Can tokens keep one or more additional tokens in reserve? Until now, this thing was not possible. However, with the future development and implementation of Bancor Protocol, this will be available. This will create relationships between those respective tokens and more than that, it will permit conversions between tokens and other modern types of economic models. This operation will be possible through the use of a smart contract - by using such an option, anyone can always exchange their tokens to other types of tokens. In this manner, currencies that are hardly ever traded will have a market price and liquidity. As most of us know, this is something not possible in today’s cryptocurrency market.

The operations that make Bancor Protocol unique

Bancor works on smart contract blockchains - by doing so, it supports any standard token. These may represent fiat currencies like dolars, euros, or crypto-currencies like Bitcoin (either tokens that were issued in crowd sales like augur and golden. Tokens represent assets like gold. The way that Bancor operates with the tokens is that you can buy them at any time by sending any one of the reserve currencies to the smart contract which will then automatically issue you the token based on the reserve ratio. When you want to pull money out of the reserve, simply send the token back to the smart contract - through this operation the token is destroyed and money is pulled out from the reserve.

Based on the ratio between the token and the reserve, the algorithm calculates the conversion rate between the documens, while preserving a constant ratio between the reserves value and the banker tokens market gaps. This ensures that reserves are never drained out. The bank or the network tokens will serve as a kind of a connective tissue - by doing so it will manage to easily link all of the user generated tokens to each other.

The beauty of Bancor is that the more people use it (as their reserve currency), the more value it captures. It essentially encapsulates the network effect of every bank or compatible token.

How can users make the most of Bancor

Just like the Internet opened the road for new types of content models (take for example the blogosphere), we are now in a similar momentum. We can enable the long tail of user generated currencies - this may all lead to a world with even millions of tokens that are highly effective locally and yet tradable world wide. Thus, Bancor Protocol will enable community currencies to thrive.

Due to the fact that the Bancor Protocol is a building block for a new type of monetary system on blockchain, the developers of this platform are beginning to discover the different use cases - from decentralized ETS to community currencies a new type of autonomous decentralized exchange. Also, the community comes up constantly with new other ideas.

Check out the Bancor Protocol white paper and smart contract, available on www.bancor.network and follow Bancor on social media for updates!