The banking industry as we know it today, and one that's slowly evolved over many centuries, is just about to get a major tectonic shift with the continued rise and popularity of DeFi, or decentralized finance. Its most appealing aspect is in how it can fix many of the problems that we average janes and joes have with Wall Street, such as financial sovereignty, accessibility, equity, as well as chipping down the elitism of centralized control. In today's Bancor Review, we'll see if the first DEX is any good.
DeFi, as it stands right now, has more than $60-billion in total liquidity within its many protocols, and this metric is just for Ethereum. At the top of it, all are decentralized exchanges, or DEXes, which help to create and accelerate the flow of liquidity within DeFi. Meanwhile, the Bancor Network is the one that created the idea of a DEX in the first place, way before the others came along. So, is the founding father of the DEX still the best one out there? Well, read along our Bancor review to find out.
What Is Bancor?
The Bancor Network is an on-chain liquidity protocol and is, in fact, the first decentralized exchange ever made. It was thus responsible for the creation of automated market makers (AMMs), which every single DEX, as well as other DeFi protocols such as lending and borrowing platforms, rely on. Based in Switzerland, Bancor released its whitepaper on February 13th, 2017. Not long after this, it held an ICO in June of that year, raising Bancor more than $153-million in Ether at the time.
Bancor is natively built and powered by the Ethereum blockchain, but it also supports seamless cross-chain compatibility and liquidity flows with the EOS network. Nevertheless, Bancor can grow beyond this, as it can be integrated quite easily with any smart contracts-capable blockchain to provide more cross-chain liquidity. Initially criticized for its apparently rather centralized control, the Bancor DAO – or decentralized autonomous organization – went live to fulfill community governance in 2020.
What Can You Do on Bancor?
Before we move on with our Bancor review, it would help to discuss a bit more on what an AMM is. In essence, an AMM – or as we explained earlier, an ‘automated market maker' – is the beating heart of how a decentralized exchange is able to function. Regularly, we have centralized exchanges (CEX) that we know and use all the time, such as Binance, Coinbase, Kraken, and so on. CEXes rely on the use of old-school order books, like a stock exchange, to match the prices of buyers and sellers.
With an AMM, DEXes don't need an order book. Instead, it relies on “liquidity pools,” which basically are pools of tokens – or more specifically, a (trading) pair of tokens – to supply liquidity. Rather than relying on individuals – or in this case, sellers – to set the prices of said tokens, liquidity pools have their market prices be set based on an algorithm. Each DEX will have its own algorithms, where it can measure metrics such as the ratio of the tokens in the pools, supply, demand, market volatility, etc.
This will then put a price, or how much one token would be worth once swapped to another token, where the trade itself is powered by smart contracts. For someone who's swapping tokens through Bancor, its AMM means there's less price slippage and more variety of token pairs to pick from. On the flip side, the liquidity pools are funded by liquidity providers (LPs). In return for helping to supply liquidity to Bancor for other users to trade with, they earn a portion of the trading fees as a reward.
1. View Protocol-Wide Analytics
The first thing that you see when you pop-open the Bancor DEX's dApp (decentralized application) is the ‘Data‘ page, which is an overview page. You can see a bit of info here, such as how Bancor has total liquidity or total value locked (TVL) of more than $1.3-billion at the time of writing this Bancor review. This would make Bancor the 11th-largest DeFi protocol based on TVL. You could also take a peek at how each token and trading pair is doing, in terms of how much locked per pair, volume, etc.
You can sort this according to whichever metric you'd like, as well as see how much the fees are for each trading pair. The trading fees on Bancor can vary depending on which pool you pick, between 0.10% and 5.00%. One particular column in the table displays ‘Rewards'. Here, it displays the APR (annual percentage rate) returns are with a maximum 2x multiplier for BNT liquidity mining. These rewards are paid out in 12-week cycles, so you could earn more by staking BNT tokens in these pools.
This is a bonus on top of the regular APR value that you see. For example, we have here an NDX/BNT token pair. Regularly, being a liquidity provider in this pool can net you around 1.37% APR annually. But owing to the extra liquidity mining rewards that Bancor is promoting for another 30 days (as of writing), you can earn on top of that 98.38% APR on your BNT holdings and another 61.84% APR on your NDX tokens that you've staked into that pool, respectively.
2. Swap Between Tokens
Next, we can move on to ‘Swap‘, where you can start to see a very familiar DEX user interface. Here, you can swap or exchange between two tokens, either based on the market value with ‘Market' or by clicking ‘Limit' to set your own prices and the amount of price slippage that you'd be willing to accept. This is all done after you've connected your wallet to Bancor, with support for the popular MetaMask, Coinbase, WalletConnect, and more.
3. Manage Your Pools and Assets
Following up on our Bancor review, we can try to click on ‘Portfolio.' As the name suggests, this is how you can manage and track all the liquidity pools that you've staked into. As a liquidity provider, this single window is a great place to help you manage all of your pools from within a single tab. You can click on ‘My Stake,' and this is where you get to choose which liquidity pool you'd like to supply some tokens to. Otherwise, this could be done from the main ‘Data' tab, along the ‘Actions' column.
Through the Portfolio tab, you can see important data such as analyzing your returns, calculating the risks of impermanent loss (IL), and how much of Bancor's native BNT tokens that you can claim. In all, the user interface of Bancor Network is quite easy to use and gives the end-user a lot of pages and data. Plus, and in contrast to some DEXes, Bancor has a fairly large selection of cryptocurrencies to pick from, making it easier to find the exact tokens that you'd want.
What Else Can Bancor Offer?
There are a few other tabs on the Bancor dApp's main UI. Clicking on ‘Vote,' for instance, would bring you to its DAO, where those who've staked or are BNT token holders could propose and vote day-to-day management changes or future plans for Bancor. The ‘Fiat‘ tab is quite interesting, as it shows you all the popular fiat currency gateways. While not directly integrated with Bancor, it can show off all the ways in which you can use your fiat currencies to buy cryptocurrencies first.
For example, MoonPay is a well-known fiat on-ramp platform into crypto, where you can buy cryptos with a simple wire transfer, debit or credit card, Apple Pay, Google Pay, or Samsung Pay anywhere in the world. Finally, we have ‘BancorX.' This will open a new tab, where you can move crypto tokens natively between blockchains. This is a cross-chain bridge for those tokens who'd otherwise not be compatible with one another. As of this Bancor review, BancorX only supports Ethereum and EOS.
What Are Bancor's BNT Cryptocurrency Tokens?
The main cryptocurrency of the Bancor Network is the BNT token. Primarily, it serves as an additional token pair in order to promote and supply constant liquidity, as well as enable Bancor to reward BNT token holders. Originally, the supply of BNT tokens was based on a ‘fixed reserve ratio' (FRR), and new BNTs were minted whenever another token is locked in a liquidity pool. Once that token was exchanged and taken from the pool, that accompanying BNT is burned to maintain its supply.
This meant that the supply of BNT is correlated to the tokens that are being traded on Bancor. The big issue with this at first is that liquidity providers needed to have exposure to BNT (or the other token pair) to pool their assets, even if they don't want to. This can create some risk of impermanent loss, as the value of one token is imbalanced with the other. Since the Bancor V2.1 update launched, there is a huge change to BNT's tokenomics to make its supply elastic.
This way, liquidity providers can actually deposit just one token into a pair – for example, an LP pooling into an ETH/BNT pool only needs to deposit ETH – and not need BNT tokens at all. Bancor's smart contracts will then mint or burn BNT tokens according to the FRR, as needed based on available liquidity. This burning program is made to put deflationary pressure on BNT's supply as its price increases, thus being able to somewhat maintain a hint of scarcity.
What About BNT's Tokenomics?
As of this Bancor review, there is a circulating supply of around 210,260,701 BNT and no total supply cap. One of Bancor's BNT tokens is worth around $4.01 today. This is quite a very healthy rise of more than 3,300% from its all-time lows back in March 2020, when one BNT was worth only $0.1174. However, the value of BNT at the time of writing this Bancor review is still about 60% down from its all-time highs of $10, observed in January 2018.
Thankfully, it looks like Bancor is getting a lot of mainstream attention following DeFi's growing popularity, and with strong proponents such as Mark Cuban being a major holder of BNT tokens. So, there's certainly some room for it to continue gaining at a price. With a market capitalization of $843,300,569, this makes Bancor's BNT tokens the 85th-most valuable cryptocurrency on the market.
What Are Bancor's Future Roadmap Updates?
We've found that Bancor is working on a few future roadmap updates as of this Bancor review. The first is to keep on refining and optimizing Bancor V2.1 (which just launched in May 2021), which brought along the new elastic tokenomics that we've mentioned earlier, and some changes to the on-chain governance. More changes are to come, as Bancor notes that there are currently over 20,000 liquidity providers, and in April 2021, they paid out more than $167-million in BNT rewards.
To round off our Bancor review, we're left on quite a positive note from our experience with Bancor. While it may not have the flash and popularity of younger DEXes such as Uniswap or SushiSwap, Bancor is still quite a very solid exchange overall. It has a very simple and no-nonsense user interface, as well as a huge variety of tokens to pick from. There's quite a lot of ways to make money on Bancor, too, thanks to all those BNT and liquidity mining rewards.
The only significant complaint that we can levy against Bancor is that it doesn't have the sheer variety in the services that it offers. All you can do on Bancor is either swap tokens or stake them into a pool to become a liquidity provider. Whereas some DEXes such as SushiSwap have everything from yield farming, leveraged trading, or even lending and borrowing out cryptos. In all, though, we're not left disappointed in our Bancor review. The first DEX is truly a great one, indeed.
- Ease of Use
- Project Values
- Tokenomics Model
- Long Term Sustainability
- A large variety of cryptocurrencies and token pairs, with good liquidity for competitive exchange rates.
- Inclusion of additional BNT rewards and liquidity mining to offer stakers and LPs a lot of extra lucrative gains.
- The ‘Portfolio' tab is a great place to manage all your tokens and liquidity pools from a single page.
- BNT's elastic supply curve meets a great balance to manage BNT's overall supply between scarce and liquid.
- Cross-chain compatibility for tokens on both the EOS and Ethereum blockchain for added liquidity flow.
- Doesn't have a lot of variety in the things that you can do, with just a few services that you can access.