Articles in this section

How does automatic pricing work?

Smart Tokens™ feature built-in automated market makers. This means that their smart contracts will always buy the Smart Token from and sell the Smart Token to, any user, for any of its connector tokens (or any other token in the network.) The price at which these conversions take place is a function of the Bancor Formula, which balances supply and demand for the Smart Token while holding a constant ratio between a Smart Token’s total value (sometimes called market cap) and its connector token balances.

These ratios (called the connector weight) are configured by the Smart Token creator and may be adjusted to increase or decrease the token's liquidity level. The weight of a connector indicates a Smart Token’s price sensitivity, meaning the extent to which buys or sells affect its price movement. Every conversion affects the price of a Smart Token by altering its connector token balance and Smart Token supply - calibrating the price to maintain the constant weight. When Smart Token prices are out of sync with external prices on exchanges, arbitrageurs quickly act to balance these gaps.

Was this article helpful?
22 out of 30 found this helpful
Have more questions? Submit a request
Return to top
Disclaimer: When reading this article, please keep in mind the following: (1) Important to notice that wherever referring to any sensitive information of yours, including private keys, key-pairs or other account information, that information is yours. We can only make limited suggestions to how such information may be treated and protected, but the responsibility is yours. You should always make sure your information is protected and kept private, in the best available way; (2) that the information contained herein is a simplified extract of detailed information and sources generally available on the internet. This basic information was collected and displayed in attempt to provide you with better understanding of certain processes and aspects which relate to content and applications on Bancor’s site. Although we do our best to keep this information up-to-date, we cannot always guaranty that. This is since the information originates from third parties or relates to third party services, applications and technologies (such as Metamask, Scatter, EOSToolkit, or EOS), which are unrelated or unaffiliated with Bancor. These third parties’ applications, services and technologies are available on the internet, and may be subjected to applicable terms and conditions. Accordingly, though the said information and third applications, services and technologies (“Third Parties Content”) are believed to be reliable, Bancor provides no warranties regarding them (including their accuracy or completeness). IN NO EVENT WILL BANCOR BE LIABLE FOR ANY SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES, INCLUDING, WITHOUT LIMITATION, LOST REVENUES, LOST PROFITS OR LOSS OF PROSPECTIVE ECONOMIC ADVANTAGE RESULTING FROM THE USE OF THE THIRD PARTIES CONTENT EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, OR FOR ANY CLAIM BY ANOTHER PARTY.

Related articles