Bancor Protocol

Blockchain project Bancor has raised a record of US$153 million in an initial coin offering (ICO). 396,000 ethers, the native cryptocurrency of the Ethereum network, were collected in less than three hours with participation of notorious venture capital firms and investors including Blockchain Capital, and Tim Draper of Draper Fisher Jurvetson. Cryptocurrency and blockchain assets fund TaaS said it has invested US$1 million.

As part of the ICO, 79,323,978 Bancor network tokens (BNT) were created. Over 80% of these tokens, or 66,601,702 BNT, were bought by the top 100 largest holders despite 10,000+ participants.

The team said that a portion of the funds raised will be used as the ether reserve for BNT. Another will be used to develop, promote and support the open sourced blockchain-agnostic Bancor protocol implementations and related technologies.

Bancor aims to become a standard for the creation of intrinsically tradable tokens.

Starting on the Ethereum public blockchain, Bancor utilizes a new method to enable built-in price discovery and an automatic liquidity mechanism for “smart tokens,” without the need for matching two parties in an exchange.

Smart tokens are standard ERC20 tokens which implement the Bancor protocol. They hold one or more other tokens in reserve, and enable any party to instantly purchase or liquidate the smart token in exchange for one of its reserve tokens, directly through the smart token’s contract, at a continuously calculated price.

The Bancor protocol creates a new type of interconnected asset exchange ecosystem, and unlocks the “long tail” of user-generated currencies. It is also a way for anyone to easily and quickly create their own cryptocurrency.

The Bancor protocol is overseen by Swiss non-profit the Bprotocol Foundation, an organization established earlier this year that’s in charge of “establishing the Bancor protocol as a global standard for intrinsically traceable currencies.”

Speaking to CoinJournal, Eddy Azar, Growth Hacker at Bancor, said:

“There are so many potential use cases for the Bancor protocol and smart tokens that it is similar to asking what are the use cases of Ethereum.”

For instance, smart tokens can be used to create a “decentralized ETFs or index funds.” These “token baskets” would represent a combination of any token or tokenized asset, “creating a decentralized, organically-balanced token basket, owned directly by its holders.”

“For example, your smart token can hold 50% Augur REPs and 50% BCAP in its reserve, and its price will track the relative changes in Augur and BCAP values through arbitrageurs,” he said.

Another possible use case is for crowdsales where the Bancor protocol can be used to create “always-liquid tokens not dependent on any exchange.”

“Your token will be liquid from day one while still remaining compatible with the architecture of all existing cryptocurrency exchanges,” Azar said.

“By using the Bancor protocol, new altcoins can achieve greater market depth than what is typically provided by exchanges, even for the largest of cryptocurrencies, by essentially pooling all the liquidity that would normally be spread across many exchanges into a single, ‘global-exchange’ provided by the smart contract (through its reserve).

“The result will be lower price volatility for customers without any counterparty risk.”

Bancor use casesBancor has already signed partnerships with several other blockchain startups to utilize its technology.

With Gnosis, Bancor is building a Token Changer to allow holders to easily convert BNT to GNO through a Smart Token with low fees and no counter-party risk. A Token Charger is a smart token that’s designed to provide an exchange service between its reserves tokens.

With Status, an open source messaging platform and mobile browser running on the Ethereum network, the partnership aims to allow users to create smart tokens directly from their Status browser, and to provide smart token communities access to a diverse world of dapps in the Status universe.