Welcome back, Crypto Fam!
Decentralized exchanges are said to be the wave of the future for exchanging crypto and
an early player Bancor was the first network to allow peer to peer cross-chain conversions
without requiring users to give up their private keys.
I’m Kris from Exodus, and today we’ll be unraveling the protocol of the Bancor Network (BNT).
Way back in 2017, Bancor’s ICO set a world record raising over $153 million in Ethereum tokens
in just 3 hours.
BNT was one of the first major ERC-20 tokens, which made it a guinea pig for ethereum’s
network.
This project was named after the supranational currency proposed by the British economist,
John Maynard Keynes.
Keynes Bancor would serve as a “unit of account” used to monitor international flows
of assets and liabilities.
This “unit of account” is merely a representation of something else: meaning gold can be used to buy bancors, but
bancors can not be exchanged for gold.
In Keynes model, all international trades would be valued and traded in bancor, bypassing the headache and
costs of currency conversion rates...
This brings us to present day 2020 where Bancor Network (BNT) exists…
But this time, we no longer need to trust people or banks with our assets.
The blockchain provides security, and smart contracts allow us to trust the code and programming.
While BNT may sound similar to a stablecoin, it’s quite different because the token is
used to power it’s own network.
BNT’s price is not pegged to any external assets and can fluctuate with the market.
Bancor’s network aims to exchange tokens directly with other coins, without the help
of cryptocurrency stock markets or exchanges.
The Bancor Protocol is comprised of a network of smart contracts called “liquidity pools.”
These liquidity pools are designed to perform algorithmic token trades and pooling of on-chain
liquidity.
In Bancor V1 Liquidity providers needed to hold BNT tokens on the network as well as
the token they were providing liquidity for, essentially meaning liquidity providers had
risk exposure to 2 separate assets and as the world of DeFi matured, other platforms
became more profitable for investors because they could provide liquidity in a single asset
and earn rewards while simultaneously using a non-reserve currency to trade with.
Bancor will follow suit in Bancor V2 where an investor can provide liquidity to an automated
market maker while being exposed to a single token.
Let’s take a closer look into how this works.
Liquidity on Bancor is provided by thousands of unaffiliated users who each receive a share
of Bancor’s trading fees.
This means that YOU could provide liquidity to the Bancor network and gain rewards in
transaction fees.
I’ll use 3 people in this analogy: YOU (the liquidity provider), Jason, and Holly.
Lastly, BANCOR PRODUCE.
Jason is a small coffee farmer, and Holly owns a few banana trees.
Sometimes Jason and Holly would like to trade coffee for bananas, but that would involve
going to the bank to withdraw cash, since bartering is no longer a social norm.
Wouldn’t it be nice if they could just trade coffee for bananas?
Well maybe they can!
But what if there are 10 Jasons with 10 types of coffee, and 10 Holly’s, one even selling
plantains…??
All of a sudden it’s not so simple…
Different Jasons have different qualities of coffee, and how does each Jason know which
Holly has enough bananas for his fancy coffee?
Because after all, bananas don’t equal coffee.
That’s where YOU, the liquidity provider, and Bancor Produce come into the picture.
You’re a big bad businessman who owns 10 coffee companies.
You have so much extra coffee you’re wondering what to do with it.
Bancor produce allows you to deposit your coffee, where you can essentially earn interest
from your “investments.”
If 50 providers all deposit coffee and bananas, now you have a large pool that Jason and Holly
can trade in and out of, satisfying both of their demands.
Jason pays with a little extra coffee, while Holly pays with an extra banana as the transaction
fee.
YOU get to keep that extra coffee because you contributed to the pool.
Now imagine if Nathan enters the picture with apples, Cynthia has chocolate, John has eggs,
and each produce has their own pool provider.
This quickly creates a large network, and Bancor produce is now a fully self sufficient
grocery store that people can use to trade produce.
Bancor Network essentially provides this service for crypto: Jason and Holly are the users,
and coffee and bananas are Ethereum and EOS.
Other coins are represented by the different types of produce.
YOU, as the liquidity provider, would stake ETH directly into the Bancor ETH/EOS liquidity
pool.
John and Holly can trade their ETH and EOS directly on Bancor Network, while YOU earn
transaction fees for being a liquidity provider.
Bancor was first listed in June 2017, starting with a value around $4.00 USD.
BNT rose to $10.00 in just six months at the height of the last bull run in January 2018.
Following the rest of the crypto market, BNT eventually fell to a recent low of just 13
cents in March 2020.
Much of this was due to strict regulations, and eventually the use of BNT was banned from
the United States.
Despite its struggles, Bancor launched V2 in July 2020, breathing new life into the
project.
Bancor claims to have processed over $2 billion in trade across many tokens, and stakers have
earned millions in transaction fees.
The Bancor Network is completely decentralized and allows users to swap ERC-20 and EOS tokens
with over 100 different trading pairs.
Users can trade directly on the network with the Bancor wallet.
It eliminates the need for centralized exchanges and is the first network to allow cross-chain
conversions without requiring users to give up their private keys.
Of course the ecosystem has expanded and Bancor is not the only large DEX in the game.
What do you guys think about Bancor?
Will they be able to overcome the trials and tribulations of regulation in the United States
or withstand new platforms taking a large part of the market?
Let us know what you think in the comments below.
And if you’d like to exchange other tokens like Bitcoin or Ethereum for BNT or simply
hold your BNT tokens in a secure and easy to use wallet, Exodus has you covered.
Thanks for watching, and if you liked this video please give it a thumbs up and subscribe
to the channel for more crypto videos from Exodus.
Until next time, HODL on!