There are many benefits to algorithmic pricing, based on buy and sell volumes as in the Bancor protocol. One of these is increased stability, which ultimately is better for holders, users and the system at large. The reason Smart Token prices are relatively stable is that they aggregate more liquidity in one place (the smart contract’s connector balance, as with BNT which holds a 10% ETH connector) rather than spreading available liquidity over various exchanges. Furthermore, transaction sizes are incorporated into the price algorithm, meaning that slippage is transparent and predictable. Lastly, because supply is dynamic (more Smart Tokens are issued as they’re purchased, and destroyed as they are sold) and Smart Tokens are continuously convertible at some price, there may be less panic driven or sentiment based spikes and crashes.

You can see a comparison of the BNT price chart to other tokens in this blog post: https://blog.bancor.network/bnt-the-first-smart-token-is-born-22a0f3a38bf2

Thanks for your questions, there are certainly many layers here and we look forward to providing clearer explanations and evidence from the field to help illustrate the ideas.

Bancor is an on-chain liquidity protocol that enables automated, decentralized exchange on Ethereum and across blockchains.

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