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BancorProtocolF.A.Q.

BACKGROUNDINFORMATION:KEYCONCEPTS 3
Whatisthelongtailandhowdoesitrelatetocryptocurrencies? 3
WhatistheDoubleCoincidenceofWantsProblem? 3
WhyisthereaDoubleCoincidenceofWantsProbleminAssetExchange? 3
WhatareSmartContractsandwhyaretheysignificant? 4

GENERALOVERVIEW 4
WhatisBancor? 4
WhatistheproblemBancorissolving? 5
Whatisasmarttoken?AndhowisitdifferentfromaregularERC20tokencreatedon
Ethereum? 5
Whataresomeoftheusecasesforsmarttokens? 6
WhosbehindBancor? 7
Whereisyourteamisbased?Haveyoubuiltanyotherprojectsinthisspace? 8

ABOUTTHEBANCORPROTOCOL 9
Howdoestheasynchronouspricediscoverywork? 9
Howisasmarttokenspricecalculated?WhatisaCRR? 9
Whathappensifausertriestoinstantlyliquidateapercentageofthesmarttokensupplythat
islargerthantheCRR? 10
DoestheBancorprotocolpricediscoverymechanismaddtothepricevolatility,comparedto
crypto-exchanges? 11

COMMONQUESTIONS 11
HowistheBancorprotocoldifferentthanhowcryptocurrenciesareexchangedtoday? 11
Howcanexistingsmallmarket-captokensbenefitfromBancor? 11
IsBancorfordevelopersonly,orforend-usersaswell? 11
Whywouldacompanydoingacrowdsaledevoteaportionoftheirproceedstocreatingthe
reserveforasmarttoken,insteadofkeepingallthefundsforthemselves? 12
HowcantheBancorprotocolbeusedforcreatingsomethingthatworkslikeadecentralized
shapeshiftforallcurrencies(akahowdotokenchangerswork?) 13
HowcantheBancorprotocolbeusedforcreatingdecentralizedandtrustlesstokenbaskets
(akaETFs)? 13
HowcanexistingtokensbenefitfromtheBancorProtocol? 14
Cansmarttokensbetradedoncrypto-exchanges? 14
DoyouhaveplanstosupportnonERC20tokenssuchasBTC,XMR,etc?CouldtheBancor
protocolbeusedacrossdifferentblockchains? 14

THEBANCORNETWORKTOKEN 14
WhatistheBANCORnetworktoken? 14
WhynotjustuseEtherasthenetworktoken?/CouldntsomeonejustforktheBancor
protocolanduseadifferentnetworktoken? 15

FREQUENTMISCONCEPTIONS 16
IsntBancorjustadecentralizedexchange? 16
Ifpeoplestartcreatingnewtokenswithlessthan100%CRRisntthislikeallowinganyoneto
createtheirownmoney?Isntthataproblem? 16
Howcanthemarket-capofasmarttokenbehigherthanthetotalvalueofthereserves? 17
Iveheardabouttokenswhicharebackedusinga150%oreven200%reserve,howcoulda
10%reservebeenough? 17
Usinganewmodelforpricediscoverysoundsrisky.Whydoyouthinkitwillwork? 18

ETHEREUMANDOTHERBLOCKCHAINS 18
ArethereanytechnicallimitationsforusingEthereum? 18
DoesnttheDAOhackmeanEthereumisnotsecure? 18

COMPARINGBANCORTOOTHERTECHNOLOGIES 19
HowdoesBancorcompareto0x? 19
HowdoesBancorcomparetoMakerdao? 19
HowdoesBancorcomparetoShapeshift? 19
HowdoesBancorcomparetoMelonport? 19
HowdoesBancorcomparetoEtherSwap/CryptoDeriviatives? 20
HowdoesBancorcomparetoCosmos/Polkadot? 20

MISCELLANEOUS 20
Whatareedgecaseswhererunsonthebankcanhappentosmarttokens?Arethereany
protectionsagainstthis? 20
WhydidyounametheprojectBancor? 21
HowwillthemarketcapoftheBANCORtokenbemeasured/increase? 21
Whywouldnttokencreatorsjustuseexchangesinsteadofallocatingvaluablefundstoa
reserve? 21

GLOSSARYOFTERMS 22

BACKGROUNDINFORMATION:KEYCONCEPTS

Whatisthelongtailandhowdoesitrelatetocryptocurrencies?
Inbusiness,thelongtaildescribescontentandproductsinlowdemandorwithlow
sales/viewvolumethat,collectively,makeupamarketshareexceedingthatofthecurrent
topperformerscombined.

Internethistoryshowsusthatwiththedigitallongtail,theaccumulationofallniche
contributionscanbe23ordersofmagnitudegreaterthanthehits.Thinkofallthe
Instagramaccountsafterthe1000mostfollowed,orallthestatusupdatesbeyondthe
mostviral.ThemostpopularYouTubevideoswithmillionsofviewseach,collectively,
accountforlessthan1%oftotalviewsonthesite.

Incryptocurrency,thepotentiallongtailcouldpointtotrillionsofdollarsinuser-generated
valuewhencombiningallsmallandnichecurrenciesbeyondthefewlargest.However,
foralongtailtoemergeincryptocurrency,theliquidityproblemmustbesolvedand
technicalbarrierstocreatingandmanagingacurrencymustbereduced.

WhatistheDoubleCoincidenceofWantsProblem?

TheDoubleCoincidenceofWantsProblemisaknownmathematicalchallengewhich
statesthatitisdifficulttofindtwopartieswithoppositewantsatthesametimeinorderto
completeanexchange.

Acommonexample:theinefficiencyofbarter,inwhichtwosidesneedtowantexactly
whattheothersideisoffering.Moneywasinventedasatechnologicalsolutiontoenable
barterovertimeandspace,soforexampleonepartycannowselltheirtomatoestoday
andcomebacktomorrowtobuycarrots,ratherthanbothpartieshavingtofindanexact
matchofoppositewantssimultaneously.Eveninthedomainofhumancommunication,
beforetheinventionofwriting,thereexistedadoublecoincidenceofwants.People
neededtomeetfacetofacetoshareinformation,whereaswritingenablesonepartyto
communicatetheirthoughtsonpaperandanothertoreadthosethoughtseven
thousandsofyearslater.


WhyisthereaDoubleCoincidenceofWantsProbleminAsset
Exchange?

Inthedomainofassetexchange,therestillexistsaDoubleCoincidenceofWants
Problem,asthereisnomoneyformoney.Everycurrencythatisexchangedrequirestwo
partieswithoppositewantstomeet(evendigitally)inreal-time,thusrequiring
speculatorsandmarketmakerstoprovideliquidityandfacilitatetransactions,takingfees
alongthewayandleadingtoinefficiencies.

Exchangesareanexampleofalabor-basedsolutiontotheDoubleCoincidenceofWants,
asopposedtoatechnologicalsolutionlikewritingandcurrencyprovideforhuman
communicationandbarter.Asananalogy,itwouldbeasifinsteadofwriting,wehad
messengerspassingtheinformationfromonepersontoanotherinordertotransfer
informationverbally.Orifinsteadofmoney,wehadaglobalmarketplacewherepeople
directlyexchangedtheirgoods&services.

However,withtheinventionofsmartcontracts,anewparadigmispossible.Now
immutable,decentralizedsoftwarecodecanitselfholdprogrammablemoney,meaning
moneythatholdsmoney.Bystandardizingsmartcontractsforexchangingdigitalassets,
BancorprotocoloffersthefirsttechnologicalsolutiontotheDoubleCoincidenceofWants
Probleminthedomainofassetexchange.

WhatareSmartContractsandwhyaretheysignificant?

Smartcontractenabledblockchains,startingwithEthereum,offerthefirstdecentralized
softwaresystemsinwhichcurrenciescanbegovernedbyprogrammablecode.This
opensthedoortodiversecustomizationopportunitiespreviouslyunimaginablein
monetarypolicyandmanagement.

GENERALOVERVIEW

WhatisBancor?
BancorprotocolisaninitiativeoftheBprotocolFoundation,anonprofitorganization
basedinZug,Switzerland.

TheBancorprotocolenablesanyonetocreateanewtypeofcryptocurrencycalleda
smarttoken,whichcanhold(andtrade)othercryptocurrencies.Thisallowsthesmart
tokenscontracttoserveasitsownmarketmaker,automaticallydiscoveringitsown
price(s)andprovidingliquiditytoothercurrencies,therebyremovingtheneedfora
secondpartyincryptocurrencytrades.Everysmarttokenisalwaysliquidatsomeprice
point.

WhatistheproblemBancorissolving?
TheBancorprotocolrepresentsthefirsttechnologicalsolutionfortheclassicproblemin
economicsknownastheDoubleCoincidenceofWantsProblem,inthedomainofasset
exchange.

Forbarter,thecoincidenceofwantsproblemwassolvedthroughmoney,allowingpeople
totransactasynchronously,overtimeandspace.Formoney,theexistingexchange
modelreliesonthelaborofmarketmakersprovidingliquidity,asrepresentedbyanorder
bookwhichcreatesmarketdepth.Thisrequirementforlaborcreatesabarrier-to-liquidity,
meaningthatsomethresholdoftradeactivitylevelisrequiredinordertoretainhigh
liquidityatthemarketprice.Thisbarrier-to-liquidityparticularlyaffectssmallcap,custom,
lightlytradedcurrencies,suchascommunitycurrenciesorsmallbusinessloyaltypoints,
asexamples.

TheBancorprotocolproposesanewsolutionthatremovesthebarrier-to-liquidityby
employinganasynchronousprice-discoverymodelenabledbyasset-holdingsmart
tokens.Smarttokensarealwayspurchasableandsellableforthetoken(s)theyholdin
reserve.Thecontinuousliquidityofsmarttokensremovesthebarrier-to-liquidityand
enablestheemergenceofthelongtailofuser-generatedcurrencies.Thiscouldleadtoa
democratizationofvaluecreation,similarlytohowblogsdemocratizedpublishingand
YouTubedemocratizedbroadcasting.

Beyondenablingthelongtailofcryptocurrencies,theBancorprotocolmechanismof
intrinsicreservecurrenciescoupledwiththeabilityofthesmartcontracttoissueand
liquidatesmarttokens,alsoholdsprofoundimplicationsinusecaseswherethegoalis
nottocreatenewcredit(asisthecasewithmostnewcryptocurrencies)butratherto
enabletheexchangeofexistingcurrencieswithoutacounterpartyororderbook(see
TokenChangers)ortoenablethedirectownershipofcurrencybaskets,orindexfunds,
withoutcounterpartyrisk(seeDecentralizedETFs).

Whatisasmarttoken?AndhowisitdifferentfromaregularERC20
tokencreatedonEthereum?
SmarttokensarecompatiblewiththeERC20standardandcanbeusedbyanysoftware
thatsupportsthisstandard,suchasEthereumwallets.However,smarttokensoffer
additionalfunctionalitynotavailabletoregulartokens.Eachsmarttokenholdsareserve
balanceinoneormoreotherERC20tokens,therebyenablinganyonetoexchange
betweenitselfandanyofitsreservetoken(s).Thesmarttokenssmartcontractissues
newtokens(expandingthesupply)toanyonewhopurchasesitwithanyofitsreserve
tokens,andwithdrawstokensfromthereserves(contractingsupply)foranyonechoosing
toliquidatethesmarttoken.Thepriceofasmarttokenvis-a-visanyofitsreservetokens
iscalculatedasaratiobetweenthecurrentsmarttokenssupplyanditsreservebalance,
atthepre-setCRR(ConstantReserveRatio.)

PleasereadourwhitepaperavailableontheBancorwebsiteformoredetailed
informationabouttheseformulasandtheirproofs.Essentially,asmarttokenspricewill
alwaysstrivetobalancesupplyanddemandforthesmarttoken,meaningthatwhenitis
beingpurchased,thepriceisclimbing,andwhenitisbeingsold,thepriceisdropping,in
relativeproportiontotherespectivetransactionsizes.

Whataresomeoftheusecasesforsmarttokens?
TherearesomanypotentialusecasesfortheBancorprotocolandsmarttokensthatitis
similartoaskingwhataretheusecasesofEthereum.Itsimprobablethatwecould
imagineallofthem,buttherearesomeofourfavorites:

ComplementaryCurrencies:Communitiescanbenefitgreatlyfromcreating
additionalunitsofcreditandencouragingcollaborationonthelocallevel.These
currenciesdontnecessarilyreplacenationalones,butrathercomplementthem,
fillinginpocketswhereliquiditymaybemissingorcommercetakesplaceentirely
locally,thusfreeingupthenationalcurrencyforotheruses.Givingcommunities
accesstoatooltheycanusetoefficientlybuyandsellgoodsandservicesfrom
trustedmemberscreatesrealabundanceforfamilies,students,affinitygroupsand
thecashconstrained.Thissameusecaseworksforonlinegroupcurrencies.You
canreadmoreaboutcommunitycurrenciesonlineandfindlistsofactive
communities,manyofwhichareevaluatingtheBancorprotocolforadoption.

BusinessLoyaltyPointPrograms:Whereasindividualbusinessesstruggletomake
theircustomloyaltyprogramsstickyenoughforcustomers,issuingsmarttokens
whichcanalsobeexchangeabletoothertokensinothernetworkscreates
tremendousvalueforcustomerswhocannowaccessmanymoreitems.This
createsadditionalstickiness,andstrengthenscooperationbetweenbusinesses.

TokenBaskets(i.e.decentralizedETFsorIndexFunds):CreatedviatheBancor
protocolbysettingthesmarttokenstotalCRRto100%.Thismeansyoursmart
tokencanrepresentanycombinationofothertokensortokenizedassets,creating
adecentralized,organically-balancedtokenbasket,owneddirectlybyitsholders.
Forexample,yoursmarttokencanhold50%AugurREPsand50%BCAPinits
reserve,anditspricewilltracktherelativechangesinAugurandBCAPvalues
througharbitrageurs.

ContentCreators:Artistscanalsocreatesmarttokensthatserveasthemethodto
purchasetheirworkorattendashow.Thesesmarttokensserveastheirown
distributionmedium(sotheartist&buyerdontpayacommissiontoany
middleman),canbeeasilyexchangedbetweenpeople,andcanbesetupsuch
thatthepricewillriseasdemandrises.

Crowdsales:AnyonecanusetheBancorprotocoltocreatealways-liquidtokens
notdependantonanyexchange.Yourtokenwillbeliquidfromdayonewhilestill
remainingcompatiblewiththearchitectureofallexistingcryptocurrency
exchanges.ByusingtheBancorprotocol,newaltcoinscanachievegreater
marketdepththanwhatistypicallyprovidedbyexchanges,evenforthelargestof
cryptocurrencies,byessentiallypoolingalltheliquiditythatwouldnormallybe
spreadacrossmanyexchangesintoasingle,global-exchangeprovidedbythe
smartcontract(throughitsreserve).Theresultwillbelowerpricevolatilityfor
customerswithoutanycounterpartyrisk.

TokenChangers:Bycreatingasmarttoken(similartoatokenbasket)with100%
CRRandmultipletokensinreserve,youenableanyonetoinstantlyexchangeone
reservetokenforanother.Unlikeatokenbasket,whosepurposeistoserveasan
indexfundforthosewantingtotakeapositionacrossmultiplecurrencies,the
purposeoftokenchangersistoexchangeonetokentoanother.Anetworkof
tokenchangersresultsinsomethingakintoadecentralizedShapeshift,where
userscancometoexchangeanycurrencyontheBancornetworkforanyother.
SinceTokenChangerscanchargefeesfortheirconversionservices,anyonewho
wishestoprovideliquiditytothetokenchanger(ratherthanjustconvertone
tokentoanother)getstoparticipateasapart-ownerinacrowdsourcedexchange,
enjoyingtheirpro-rataofthefeestakenbytheChangerforitsautomated
conversionservices(andaccruedtoitsreserve,therebyappreciatingthesmart
tokensvalue).Softwarecompaniesbuildingonlinewalletsfortokenscannow
offerexchangeservicesdirectlyinsidetheirapplicationsandopenupanew
revenuestreamovernight.

Whatweremostexcitedaboutistheinnovationwellseefromthecommunity.
Historically,longtailsareformedwhenbarrierstoentryarereduced.Bancorisenabling
anyonetocreateaviablevaluenetworkintheirimage.Therearehundredsofthousands,
evenmillionsofpotentialdigitalcurrencyentrepreneursoutthere,andtheywillteachus
aboutthepoweroftheprotocolandtheplatform.

WhosbehindBancor?
TheteambehindBancorisbuiltofserialconsumerInternettechnologyentrepreneurs
withdecadesofexperienceworkingtogether,raisingventurecapital,growingcompanies
toInternetscale,bringingproductstomarket,reachingcriticalmass,mergersand
acquisitions,andevenafewwinddowns.SomeofourcompaniesincludedContact
Networks(oneofthefirstsocialnetworksin1998andaninspirationtoPlaxoandlater
Facebook),MetaCafe(thelargestuser-generatedvideosharingsitebeforeYouTubewith
over50millionactiveusers),Mytopia(thefirstdeveloperofmultiplayergamesforPDAs
andSmartphones),ParticleCode(across-platformdevelopmentenvironmentformobile
andwebapplications)andAppCoin(apioneerindigitalcommunitycurrencieswithovera
millionrealitemtransactionslogged.)Venturefundsthatwehaveworkedwithorraised
fromincludeFoundersFund,Accel,Benchmark,HighlandCapital,TrinityVentures,SK
TelecomVenturesandmore.

SincediscoveringBitcoinin2011,wehavebeenfascinatedbytheparallelsbetween
blockchainandtheInternet,andtheimplicationsforsocietyofuser-generatedcurrencies.
Wevespentyearspilotingcommunitycurrenciesanddeeplyunderstandingthebarriers
tounlockingthelongtailintheInternetofMoney.TheBancorprotocolisoursolutionto
thefundamentalliquiditychallengewediscoveredtimeandagain,andhasgonethrough
yearsofincubation,refinementandreviewwithindustryandacademicexperts.Youcan
readmoreaboutourteammembersonourwebsite.

Wherestheteambased?Haveyoubuiltotherprojectsinthisspace?
TheBprotocolFoundationisaSwissnon-profitorganization,headquarteredinZug,
Switzerland.TheFoundationhasaresearchanddevelopmentcenterbasedinTelAviv,
Israel.

OurteamhasbeeninvolvedintheblockchainecosysteminIsraelsince2011,
co-organizingthefirstmeetupsinthecountry,incubatingtheMasterCoinFoundationin
ouroffices,includinghostingtheirfirsthackathons,allinattempttopushforwardthe
infrastructureforadiversecurrencyplatform.Wehavebeendevelopinganddeploying
ourownuser-generatedcurrencysolutionssince2013.TheEthereumsmartcontract
protocolprovidedthemuchneededdecentralizedplatformforuser-generated
programmablecurrencies(tokens)thatinspiredustodesigntheBancorprotocol.

Previously,ourteammembershavebuiltend-userInternetapplicationsthatwereusedby
tensofmillionsofuniquemonthlyusers,andhavebeenpioneeringnewdigital
user-experiencesingaming,videoandcommercesincetheearlydaysoftheInternet.

ABOUTTHEBANCORPROTOCOL

Howdoestheasynchronouspricediscoverywork?
Asynchronouspricediscovery:theabilityofasmarttokentodiscoverthepriceofitselfor
itsreservetokenswithouthavingtomatchabuyer&sellerinrealtime.

Smarttokensuseasimplecalculationtorepricethetokenanytimeitispurchasedor
liquidatedthroughitssmartcontract.Thisisdonebyholdingthepre-setCRRconstant
andadjustingthepricetoreflectcurrentsmarttokensupplyandreservebalance.The
tokensupplyincreaseswithpurchases(newsmarttokensissuedtobuyerinexchangefor
areservetoken)andcontractswithliquidations(smarttokensreturnedtoanddestroyed
bythecontractinexchangefortokensfromthereserve.)Thepriceincreaseswhenthe
tokenispurchased,anddecreaseswhenitsliquidated.Overtime,thepricewillstabilize
atthepointofbalancebetweenthepurchaseandliquidationvolumes.Youcanseethe
preciseformulasandmathematicalproofsinourwhitepaperavailableonourwebsite.
Howisasmarttokenspricecalculated?WhatisaCRR?
TheCRR(ConstantReserveRatio)isaparameter,setbythecreatorofthesmarttokenfor
eachofthesmarttokensreserves.TheCRRisakeyparameterusedbythesmarttoken
asanasynchronouspricediscoverymechanism,asitdeterminestheratiobetweenthe
reservebalanceandthesmarttokenscalculatedmarketcap.

Forexample,aCRRof10%,fora100ETHreservebalance,wouldpricethesmarttoken
accordingtoa1,000ETHmarket-cap(witheachsmarttokenbeingpricedasthismarket
capdividedbythenumberofsmarttokensinsupply,initiallyconfiguredbythecreator,
andthendynamicwithmarketbuysandsells).Wheneverthesmarttokenispurchased,or
liquidated,thereservebalanceincreasesordecreases,andsodoesthetotalsmarttoken
supply.TheresultisthatforasmarttokenwithaCRRsmallerthan100%,anypurchaseof
thesmarttokenwillleadtoapriceincrease,whileanyliquidationwillcauseaprice
decrease.Thismechanismconstantlyreadjuststhepricetowardthepointofequilibrium
betweenthepurchaseandliquidationvolumes.Pricechangesarealsoproportionalto
transactionsize,soalargerpurchaseorliquidationwillaffectthepricemoresignificantly
thanasmallone.Youcanreadmoreaboutthesemechanicsandformulasinourwhite
paper.

BelowisanexcerptfromourELI5(ExplainittomeLikeIm5)descriptiondescriptionon
Reddit:

SopictureaSmartTokenwith<100%CRR(ConstantReserveRatio)likealittle
robotyouvecreated.Therobothastwo(ormore)wallets.Onewalletisfullofan
asset(let'schooseETHforthisexample).Theotherisabottomlesswalletofa
newassetwe'redubbingthesmarttoken.

Whenyoucreatetherobot,yougiveitaCRR.Thisisthepercentageoftotalvalue
thattherobotassignsthetotal-individual-valueofeachofitswallets.Itwillusethis
CRR(whichisa%between>0and100)todeterminethepriceofnewsmart
tokens.

Here'show.Let'ssaytheCRRforthisRobotis20%ETHand80%ofanewsmart
tokencalledNewCoin(ofwhichtherearecurrently100inexistenceoutinthe
world).Ifithas1000ETHinitswallet,thecostof1NewCoinis

MarketCap=ReserveBalance/CRR=1000ETH/0.2

SoMarketCapis5000ETH

PriceofNewCoin=Marketcap/Supply=5000/100

1NewCoin=50ETH

NowthereisalargerreservebalanceofETH,therebyincreasingthepriceof
NewCoinforthenextbuyer.

ThenextNewCoinwouldcost(1050/0.2)/101=51.9802ETH

Whathappensifausertriestoinstantlyliquidateapercentageofthe
smarttokensupplythatislargerthantheCRR?
Wheneverauserpurchasesorliquidatesasmarttoken,theactualpriceiscalculated
accordingtothetransactionsize.ThereasonforthisisthattheBancorprotocolusesa
specificfunctionwhichtakesintoaccountpricechangesthatwouldhaveoccurredifthe
transactionweresplitintoinfinitelysmallpieces.Liquidatingahighpercentageofthe
supplywouldcauseasubstantialpricedecrease(sinceeachincrementalliquidationputs
downwardpressureontheprice)andthisdecreaseistakenintoaccountincurrent
transactionpricing.Thisensuresthatthereservebalancewillneverrunout,andthatthe
CRRwillalwaysbemaintained.Thisalsohelpsavoidmanipulationbylargeplayers(by
makingitmuchmoreexpensivetodoso)thatissocommonintodaysexchangemodel.

DoestheBancorprotocolpricediscoverymechanismaddtotheprice
volatility,comparedtocrypto-exchanges?
Onthecontrary.Byholdingareservebalancewhichpreservesaconstantratiotothe
market-cap,thepricevolatilityofsmarttokensisnotsubjecttothecurrentmarketdepth
sincethereservefunctionsasapredictableandcontrolledalternativetothetraditional
orderbookwhichnormallyprovidesmarketdepth.Weveseenthatregularexchanges
generallyholdaround1%marketdepth,meaningthatanysmarttokenwithaCRRabove
1%couldberelativelymorestable.

COMMONQUESTIONS

HowistheBancorprotocoldifferentthanhowcryptocurrenciesare
exchangedtoday?
Cryptocurrenciestodayaretypicallytradedinclassicexchangeswhichcanchoosetolist
thembasedontheirexpectedtradingvolume.Theyuseabid-askmodelwheretwo
partieswithoppositewantsmustbematchedtoeachotherinorderforatransactionto
occur.

TheBancorprotocolenablessmarttokenstobecontinuouslyliquidthroughtheirsmart
contract(exchangeablefortheirreservecurrencyatanalgorithmicallycalculatedprice)
andthusdonotrelyonexchangesforliquidityorpricediscovery.Smarttokensare
purchaseddirectlyfromtheirsmartcontracts,notfromsellers,andareliquidatedthrough
theirsmartcontracts,ratherthanthroughbuyers.

Howcanexistingsmallmarket-captokensbenefitfromBancor?
Smallmarket-capandlightlytradedtokenswillbenefitgreatlyfromtheBancorprotocol,
whichoffersasimpleandpracticalsolutiontothecurrentliquidityproblemtheyface.

Illiquidtokensarepracticallydisconnectedfromthegreatereconomy,renderingthem
lessusefultotheirholdersandthusdiminishingtheirvalue,furtherlimitingadoption.
Someexamplesofthesemaybelocalcurrencies(foraspecificgeographiclocation),
groupcurrencies(foracluborcommunity),loyaltypoints(forindividualbusinessor
networksofbusinesses)andcrowdsaletokens(foraprojectorinitiative).

IsBancorfordevelopersonly,orforend-usersaswell?
Bancorwilllaunchauserinterfacethatenablesanyone,regardlessoftechnicalskills,to
easilycreateandmanageafullyfunctional&fullyliquidsmarttokenforanypurpose.

Adesktop/mobilewebinterface,integratedwithpopularmessengerchatbotplatforms
willprovidesimpleon-boardingaswellasallthebasicfunctionalityneededforusing
user-generatedtokens.

Bancorisalsointegratingitsprotocolwithleadingsoftwaredevelopersandexchangesin
thecryptocurrencyspacetobringthepowerofsmarttokensdirectlyintootherpopular
andimportantapplicationsandservices.

Whywouldacompanydoingacrowdsaledevoteaportionoftheir
proceedstocreatingthereserveforasmarttoken,insteadofkeeping
allthefundsforthemselves?
Researchhasshownthatassetscangaininvaluejustforbeingliquid.Guaranteed
liquidityhassignificantbenefitstoassetholdersandthisassuranceislikelytoencourage
participationinthecrowdsale.Asforusage,inbothcommunitycurrenciesandloyalty
pointsalike,liquidityisamajordriverinadoptionandretention,andallowsuserstomove
inandoutofthenetworkeasily,encouragingthemtojoinininthefirstplace.Thisis
similartohowmanypeoplewillacceptUSDknowingthattheyareeasilytradablefor
otherassets,eveniftheydontplantotradethem.Thereispeaceofmindinliquidity,and
thistrustbuildingcanbethedifferencebetweenanewtokentakingofforstrugglingto
proveitsworth.

Havingsaidthat,thesmarttokencreatordoesnotneedtodevotethesefundstothe
reserveforever,sinceitispossibletosetasmarttokenwithanadjustableCRR(withina
pre-setrange)thatwouldallowtheissuertowithdrawsomeofthereserveasthesmart
tokenuserbasegrows(anditsmarket-capandorganicliquidity,withit).

Thereservecanactuallybeseenasatemporarydeposit,andinsomecases,asafuture
sourceofadditionalfunds(whentheissuerdecreasestheCRR).

Forthelongtailofuser-generatedcurrenciesthatwillnothaveahighenoughtrading
volumetofindcounterpartiesandbeeasilytradeable,thereisnocurrentalternativeto
achievingliquidity.BancoristheonlytechnologicalsolutionfortheDoubleCoincidence
ofWantsprobleminassetexchange.Webelievethebenefitsofendowinganewsmart
tokenwithareservefaroutweighthecostofthereservedliquidity.

HowcantheBancorprotocolbeusedforcreatingsomethingthat
workslikeadecentralizedshapeshiftforallcurrencies(akahowdo
tokenchangerswork?)
Tokenchangersaresmarttokenswithtwoormoretokensinreserve,totaling100%CRR
betweenthem.TheirpurposeistoallowyoutoinstantlytradeanycurrencyontheBancor
networkwithanyothercurrencyontheBancornetwork.

Tokenchangerscanhavefees,orcanbefree,asconfiguredbythecreator.

Atokenchangerthathasafeeof0.1%meansthateverytimesomeoneusesthetoken
changertofacilitateanexchangebetweenitsreservetokens,0.1%ofthetokens
exchangedwillbekeptinthesmarttoken'sreserve.

Aswithanysmarttoken,anyonecanpurchaseastakeintokenchanger.Owningatoken
changerwithafeeissimilartoowningashareinamini-exchange.Thevalueofthe
tokensgrowswitheachfeepaid(asitaccumulatestothereserve,puttingupward
pressureonthepricealgorithm).Itispossibletoliquidatethetokensatanytimetocash
intheinvestment.

Usersmaystillgravitatetowardsfee-takingtokenchangersoverno-feetokenchangers
becausetheyarelikelytohavegreatermarketdepth(morepeoplewillwanttoprovide
theirliquidity,viathereservetokens,toaprofitgeneratingsmarttoken)andarethus
likelytohavelowerpricefluctuations,makingitpossiblethattheenduserwillactuallyget
abetterexchangeratewhenusingatokenchangerthatchargesfees.

Bancorsalgorithmsandprice-discoveryUXwillassistusersinselectingwhichtoken
changertheyshoulduseatanygiventimetoachievetheirgoals.
HowcantheBancorprotocolbeusedforcreatingdecentralizedand
trustlesstokenbaskets(akaETFs)?
Smarttokenscanholdmultiplereserves,eachwithanindependentCRR(Constant
ReserveRatio)setting.Atokenbasketcanbedefinedasasmarttokenwithtwoormore
reserves,totaling100%CRR.Abasket,likeanysmarttoken,canbepurchasedforanyof
itsreservetokens,aswellasliquidatedinexchangeforanyofthem.Whenthebasketis
purchasedwithoneofitsreservetokens,thepriceofthebasketinthattokenincreases,
anddecreasesintheotherreservetokens.Thisbehaviourcreatesanincentivefor
arbitrageurstorebalancethetokenbasket,incaseswherethecalculatedpricesdiffer
significantlyfromoutsidemarketprices.

TokenBasketscanalsobeusedastokenchangers(withorwithoutfees).

HowcanexistingtokensbenefitfromtheBancorProtocol?
AnyERC20token(smartorstandard)canbesetasareservetoken.Whileitmaybe
challengingtomigratesomeexistingtokenstothesmarttoken(Bancor)protocol(e.g.
tokenswithafixedsupply),itisstillpossibletoconnectthesetokenstotheBancor
networkbyusingthemasoneofthereservetokensinatokenchanger.Thiswould
enablebuyingandsellingoftheexistingtokenwithnoneedforacounterparty.
Furthermore,itmaybegoodforexistingtokenstoseeincreaseddemandstemmingfrom
theirusageinthereserveof(smart)tokenchangers.

Cansmarttokensbetradedoncrypto-exchanges?
Yes,assmarttokensareERC20compatible,theycanbetradedanywhere.However,
smarttokensdonotneedtobetradedinacrypto-exchangeinordertoachieveliquidity
andfacilitatepricediscovery,asthesearedirectlyhandledbythesmarttokenscontract
usingtheBancorprotocolforcontinuousliquidityandalgorithmicpricing.

DoyouhaveplanstosupportnonERC20tokenssuchasBTC,XMR,
etc?CouldtheBancorprotocolbeusedacrossdifferentblockchains?
Yes.Intheshortterm,thiscanbeachievedthroughassettokenization(withtheinherited
counterpartyrisk)orfederatedtwo-waypegs(withmuchsmallercounterpartyrisk).This
meansthat3rdpartiesaresafeguardingtheassetsinothercryptocurrencies,while
issuingEthereumtokenstorepresentthem.Thosetokenscanbeexchangedbacktothe
originalasset(cryptocurrencyinthiscase)atanytime.Thesetokenized(ERC20)assets
canbeusedastokenchangerortokenbasketreserves.

Longerterm,wearetrackingsolutionsforcross-blockchaininteroperability(suchas
CosmosandPolkadot)andplantoultimatelyensuretheBancorprotocolisauniversal,
blockchainagnosticsolutionforcontinuousliquidity.

THEBANCORNETWORKTOKEN(BNT)

WhatisBNT?
TheBNTistheGenesissmarttokentobedeployed,establishingtheBANCORnetwork,
functioningasitsnativecurrency.BNTwillholdareserveinETH.

BNTwillbeissuedinacrowdsale.Thecrowdsaleproceedswillbeusedtodeployand
continuouslyevolveauser-friendlyweb/chatbotinterfaceforissuingandusingtokensin
theBANCORnetwork,tosupportvariouseffortsforgrowingthenetworksuchas
investinginthereservesofnewtokens,andtomaketheinitialdepositsrequiredtosetup
anewtypeofhighliquiditydecentralizedtokenexchangenetworkbasedontheBancor
protocol,using100%CRRtokenchangers.

AllsmarttokensissuedwithintheBancornetworkwillholdBNTasareserve(thoughthey
mayalsoholdadditionalreservetokens.)Thismeansthatanappreciationinthevalueof
anyofthenetworkssmarttokenswillappreciatethevalueofBNT,benefitingallother
smarttokensintheBANCORnetwork,sincetheirreservebalancevaluewillincrease.

BANCORwillalsobeusedasareserveforthetokenchangersthatmakeupits
decentralizedexchangenetwork.ABancortokenchangerisbasicallyasmarttokenthat
holdsa50%CRRreserveinBANCOR,and50%CRRreserveinanexisting,standardERC
20token(e.g.REP,GNT,RLC)allowingend-userstoeasilyconvertbetweenthetwobuy
buyingthesmarttokenwithonereservetokenandsellingitfortheother.Inthefuture,
Bancorplanstosupportadditionaltokensaswell.

WhynotjustuseEtherasthenetworktoken?/Couldntsomeonejust
forktheBancorprotocolanduseadifferentnetworktoken?
UsingEtherasthenetworktokenfortheBancorprotocolcanbecomparedtousingthe
BitcoincurrencyforEthereuminsteadofEther.UsingBNTasthedefaultreservecurrency
oftheBancornetworkcarrieswithitafewkeyadvantages:

1. NetworkEffects:ThemoresmarttokensthatuseBNTinreserve(whichwillbethe
defaultsettingforsmarttokencreationinanyBancordevelopedorfinanced
softwareservice),themorevaluableandmorein-demandtheBNTbecomes.As
thevalueofBANCORrises,sotoodoesthevalueofeverysmarttokenholding
BANCORinreserve.And,becausewereboththemostknowledgeableaboutthe
technologybehindtheBancorprotocolandhavefirstmoveradvantageinbuilding
onit(includingoverayearworkingwithalargedeveloperteamonbuildingthe
firstBancorsoftwareserviceUX,seedingtokenchangers,high-potential
communitycurrencies,andpopulartokenbasketswithBNT),anyoneforking
wouldneedtheeconomicincentiveandtheabilitytosurpasswhatwevebuilt,or
elsewillhavecreatedaninferiornetworkwithlittleincentiveforotherstouseit.
(ThiscanbecomparedtoEthereum,wherethesuccessofanysolutionthatuses
ETHappreciatesEthervalue,benefitingtheentireEthereumnetwork).

2. IncentiveforEarlyAdopters:Justaswithanycryptocurrency,theinitial
contributorssothattheycanseetheircontributionriseinvalueastheprotocolis
builtandgrows.Withoutthisincentive,itwouldbeachallengetosupportBancors
developmentandgrowth,aswellastoobtaintherequiredreservedepositsin
ordertoenableBANCORtofunctionasacontinuouslyliquiddecentralized
exchangeforpopularERC20tokens(basedonsmarttokenchangers,asdetailed
inthewhitepaperandinvariousFAQsinthisdocument).Linkingpopulartokensto
theBancornetwork(viatokenchangerortokenbasketreserves)isexpectedto
dramaticallyincreasetheusabilityandvalueofthenetwork.
3. Additionally,therearenorealadvantagestousingETHasareservetoken,sinceit
isexactlyasliquidasBANCOR(whichholdsETHinitsreserve).Infact,theonly
reasontouseETHasareserveisifthetokencreatorpredictsthattheBANCOR
valuewilldepreciateinthelongtermrelativetoETH,whichwillonlyhappenif
BANCORusageisdecliningforsomereason(makingitanoddchoiceforanyone
toissueasmarttokenbasedontheBancorprotocol).

FREQUENTMISCONCEPTIONS

IsntBancorjustadecentralizedexchange?
Bancorisnotanexchange.Itisaprotocolwhichallowsforasynchronouspricediscovery
andcontinuousliquidity.Thismeansthatconvertingasmarttokendoesnotrequire
matchingtwopartiesinrealtimewithoppositewants,rather,itcanbecompletedbya
singlepartydirectlythroughthetokenssmartcontract.

So,unlikeexchangeswhereyouhavetofindsomeonewhoactivelywantstobuywhat
youreselling,smarttokensarealwayscompletelyandimmediatelyliquidregardlessof
tradevolume.Thisenablesalongtailofcountlesspotentialcurrenciesthatnormally
couldntachieveliquiditybecausetheirtradingvolumeistoolowortheiruseistoo
specialized.SmarttokensbuiltusingtheBancorprotocolformaninterconnected
monetarynetworkthatinstantlyfacilitatesanyrequesttoconvertbetweentokensinthe
network.

Ifpeoplestartcreatingnewtokenswithlessthan100%CRRisntthis
likeallowinganyonetocreatetheirownmoney?Isntthataproblem?
Moneycanbeseenasatechnologyforcollaboration.Itworksbydistributingmutually
agreeduponunitsofcredit,andhelpinggroupskeeptrackofwhodidwhatforwhoand
howmuch.Throughouthistory,therehavebeenmanymethodsinwhichtheinitialcredit
hasbeendistributed(andremovedfromcirculation.)Goldisdistributednaturally,
bank-notesareextendedasloans,andcryptocurrenciesaretypicallyissuedthrough
crowdsales,PoW,andPoSmining.

Bydemocratizingthecreationofnew,liquidtokens-avarietyofpoliciescanbe
implementedbydifferentgroupsacrossdifferentgeographies,thusdecentralizingthe
processbywhichnewcreditisextended,allowingforadiversevarietyofvalue
ecosystems.

ThiscanbecomparedtothewaytheInternetisstructured;whileprotocolsareagreed
upon(HTTP,TCP/IP,etc.),eachnetwork(e.g.ISP)mayadoptadifferentbusinessmodel,
usagepoliciesandbackbonetechnologies.

Adecentralizedandinterconnectedmonetarymodelcanachievehigheragility,stability
andaccesstocredit,whichwebelieveisnotaproblem,butasolution.Weexpecttosee
atremendousamountofinnovationandcreativity,andmostofall--realvaluefor
end-users.

Howcanthemarket-capofasmarttokenbehigherthanthetotal
valueofthereserves?
Fortokenswitha100%totalCRR(tokenchangersandETFs),thevalueofthesmarttoken
isequaltothevalueofitsreserves.

However,fortokenswith<100%CRR,thetokensvalueisgreaterthanitsreservevalue.
Therearemanyexamplesofvaluableuser-generatedcurrenciesthatholdnoreserves,
suchasloyaltypoints(airlinemiles),localcurrencies(Ithacash),andprotocoltokens
(AugursREPandGOLEM),andyethaveamarketcaporperceivedvaluegreaterthan0.
Inalloftheseexamples,newcreditisissued,whichisacceptedbyotherpartiesin
exchangeforgoodsandservices.Thevalueofthesecurrenciesisderivedfromthe
willingnessofotherpartiestoacceptthemandnotfromanyunderlyingassets.

Thereservesheldbysmarttokensareamechanismwhichenablesthemtoprovide
continuousliquidityandasynchronouspricediscovery.Nevertheless,thetokenitselfmust
beintrinsicallyvaluableforwhateverpurposeitserves.Thereservesarenotthesourceof
thesmarttokensvalue.Rather,theyarearequirementtooperatethemechanismwhich
ensurestheirliquidity.

Iveheardabouttokenswhicharebackedusinga150%oreven200%
reserve,howcoulda10%reservebeenough?
Sometokensaredesignedtobepeggedtothevalueofexternalassets(suchas
TETHER),andinsomeimplementations,thesetokensusea>100%reserve,combined
withpriceoracles,asamitigationstrategyforthecounterpartyriskintroducedbythis
model(akaStablecoins).

Thereasonforholding>100%reservesisthatthevalueofthepeggedasset(e.g.USD),
mightincreaserelativetothebackingasset(e.g.ETH),inwhichcasethereserveratiois
reduced,butaslongasitishigherthan100%,thepeggedtokenremainsfullybacked.

Thesetypesoftokensserveaverydifferentpurpose(representingexternalassetson
blockchainswhileminimizingthecounterpartyrisk.)InBancorscase,thereservetokens
serveasamechanismtoprovideliquidityandpricediscovery,notasthebackingofthe
smarttokensvalue.Thereforesmarttokenreservescanbesetanywheregreaterthan
0%andupto100%.Thisallowstokencreatorstocreatenewvaluewhilebenefitingfrom
continuousliquidityandautomatedpricediscovery,fromdayone,beforethesmarttoken
hashadachancetoaccumulatetradevolume,thussignificantlyloweringthebarrierto
liquidityandenablingthelongtailofuser-generatedcurrenciestoemerge.

Usinganewmodelforpricediscoverysoundsrisky.Whydoyouthink
itwillwork?
Whenitcomesdowntoit,themarketpriceinboththetraditionalmodelandBancors
representtheequilibriumpointbetweenbuyersandsellersatanygivenmoment.Inboth
models,abuyersmarketwilldrivepricesup,whileasellersmarketwilldrivepricesdown.
Thiscommonincentivealignmentmechanismisthekeyformarketpricediscoveryand
whywebelieveBancorsasynchronouspricediscoverymodelwillfunctionproperly.What
makesBancorsmodeldifferentisthatitdoesntrelyontradevolumeforpricediscovery,
butrathersetspricesbymaintainingaratiobetweenareserveandthetokenssupply,
whichcanfunctioneffectivelyevenatverylowtradevolumes.

ETHEREUMANDOTHERBLOCKCHAINS

ArethereanytechnicallimitationsforusingEthereum?
Ethereumisquicklybecomingaplatformfortokens,andtheBancorprotocolexpandsthe
functionalityofERC20tokensthroughEIP228,BancorsTokenChangerimprovement
proposal.We'vefoundEthereumtobeasolid,comprehensiveplatformtoworkwithand
usefulforimplementingeverythingweneedtoeffectivelylaunchtheBancorprotocol.We
haveencounteredsomechallenges,suchasimplementingadvancedmathfunctions,but
nothingwecouldntworkaroundandthatcouldnteasilyimproveinthefuture.
Additionally,basedontheprovenabilityoftheEthereumfoundationtoguidethe
evolutionoftheEthereumblockchainoverthepastcoupleyears,asopposedtothe
stagnationoftheBitcoinblockchainwithitsneverendingin-fighting,webelievethe
futureisbrightforETHandareexcitedaboutbuildingacomprehensiveliquiditysolution
fortheecosystem,andeventuallyconnectingittoothers.
DoesnttheDAOhackmeanEthereumisnotsecure?
No.However,itdoesmeanthatsmartcontractsshouldbeprofessionallyauditedbefore
theyaredeployed,andthatadditionalprotectionsshouldbeimplementedinthesmart
contractsincaseanissueisdiscoveredaftertheirdeployment.SincetheDAOhack,
severalbestpracticeshaveevolvedintheindustrytoincreasethesecurityofnewly
deployedsmartcontracts,andBancorutilizesthesetoensurethesecurityofoursmart
contractsaswell.Werealsoimplementingmultipleredundanciestosafeguardagainst
unexpectedscenarios.

COMPARINGBANCORTOOTHERTECHNOLOGIES

HowdoesBancorcompareto0x?
0xisanext-generationdecentralizedexchangethataimstosolvesomeofthescalability
andcostchallengesofcurrentdecentralizedexchangesolutions.UnlikeBancor,0xuses
theclassicexchangemodelofmatchingbidandaskorderstofacilitatetransactions
betweentwoparties.TheBancorprotocolworksdifferentlythantheexistingexchange
modelsinceitdoesnotrequirematchingtwopartiesinordertofacilitateanasset
conversiontransaction,thusenablingcontinuousliquidityforassetsatanytimeandscale.

HowdoesBancorcomparetoMakerdao?

Marketdaoiscreatingastableandcollateralizedcryptocurrency.Thismeansthatthe
valueoftheDAIcurrencyissuedbyMakerdaoispeggedtoabasketofinternational
currencies(SDR)reflectingtheactualcostsofgoodsandservicesinmajoreconomies.
BeingcollateralizedmeansthatcollateralisbeingmaintainedfortheDAIcurrency,
effectivelybackingit.Thisisquitedifferentthansmarttokens,wherethereservesarenot
collateralbackingthetoken,butratherusedasliquiditypools,essentiallyprovidingan
alternativetomarketdepthforthiscurrencyindifferentexchanges.

HowdoesBancorcomparetoShapeshift?

Shapeshiftisprovidingasimplesolutionforexchangingcryptocurrencies,wheretheuser
sendscryptocurrencies/tokenstoanaddress,andreceivesadifferentcurrencyinreturn.
WhileBancortokenchangersprovideasimilarexperience,thebackendisquitedifferent
asShapeShiftisusingamoreclassicexchangeinfrastructurewhilewithBancor,smart
tokensareusingthereservemechanismforalgorithmicpricing.
HowdoesBancorcomparetoMelonport?

Melonportisaplatformforcreatinguser-generatedfunds,meaningthattheyare
simplifyingtheprocessofcreatingasmartcontractbasedinvestmentvehiclewhichis
managedbyaspecificparty.Melonportalsoprovidesamechanismwhichallowsfor
performancecomparisonsbetweendifferentfunds.

Theonlyuse-caseofBancorwhichhassomesimilaritiestoMelonportisthetoken
baskets.Tokenbasketscanbemanaged,meaningthattheirownercanupdatethe
reservelistandCRRsfromtimetotime,aswellasunmanaged,meaningthatthetoken
basketkeepsthesamesetofassetsandratiosindefinitely.

HowdoesBancorcomparetoEtherSwap/CryptoDeriviatives?

EtherSwapandCryptoDeriviativesessentiallyprovideopenmarketordersonthe
Ethereumnetwork.Usingsmartcontracts,anyonecanoffertoswaptokensforETHata
predefinedexchangerate.Thismeansthattherearestilltwopartiesthatareinvolvedin
theprocess,whichisquitesimilartothematchmakingprocessthattakesplaceinclassic
exchanges.Additionally,noorganicorautomatepricediscoverytakesplace.

HowdoesBancorcomparetoCosmos/Polkadot?
Cosmos/PolkadotandBancorarequitedifferent,andverysynergetic!Cosmos&polkadot
plantolaunchsolutionsallowingdifferentblockchainstointeroperate.Byusingthese(or
similar)technologies,theBancorprotocolwilloperateacrossmultipleblockchains,rather
thanjustonEthereum.WearesuperexcitedabouttheopportunitytoenableBancorto
connectbetweeneverykindofassetonvariousanddiverseblockchains,andbelievethat
thiswidercoveragewillcontributegreatlytothevalueandpotentialoftheBancor
protocolmovingforward.Wewillseektocollaboratewiththeseandotherinterchain
solutions.Ifyoucomeacrossanyweshouldevaluate,pleaseletusknow.

Miscellaneous

Whatareedgecaseswhererunsonthebankcanhappentosmart
tokens?Arethereanyprotectionsagainstthis?

Yes,theCRRisthemainprotectionsincethewaythepriceiscalculatedassuresthatthe
reservescanneverbedrained.Thepricewilldropinsuchscenario,providingapotential
opportunityforthosewhoarenotliquidating.

WhataretheimplicationsofselectingahigherorlowerCRR?

AhigherCRRwillcausethepricetofluctuatelesswithanybuysandsellsofthesmart
token.Thismeansthatgiventhesamemarket-capandtransactionsize,theprice
increase(ordecrease)followingapurchase(orliquidation)willbesmallerastheCRRis
larger.Intuitively,alargermarketdepthismoreresilienttochangesinsupply.

WhydidyounametheprojectBancor?

ThenameisinhonoroftheKeynesianproposaltointroduceasupranationalreserve
currencycalledBancortosystematizeinternationalcurrencyconversionafterWWII.The
proposalwasintroducedattheBrettonWoodsconferencewheredelegatesfrom40
countriesgatheredtoestablishthenewfinancialworldorder.

HowwillthemarketcapoftheBNTbemeasured/increase?

Likeanyothercurrency,themarketcapisthesupplyofthetokenmultipliedbyitsunit
price.Asmoresmarttokensarecreated,usingBANCORas(oneof)theirreservetoken(s),
growingdemandwillputupwardpressureontheunitpriceofBANCOR.Inadditionto
end-users,thosewishingtoparticipateinBancorsnetworkgrowthandassociatedvalue
increasemaybeinclinedtoownBANCORthusfurtherincreasingdemand.

Whywouldnttokencreatorsjustuseexchangesinsteadsofallocating
valuablefundstoareserve?

Beinglistedonanexchangeinvolvesbeingregistered,verifiedandapprovedby
exchangeowners.Buyersandsellersandthensubjecttoallsortsoflimitsbythe
exchange,dependingonjurisdictionandotherbusinessmodelconsiderations.Needless
tosay,theseexchangesalsochargefees,oftenhighones.WithBancor,allasmarttoken
creatorneedstodoisdeposit(orcrowdfund)ETHintothesmarttokensaccount,anditis
instantlytradeable.Additionally,theavailableliquidityisalsospreadbetweenthe
differentavailableexchanges,makingmarketdepthmoreshallow(andpricevolatility
higher)ineachone.WithBancor,alltheavailableliquidityexistsinthesameliquiditypool,
thesmarttokensreserve,directlyinitssmartcontract.


GlossaryofTerms

Term Definition

Bid-AskSpread Thedifferencebetweenthelowestpriceaselleriswillingtosellan
assetfor,andthehighestpriceabuyeriswillingtobuyanassetfor.
Theinherentriskthatispresentinanydealingwithanotherhuman:
CounterpartyRisk
thatthathuman/institutionwillnothonourtheirpartofthedeal.
TheCRR(ConstantReserveRatio)isaparameter,setbythecreator
ofthesmarttokenforeachofthesmarttokensreserves.TheCRRis
CRR(ConstantReserveRatio) akeyparameterusedbythesmarttokenasanasynchronousprice
discoverymechanism,asitdeterminestheratiobetweenthereserve
balanceandthesmarttokenscalculatedmarketcap.
Theproblemoffindingsomeonewhowantswhatyouhavetosell
andhaswhatyouwanttobuy,inreal-time.
DoubleCoincidenceofWants Theinventionofmoneywasthesolutiontothisprobleminbarter.
TheinventionofBancoristhesolutiontothisprobleminasset
exchange(akathebartersystemofmoney,ormoneyformoney).
Meta-fund(fundoffunds).Tradedonstockexchange.Low
ETF(ExchangeTradedFund) maintenance&lesscentralizedthanmutualfunds.Mostpopularclass
ofassettradedworldwide.

WhenyoureceiveXmoney,youholdX-Y(thepercentageYofXis
FractionalReserveBanking the"ReserveRatio")&loanoutY,adinfinitum.Isismostcommonly
usedbybanks.
Theabilityforanassettobeeasilyboughtandsold.
Highliquidity=Sellingonepopularcryptocurrencyforanother.Can
Liquidity bedonecheaplyin<1minute.
LowLiquidity=Sellingahouse.Takesalotoftime,effort,andmoney
tofindabuyerwhowantsyourhouseatapriceyoucanaccept.
Thelargeamountofcontent/productsthatareinlowdemandthat,
LongTail collectively,makeupamarketsharethatisgreaterthanthatofthe
combinedtopperformers.
MarketDepth Theamountofanassetthatiscurrentlyavailabletobetraded.
MarketMaker Anentitythatputsupanordertobuy/sellanassetatagivenprice.
Theprocessofbuyers&sellerscomingtoanagreementontheprice
PriceDiscovery ofanasset.Normallythishappensbymatchingbidsandasksinan
exchange.Bancorusesanalgorithmbasedonreserves.
Aprogramrunonablockchain(andthereforeunchangeablew/o
SmartContract record&irrefutable).Cangiveanobjectautonomy,sothatitcanrun
code,make&acceptpayments,andownitselfandotherassets.

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