The Bancor Protocol is a standard for designing digital currencies, called smart tokens, with the embedded automatic convertibility directly through smart contracts, serving as decentralized, autonomous, and reliable market makers.
Representing a standard for ERC20 tokens, Bancor connects currencies in order to create liquidity networks providing instant continuous on-chain token conversions that occur between network users and smart contracts.
The Bancor open-source protocol uses “connector” modules, which hold balances of other ERC20 tokens within a smart contract.
Due to constant and automatic price recalculation, the Bancor Formula achieves a balance between smart tokens and their connectors, thus balancing buys and sells.
A transparent and immutable smart contract logic allows predicting how a token purchase or sale will fluctuate in price.
As a result, we get more stable token prices with no high pumps and dumps and price manipulations.The Bancor Network significantly differs from traditional and decentralized exchanges.
Opposed to trading on exchanges that requires matching between two parties, the Bancor Protocol allows automated token conversion without the participation of traders and market makers. The inclusion of a counterparty in the trading process is optional, not required.
So, users can purchase or sell tokens at any time, even when there is no the second party on the market.
As the price adjusts to conversion size, there is always some price at which token can be converted. Continuous liquidity is one of the main advantages of smart tokens.
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