Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche


Is Bancor (BNT) making Money from Liquidity?

Bancor (BNT) or the Bancor Network is the largest and one of the oldest cryptocurrency liquidity networks out there. Today, Bancor calls itself a DeFi trading and staking protocol.

The Bancor Network’s latest iteration, Bancor 3, now contains over 100 liquidity pools, a press release claims. Bancor claims to offer safe single-sided staking with 100% upside exposure and Auto-Compounding.

Bancor claims it can protect tokens from Impermanent Loss. Impermanent Loss is the shrinkage of the cumulative value of pool tokens over time because of market changes. They claim the Bancor Protocol can protect investments from Impermanent Loss by using fees earned by the protocol’s pools tokens to cover losses.

The Bancor 3 pool tokens include Axie Infinity (AXS), Enjin (ENJ), Synthetix (SNX), Tether (USDT), USD Coin (USDC), The Basic Attention Token (BAT), AAVE, Wrapped NXM (WNXM), Woo Network (WOO), (YFI), Polygon (MATIC), Ethereum (ETH). DAI (DAI), Chainlink (LINK), Gnosis (GNO), Reserve Rights (RSR), POOLZ, and Wrapped Bitcoin (WBTC).  There are many other Bancor 3 pools including Harvest Finance, Nexus Mutual, the VitaDao, DaMaker, Fodl, Saffron, Sheesha, Phuture, UMA, ParaSwap, and Rook.

How Bancor Ensures Liquidity

The purpose of Bancor is to provide liquidity for cryptocurrencies through a basket of cryptocurrencies. Users can deposit tokens to ensure liquidity and earn fees and rewards.

illustration of economist choosing between investing in cash or house
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The Bancor Network claimed to offer $353.77 million in Total Liquidity and have a trading volume of $40.84 million on 13 June 2022. Bancor claimed to earn $177,070 in fees in the 24 hours ending on 13 June 2022. They claimed 75.83% of Bancor were staked through the Bancor Network on 13 June 2022.

Predictably, Bancor now has a DAO (decentralized autonomous organization) to administer the Bancor Network. Bancor users can vote on the Bancor DAO through Snapshot. To participate in the Bancor DAO you will need to stake the vBNT governance tokens.

The Bancor DAO and Bancor 3

For example, the members of the Bancor DAO vote on the creation of new liquidity pools. They must seed new liquidity pools with 10,000 BNT worth of tokens. If the Bancor DAO members approve the pool, they will provide 10,000 BNT in liquidity to match the pool’s value. Then trading can start on the Bancor Network.

On Bancor 3, pool tokens represent a pool’s liquidity, which auto-compunds through the pool. Bancor also offers Liquidity Protocol (LP) tokens. Each pool token has a name such as bnLINK, bnUSDC, bnBNT, etc. Users can trade tokens on the Bancor Network through the Bancor App.

Bancor 3 is a DeFi Liquidity Solution that supports an Omnipool architecture that simplifies pools and makes them more efficient. The purpose of Bancor 3 is to provide liquidity for DAOs.

Bancor and Keynes

The name bancor was inspired by the French term banque or bank gold. Bancor entered economics during World War II as part of John Maynard Keynes and E.F. Schumacher’s proposal for a new international monetary system.

Keynes and Schumacher hoped to avoid economic crises by guaranteeing liquidity to national economies and currencies through an International Clearing Union. The basis of the International Clearing Union was the bancor which they designed as an international currency. Nations would use the bancor in trade and the International Clearing Union would provide liquidity to national currencies.

businessman showing liquidity of real estate sales and profit
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I think the Bancor Network is based on Keynes’ proposal. The difference is Bancor is a private organization that guarantees liquidity for cryptocurrencies, DAOs, and stablecoins.

What Value does Bancor Offer?

Hence Bancor (BNT) is the granddaddy of liquidity protocols, but what value does it have?

Mr. Market views Bancor as just another cryptocurrency. For instance, CoinMarketCap lists Bancor (BNT) was the 112th largest cryptocurrency, with a 88.73₵ Coin Price on 13 June 2022. CoinMarketCap gave Bancor a $219.185 billion Market Cap, a $219.063 million Fully Diluted Market Cap, and a 24-Hour Market Volume of $33.857 million on 13 June 2022. They base those numbers on a Circulating Supply of 247.042 million BNT.

In contrast, CoinBase gave the Bancor Network Token (BNT) a 90₵ Coin Price, a $221.1 million Market Cap, and a 24-Hour Market Volume of $33.7 million on 13 June 2022. They based those numbers on a Circulating Supply of 247million BNT. CoinBase gave Bancor an all-time high price of $23.73.

Bancor is still one of my favorite DeFi cryptocurrencies because its network is up and running and providing hundreds of millions of dollars’ worth of liquidity. If you want to invest in a liquidity protocol or a liquidity network, I think Bancor is worth examining.