Cryptocurrencies are digital currencies that are encrypted (secured) using cryptography. Cryptography refers to the use of encryption techniques to secure and verify the transfer of transactions. Bitcoin represents the first decentralized cryptocurrency, which is powered by a public ledger that records and validates all transactions chronologically, called the Blockchain
Tokens are a representation of a particular asset or utility, that usually resides on top of another blockchain. Tokens can represent basically any assets that are fungible and tradeable, from commodities to loyalty points to even other cryptocurrencies. Tokens operate on top of a blockchain that facilitates the creation of decentralized applications.
Usually tokens are created and distributed to the public through a Token Sale Event, which is a means of crowdfunding, through the release of a new cryptocurrency or token to fund project development. It is similar to an Initial Public Offering (IPO) for stocks. As the token value increases, those early users who bought tokens will benefit from appreciating token prices. Each token offering has different rules around the total supply of tokens and when they are released. The user would pay for a token upfront, providing funds for coders to develop the promised technology. If the technology works as advertised and gains popularity, it should attract more users, thus increasing demand for the token offered at the start.
Tokens are cryptocurrency. Once tokens are issued by some enthusiastic developers group and someone bought it and can trade them, it becomes cryptocurrency.
Tokens can be used for various cases in the smart contracts ecosystem, for example MIOTA can be used as token for Internet-of-Things related services. This means, that MIOTA tokens value will potentially increase as all people will have to buy it to use the service.
But currently all tokens still experience the common problems:
- Can not convert tokens directly on-chain
- Counter party risk
- There still discrimination between big tokens and small tokens
- Price Volatility
- Price slippage
- Low liquidity
Bancor’s Smart Tokens™ can address the challenge of liquidity faced by conventional tokens, cryptocurrencies, and community currencies by being autonomously convertible for their Connectors, and with an unconstrained supply that grows in response to purchases, each individual Smart Token™ has built-in liquidity that does not depend on counterparties or exchanges. It means that the tokens are always liquid regardless of the trading volume.
Another feature of Smart Token™ is it enables inter-convertibility between any two other Smart Token™ or between any Smart Token™ and any conventional Ethereum network tokens, making fees relatively low as well with no spread as additional advantage.
Smart Token™ also allows users to create their own tokens and community currencies in the form of Smart Tokens™ that hold a common Connector, enabling any Smart Token™ in the network to be converted into any other.
By using Smart Token™ technology, new altcoins can achieve greater market depth than what is typically provided by exchanges, by pooling all the liquidity that would normally be spread across many exchanges into a single, “global-exchange” provided by the smart contract (through its Connector tokens). Leading to lower price volatility for customers without any counterparty risk.
It is also possible for users to launch their own Crowdsale or Token Sale, since any newly token will be instantly liquid without need to be listed or partner with any exchange. This newly tokens can be instantly traded on The Bancor Network and convert into another token within The Bancor Network.
It’s now very clear that Smart Token™ is definitely smarter than any other standard tokens, in terms of functionality and liquidity.
