Bancor is a system that provides liquidity for small-cap tokens. It has built-in tradable one or more ERC20 tokens as reserves. Issue new tokens through smart contracts in exchange for reserve tokens. The price of new tokens is priced autonomously through smart contracts, so that tokens can be directly converted without the need for an exchange, without the need for a second party to participate in the transaction, or the second Three parties to match the transaction. The network effect of the tokens created by the Bancor protocol lowers the barriers to entry for these new currencies, effectively solving the liquidity problem.

The new currency is endorsed by Bancor, and Bancor is endorsed by ETH. Bancor's constant reserve ratio (CRR) is set and maintained at 20%. BNT is issued by sending ETH to the smart contract that Bancor holds reserves, and these sent ETH become Bancor's endorsement. Under such a setting, the user can send 20ETH to the smart contract to purchase 100BNT, and the 20ETH will be forced into the reserve fund by the smart contract. Using the same method, BNT can be exchanged back to ETH, as long as the user sends it to Bancor's smart contract, they will get some ETH. The Bancor protocol allows users to generate or burn BNT every time they deposit or withdraw reserves (ETH). If the price of ETH increases (due to the development of the Ethereum ecosystem), the price of BNT will also increase (due to the constant reserve ratio between BNT and its reserve token ETH), and the increase in the price of BNT will also increase the price of new coins.

Project Highlights

The biggest innovation of the Bancor protocol is that the value discovery of digital currency in traditional exchanges is based on the real-time synchronous (Synchronous) matching of buy orders (BID) and sell orders (ASK). However, based on the Bancor protocol, the price of digital currency depends on the reserve The balance and circulation of tokens, the process of value discovery is asynchronous (Asynchronous).

Bancor's main advantages

1、持续的流动性
 
即使市场上只有很少或没有其他买家或卖家，用户可以通过智能合约直接在网络中购买或出售 Token。 Since the price will be adjusted according to the exchange scale, there will always be a certain exchange price. The Bancor protocol effectively decouples liquidity from trading volume.
 
2、智能合约对执行的兑换不收取费用
 
用户产生的唯一费用是与底层区块链进行交互所需的费用。 Although the exchange of some Smart Tokens may have optional usage fees set by the creator, these fees are generally very low, because of the open source nature of the Bancor Protocol, other users can easily create competing Smart Tokens to provide similar exchange services , effectively reducing costs.
 
3、可调节的价格敏感度
 
大额的连接器代币准备金和比较高CW，产生的杠杆作用，使得智能代币The price is less sensitive to short-term speculation or sudden fluctuations caused by large orders.
 
4、没有价差
 
在处理买入和卖出订单时，Bancor 公式使用相同的价格计算方法，不存在买卖价差，这与购买This is in contrast to traditional trading platforms where the price is always lower than the ask price.
 
5、价格可预测
 
与传统的基于订单簿的交易不同，智能代币的价格算法是完全透明的，允许用户在执行兑换The effective price of its exchange is calculated in advance, and the price decline warning is given according to the transaction volume before the transaction is executed.

Bancor、KyberNetwork 与0x 流动性解决方案对比：
 
1）Bancor 协议对于流动性问题的解决思路，是通过以区块链为基础的智能合约和储备货币，使得在不需要交易对手的情况下可以按照相应的汇率将智能Token 兑换成储备金；
 
2）KyberNetwork 通过储备库及储备贡献者为其提供流动性，Kyber 智能合约提供最佳的储备池价格，通过链上的智能合约可以快速完成结算；
 
3）0x 采用订单撮合机制无法保证流动性，由relayer 托管链上订单簿，链上完成结算，匹配速度取决于交易量size.

Application scenario

1. User Generated Currency (User Generated Currency) This is also the first application product developed by the Bancor team. Users do not need any technical background to use a user interface similar to Facebook, and through WhatsApp, Telegram (the future will be The intelligent chat robot (Chatbot) that supports WeChat) generates its own digital currency network. Users can also initiate Token Crowdsales with one click through this product.

2. TokenChangers When the user sets the "constant reserve rate" to 100% (meaning that the "reserve balance" is equal to the "token circulation") and puts two When there are two different digital currencies X and Y, the user has the ability to exchange these two currencies, and is called a "currency swapper". For example, if the user wants to exchange currency X for currency Y, he only needs to deposit currency X in the reserve, and then destroy the "smart token" to withdraw currency Y from the reserve. It is worth mentioning that changing the "reserve balance" and "token circulation" of X and Y will affect its price, and when there is a difference between the price of X and Y in the Bancor network and its price in the external exchange market When there is a risk-free arbitrage (Arbitrage) opportunity. By continuously discovering arbitrage opportunities, currency swappers effectively keep the price of each currency in the Bancor network consistent with the market price under economic incentives.

3. Decentralized Token Baskets (Decentralized Token Baskets) is the same as "currency swapper". When the user sets the "constant reserve rate" to 100%, and puts a variety of digital currencies in the reserve At that time, he can realize the similar function of exchange traded funds (Exchange Traded Funds, referred to as ETF) or index funds (Index Fund). It is worth mentioning that the concept of Bancor was first proposed by John Maynard Keynes, an economist who was then a consultant to the British Ministry of Finance, after World War II. He advocated the overdraft principle and established a worldwide central bank called the Union for International Settlements. And issue a Supranational Currency called Bancor. In a sense, the Bancor team is paying tribute to Keynes and establishing the first real "Network Currency" through the Bancor protocol.

The main purpose of the token

As a medium of token exchange: All tokens in the network can be converted to BNT through the exchange rate calculated by the Bancor formula, so as to convert each other.

Related information:
1. http://sncrating.com/?p=1278
2. https://www.jianshu.com/p/22f64f14241b
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