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What is BNT (Bancor Network Token)?

The Bancor Protocol is made up of a network of smart contracts (called “liquidity pools”) designed to perform algorithmic token trades and pooling of on-chain liquidity.

What sets Bancor apart from most decentralized and centralized exchanges is liquidity on Bancor is provided by thousands of unaffiliated users who each receive a share of Bancor’s trading fees, instead of liquidity coming from a small handful of professional market-makers.

This is because adding liquidity on Bancor is permissionless (no central party can block or control the process) and easy for everyday users (add liquidity and earn fees in a couple clicks).

Every liquidity pool on Bancor holds BNT (Bancor’s Network Token) in its reserves as well as the “base token” receiving liquidity. BNT serves as the intermediary token connecting pools in the network and across blockchains. For example, a trade from DAI to BAT has the following conversion path: DAI > BNT > BAT.

Users who trade on Bancor do not need to hold BNT; however, users creating a liquidity pool on Bancor or providing liquidity to an existing pool must hold BNT.

When creating or staking in a Bancor pool, users do so in equal values of ERC20 token + BNT, or EOS token + BNT. For example, users provide liquidity to the DAI/BNT pool in equal parts DAI + BNT:

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Guide: How to add Liquidity to Bancor 

 

Why use BNT?

There are key advantages to using a protocol token like BNT in a network of liquidity pools.

Here are a few:

1) Network Effects:

Staking on Bancor directly increases demand for BNT. Since every pool in the network holds some part of its liquidity in BNT, as more liquidity is locked up in Bancor pools, each pool on the network becomes more liquid.

As liquidity providers (LPs) join the network, existing LPs benefit not only because the liquidity of the protocol increases but also because the value of their ownership increases.

In systems based on ETH, adding liquidity to a pool does not have a direct effect on other pools on the network, since demand for ETH is tied to its usage in many networks.

2) Staking Rewards:

Pending a community vote, Bancor Protocol may activate BNT Staking Rewards. Users who stake their BNT in Bancor pools will receive BNT staking rewards via newly minted BNT (i.e., BNT inflation). These rewards will increase the profitability of staking inside Bancor pools, and create a strong incentive for users holding BNT to become liquidity providers on the network.

3) Governance

Following the launch of the BancorDAO, BNT will be used to vote on key attributes of the Bancor Protocol.

4) Cross-Chain Conversions:

Using BNT in Bancor pools allows Bancor to efficiently process token trades across blockchains. BNT mints and destroys itself across chains to process these cross-chain trades (currently live on the Ethereum and EOS blockchains).

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Disclaimer: When reading this article, please keep in mind the following: (1) Important to notice that wherever referring to any sensitive information of yours, including private keys, key-pairs or other account information, that information is yours. We can only make limited suggestions to how such information may be treated and protected, but the responsibility is yours. You should always make sure your information is protected and kept private, in the best available way; (2) that the information contained herein is a simplified extract of detailed information and sources generally available on the internet. This basic information was collected and displayed in attempt to provide you with better understanding of certain processes and aspects which relate to content and applications on Bancor’s site. Although we do our best to keep this information up-to-date, we cannot always guaranty that. This is since the information originates from third parties or relates to third party services, applications and technologies (such as Metamask, Scatter, EOSToolkit, or EOS), which are unrelated or unaffiliated with Bancor. These third parties’ applications, services and technologies are available on the internet, and may be subjected to applicable terms and conditions. Accordingly, though the said information and third applications, services and technologies (“Third Parties Content”) are believed to be reliable, Bancor provides no warranties regarding them (including their accuracy or completeness). IN NO EVENT WILL BANCOR BE LIABLE FOR ANY SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES, INCLUDING, WITHOUT LIMITATION, LOST REVENUES, LOST PROFITS OR LOSS OF PROSPECTIVE ECONOMIC ADVANTAGE RESULTING FROM THE USE OF THE THIRD PARTIES CONTENT EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, OR FOR ANY CLAIM BY ANOTHER PARTY.

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