The Bancor Protocol uses a unique mechanism called the “Constant Reserve Ratio” (CRR) to determine the price of tokens in a liquidity pool. The CRR ensures that the ratio of reserve tokens to pool tokens remains constant, regardless of the trading volume.

This mechanism provides continuous liquidity and eliminates the need for buyers and sellers to match orders. Instead, users can trade directly with the liquidity pool at any time, without relying on a counterparty.

Bancor also introduced the concept of “Smart Tokens,” which are tokens that hold a reserve of other tokens. These Smart Tokens can be created and managed by anyone, and they provide built-in liquidity through the Bancor Protocol.

The Bancor Network Token (BNT) is the native token of the Bancor Protocol. It serves as a connector between different tokens in the network, allowing for seamless conversions. BNT also plays a role in the governance of the protocol, with holders able to vote on proposals and participate in the decision-making process.

Overall, Bancor aims to provide a decentralized and efficient solution for liquidity provision and token exchange, enabling a more accessible and inclusive financial ecosystem.

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