What is Bancor (BNT)?
Bancor (BNT) is a DeFi protocol that enables cryptocurrency swaps through liquidity pools instead of matching buyers and sellers. It operates on Ethereum and Solana and first launched in 2017, making it one of the earliest projects to adopt the automated market maker model.
What role does the BNT token play in the protocol?
BNT is the native token of the Bancor ecosystem and functions as a common reserve unit connecting all liquidity pools. Each pool holds at least one token paired with BNT, creating a bridge for converting between different assets. Holders can also participate in governance votes and stake their tokens to earn additional rewards.
The protocol rewards liquidity providers with BNT and may use a portion of its revenue to buy BNT off the open market and burn it, helping to regulate the circulating supply.
What sets Bancor apart for liquidity providers?
Most decentralized exchanges require depositing equal value of both tokens in a pair to provide liquidity. Bancor offers single-sided liquidity, meaning users can add only one token to a pool. The protocol fills the other side from its treasury, sparing users the need to rebalance their portfolios.
Another challenge for liquidity providers is impermanent loss: when two assets diverge in price, the pool's value can decline compared to simply holding the tokens. Bancor compensates this loss with BNT over time. The protection builds up gradually and can approach full coverage for those who stay in the pool for the entire qualifying period.
