Famous American economist, John Maynard Keynes, had a proposal of an independent global currency that would regulate the exchange of national currencies. As cryptocurrencies set out to lead in the global economy, ‘Bancor’ (the name coined by Keynes) is a start-up with a vision to provide common grounds for crypto-to-crypto payments. With over 5000 tokens in the market, and the collective view of a tokenized world.
Bancor was founded on Aug 21, 2016, by Eyal Hertzog, Galia Benartzi, Guy Ben-Artzi, Yudi Levi. It offers non-custodial, decentralized token exchange using the liquidity pools of cryptocurrencies. While most of its token are forced around Ethereum-based tokens, it also offers exchange with EOS and POA Network.
Dynamic to Fixed Supply
In January 2020, the developers conducted an airdrop of ETHBNT tokens, based on the value of BNT tokens held at supporting exchanges and wallets. This also markets an important milestone for BNT tokens as their supply was fixed.
As a result of the airdrop, the BNT token will no longer hold a reserve of ETH and BNT will shift from a dynamic supply to a fixed supply token. BNT will be connected to the Bancor Network via the new ETHBNT liquidity pool.
The current circulating supply of BNT is 69,148,554 BNT. At the time of creation, 70% of the tokens were allocated for distribution to crowdfunding participants (50%), and 20% locked for distribution via grants and promotions. The rest 30% was assigned for the development and to the founders directly.
Reportedly, via public fundraisers in 2017, Bancor raised a total of $152.3M in ETH, sold at around $3.2 at the time. Currently, the price of BNT is $0.59, with around $7.6 million worth of ETH left ( in total the pool value is $11 million). The total market capitalization of BNT is $41,292,912 ($41 million). Hence, there has been a considerable loss in value and the network’s value seems to be inflated by speculation and dormant supply issued during creation.
The Liquidity Pool
The Bancor Network developers released a liquidity pool explorer, which reports on the amount and composition of the liquidity pool. Presently, the total value of the pool is reported to be $10.9 million.
Surprisingly, the value of the pool remained intact during the COVID-19 crash across the crypto-markets. It went on a high of $16 million before dropping to the current levels in the last two weeks.
The total market capitalization of Bancor is $41,292,912, where Ethereum accounts for 68% of the total value.
The details of the Bancor Network Liquidy Pool can be obtained from here.
Reportedly, Uniswap is responsible for nearly 25% of all DEX (Decentralized Exchange) volumes year-to-date, leading the DEX space. Kyber Network and dYdX follow with a combined market share of around 30-35%. Bancor with a liquidity pool of around $11 million is three times less than that of UniSwap.
Airswap, Curve, DDEX, Oasis, and OpenSea are some of the other DEX liquidity providers. Other applications of these pools are primarily Decentralized Applications with crypto payments.
A bridge on a Bridge
Bancor Network is building a combined liquidity pool of cryptocurrencies. While some cryptocurrencies may have a larger share of the pool and others might leverage it without contribution much on the network. It is likely that the providers of ETH liquidity could demand higher returns. Hence, ETHBNT has been developed to collect the fees for exchange between ETH-BNT.
The ETH:BNT pool will be configured with a liquidity provider fee of 0.1% — meaning an ETH <> BNT conversion will generate a 0.2% fee for liquidity providers, since it requires two hops, ETH <> ETHBNT <> BNT. The liquidity provider fee is distributed to ETHBNT token holders in proportion to their holdings.
These are ‘pool tokens’ which earn from the specific conversion from cryptocurrencies like DAIBNT or DAIUSDB. Not only the liquidity provider of Ethereum but the one who validates (secures) the conversion will get proportional liquidity provider fee.
The launch of a second bridge was essential to shift from dynamic to stable supply. Now the BNT network can grow from the fixed supply narrative.
V2 Upgrade
Most cryptocurrencies have been in an uptrend after the COVID-19 crash. They have been mostly facilitated by the rise in Bitcoin. Moreover, the uptrend in BNTUSD price is accentuated by an increase in w.r.t. BTC in May. This can due to the imminent launch of the V2 upgrade by the end of June.
The key highlights of the new launch include an AMM (Automated Market Maker) which claims to be the superior on-chain liquidity provider over the current DeFi systems.
A new AMM (automated market maker) liquidity pool integrated with Chainlink price Oracles to address the issue of impermanent loss. AVA Labs, the creator of AVA blockchain, has also included Chainlink’s price oracle to its DeFi model. Hence, it seems to be a growing trend among liquidity providers to avoid unforeseen losses.
Dapps or DeFi applications are not completely censorship-resistant, in that the DeFi value is still controlled by centralized entities. By linking the price oracles, the liquidity providers will now be insured against a collapse of the application. Unless, of course, the value of the underlying liquidity crashes as well.
Furthermore, Bancor is also adding the option of providing liquidity with 100% exposure to a single token. Hence, essentially the users can make their own liquidity portfolios can benefit from the fees on Bancor. The success of the update will depend on its integration with Dapps and DeFi models, which uses the Bancor Network Liquidity pool.
Price Analysis
The price of BNT has increased significantly this year with a 200% rise w.r.t. Bitcoin and a 325% rise w.r.t. USD. However, it is still down at least 94.5% (assuming the ATH to be $11, it fluctuated up to $14.3) during the bull run of 2017.
Currently, Bancor [BNT] tokens trading is dominant on exchanges like Bilaxy and Coinbene, a few of the non-popular exchanges within the space. Moreover, the liquidity on some exchanges like Bitfinex is quite low. Notice the gaps in the chart of ETH/USD on Bitfinex.
The price of Bancor [BNT] at 10: 00 hours UTC on 1st June 2020 is showing a difference in BitFinex and Binance.
The weekly chart on BNT/BTC has been similar to one of radioactive decay. Nevertheless, it moved above the 50-period EMA on a weekly scale, which is positive. For a bullish retreat, it will effectively need to find a pivot around 11000 sats or 25,000 sats to establish momentum in adoption.
The oscillators (CMF and MACD) on a daily scale are suggesting that a reversal might be underway.
However, on a weekly scale, the oscillators are leaning towards a bullish breakout, after a period of nearly 2 years.
Moreover, the chart for ETHBNT (the relay token)/BTC is comparatively new and would need to find enough volume and momentum to find a stable price. Nevertheless, the rise after the recent launch this year around the V2 upgrade with single token exposure could continue to be favourable to the price of ETHBNT.
The vision of DeFi along with a tokenized world built a strong case for Bancor in the Bitcoin bull run. Bancor stands to benefit from the decentralized liquidity pool in a diverse environment. Still, there are many competitors in the space who are leading past Bancor at the moment, the adoption and success of V2 in the latter half of the year will be paramount to it’s long-term outlook.
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