The basic concept of trading is involving buyer and seller and the most common medium of exchange is money. In other words, every buyer of a product must be paired up with a seller who is willing to sell and vice versa.
Manufacturers need wholesalers, wholesalers need retailers, retailers need consumers, and so on. The whole concept is an important social activity because the society needs uninterrupted supply of goods and an increasing and ever changing human wants.
It was started with the beginning of human life and shall continue as long as human life exists on the earth. People used to buy and sell goods by exchanging them, or barter between 2 (two) parties. It was a cashless economy.
Because barter is based on reciprocity, it requires a mutual coincidence of wants between traders. This requirement complicates barter.
- Double Coincidence of Wants; The problem is caused by the improbability of the wants, needs, or events that cause or motivate a transaction occurring at the same time and the same place.
- Standard Unit of Account Problem; There is no standard in which prices could be measured and quoted, for example is 1 horse equal 1 cow?
Cryptocurrency is still in its infancy but it has attracted billions of dollars in trading volume. Most cryptocurrency trading happened through exchanges. Cryptocurrency-exchanges are the place where people can buy, sell and trade their digital currencies for other currencies or even into fiat money like US Dollars.
The problem is, there are thousands of cryptocurrencies right now, and new digital currencies are created each month. We are witnessing the global wave of cryptocurrencies with could reach millions. But not all currencies are created equal. Most parts of the current cryptocurrencies are not traded on any exchange because they are not “famous” enough to be listed, means no one is buying or selling these currencies.
But how can people buying and selling these currencies if they are not listed and traded on an exchange?
In the domain of asset exchange, there still exists a Double Coincidence of Wants Problem, as there is no ‘money for money’. Every currency that is exchanged requires two parties with opposite wants to “meet” (even digitally) in real-time, thus requiring speculators and market makers to provide liquidity and facilitate transactions, taking fees along the way and leading to inefficiencies.
The The Bancor Protocol™offers a unique solution; any currency can now be exchanged or traded by anyone without need to wait for a buyer or a seller. It is an automated platform where Buyer can buy any cryptocurrency without need to wait for a seller, and Seller can sell any cryptocurrency without need to wait for a buyer. But this scenario won’t be successful if there is no standard to measure the price of each cryptocurrency each time it is sold or bought. Otherwise the market would crash since anyone can buy low and sell lower or buy high and selling higher.
The Bancor Protocol™ solve this problem by employing an asynchronous price-discovery model enabled by asset-holding Smart Tokens™. Smart Tokens™ are always purchasable and sellable for the token(s) they hold in reserve. The continuous liquidity of Smart Tokens™ removes the barrier-to-liquidity and enables the emergence of the long tail of user-generated currencies. This could lead to a democratization of value creation, similarly to how blogs democratized publishing and YouTube democratized broadcasting.
Smart Tokens™ hold balances of one or more other tokens, called “Connectors”, and have a builtin autonomous conversion mechanism that allows any party to instantly purchase or sell the Smart Token™ for one of its Connectors, directly through the Smart Token™ contract, at a price calculated by a formula which balances buy and sell volumes.
With it’s innovative solution Bancor solves two problems at the same time, The Double Coincidence of Wants problem and Standard Unit of Account problem, with aim to create a fair and equal market for all.
