DeFi Decrypted: Bancor and BNT
Bancor is a decentralized exchange (DEX) built on Ethereum, designed to solve the problem of illiquid markets. On Bancor, you can trade any token against any other token, without needing to match buyers and sellers. It’s a revolutionary way of operating markets, powered by native ‘smart token’ BNT.
Bancor launched in 2017 with a record-breaking ICO that brought in $153 million, distributing half of all BNT tokens. Since its launch, Bancor has established a strong advisory board that includes big names in crypto like Tim Draper which has helped solidify its standing in the crypto space.
Today, the Bancor wallet is operational for storing, managing, and trading between any crypto assets through their existing decentralized liquidity pools – or users can create new liquidity pools for any ERC20 or EOS token.
How Bancor works
The most distinctive feature of Bancor is that you can trade between any crypto asset. The way this works on the platform is through maintaining formulaic relationships between every token, which allows for seamless on-chain token trades. Another important element that makes this possible is the use of automated market makers. It completely removes the need for the decentralized exchange to maintain an order book as it relies on pools of liquidity instead using programmed price slippage dynamics to mimic naturally occurring price fluctuations.
The Bancor Network Token (BNT) plays a central role as it is used as the intermediary token between all pools available on the network across blockchains. All trades are routed through BNT to support conversion between currencies. For example, a trade from COMP to ADA consists of two steps: COMP to BNT, and BNT to ADA.
While BNT is what makes it all possible, traders to not need to hold BNT in their wallet to effect exchanges. But users do need to have BNT if they want to create new liquidity pools or supply funds to an existing one. The incentive for adding liquidity to a pool is receiving pool-associated tokens which are used to determine the proportional distribution of trading fee rewards. In a way, adding funds to a pool means you own a stake in the trading fees the pool earns.
BNT is moving up the charts
Mid 2017 when BNT started trading publicly, the price ranged between $4 and $2 for the first 6 months. Along with BTC, ETH and altcoins, BNT rose sharply near the end of the year and reached its all-time high at $10.20 in January 2018. For the rest of that year, BNT made a slow descent down to $0.40 where it remained up until 2020.
Bulls finally started taking charge of BNT in May 2020 and the $1 threshold was surpassed in June 2020. As of writing, BNT increased by 1050% over the last 3 months from $0.19 up to $2.27.
On the whole, the DeFi space is developing rapidly with new users connecting to its vast ecosystem and more ETH than ever is currently locked in DeFi. BNT has benefitted from DeFi take-up, and the protocol upgrade it has planned for this year will only boost its standing with crypto traders.
Bancor version 2 is the second major upgrade made to the protocol and includes an Automated Market Maker liquidity pool integrated with Chainlink to eliminate the risk of impermanent loss for stable and volatile tokens, a more efficient bonding curve to better manage price slippage, the ability to provide liquidity for a pool with exposure to only one of the currencies in that pool, and broader integration with DeFi lending protocols.
Why trade BNT with AAX
Institutional investors that can bring in much needed capital into the space, cannot so easily interact with decentralized solutions. AAX provides an institutional-grade platform for investors to gain safe exposure to assets such as BNT, and we are now also opening up futures markets for DeFi-tokens, so our users can short defi or gain leveraged exposure.
AAX also offers a host of savings products and will continue to make it easy for users to save and collect interest on their crypto holdings.
AAX is the world’s first digital asset exchange to be powered by LSEG Technology. Offering OTC, spot, and futures, it provides a highly secure, deeply liquid and ultra-low latency trading environment; and a meeting point between crypto and global finance.
Share this article