Something I don't understand yet. Lets say I want to make a new currency ("ImaginaryCoin" or IMC lets say). That currency isn't on any exchanges. How would I give IMC value through Bancor? Do I just make a value up (1 ETH per IMC or 0.25 BNC per IMC or etc.)? I haven't seen a clear outline on that process yet.
For a normal cryptocurrency the value is determined by its exchange value, but Bancor is looking to bypass counterparty. They say the price is self-regulating and will stay at market value, but what about coins without an existing market value like this hypothetical IMC currency? What determines the starting price?
Okay so imagine the creation of the ImaginaryCoin smart token (and IMC's smart contract) like a little robot you’ve created.
The robot has two (or more) wallets. One wallet is full of an asset (let's choose ETH for this example). The other is a bottomless wallet of a new asset (IMC, in this case).
When you create the robot, you give it a CRR (Constant Reserve Ratio). This is the percentage of total value that the robot assigns the total-individual-value of each of its wallets. It will use this CRR (which is a % between >0 and 100) to determine the price IMC relative to ETH.
Here's how. Let's say the CRR for this Robot is 20% ETH and 80% IMC (of which there are currently 100 in existence out in the world). If it has 1000 ETH in its wallet, the cost of 1 IMC follows this equation: Price = Marketcap / supply
Market Cap = Reserve Balance / CRR = 1000 ETH / 0.2
So Market Cap is 5000 ETH
Price of IMC = Marketcap / Supply = 5000 / 100
1 IMC = 50 ETH
Now there is a larger reserve balance of ETH, thereby increasing the price of IMC for the next buyer.
The next NewCoin would cost (1050/0.2)/101 = 51.9802 ETH
Now all of this gives value to the coin in terms of price discovery... but IMC has to itself have value or else everyone will liquidate it for ETH and it will die. So the value is created by, just like any currency, some external source. But trading is created by the reserve currency.
