While the pace of innovation in the crypto space is incredibly rapid, there is one thing that has been around for a while and has been crucial to the fabric of the market: automated market makers. Before automated market makers became mainstream, Bancor Network presented an alternative to order books by allowing for automated liquidity provision and reduced slippage, enabling users to trade between assets. Fast forward to today, the decentralized finance market is maturing, and Bancor is still one of the key players in this space, and it is not just because of its legacy. It’s still innovating and leading the way in liquidity provision, tokenization, and risk management.
If you’re new to decentralized applications, or you’re a seasoned crypto trader, learning about Bancor is a good way to grasp the fundamentals of how liquidity functions in the background.
What Is Bancor Network (BNT)?
Bancor Network is a decentralized liquidity network that utilizes an automated market making mechanism, as opposed to an order book, for trading tokens. Users can interact directly with the protocol to trade cryptocurrencies directly from their wallets, as the network uses smart contracts as the central underlying interface instead of being able to connect to one another. Rather than having to await incoming buy/sell requests from buyers and sellers that match the timing of the bid, the network uses a sophisticated algorithm to guarantee that there is always an available market with which users can trade. This means that Bancor’s liquidity protocol is able to maintain continuous trading volume and a fair price for a particular token.
Bancor Network Token (BNT), a token that serves as a central connector asset within the protocol, sits at the heart of this mechanism. It ensures consistent liquidity levels throughout the pools and facilitates smooth trade settlements, also playing an integral role in Bancor’s smart liquidity approach. The platform was founded by entrepreneurs who recognized the need for such a model years ahead of DeFi’s ascendance to its current status of a global phenomenon.
How Bancor Network Works
Automated Market Making (AMM) and Smart Liquidity
Bancor utilizes an automated market making (AMM) model, meaning the pools themselves act as market makers and dictate the rate at which you trade between tokens. When you trade between tokens, a smart contract changes the balance in the pool and the price adjusts according to the supply in the pool.
Initially dubbed Smart Tokens by Bancor, the idea was to have one or more reserve tokens built into a contract which, using a formula, would determine the price of the token and execute trades instantly. This idea would improve the efficiency of trading and reduce the friction traditional marketplaces are associated with.
Unified Liquidity Through BNT
What makes Bancor unique is its use of BNT as a hub asset. Whenever a trade occurs, the system uses BNT to bridge the pair. This means that:
- Ensures liquidity even for tokens with low market capitalization
- Reduces slippage by distributing liquidity efficiently
- Supports automated trading strategies and arbitrage activity
Because of this architecture, Bancor acts as a liquidity engine that scales with demand while maintaining smooth execution for end users.
Continuous Liquidity Without Order Books
Most exchanges, including some decentralized ones, depend on order books, lists of buy and sell orders that match dynamically. Bancor replaces this with:
- Programmatic pricing
- Real-time computing
- Automated liquidity balancing
This system increases accessibility, making trading feel closer to a point-and-click interface rather than a complex financial tool.
Key Features of Bancor Network
Reduced Slippage and Better Market Liquidity
Since liquidity stays active at all times, traders can execute swaps with less slippage compared to low-volume decentralized exchanges. The protocol adapts prices automatically using supply and demand, allowing for smoother market value adjustments.
Permissionless Access
Permissionless Access Bancor is an open-source, decentralized application that allows users to:
- Swap tokens
- Provide liquidity
- Track pool performance
- Participate in governance
No identity verification, no account creation, no permission needed, another philosophy adhering to the cryptocurrency principle of being transparent and democratic.
Liquidity Incentives
A pool of rewards (a proportion of trading fees) paid to those who contribute assets to liquidity pools. This results in:
- A passive income mechanism for liquidity providers
- A stronger pool foundation for traders
- A more resilient ecosystem overall
Cross-Chain Design
While initially built on the Ethereum Blockchain, the Bancor Network has been designed to be cross-chain. This is an important reflection of the trajectory of the industry, in which assets will increasingly need to be able to easily move between blockchains in order to realize maximum potential and remain efficient.
Security, Audits, and Risk Management
Security is central to the protocol’s design. Bancor employs:
- Formal verification
- Continuous smart contract audits
- Bug bounty programs
- Application security reviews
The protocols above safeguard liquidity providers against risks, enhance the entire computer network, and guarantee the persistence of data integrity.
While it’s important to note that there are always risks when dealing with liquidity protocols (such as impermanent loss, market volatility and market fluctuations), Bancor has been working on ways to address this risk over time, though no mechanism can fully eliminate risk in uncertain trading environments.
Using Bancor: Wallets, Trading, and Experience
As an ERC-20 token, BNT is compatible with a wide variety of crypto wallets across Android, iOS, macOS, and desktop. Users can pick between:
- Hardware wallets for maximum security
- Software wallets for convenient, everyday access
- Web-based wallets for fast swaps and portfolio adjustments
Once connected, users can execute trades, track performance charts, manage liquidity positions, or explore governance features. Bancor’s interface is designed to reduce friction, simplify navigation, and support both new and experienced traders.
Why Bancor Still Matters in a Competitive DeFi Market
Bancor was a pioneer in showing how automated trading systems could reshape digital markets. Today, its influence is visible across the entire decentralized finance industry. Its main innovations are:
- Establishing AMM methodology
- Improving liquidity design
- Demonstrating decentralized, real-time trading
- Shaping modern tokenomics models
- Providing a blueprint for multi-chain liquidity
In an environment where innovation moves at such a quick pace, it’s not easy to remain at the tip of the spear. However, Bancor continues to adapt its software versions, update its infrastructure, and refine its governance system. Its longevity is a testament of its strong community support, ongoing development, and a commitment to transparency.
Bottom Line
Bancor Network remains one of the most important foundations of modern decentralized finance. By introducing automated market making, unified liquidity, and smart contract–driven price discovery, it helped shape how crypto markets operate today. Its infrastructure continues evolving, its community remains active, and its model still influences the design of many liquidity protocols.
For users who want to understand how automated liquidity really works, or who simply want exposure to a long-standing DeFi project, Bancor offers both historical relevance and ongoing utility in a competitive crypto landscape.
Where to Get BNT
If you're exploring Bancor's approach to automated liquidity, interested in how its AMM design supports the broader DeFi ecosystem, or simply want exposure to one of the earliest innovators in decentralized market-making, BNT offers an accessible entry point into a well-established protocol. You can find BNT on Tap, alongside a growing selection of cryptos.
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