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12.BANCOR (Published: 24th Jun, 2017)

Bancor Protocol is a recently developed project in 2017 that issued an ICO on 12 June 2017 and has raised about $150 millions in Ether in three hours, making it the second-largest fundraising campaign in the blockchain industry. It aims at providing a liquidity solution for small-scale tokens which suffer from low trading volume and hence a poor market exchange rate with other popular currencies.
Standard ERC20 tokens implementing the Bancor Protocol will become smart tokens which will hold a balance of at least one reserve token, be it Ether or any other standard ERC20 tokens. The smart token is minted when purchased and destroyed when redeemed, therefore one can always buy or sell the smart token with its reserve token. In addition, price is determined automatically to maintain a constant reserve ratio (CRR) and as a result, liquidity is provided without an exchange.
The significance of these smart tokens is illustrated by creating the Long Tail effect. The liquidity they provided can lower the barrier for user-generated currencies to connect with the global market, which would stimulate the creation of tremendous amounts of innovative small-scale tokens. Just like Youtube allowing users to upload and share videos easily, the long tail created by the Bancor Protocol can potentially change the economy.
The Bancor Network Token (BNT) is the first smart token that uses Ether as a single reserve token. BNT can be the common reserve token of other newly issued smart tokens, forming a network of tokens. When demand of a particular smart token increases, it will increase the demand of its reserve token and thus drive up the price of the network token, which will eventually raise the value of the entire network as a CRR has to be maintained. There are also other functionalities such as the Token Changers, Decentralised Token Baskets, all of which are introduced in their white paper.

The Roadmap of Bancor on Trello stated a list of features currently being tested on the test environment and the plans for the next release, of which the most important one is enabling buy and sell smart tokens for Ether. The release date is not announced, though.
On the other hand, TaaS, a tokenized closed-end investment fund for blockchain projects, has invested in Bancor for 352 Bitcoin, which is equivalent to $1 million. They have established a strategic partnership for shared profit, starting from August, while TaaS will announce additional investment in Bancor before the end of July.

The Bancor Protocol is a solid idea and it has been an immense success in the ICO, indicating that many other investors are also being optimistic about its development. Moreover, its first smart token BNT will become the major reserve token of other new smart tokens, meaning that the network effect will only raise its value as the project improves and more smart tokens are created. Although it is still not available to trade freely on the market, it is recommended to buy whenever it is possible due to the huge potential upsurge.

Overall the Bancor Protocol is a promising project, and its price would certainly rise in the short-term. However, to sustain the growth, mass adoption is the key as the network effect of BNT relies on it to become beneficial. Also, it is possible for people to create another network token on Bancor and become more popular than BNT. After all, if the team fail to market their own BNT, the whole system might still work, but the value of BNT would depreciate.

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