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 altcoins while also compensating liquidity providers. Without the intervention of a third party, the protocol converts various cryptocurrencies into other tokens, including those running on other blockchains.
All smart tokens created on the network start with BNT, the protocol’s main token. Bancor’s smart tokens are the first of their kind to be created using blockchain technology. The protocol’s main goal in developing smart tokens is to provide a long-term solution to liquidity issues, which sets it apart from other market makers.
How does Bancor work?
Bancor wants to entice customers to deposit money into pools so that its AMM service can be automated. Each pool is equipped with a pair of tokens as well as a BNT coin reserve.
When a user deposits coins into a pool, they receive a new token. This token is known as a pool token, and it allows the user to retrieve the amount that they initially locked in the protocol. BNT tokens are used as an intermediary currency when each token is traded.
Bancor, for example, lets customers lock a single token in one of its pools (as opposed to a pair). To gain access to the pool in some AMMs, for example, a user may be required to lock up pairs of tokens in specific proportions.
A user on Bancor could only deposit ETH or DAI into a pool of both ETH and DAI. As an alternative, a user would have to deposit both ETH and DAI on Uniswap.
Who Are the Founders of Bancor?
Guy and Galia Benartzi, Israeli siblings, launched the Bancor Network in 2016. Both are still involved in the initiative, with Guy serving on the Foundation Council and Galia overseeing business growth. She’s also an outspoken supporter of women in blockchain and cryptocurrency.
Olivier Nathan Cohen, the founder, and COO of Altcoinomy, a crypto KYC operator that facilitates cash out in Swiss private banks, AML screening of ICO investors, and institutional crypto/fiat transactions, is another board member.
Yudi Levi has served as Bancor’s Chief Technology Officer since the company’s inception in 2016. He was previously the co-founder and CTO of AppCoin. He was also the principal architect of various mobile projects, including Real Dice, Mytopia, and Particle Code, for over a decade.
Brock Pierce, the Chairman of the Bitcoin Foundation’s Board of Directors, and venture capitalist Tim Draper are among the team’s advisors.
Hack and criticisms
A cryptocurrency wallet on Bancor’s network was hacked on July 9, 2018, resulting in the theft of $12.5 million in Ethereum and $1 million in Pundi X. Hackers initially stole $23.5 million, but $10 million was recovered, and no customer wallets were compromised.
Pros and Cons
| PROS | CONS |
|---|---|
| Bancor uses a one-of-a-kind model that eliminates bids, asks, market makers, and takers. | Bancor isn’t for anyone who isn’t familiar with Ethereum’s environment. |
| As a result of the unique business strategy, there is reduced counterparty risk. | There is no support for fiat currencies. |
| On the Bancor network, a considerable number of ERC20 tokens are supported. | The interface comprises of a simple order box and there is no trading platform supplied. |
| The cost of trade is competitive. | Margin trading is not supported |
Closing thoughts
Even though there is a minor learning curve for newcomers to the Bancor network, Bancor has shown to be worthwhile. By automating liquidity in the network, it solves many of the challenges that other networks and exchanges confront.
Furthermore, Bancor has made it very simple for developers to create exchange applications while having access to a large number of ERC20 tokens. The development team is always working on this project in order to improve it and provide the best possible service to users.
However, there are certain worries, including challenges with legislation in India and other jurisdictions, but this is a problem that may be readily solved when the mass usage of digital assets and blockchain technology grows.