At the moment, decentralized exchanges are the pinnacle of asset exchange and trading. However, a new player, Bancor, is making moves that can turn it into an industry leader.
This platform has the power to manage multiple cryptocurrencies, while offering accurate exchange rates and this is why it’s a very valuable resource. As Huffington Post reported, Bancor was able to grow and increase after its highly successful ICO when other platforms were struggling; this shows that they are taking the right path.
As everyone is becoming more open to tokens and digital currencies, having a reliable platform through which people can send, receive, manage and convert their funds is essential. We have entered a new era where there are many cryptocurrencies and not just Bitcoin, and there are many people around the world using Ripple, Ethereum, Dash, Stori, Lisk, Monero, Dogecoin, Litecoin and many other smaller cryptocurrencies. At the same time, there are many others to come in the future.
What is Bancor?
This protocol company has the potential to become the number one platform where people can send, receive and manage their funds from all the tokens we mentioned. There are no commissions or fees for converting cryptocurrencies, the price slippage is predictable and without any spread. Already many people recognizing that the issue of cryptocurrency liquidity might be solved by Bancor, Bitcoinsit.com suggested in a detailed article.
Simply put, Bancor has created a new standard with Smart Tokens. All Blockchain-based tokens are converted into these Smart Tokens, which are used to trade different values. They have created a connection token standard that is used to trade different tokens in real time and without any clutter.
Liquidity problems with decentralized exchanges
In the financial world, liquidity is a term used to explain how easy it is to convert a certain asset into real money on demand, without any price fluctuations or nuisances. Markets that have low liquidity are volatile while higher liquidity means stable prices and low volatility.
Cash has very high liquidity and this is why it’s used in most markets, however when making transactions with cryptocurrencies and the digital coins currently on the market, the value can fluctuate considerably as this market has very low liquidity. Every cryptocurrency has a certain number of tokens available within a single platform and making transactions could mean paying significantly higher amounts.
When we take all of these things into consideration it is obvious that DEX is much more volatile than Bancor. Decentralized exchanges are facing great problems with liquidity, but Bancor seems to be a platform that handles them rather easily.
Why is Bancor better?
The Bancor Protocol, explained here, offers a liquidity mechanism and automatic price assignment which is autonomous to all of the crypto coins running on smart contract. All smart contract tokens are connected with holding balance networks of individual cryptocurrencies.
This is why smart tokens have liquidation and simple purchases available with all assets that are connected utilizing smart contract during the process. Simply put, prices are constantly calibrated based on the behavior of the market.
With Bancor protocol any user can create a new cryptocurrency and it becomes a Smart Token. With this new currency a connection is created between all the other available cryptocurrencies. This kind of solution allows users to trade and store other cryptocurrencies amongst themselves.
The whole process is designed to allow the smart contracts of tokens to act as individual market creators. Liquidity is established through these entities, allowing other users to sell and buy whenever they want, regardless of the quantity.
A very important thing to mention is that these smart tokens are ERC20 standard compatible. This means that any software which has this standard can use these tokens as well. All of them have their own ERC20 tokens reserve balances, enabling them to be traded freely with other tokens.
To sum up, the reason why the Bancor Blockchain protocol is so valuable is because it removes any third parties from cryptocurrency transactions. This means that trading is fast and reliable. On top of, all smart tokens that are used have high liquidity, no matter what the price is. This is why Bancor is a perfect platform for asset trading online.