| To add to the other reply, here's my analysis: Well, Bancor itself is... interesting. The background section of the whitepaper provides the motivation: https://www.bancor.network/static/Bancor_Protocol_Whitepaper... So, unless I'm grossly misunderstanding things, during the ICO, Bancor BNT tokens were purchased representing some fraction of the 150M contributed. Those tokens can now be exchanged by participants in Bancor's exchange, and purchased or liquidated freely to the underlying held cryptocurrency. The ether raised during the ICO are used 1) fund various Bancor operations, and 2) fund an ether reserve to support liquidity. But note, that reserve is just a fractional reserve. If there's a run on BNT, some people will lose if the reserve dries up! In their whitepaper example, of 200k ether raised, they mention a 30% fractional reserve. You might ask yourself, why not just buy/sell ether directly? Well, the novelty, here, is that Bancor tokens could represent other cryptocurrencies or even baskets of currencies (though how the subsequent transactions on those other blockchains are handled, I have no idea, and their whitepaper doesn't go into it). So yeah, I'd say your general description is accurate. If things go bad for Bancor, there's gonna be a lot of people losing out. |