BNT is the utility and governance token for the protocol.
BNT token is used for
- Reserve token for token swaps
- Fees to Liquidity providers
- Impermanent loss protection
- Mint governance tokens
How BNT token works
BNT role is an intermediary token that connects liquidity pools in the network and across blockchains. In for example Uniswap, ETH is the reserve token used to facilitate trades. In Bancor, BNT is used.
BNT has an elastic supply and is minted and burned to facilitate swaps and cross-chain trades.
How Bancor works
The Bancor Protocol is a network of smart contracts for token swaps enabled by pooling on-chain liquidity.
Bancor uses a bonding curve and was the first to introduced the concept of an AMM. Eventually made popular by Uniswap.
This version offers two key features to it’s Automated Market Maker:
- Liquidity Protection (i.e. Impermanent Loss Insurance)
- Single-sided exposure
Providing any token (TKN) to a pool
- Deposit is record with an ID.
- Bancor mints BNT equivalent to TKN.
- BNT and TKN are added to the pool.
- LP receives 50% of pool tokens and the protocol receives 50%.
- Protocol and LP earn 50% of fees from swaps.
Remove token TKN from a pool
- LP inputs deposit ID, identifying a specific TKN deposit.
- Calculate: The amount of pool tokens required to provide the LP with their full stake + protection + fees is computed. This value will be indicated in pool tokens but can also be converted to TKN or BNT.
- Based on the availablity in the pool LP will receive the entire amount in TKN, or TKN + BNT to cover the full amount.
- As an incentive to provide BNT – BNT holders receive vBNT – the Bancor governance token when they stake/supply BNT.
Impermanent loss protection
- 0% for the first 30 days.
- 30% on day 30
- Increase by 1% point per day up to 100%.
At 100% insurance the LP will receive the same amount as a holder would for the same period.
Current supply: ~ 90M (variable)
- 50% – public distribution.
- 20% – community grants, partnerships & bounties.
- 20% – Long-term foundation budget (locked for 2 years)
- 10% – Founders, team, advisors, and early contributors (vested over 2 years)
Bancor announced a liquidity mining program on Nov 16. That could mint 28M Bancor at most. Around 40% of current supply.