Bancor, an Automated Conversion Protocol for Digital Assets, Deploys Update on Ethereum for Putting Deflationary Pressure on BNT Tokens

The team at Bancor (BNT), which serves as a protocol and standard for decentralized exchange networks for the automated conversion of crypto tokens into other tokens, including across blockchains (without requiring an order book or counterparty to facilitate the exchange), reports that the Bancor Vortex Burner has been deployed to the Ethereum (ETH) mainnet.

As explained in a blog post by Bancor, the Vortex Burner “collects 5% of swap fee revenue and uses it to buy and burn vBNT.” The announcement further noted that BNT tokens will be “burned with every swap — locking BNT in the protocol forever, and putting deflationary pressure on the circulating supply of BNT.”

The update also mentioned that BNT burning “lowers borrowing risk for users who wish to take leverage on their staked BNT.” The Bancor team claims that the vBNT burn rate will become “a critical part” of the BancorDAO’s “flexible” monetary policy, and may be “adjusted to collect up to 15% of swap fee revenue.”

The Vortex Burner provides an “adjustable” fee taken from swap revenue that’s generated by liquidity providers (BIP9 and addendum). For instance, if a $100,000 trade is performed on a pool with a 0.2% pool fee, $200 is “collected by the liquidity providers as commission,” the Bancor team noted while adding that the vBNT burner “takes a 5% portion ($10) and uses it to buy vBNT and burn it.”

As mentioned in the announcement, vBNT burning is designed to:

  • Increase locked liquidity: “a portion of every swap is permanently locked into the protocol”
  • Reduce the circulating supply of BNT: “BNT is continuously bought and removed from circulation forever”
  • Increase lending capacity: “By putting continuous upward pressure on the vBNT price, the burning of vBNT lowers borrowing risk for users who wish to take leverage on their staked BNT”
  • The full powers of the Bancor Vortex “can now be accessed to perform key actions on the network that drive increased value to traders, LPs and the protocol’s owners, BNT holders.”

(Note: for more details on how these processes actually work, check here.)

The Bancor team confirmed that analytics will soon be released in the front-end and on Bancor’s Dune dashboard “showing the total vBNT burned over time.” The team also noted that the rate of vBNT burning is “expected to ramp up as whitelisted pools opt into the network upgrade.”

They added:

“We are incredibly excited for the next phase of Bancor Vortex and for Bancor tokenomics to continue evolving, guided by the DAO and the growing community of researchers and economists who support its operations.”