Token Sale

Bancor Protocol: Token Launch Report

Update: Bancor raised 396,720 ETH within two hours, worth approximately $150 million at time of close.

A smart-contract-based token conversion standard, enabling a single party to convert any token to another, without requiring a second party to exchange with. It achieves this through the use of reserve-tokens, which provide liquidity through autonomous algorithmic price discovery, regardless of trade volume. — The Bancor Team

Bancor is a platform built on Ethereum that enables anyone to launch tokens–called “SmartTokens” in the protocol–backed by crypto-token reserves, such as ETH. These SmartTokens can be freely traded and even used as the crypto-token reserves for issuing other tokens. The reserves are locked in a smart contract. Users specify the ratio of SmartTokens to their reserve tokens when they launch, and this determines the price at which the smart contract will issue new SmartTokens (if the reserve grows) or redeem SmartTokens for the reserve tokens. and this establishes a price at which the smart contract will exchange SmartTokens for reserve tokens issue new SmartTokens. The smart contract underneath each SmartToken functions essentially like a distributed “central bank” with predictable monetary policy.

As a whole, this platform introduces three novel features to the industry.

  • Issue tokens backed by reserves with stabilized prices: it allows people to issue tokens that have a reserve, similar to how fiat currencies have central banks with foreign exchange reserves. It is one method of stabilizing the value of a currency, even though currencies are rarely backed one to one. Arbitrage should keep the price stable.
  • Marketplace of token changers: it can add a kind of liquidity to the token exchange market because the token reserves can be tapped when people want to buy or sell them using the SmartTokens that they back. Trading with reserves also incurs no fees beyond the Ethereum transaction fees (gas) needed to support the transaction.
  • Launch token baskets: it allows the easy launch of token or currency baskets, such as ETFs. This in turn could support the emergence of various exotic financial instruments as both the number and diversity of tokens grows.

The Bancor Protocol is based on John Maynard Keynes’ proposal after WWII at Bretton Woods to create a supranational currency that is beyond the scope of any one nation and has reserves based on the currencies of all participating nations.

Users interact with Bancor through their app and can launch tokens using chatbots. The Bancor team is using Bancor to run their token sale bounty program.

How does it work?

When someone wants to issue a Smart Token, they will set a Constant Reserve Ratio (CRR) that defines how many Smart Tokens are issued. Countries that use a fractional reserve banking system will put into circulation much more currency than is technically redeemable: the theory is that only a fraction of people would redeem at any given time. A small reserve can support a larger supply of circulating monies, and the value of those circulating monies will reflect how much confidence the market has in both the reserve and the SmartToken relative to it.

Banks operate with a similar principle: using cash on hand, they can engage in transactions many times their value. In the US, the Federal Reserve requires that banks having a liability of over $115m have at least 10% as cash-on-hand. The array of debt instruments and financial relationships that exist in fiat-based economies is currently much more complex than that in the emerging crypto-industry, though the industry will likely see more tradeable debt tokens (such as Bitfinex’s BFX token) as time goes on.

The CRR is more complex than just defining the number of SmartTokens relative to the number of reserve tokens: rather one can think of it as the value (measured against a third currency such as fiat) that the supply of SmartTokens should have relative to its reserve. The supply of SmartTokens and reserve tokens will adjust to reflect this, driven by the arbitrage the smart contract creates. v

Once the SmartToken is issued, its value relative to other currencies will float as foreign currencies do, but the CRR will determine how much of the reserve currency one SmartToken can be redeemed for and how many more SmartTokens can be issued by adding to the reserves. This establishes a target price (denominated in reserve currency per smart token) that the Bancor smart contract will honor in creation and redemption.

The CRR equation is such that it becomes cheaper (priced as SmartToken per Reserve Token) to issue SmartTokens the more SmartTokens are in circulation. Given that both SmartTokens and Reserve Tokens have independent fiat prices (or relative to any other currency, though fiat is still the most stable) on the market, arbitrage should keep the supply of SmartTokens in line with the reserve requirements and aligning the relative fiat prices of the two.

If the reserve currency increases in value relative to third currency (such as fiat), the SmartToken will as well–and to a lesser extent, vice versa, though the effect will be small if the amount of reserve tokens held is small relative to the total supply.

SmartTokens themselves can also be used as the reserves of other SmartTokens, vastly increasing leverage in tokens.

What is the token being sold?

The Bancor Token will be the first token launched on the protocol, backed by the ETH in the crowdsale at a 20% Constant Reserve Ratio (CRR). The Bancor Token can be used by anyone to back additional SmartTokens. The Bancor Foundation will use some of the proceeds from the sale to launch more SmartTokens and support users in launching their own as well. If the Bancor Token is used as a reserve currency for another SmartToken, it will be accepted as part of the reserve.

The value of the Bancor Token will thus depend on both the value of ETH and the value of the SmartTokens that Bancor is used to back.

  • When the market price of ETH increases faster than Bancor’s, it becomes cheaper to get ETH through the smart contract until the supply of Bancor goes down (or the price of ETH goes down) until the price in the smart contract matches the relative prices in the market.
  • When the market price of Bancor’s increases faster than ETH’s, it becomes cheaper to get Bancor through the smart contract until the supply of Bancor goes up (or the price of ETH goes up) and the price in the smart contract matches the relative prices in the market.
  • Conversely, when the market price of a SmartToken with Bancor as a reserve goes up faster than Bancor’s, it becomes cheaper to get SmartTokens through the smart contract until the supply of SmartTokens goes up (or the price of Bancor goes up).
  • The effect of the SmartToken market price on that of the reserve token’s market price is relatively smaller than that of the reserve token’s on the SmartTokens’.

This also means that the value of the Bancor protocol token does not directly scale with the following:

  • Usage of the smart contracts for trading liquidity
  • Arbitrage profits collected by traders
  • Total users on the system (unless they use Bancor as a reserve token)

Bancor should retain a first-mover advantage that will privilege it as a reserve token of choice for future projects.

At time of writing, the terms have not been released yet.

What is the status of the project?

The Bancor app almost complete. There is currently a software bug bounty program for the smart contract on the mainnet itself. The Bancor app is actually running the software bug bounty program and the token sale bounty program, and bounty program participants will be paid from the Bancor protocol after it launches.

A full demo is available on the testnet. The entire project will be released to testnet before crowdsale. The mainnet release depends on debugging, audit results, feedback, and governance functionality release.

Who is the team behind the project?

The team is based in Tel Aviv, the team has experience in both blockchain and scaling startups.

Team Members

  • Guy Benartzi – Chief Executive – Crunchbase
  • Eyal Hertzog – Chief of Product – LinkedIn
  • Yehuda Levi – CTO – LinkedIn
  • Galia Benartzi – Business Development – LinkedIn
  • Ilana Pinchas – VP Engineering – LinkedIn
  • Or Bachor – Core Dev – LinkedIn
  • Asaf Rachman – Core Dev – LinkedIn
  • Omry Rosenfeld – Core Developer – LinkedIn
  • Mati Levi – QA Engineer – LinkedIn
  • Itay Dreyfus – UI/UX Designer – LinkedIn

The team has experience in building blockchain protocols and scaling companies. Yudi (CTO), Ilana (VP Eng), and Eyal (Product) have deployed a bitcoin marketplace platform called Appcoin, which is a cryptocurrency that offers a digital payment method for purchasing applications with a decentralized digital currency. They have been developing Bancor since mid 2016.

Two of the founders, Galia and Guy Benartzi have each founded and exited a startup. Guy’s startup was a company called Mytopia to play social games with friends on mobile devices. It was acquired by 888 Holdings in 2010. Galia founded Particle Code, which developed a cross-platform that automates the porting process for software developers and was acquired by Appcelarator in 2011 for an undisclosed sum.

Strategic Partnerships

Bancor is creating a number of strategic partnerships in the emerging distributed application industry. One of the most notable is Status, with which one will be able to interface with the Bancor network through the Ethereum messaging app. They are also developing a partnership with with TokenCard, the first project issuing Visa debit cards based on ERC20 tokens.

They have also announced several advisors, including Meni Rosenfeld, an award-winning mathematician active in the blockchain industry since 2011, and Yoni Assia, the CEO of eToro, a social investment network.

Learn More

Note: An impending post will update this report with a deeper discussion of the Bancor Token, the market for the Bancor protocol, and some commentary on the project.

Note: Special thanks to Jake Vartanian of CryptoDex for his help in answering questions about Bancor. He was originally writing about Bancor but due to his deep understanding of the protocol, the team hired him for communications. Jake recused himself from finishing this report, and Smith + Crown rewrote it. Smith + Crown does not have a relationship with Bancor. 


June 12, 2017 at 10:17 am, jon said:

No token total supply figures for Bancor. Cant find them anywhere. How can we make an assessment without knowing?


June 29, 2017 at 3:34 pm, Chris said:

Hey Matt,

Where is this product mockup you gave a check mark to?



June 29, 2017 at 8:16 pm, Matt Chwierut said:

Hi Chris,

You can find product mockups on their website and throughout their blog. The source code in their github, and they have a walkthrough about using their testnet (

Let us know if that answered your question.



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