The Bancor Network is a decentralized liquidity ecosystem that allows people to hold different kinds of tokens from different blockchain systems without any counterparty, and they do it with a simple web wallet interface. At the present time, you can easily exchange EOS and Ethereum tokens, and you don’t need any kind of middleman in the process. While other decentralized exchanges struggle to ‘connect’ different blockchain platforms to one another, Bancor has successfully become the bridge between ERC20 and EOS ecosystem. With this article, we are going to talk more about Bancor use cases, technology, and its history. Let’s just begin!

History of Bancor Network

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The main idea behind Bancor Network itself was first inspired at the Bretton Woods Conference and slowly (but surely) it evolved into what they call as the Bancor Network today. The team envisioned there has to be zero influence of a counterparty whenever you want to convert tokens from different blockchain platforms. Not only that, but Bancor Network also envisioned that conversion prices must be automatically calculated. Bancor team also wanted to solve the liquidity problem that has long existed for decentralized cryptocurrency exchanges.

The team did not wait for too long before they launched the network. They launched Bancor directly in 2016, one year before they got fully funded through an initial coin offering (ICO). The team itself is a mix of heavyweight people with interesting backgrounds. Bancor president is Bernard Lietaer, while Eyal Hertzog, Guido Schmit-Krummacher, and Guy Benartzi are the members of the foundation council. 

Bancor Network also has an advisory board with multiple experts taking care of different divisions. Tim Draper manages the Venture Capital department. Elie Galam takes care of the financial division while Brock Pierce is in charge of the blockchain division. They also have Lee Linden for the mobile applications division and Yoni Assia for social trading strategies. And for algorithmic trading, they have Yariv Gilat. Justin Rosenstein is in charge of collaboration software, and then there’s Roel Wolfert, who is the leader for community currency.

On June 12th, 2017, Bancor successfully collected $153 million from its initial coin offering (ICO) participants. Even until today, Bancor ICO was considered one of the biggest ICO funding in the history of cryptocurrencies. With a great amount of money, unfortunately, there’s also a great amount of pressure. Bancor Network still has a lot to prove to the crypto community before they can justify their huge $153 million funding number.

Purpose of Bancor Network

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It is a decentralized liquidity network. The concept is to allow everybody to seamlessly convert different tokens and automatically calculate their own prices without counterparty requirements. The goal is to enable completely liquid cryptocurrencies and to solve trading volume issues that have long existed (especially in decentralized exchanges).

As we all know, one of the biggest problems in cryptocurrencies is liquidity. Many big traders hesitate to get into crypto trading because the majority of tokens have a low amount of liquidity. It becomes a chicken and egg situation as crypto trading space needs these big traders to improve liquidity, but the same people don’t want to trade crypto if the volume is not there in the first place. 

Bancor Network is hoping to solve all these big problems and become the de-facto platform for people who wish to trade crypto tokens from different ecosystems. While trading volume on some centralized crypto exchanges have been improving in the past few years, but they also increase the risks of being too dependent on counterparties and centralized entities. Bancor wants to be the platform that promotes no counterparty and yet still has all the liquidity needed to convert your crypto tokens to different platforms.

How Does Bancor Work?

To become the default cross-platform and inter-platform currency exchange, Bancor understands that it needs to think differently. Bancor works by connecting traders with the program. It does not work by simply connecting traders and counterparties. Bancor Network even works more innovatively compared to fiat trading. For example, you can easily exchange USD to EUR or CHF by having the other party buying your USD. If there’s no counterparty that buys your USD, you cannot get your CHF or your EUR. For someone buying, someone else must be selling. This is the basic principle of currency trading.

However, in Bancor, liquidity is given by having a smart contract that can track the balances of different crypto tokens. The total amount of the balance is always equal to the amount of BNT (Bancor Network Token) that are represented on the smart contract itself. The idea here is that you don’t need to deal with a crypto exchange that acts as a middle man between you and your token buyer. There are on-chain token conversions inside the Bancor Network, and they are compatible with both EOS and Ethereum based tokens. You can even do it easily without any form of complicated registration. You can just do it with a web3 wallet.

Some other websites usually use “hourglass” as an analogy of how Bancor Network works. In an hourglass, they always have the same amount of sand, even if you turn it upside down. Every grain of sand is like the token that you want to trade. Meanwhile, you can see the hourglass as the smart contract that we mentioned above.

As of today, you can seamlessly trade EOS and Ethereum based tokens with Bancor technology. They plan to add more blockchain platforms in the future. Once they are able to do so, most likely, they will issue BNT in that supported platform.

Controversies and Criticism

There are, unfortunately, several controversies surrounding Bancor Network. One controversy is more about its advisor, Brock Pierce. As revealed in 2017 and 2018, Brock Pierce was accused of sexual misconduct. A famous late-night host John Oliver even made a special segment roasting Brock Pierce. While Brock himself was more associated with EOS, but keep in mind that he’s also an advisor to Bancor Network. There are some skeptics who believed that Bancor core team was already aware of sexual allegations against Brock Pierce, but they just ignored it.

There’s another legit criticism about this project. As mentioned above, the Bancor Network received $153 million from its ICO participants. However, as of this post was written (October 30th, 2019), Bancor Network only had slightly more than $400,000 USD daily trading volume. The amount of money invested in the project does not “translate” into a successful business. There are many crypto exchanges with a significantly lower amounts of funding, and yet they still had more daily trading volume. 

While centralized crypto exchange serves a different purpose and uses different technology, but still, the target market remains the same. You can even compare Bancor Network and Binance, which were both funded in the same year (2017). Binance received a $15 million funding while Bancor received a $153 million funding. And yet, Binance is the most successful crypto exchange today. Bancor is still struggling to gain some decent market share.

Competitors

The biggest competitors to Bancor Network are not other platforms that offer similar solutions. The competitors are the centralized crypto exchanges. As long as crypto traders refuse to trade outside these centralized crypto exchanges, the market share for Bancor Network will remain small. While Bancor offers excellent technology to solve liquidity issues, but most crypto traders don’t really care about counterparty risks. As long as they can conveniently trade EOS to BTC or to ETH with a large amount of liquidity in the centralized crypto exchanges, they will not care too much. Binance, Huobi, Bitfinex, Upbit, Gate.io, OKEx, and many other centralized exchanges remain the biggest roadblocks of Bancor’s future.

Other than the centralized exchanges, you can also include the likes of 0x, Switcheo, and Kyber Network. They are also trying to solve cross-chain liquidity issues by using different technologies. Directly or indirectly, they are Bancor competitors.

BNT (Bancor Network Token) In The Crypto Market

At the time this post was written, one BNT was worth $0.325344 USD. It had a market cap of $20,406,665 USD with more than $5.5 million daily trading volume. BNT was ranked 157th in the crypto rankings. While BNT used to be much more popular (it used to be part of the top 100) but now it looks like the token is slowly losing its popularity compared to the newer altcoin projects.

Conclusion

The Bancor Network project remains one big potential to solve liquidity issues in the cross-platform crypto industry. However, Bancor still has a lot to prove itself to the crypto traders. As of today, many crypto enthusiasts have heard of Bancor, but they rarely use the platform to trade different crypto tokens. They still prefer to go to centralized crypto exchanges like Binance or Huobi whenever they want to trade or sell their crypto tokens for other crypto tokens. It might take a lot of time before Bancor can finally gain some decent market share in the very competitive crypto trading space.