What is Bancor protocol?
Bancor is an on-chain liquidity protocol enabling automated, decentralized exchange on Ethereum and across blockchains. It is made up of a series of smart contracts designed to pool liquidity and perform peer-to-contract trades in a single transaction with no counterparty. Users stake BNT in automated market makers in exchange for trading fees, BNT staking rewards and voting rights in the Bancor DAO. Bancor has processed more than $2 billion in trade volume across thousands of tokens, with millions in fees generated by stakers.
Recently, the project has just announced they are working on a cross-chain bridge to Bancor to bring their project to Polkadot. With this bridge, users will be able to create pools, provide liquidity and perform trustless cross-chain swaps on Bancor between Polkadot and ERC20 tokens.
The benefits of cross – chain bridges for the community
In the pre-bridges world, there was no way of transferring funds directly between blockchains. A chain must have a self-sustaining ecosystem in case it wants to run. However, building an ecosystem is not an easy task, that’s why many small chains were not able to develop long-term. Many projects, on the other hand, choosing to build on Ethereum blockchain, would soon find themselves captive to the high transaction fees on the congested network. With the emergence of cross-chain bridges, this problem might be solved easily.
The building of Bancor’s bridge
The Bancor’s bridge is being built with the Liquid Apps team, and they want to utilize lightweight nodes to listen to and interact with both chains. This will help to save the costs as well as setup time for new bridging agents. It also allows anyone to participate in securely setting up and maintaining the bridge. The software is WASM-based, and could be used to enable mesh networks across multiple ecosystems.
With the popularity of the Polkadot ecosystem, the creation of this ETH<>DOT bridge will be the first step towards making Bancor a multi-chain liquidity protocol. This will be the foundation for the development of both Bancor and Polkadot in the future.