What is Bancor?
The Bancor protocol is a program to help create smart currencies and give them liquidity and asynchronous price discovery. It allows users to create intelligent currencies that can be exchanged for other cryptocurrencies immediately. There is no need to search for a buyer or seller who has an equivalent need. Besides, it allows new coins to be exchanged at the time of their creation. Bancor is paving the way for smart currency exchange.
How does it work?
Bancor is not about a bag in which a smart coin is placed with other currencies. It is a protocol that gives value and liquidity to the new money. The challenge right now is to pair the new coins with Bitcoin or Ethereum. The gap is so significant and the circulation of an interest in a newly created currency so low that this coin has no way of being immediately exchanged. A constant process and strategy are required to develop user interest and increase circulation before it appears on the exchanges and has value. Bancor has been introduced to change this.
About Balance, CRR, and Liquidity:
The creator of the coin determines the balance and CRR (Constant Reserve Ratio). So if you were to create a currency, add 10 Ether to the balance, and put the CRR as 0.02; this would make the total market capitalization of your coin 500 Ether. The supply is the number of coins in circulation, which means buying and selling the smart currency will affect the price.
No matter how huge or little the trading volume of the smart token is. It is always liquid, making it possible for the small tokens to remain active and in circulation. Bancor takes brokers like exchanges as they use synchronous price discovery. Eliminates the need to compare a smart token with other currencies, allowing users to start trading and trading them immediately.
We can conclude that Bancor is a protocol that allows the creation of smart tokens that can be exchanged for other cryptographic tokens at their product. The relationship of formulas that you introduce between different cryptocurrencies gives liquidity and circulation to the tokens' smallest. All currencies are available for trading the moment they are created using the Bancor protocol. There is no need to exchange and find a matching offer or match the new token price against existing coins to make a fair trade. The protocol takes care of all of that in real-time and helps you trade any currency you want.