While Ethereum has created and developed an enormous platform that allows users to coordinate and incentive the creation and distribution of their digital tokens, there are still significant issues that need to be solved to achieve full efficiency in the system.
With Ethereum, tokens and decentralized models and exchanges have grown at incredible rates. However, the inception and issuance of new tokens and the users’ liquidity still loom as obstacles in the quest for the perfect financial system. Tokens are often hard to be created safely.
Bancor, liquidity for every sector
Fortunately, the Bancor protocol is now among us, ready to simplify things from the very beginning of the chain. Even people that are not yet entirely familiarized with the blockchain technology can stand to be benefited with this initiative.
Bancor is a platform that allows people to create standardized Smart Tokens on the Ethereum blockchain. This protocol has the particularity of processing buying and selling orders at the moment they are issued, a process that helps stabilize the market; The Merkle explains further what is the Bancor protocol?
These Smart Tokens are all ERC20 digital assets, and the Bancor protocol’s prominent trait is that these tokens don’t need to be traded in a decentralized exchange for them to be liquid.
In economy and finances, liquidity is the assets’ quality and capability to be converted into cash or liquid money immediately upon issuance or receiving, without losing significant value in the process.
The Bancor protocol, as it may allow people to create, hold and trade their digital coins, is poised to solve the problem of liquidity for the cryptocurrency. Its existence and effectiveness may prove to be a fascinating instrument that could benefit decentralized tokens, banking institutions, startups, unemployed and low-income individuals.
With the Bancor protocol, absolutely anybody will be able to arrange new monetary systems and currency networks, while issuing assets with proven and backed value. This new initiative is here to stay and will provide incredible solutions for the rich and the poor, the employed and the currently unattached.
One of the primary advantages of implementing the Bancor protocol in everyday transactions is it promotes the inclusion of all sectors of the economy. Avid investors, cryptocurrency moguls and people with years of experience using banks and their online platforms can quickly adapt the performance of all of their operations to this platform, but bankless people and those with little to no knowledge of how to perform online banking transactions can also send and receive digital money and exchange it for their preferred token.
Excellence in price discovery systems
Using the Ethereum blockchain, Bancor is allowed to support price discovery and liquidity mechanism of tokens, because these assets hold other tokens in reserve. This scenario lets investors acquire a smart token related to any of their reserve tokens using the former’s smart contract.
The transaction is done at a price calculated by a balancing formula, one that uses sell volumes as well as buys volumes. That is why Bancor is so good at determining the cost or value of any given asset, and also why it provides a creative and immediate solution to the liquidity problem that looms around the decentralized exchanges, as Bitcoinist explains Bancor’s solution.
Bancor and specifically Smart Tokens don’t need an active counterparty. It is a market maker through and through, and since it will be of the open source variety, it will offer a crucial source of supplemental liquidity because of its asynchronous and automatic nature.
Banks have dominated the financial outlook and landscape for decades now, but with cryptocurrencies, decentralized exchanges, and now the rise of the Bancor protocol, that figures to change. People in need of instant liquidity will stand to be benefited by this initiative, and the bankless will not be left out of the system, a fate they suffered for years.