Hi, I think this is a really interesting article, one question however (I’m not very proficient in…
Philip Mueller

Hey Philip,

To answer your question, the ‘discount’ mentioned in the article emerges when BNT’s price becomes out of sync with the price of BNT on an exchange targeted by a pump & dump. As the pump occurs on the targeted exchange, BNT’s price on that exchange rises, but the calculated price of BNT on the Bancor Network remains the same. That’s because the calculated price of Smart Tokens on the Bancor Network is determined by the Bancor Formula, which has no internet connection — that is, the Bancor Formula has no idea what the ‘market’ considers a fair exchange between BNT and its ‘connected’ token, ETH. It only knows that it should always have a fixed ratio between BNT and ETH. This ratio is known as the Connector Weight (CW).

As Smart Tokens become out of sync with external prices on exchanges, arbitrageurs will quickly act to close these gaps.

Therefore, during pumps, incentivized arbitrageurs will flood the targeted exchange with repeated sells until price consensus is reached between the Bancor Network and the price on the targeted exchange, thereby choking the attempted pump on the targeted exchange.