The Bancor protocol is a standard for a new generation of cryptocurrencies called “smart tokens,” which can hold one or more tokens in reserve.
It is about easily creating, managing and trading tokens, currently, ERC20 tokens created on the Ethereum network, by increasing their liquidity and allowing them to have an automated market price.
Bancor already has a working front-end product which includes smart token creation and wallet, as well as community features like discussions, profiles and stats. The Bancor Network Token allocation event, happening today, will launch the project.
Bancor in a nutshell
The Bancor protocol enables built-in price discovery and a liquidity mechanism for tokens on smart contract Blockchains using an innovative reserve mechanism.
These “smart tokens” hold one or more other tokens in reserve and enable any party to instantly purchase or liquidate them directly through the smart contract, without any counterparty and without relying on exchanges.
Bancor creates relationships between the ever-increasing number tokens and allows conversion between them through a new kind of economic model which uses an algorithmically discovered price to balance buys and sells, keeping constant the ratio of reserve balances available. This reserve ratio is called a CRR and is user-configured.
What Bancor is really doing is creating a paradigm shift, by allowing any token to have liquidity and a market price from day one, which is something not possible on today’s financial exchanges.
Moreover, it is intended to support any token, whether it is a fiat currency (dollar), a cryptocurrency (Ethereum), a token issued in a crowdsale (Augur) or a token that represents physical assets (gold). Currently, this is possible through the increasingly popular “tokenization” of assets. In the future, the protocol will support additional Blockchains and currency types as well.
Bancor’s Network Token (BNT) is the unifying reserve token linking all network tokens together. It benefits from network effect as the more people use it as the reserve token for their smart tokens, the more value it captures, which in turn appreciates all the smart tokens holding it in reserve.
The company is also developing a partnership with TokenCard, the first project issuing Visa debit cards based on ERC20 tokens, to allow smart tokens to be used wherever Visa debit cards are accepted.
A summary of the terms
The Bancor token (BNT) allocation event will begin on June 12, 14:00 GMT.
The fundraiser is held here, and the white paper can be pulled from here. The company has also made public its development plan for the next two years.
Bancor has designed a unique token allocation model, from a desire to listen to the concerns and needs of its community. Therefore, we present below a summary of its special sale terms:
- 50/20/20/10 Token Distribution: 50 percent of BNT will be issued to the contributors in the fundraiser, 20 percent allocated to partnerships, community grants and public bounties, 20 percent to the foundation’s long-term operating budget, 10 percent to founders, team members, advisors and early contributors. Founders and team contributors will be subject to a three-year vesting schedule.
- Fixed Price: 0.01 ETH per 1 BNT (i.e. 100 BNT per 1 ETH).
- Hidden ETH Cap: revealed if 80 percent of the cap is reached.
- Duration: The fundraiser will run for 14 days or until the hidden cap is reached, with a one-hour minimum time.
- How minimum time works? Read this: https://goo.gl/1lL0NY.
- Token Availability: BNT for ETH contributions will be distributed immediately. The ability to transfer, purchase and liquidate BNT through the smart token’s contract will be enabled gradually during a time span estimated at seven days following the fundraiser closing.
- Security: Funds will be held using multi-signature wallets according to industry’s best practices.
An innovative token allocation event
Bancor heard the concerns that having no cap in the first hour (other than the 1 mln Ether security cap) may result in BNT dropping below its initial price after the token allocation event.
Indeed, a large contribution event could possibly result in a post-fundraiser price drop, to below its initial price, due to fully saturated demand and evergreen supply.
This is why Bancor has designed a unique model to create a price floor that will address these concerns.
The company has decided to allocate any proceeds collected in the minimum hour which exceed the hidden cap as follows:
20 percent will be allocated to the BNT Ether Reserve, to further improve the liquidity of BNT, which increases stability while reducing conversion costs for all.
80 percent will be locked for two years in a smart contract that will buy back BNT for 0.01 ETH (the initial price) whenever it is available. The purchased BNT will be added to the foundation’s long-term budget, and after a two-year period, any remaining ETH will be allocated pro-rata.
In other words, Bancor is seeking the kind of contributors that purchased Ether at 30 cents and are still holding most of it.
To give everybody the chance of joining the adventure as a contributor, a limit on gas has been set so that “whales” can’t jump in line. Transactions with higher gas than needed will be rejected by their system during the token allocation event. It is the people’s token sale!
The A-Team of visionaries and advisers
The team behind Bancor has extensive experience in building software products and scaling companies.
Yehuda Levi (CTO), Ilana Pinchas (VP engineering) and Eyal Hertzog (chief of product) have deployed a Bitcoin marketplace platform called AppCoin. Two of the founders, Galia and Guy Benartzi have each founded and exited a startup.
The team has been working together for over 10 years on a variety of these initiatives. Some of their advisers include venture capitalist Tim Draper, Founders Fund partner Brian Singerman, governance visionary John Clippinger, founder of Asana Justin Rosenstein and more.
Since the BNT smart contract introduces new mechanisms never deployed before on the Ethereum Blockchain, it is of utmost importance to ensure beyond any shadow of a doubt that funds will be secure.
For this purpose, Bancor is working with some of the most respected Ethereum security advisors, including Nick Johnson and Martin Holst Swende from the Ethereum Foundation. The results of the audits will be made public.
Meni Rosenfeld, an award-winning mathematician well-versed in Blockchain technology, and Yoni Assia, the CEO of eToro, have both joined the adventure as previous advisors.
Learn more about Bancor, the BNT allocation event begins today at 14:00 GMT.