The Bancor Revolution

Ethereum is a programmable blockchain, and this means decentralized applications called “DAaps” can be built on top of the platform. These projects are crowd-funded through initial coin offerings where interested investors send Ethereum to the developers in exchange for newly minted tokens that represent the new project. These tokens are based on Ethereum, and to my knowledge, their value remains within Ethereum’s market-cap.

Ethereum in the narrow sense refers to a suite of protocols that define a platform for decentralised applications. At the heart of it is the Ethereum Virtual Machine (“EVM”), which can execute code of arbitrary algorithmic complexity. In computer science terms, Ethereum is “Turing complete”. Developers can create applications that run on the EVM using friendly programming languages modelled on existing languages like JavaScript and Python.

Because Ethereum is built on a blockchain, it is also gaining traction with blockchain start-ups. Many of these are taking advantage of initial coin offerings (ICOs), which allows Ethereum to build early investment in return for offerings of Ether equivalent to shares.

It is hard for most people to wrap their heads around what is actually does and why they would need it. It also sounds difficult to monetize. But if Bancor ends up becoming a groundbreaking technology, people who want to use it will have to buy Bancor tokens driving up their value in the same way people who want to buy Bancor must first buy Ethereum, driving up its value.

When smart tokens are purchased (in any of their reserve currencies) the payment for the purchase is added to the reserve balance, and based on the calculated price, new smart tokens are issued to the buyer. Due to the calculation above, a purchase of a smart token with a less than 100% CRR will cause its price to increase, since both the reserve balance and the supply are increasing, while the latter is multiplied by a fraction.

Bancor is a neat innovation providing liquidity (the ability to buy or sell not very popular tokens) very easily and quickly based on a smart contract that follows a maths formula. The mathematical proof checks out and it seems to have been thoroughly tested.

The revolution has begun and it starts from Ethereum. Soon Bancor will become the standard of cryptocurrencies on all blockchains just like US Dollar become the default reserve in the whole world.

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