Bancor celebrates reaching a big milestone after burning more than 2 million BNT, around nine months after the Vortex feature was introduced.
The distinction between BNT and vBNT
Unlike other AMMs, Bancor has single-sided liquidity pools, all of which use the protocol’s native BNT token as its counterpart, which has an elastic supply. Users who want to add project tokens to a liquidity pool require the project token because the Bancor protocol can automatically mint any quantity of BNT if necessary.
On the other hand, BNT holders can provide liquidity, relieving the protocol of the need to manufacture fresh tokens. In exchange, they obtain vBNT tokens in a 1:1 ratio, which may be used to vote in the decentralized governance of Bancor DAO. This also allows you to stake BNT tokens in liquidity while using them as collateral for a loan by selling vBNT briefly and buying them back to unstake BNT.
https://twitter.com/PrimalGlenn/status/1475234233887211523?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1475234233887211523%7Ctwgr%5E%7Ctwcon%5Es1_&ref_url=https%3A%2F%2Fcryptocoin.news%2Fnews%2Fbancor-vortex-has-burned-2-million-vbnt-since-april-69554%2F
Protection Against Immediate Impermanent Loss
The elastic supply of BNT also allows liquidity providers to be protected from the impacts of Impermanent Loss. Bancor released the Impermanent Loss insurance in October 2020, but with several limitations. Impermanent Loss insurance began accruing 30 days after depositing project tokens as liquidity, and liquidity providers had to wait 100 days to become fully insured.
When Bancor v3 was released last month, these restrictions were removed. Liquidity providers are now immediately shielded from Impermanent Loss. They now receive the exact token quantity they initially specified while withdrawing their liquidity.
https://twitter.com/BancorVortex/status/1475609149027368960?ref_src=twsrc%5Egoogle%7Ctwcamp%5Eserp%7Ctwgr%5Etweet
Is there going to be a Burn Day celebration?
Because the Impermanent Loss insurance mechanic puts BNT stakeholders at risk, Bancor introduced the Vortex function in April 2021. This established a mechanism that takes a fraction of all trading fees collected on the decentralized exchange and uses the proceeds to burn vBNT tokens in order to encourage BNT holders to stake their tokens.
This component (“Burner rate”) was initially set at 5% but was increased to 10% in June. In October, a snapshot vote passed, increasing the Burner rate to its maximum of 15%. Recently, a suggestion has been made to launch a Burn Day event, which would set the Burner rate to 100% for 24 hours to promote awareness about Bancor’s tokenomics.
