After winning first place at the CoinAgenda conference, Bancor recently announced the crowdsale of its default network token, the BANCOR, will occur on May 30, 2017. The BANCOR will be the first token to use the Bancor Protocol and will function as the primary reserve currency for the cross-blockchain network, which will start on the Ethereum blockchain.
The Bancor Protocol is a token conversion protocol that uses executable distributed code contracts (EDCC) to enable a single party to convert any token to another, without having to exchange with a second party. According to Bancor, this is achieved “through the use of reserve-tokens, which provide liquidity through autonomous algorithmic price discovery, regardless of trade volume.”
The protocol was designed to help the liquidity of cryptocurrencies. As Bancor CEO Guy Benartzi explained:
“We created Bancor with the goal of introducing a new type of standard for cryptocurrencies that would enable token creators, who generate real value, with an instantly viable token. With the Bancor Protocol, new coins enjoy continuous liquidity, allowing cryptocurrency development to flourish in local communities and on a much broader scale.”
The protocol works by creating a reserve (ranging between 0 to 100 percent as predefined in the EDCC) when a Bancor-compatible token is purchased or converted from another Bancor-compatible token. When a token is sold, it is erased and the reserves are withdrawn. The price of the token varies based on its supply compared to the reserve.