The crypto Bancor (BNT) was developed to offer liquidity for smaller tokens. How does it do this? Is it any good? If you have these questions on your mind, this explainer should help. Because it presents the top 10 facts about Bancor, you should know.
Introduction to Bancor
Established in 2017, Bancor was one of the pioneers in the Decentralized Finance (DeFi) space. While there are plenty of things to know about this crypto, a list of the top 10 things about Bancor may help, don’t you think?
1. What is the Bancor network?
Bancor is a decentralized trading and liquidity platform. It offers users a space where they can exchange different tokens and access liquidity without relying on a centralized exchange.
The platform makes use of an Automated Market Maker (AMM) system. This is a system that runs on a blockchain and bases the price of tokens on supply and demand.
By enabling users to trade tokens without relying on centralized exchanges, Bancor tries to address the liquidity issue in the DeFi space.
2. The concept of automated liquidity provision
DeFi recently introduced the idea of automated liquidity provision. This enables users to trade tokens without relying on centralized exchanges. Platforms that offer this provision use smart contracts to automate the provision of liquidity—that is, they create a pool of tokens that can be traded without an order book.
How does Bancor solve the illiquidity problem?
With the help of a special algorithm, Bancor’s AMM system makes sure users can always deposit a token, even when there is little liquidity. This sets it apart from other Decentralized Exchanges (DEXs) like Uniswap or PancakeSwap. You see, Bancor lets you earn passive income if you have idle ETH in your wallet. On any other available exchange, you cannot just deposit your ETH. You need to wait for a buyer. That’s because, with other DEXs, you need a trading pair. Bancor makes single-sided deposits possible by depositing its native token BTN as a second asset in the trading pair. This allows it to keep your crypto in reserve. And you and the DEX can earn money from other users who pay exchange fees.
The other users thus always have access to on-chain liquidity pools that the AMM system has made possible.
The algorithm that makes all of this possible takes both the supply and demand of a token into account to determine the price of the token in the liquidity pool. This ensures that even during periods of low liquidity, the price of a token is always accessible. The price of a token in the liquidity pool is also transparent. So users can see the price of a token at any time.
3. Bancor protocol and its components
Bancor relies on smart contracts to automate the provision of liquidity for tokens. The Bancor AMM, wallet, and API are just a few of the protocol’s parts. They interact to offer a seamless user experience. This article will examine the Bancor protocol, its elements, and how they impact the Bancor price later, but for now, let’s focus on the protocol and its elements.
The core of the Bancor protocol is the AMM mechanism. The AMM mechanism means the protocol uses smart contracts to establish token liquidity pools. Users always have access to these liquidity pools, so they can transact without centralized exchanges. The Bancor AMM calculates token prices by using a mathematical formula. This ensures that prices remain stable, even during periods of high volatility. The Bancor AMM is one of the key components of the protocol and has a direct impact on the token’s price.
Bancor wallet is the second key component. It is a non-custodial wallet that accepts numerous tokens. Because it enables user interaction with the AMM and other smart contracts, the wallet is a crucial part of the protocol. Users frequently use the Bancor wallet to buy BNT and other tokens, so it may impact the Bancor price.
4. Bancor’s native token: BNT
The native token of Bancor, BNT, plays a key role in the provision of liquidity. Holders of BNT can benefit from the network’s need for liquidity. They can also take part in governance and decision-making pertaining to the network.
5. Smart contracts and Bancor
Bancor automates trading and builds liquidity pools using smart contracts. Smart contracts guarantee the efficient and transparent execution of trades. Additionally, smart contracts make sure that a token’s price is always accessible—even when there is limited liquidity.
6. Bancor’s unique features
Bancor differs from other DeFi projects in a number of distinctive ways. This section will examine its distinctive qualities and how they apply to the BNT coin.
Cross-chain liquidity is one of Bancor’s most distinctive characteristics. So, users can trade across blockchains, including Ethereum and Binance Smart Chain. The ability to enable cross-chain liquidity depends on the BNT coin. BNT holders, as we have seen above, can provide liquidity for other token holders, enabling them to trade across blockchains.
On-chain liquidity pools
Users always have access to on-chain liquidity pools thanks to the Bancor AMM system. As a result, users need no longer depend on centralized exchanges. Additionally, these on-chain liquidity pools ensure that a token’s price is accessible at all times.
BNT plays a key role in these pools because it offers liquidity. Holders of BNT can benefit from the network’s need for liquidity.
7. Bancor’s use cases
There are many uses for Bancor. We discuss a few of them below.
Bancor is primarily meant to serve as a DEX. Users can trade tokens without conventional centralized exchanges, which frequently impose exorbitant fees and are susceptible to hacking.
Bancor is also a crucial piece of software that can be used to create stablecoins. Currencies, physical assets, or other cryptos back the prices of these stablecoins. These digital tokens have a relatively stable value. Investing in them is less of a rollercoaster ride.
8. BNT tokenomics
BNT has a total supply of 244.2 million tokens. The current circulating supply is 244.2 million. That’s 100% of the total supply. The market cap of BNT is close to $78 million.
9. Bancor’s security measures
Decentralized exchange Bancor has put in place a number of security measures to protect user funds. There are multi-sig wallets, regular security audits, and code reviews of smart contracts by outside security companies. Additionally, it incentives ethical hackers, who find and report any vulnerabilities via a bug bounty program.
Smart contract audits
Security is a top priority for Bancor. It ensures that independent security companies examine all smart contracts to make sure they are safe, secure, and free of flaws. This boosts the platform’s long-term success prospects.
Security Token Offerings (STOs)
Bancor offers Security Token Offerings (STOs). STOs essentially enable the issuance of tokens that signify ownership of assets. These tokens can be traded, providing accessibility and liquidity.
10. The future of Bancor
The development of its own blockchain is a key area of focus. If it does manage to create one, it would further strengthen the DEX and BNT’s tokenomics.