Adding a Token to the Bancor Network
What is a Bancor relay?
A Bancor relay is a smart contract that is created, owned and managed by a third-party liquidity provider. Relays perform token-to-token conversions which are non-custodial and occur fully on-chain, without order books or counterparties. Each relay manages two pools of token inventories. One pool contains BNT, the other contains the token added to the network. The pools receive and dispense tokens in order to fulfill trades and are autonomously rebalanced to determine prices. Relays interconnect to form Bancor’s decentralized liquidity network, which has processed nearly $2 billion in non-custodial conversions since 2017.
Watch: How Bancor Relays Work
Read: How Bancor Relays Work
Why are relays useful?
A relay connects a token to the Bancor Network, providing the token with constant liquidity regardless of trade volume. Even low-volume tokens can offer frictionless conversions to their users in their earliest days or during periods of decreased volume.
Any token added to the Bancor Network becomes instantly convertible for more than 150 tokens on Ethereum and EOS, including ETH, EOS, DAI, OMG, PEOS & more.
Bancor’s conversion widget is embeddable within any website or app. This enables frictionless non-custodial conversions for your users, directly from your website or dApp. Supported third-party wallets include MetaMask, Scatter, Fortmatic, Ledger, Trezor, as well as Bancor’s native cross-chain wallet.
How does a relay calculate prices?
Each relay maintains two pools of token inventories. One pool holds the “base token” (i.e., the token added to the network, such as DAI, OMG or BAT). The relay’s other pool holds BNT, Bancor’s Network Token, which connects relays in the network.
Relays adjust the prices of each token in terms of the other, in order to maintain a fixed 50/50 ratio between the two pools. For example, a relay created with DAI and BNT tokens allows a user to sell DAI to the relay and receive BNT in return. Such a transaction would add DAI to the relay’s DAI pool, and withdraw BNT from the relay’s BNT pool. In order for the relay to maintain its 50/50 ratio between the pools, the relay rebalances prices to decrease the price of the sold token (DAI) and increase the price of the purchased token (BNT). This continuous rebalancing occurs along a predetermined price-curve and is designed to reflect the real-time buy and sell volumes of tokens in the network.
While relays are disconnected from any external price feeds, they are continuously monitored by third-party arbitrage traders who are incentivized to balance prices when the price of a token in a Bancor relay diverges from its price on external markets.
What does it cost? And how is Bancor any different than listing my token on a centralized exchange?
While anyone can create a Bancor relay, to appear on https://www.bancor.network/, a popular front-end interface built atop Bancor’s smart contracts, a liquidity provider must deposit at least $20,000 USD worth of BNT and the relevant ERC20 or EOS-based token, meaning each side of the relay must contain at least $10,000 of value upon creation.
There is no listing fee on Bancor. The Relay and its liquidity is owned and managed by its liquidity providers. The liquidity in a Bancor relay can be withdrawn at any time by the liquidity provider. The value of liquidity in the Relay fluctuates based on the market value of the Relay’s underlying assets as well as the conversion fees (explained below) which accumulate in the Relay.
Therefore, unlike listing fees, liquidity providers do not face a “sunk cost” when adding their token to the Bancor Network.
Can I add a fee to a relay?
A small liquidity provider fee (0.1%) is taken out of each conversion and added to the relay’s liquidity. Fees ensure that the total combined liquidity size increases with every conversion. Fees function as a payout to the liquidity provider that can be collected when they withdraw liquidity from the relay.
A liquidity provider is free to change the liquidity provider fee to any number at any time. Bancor is a non-profit protocol and therefore does not take any fees from conversions on the network.
How do I create a relay?
Anyone can create a relay by depositing an equal value of BNT and ERC20 or EOS-based tokens in smart contract.
To appear on https://www.bancor.network/, a popular front-end interface built atop Bancor smart contracts, a liquidity provider must deposit at least $20,000 USD worth of BNT and the relevant ERC20 or EOS-based token, meaning each side of the relay must contain at least $10,000 of value upon creation of the relay.
What is BNT? Why do I have to purchase it to create a relay? Where can I buy it?
BNT is the common “network” token stored within each relay through which conversions are processed. For instance, a conversion from DAI to BAT would convert DAI for BNT and then BNT for BAT — with the user experience being an instant, on-chain conversion from DAI to BAT. End users never need to hold BNT at any time in order to perform conversions on the Bancor Network.
Crucially, BNT enables non-custodial conversions across blockchains and removes dependencies on any single blockchain. For example, any ERC20 token on the Bancor Network can be instantly converted for any EOS-based token, and vice versa, through BNT.
Thus, BNT is the means through which liquidity providers connect to the Bancor Network. BNT can be purchased on https://www.bancor.network/ as well as numerous other third-party exchanges.
How is Bancor different than a DEX?
Compared to order book-driven DEXs, Bancor relays offer:
- Constant Liquidity - Relays remove counterparty risk from the equation and ensure always-available liquidity.
- Predetermined Pricing - By replacing game-able order books with smart contract code, users can more accurately measure how much of an asset they’ll receive prior to submitting a conversion.
- Fully on-chain - Conversions via relays occur fully on-chain - from pricing through settlement - ensuring unmatched transparency.
- Open - Using second-layer solutions, numerous parties will eventually be able to add their idle assets to liquidity pools and earn fees off conversions (further decentralizing and incentivizing the creation of liquidity).
I opened a relay, now what can I do with it?
After creating a relay on Bancor, a liquidity provider will begin generating fees from each conversion processed by the relay (as explained above). The liquidity provider is free to withdraw any portion of liquidity from the relay at any time.
In addition, a liquidity provider may embed Bancor’s conversion widget on their website or app, providing a clean interface for end users to perform instant conversions between the added token and over 150 tokens in the Bancor Network, directly from the third-party site or app.
In the near future, liquidity providers will also be able to incentivize members of their communities to contribute liquidity to the relay in return for a share of the fees generated from conversions, thereby increasing the relay’s liquidity depth and reducing price slippage.