What is Smart Tokens technology?

First of all, it is necessary to mention what exactly is the Bancor protocol. Bancor protocol allows creating networks of Ethereum Smart contracts, which can be exchanged directly on the chain between themselves. So, you can hold any Ethereum token (supported by Bancor) and convert it to any other Ethereum token. This feature is possible thanks to the Smart Tokens technology.

Smart tokens technology are standard Ethereum based smart contract. So simply said, smart tokens is some type of programming code defined in smart contracts based on Ethereum network. Smart tokens allow that you can convert Etherum tokens or DApps between themselves without any third party and directly on the chain.

How is it possible to convert tokens on the chain?

Basically, Smart Tokens hold balances of tokens which is called “Connectors”. Through connectors, it is possible to convert tokens between each other based on autonomously and algorithmically calculated rates. Connectors are represented by Bancor tokens (BNT), which provide the function

Advantages of smart tokens:

  • Tokens can be converted directly on-chain without any third party or Exchange.
  • No extra fees.
  • You do not need liquidity on the market because everything happens on the chain through algorithmically calculated rates.
  • You can convert all tokens – big or small (liquidity).
  • Price is based on the algorithmically calculated rates.
  • Buy and sell at same price without spread.
smart tokens, bancor, third party conversion

Comparison between classic and smart tokens conversion.

The conclusion

Bancor protocol really can improve the environment of centralized crypto exchanges and move a whole industry to the next level. As a result of this solution, Bancor can probably remove standard problems of classical exchanges like fraud actions and failed transactions. On the other hand, there are a lot of others projects, which are trying to create the same idea like the Bancor. Also, for more information you can look on Bancor Whitepaper.