Bancor
Crypto Exchange Review 2022

Making Crypto Simple
Liam Kemp — Last Updated on January 3, 2022

In the dawn of cryptocurrency, as eye-widening as the premise of exchanging digital goods was, there was still a lack of diversity when it came to the methods of acquiring those digital goods. As years went by, a plethora of new cryptocurrencies started popping up on every corner, but all a trader could do was simply buy and sell these altcoins in exchange for more crypto or fiat.

Bancor white logo

Maybe at the time, this was a revelation in itself, but from today’s standpoint, after all the dApp token swap services, futures, and margin support, we have grown to expect more from the average Bitcoin (BTC) exchanges than Bitcoin purchases. An increasing number of traders across the market are turning towards advanced or decentralized and immutable crypto providers. Are we at the cusp of a paradigm shift?

Bancor is one of these new-tech crypto platforms that run on DeFi protocols and takes trading cryptocurrencies to the next level. This might be quite a lap for inexperienced traders, so let’s get on the ropes and see what exactly this new generation of crypto trading services can really offer.

About the Bancor Network

Bancor came to the scene in 2016. The trading platform was a pioneer when it comes to decentralized liquidity networks because before Bancor entered the crypto market, next to no one could imagine converting tokens without going through and setting up a ton of operations first. However, the Bancor Network Token (BTN) offered users the option to convert tokens from the convenience of their own crypto wallet.

Bancor Network homepage

With Guy Benartzi, Galia Bernartzi, and Eyal Hertzog at the helm, the platform currently resides in Zug, Switzerland and Israel, under the name Bancor Foundation. The trading platform’s 2017 Initial Coin Offering (ICO), managed to perk the ears of over 10,000 investors and resulted in over 150 million USD in purchases.

Centralized vs Decentralized Crypto Exchanges

In order to understand how Bancor functions the first distinction that should be made is the one that differentiates between centralized crypto exchanges also known as CEXs and decentralized crypto exchanges, also known as DEXs. Both types are able to provide the same services on many parameters, however, they are vastly different when it comes to the methods of execution and the way in which they operate.

Centralized Crypto Exchanges

Centralized crypto exchange platforms are the bread and butter of the crypto industry. They serve as a mothership that encompasses everything a trader needs. They chaperone every step of the way and try to make the trading experience as easy and as seamless as possible for its clientele. Of course, this does come at a price. Centralized crypto exchanges have a knack for charging a fee on every move you make, be it on trades, deposits, withdrawals, transactions, as well as collecting multiple points of personal user data throughout.

Vector illustration of two men looking at documents for KYC

The upside is that crypto users that choose to do business through centralized exchanges don’t need to have much prior knowledge about the crypto industry and how it functions. The centralized exchanges have everything at the ready and serve as a mediator and executioner between parties. Most CEXs will have a policy in place that requires that all users have to undergo full KYC and AML processes before they can be eligible to enter the order books.

Decentralized Crypto Exchanges

In the other corner, we have decentralized exchanges or DEXs, which can be viewed as the complete opposite of CEXs. The most important distinction between the two is that decentralized crypto exchanges do not rely on employing a governing body or this party to oversee, execute or control trades. Rather, DEXs rely on either automation or the involved parties themselves to make the trade possible and see it through. Such is the case with P2P or peer-to-peer exchanges.

The main reason why traders go through decentralized crypto exchanges as opposed to centralized ones, apart from the fee structure, is that DEX’s offer traders complete and utter anonymity and store no personal data or records of their actions of any kind.

Similarly, Bancor functions as an AMM or automated market maker. The platform relies on its set of protocols when it comes to executing trades and orders and allows traders to take full control of their assets without having to press every single button manually.

How Does the Bancor Network Work?

Bancor is a forward-looking exchange. The Bancor team is always looking for ways to expand on what it has in place and reach new heights. In 2021, the trading platform introduced the Bancor V2 and the Bancor V2.1 that rely on gasless voting that is done via Snapchat.

About Bancor exchange page

The platform also expanded its protocol by encompassing more digital assets, which came as a result of the alternations in their whitelisting policy, and made it easier than ever for users to bring in new tokens to the fold, and introduced a whole slew of new and improved tools that provide in-depth market analysis, charts and insights.

Trading Platform

Bancor runs as an open-source DEX, which means that even though it is a decentralized crypto exchange, it’s not tangled up in code that no one understands. The trading platform is as user-friendly as they come and relies on ergonomics rather than flash for its clean interface that is tailor-made for swapping tokens without breaking a sweat. Users can either do business through the platform’s official website at https://bancor.network or if they’re always on the run, they can settle for the trading platform’s mobile app offering, compatible with both Android and iOS devices.

Bancor is part of the EOS and Ethereum blockchain. The employed blockchain technology connects users so that they can make traders and conversions directly from their private wallets. How many trading pairs does Bancor offer? Over 8,700 trading pairs. To put that in perspective, Binance, one of the leaders on the centralized crypto exchange market that has some of the most diverse offerings in crypto pairs, supports about 450 trading pairs.

Bancor trading page

How come the discrepancy? Well, it all comes down to liquidity. In order to be able to execute the trades on all the trading pairs it supports, an exchange has to have high enough liquidity, which brings us to our next segment.

Liquidity Providers

Bancor has a very different liquidity protocol scheme than its centralized counterparts. The trading platform draws liquidity from the traders themselves. Users are incentivised to aid in the liquidity department – every user that has a stake in the platform’s liquidity gets a part of the trading fees in proportion to the stake.

You see, Bancor doesn’t support an order book where users can match pairs and execute a trade on the ones that they deem worthy. No, no. Bancor allows users to swap any and all smart tokens if there is a liquidity pool for them. Call it reverse engineering.

Bancor employs its ERC20 token to bridge the gap between the employed blockchain and the liquidity pools. The platform doesn’t swap token A for token B. Instead it swaps token A for its own BNT token and then swaps the BNT token for token B. This way it has an intermediary on all pairs. This means that it doesn’t need to create or support a liquidity pool that will house token A and token B. It only needs to connect currencies to its Basic Attention Token (BAT) network – have a nexus, if you will. Genius? Well, not quite.

Bancor liquidity provider

The platform employs its Bancor Formula in order to calculate the relations between smart contracts and taxes them accordingly. That being said, the genius part is that without the BNT token users can’t do much. They have to have it in order to be able to create a liquidity pool that will bridge the gap between token A and token B.

Users aren’t required to have the BNT token if there is already a liquidity pool for the trading pair that they are after, so non-BNT holders are still welcome, however, if a user does have the token, they can choose to add to the liquidity of the pool and get a percentage of the trading fee on the back end. Touche Bancor. Touche.

BNT Vortex

The Bancor vortex (vBNT) serves as an auxiliary token for users that are interested in staking BNT tokens is already up and running Bancor pools. The way it works is that traders can either exchange their vBNT, or leverage it against the liquidity pool so that they can get a bigger piece of the pie when a trade goes down. Without vBNT users cannot add liquidity to staking pools. vBNT tokens can also be utilized as a vote on Bancor’s future operations and developments.

The vBNT can only be leveraged against EOS or ERC20 tokens.

Bancor Network Fees

Where Bancor really has it made is its fee protocols. In an age when there seems to be a fee for crypto breathing, the trading platform employs no trading fees, deposit fees or withdrawal fees. It doesn’t matter if a user is bringing a token to the fold in order to pair it or wants to convert one digital asset for another on the platform’s network, the fees remain the same – nonexistent.

Bancor payment methods

By employing AMM protocols the platform completely erases the spread that occurs in relation to buying or selling an asset. Furthermore, because AMMs aren’t coded to draw a profit, the transaction fees for its services are also free of charge. So, in a sense, there are no deposit or withdrawal fees, because there aren’t any deposits on withdrawals to be made.

Funding Methods

Everyone that isn’t completely new to decentralized crypto exchanges knows that fiat support is not available on DEXs, however, even though Bancor is listed as a decentralized crypto exchange, it bends the rules, as it does have support for fiat currencies. Users have to take the road less travelled, but should they have a need for it, the option is there.

If a trader wants to make fiat deposits on the trading platform, they have to employ their credit card and go through Simplex, which acts as an intermediary between the two currency worlds. Because Simplex is a third-party and isn’t part of Bancor’s instant crypto purchase system, users that employ fiat in order to get their hands on some Ethereum are subject to a 3.5% fee on a per transaction basis, as well as a fixed $10 fee on top.

Bancor Network Security

Decentralized crypto exchanges are somewhat tricky when it comes to crypto security because they are non-custodial and do not store any funds or data on their servers. Because DEXs are decentralized, they don’t have all their servers in one place. This means that even if the platform ends up being breached and falls prey to a hacking attack or a scam, only one remote server will be compromised. Most traders consider DEXs as far less prone to malicious attacks because there is nothing to steal, however, the private keys that are utilized to unlock a user’s wallet are still a target and a traceable one at that.

In 2018, a crypto wallet on the platform’s network was compromised and the platform lost more than $23.5 million. Bancor was quick to act and severed its BNT bridge in order to stop the bleeding, however, the news was already out and Bancor had its reputation shattered. Nevertheless, the company has done everything in its power to move forward and improve its security rather than attempt to conceal its flaws.

FAQ

What is the Bancor protocol?

The Bancor protocol is a blockchain network that enables users to instantly convert virtual tokens without the need to go outside of the exchange and through the whole process that comes along with matching pairs and exchange order books.

How to stake in a Bancor Pool?

Staking at Bancor is very simple and straightforward. In order to get started, users have to convert the Bancor app to their crypto wallet and tap the “Join a Pool” box. From there, they only need to enter the desired number of tokens that they would like to supply the pool with and confirm their action by tapping on the “Supply” box.

What crypto wallets can I use on Bancor?

The Bancor exchange supports ten of the most popular and utilized crypto wallets on the market today. Traders can have their choice between WalletConnect, Authereum, Opera, Trezor, Fortmatic, MetaMask, Ledger, YouHodler, Lattice1, Torus, as well as WalletLink.

The trading platform also supports a wallet app that is compatible with both desktop as well as mobile platforms. The app is available on five different operating systems: Windows, OSX, iOS, Android, and Ubuntu. There is no need to create a separate account in order to log into the app itself. Traders are able to make use of their Gmail and Facebook credentials and immediately get down to business.

Even though this option seems like the more convenient way to go about things, users should always keep in mind that the security infrastructure on hardware wallets is far superior to software ones.

A Few Words Before You Go…

To say that Bancor has a lot of things going for it, would be somewhat of an understatement. The cryptocurrency exchange has an excellent infrastructure and ecosystem in place that enables users to take advantage of its Bancor wallet, chain liquidity, pricing and token conversions. The trading volume might not be as high as some of its central counterparts such as Uniswap and Coinbase but it still has a commanding presence.

The only knock against it is that DAO exchanges in general aren’t exactly suited for beginners. However, once users get familiar with the terms, protocols, and technology that drives them, it’s smooth sailing from there on out, because the platform is very intuitive by the nature of its build.

Although there has been some controversy around the question of whether Bancor is truly a decentralized crypto exchange platform or not, even if it turns out that Bancor is not completely decentralized, it still stands tall and has a lot to offer for those looking for a capable and forward-thinking DEX.

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