What's hot in crypto this week?
Bancor. It enables the exchange of various tokens directly on the Ethereum and EOS blockchains. This is done with the on-chain liquidity protocol's smart contracts that manage liquidity pools for each trading pair, which users can then tap into when making an exchange. Everyday users can participate as market makers who earn fees for providing liquidity to each pool and all trades are facilitated via the native BNT token.
The team on April 29 announced a new version to its on-chain liquidity protocol that aims to mitigate the risks that liquidity providers face when participating in the network.
Bancor operates through automated market makers. Instead of maintaining an order book, it relies on pools of liquidity and a price slippage mechanism to reproduce natural fluctuations in price. Liquidity providers earn trading fees, but in many cases they will suffer an “impermanent loss” that diminishes the value of their staked liquidity.
Bancor V2 introduces a new automated market maker liquidity pool that holds the relative value of its reserves constant, using prices from Chainlink’s oracles. In this way, users and token teams can feel more confident about their staked liquidity generating profits from trading fees.
How has BNT’s FCAS score changed?
BNT FCAS has climbed 30-points (4.11%) in the past month, led by a 36-point (4.32%) spike in User Activity and a 26-point (4.1%) increase in Developer Behavior. Market Maturity also went up 31-points (3.81%) in the same timeframe.
What’s Flipside’s Take?
Bancor V2 offers a solution to the key challenges holding back Automated Market Makers -- namely “impermanent loss,” “multi-token exposure,” “low capital efficiency,” and high opportunity costs for lenders. The announcement itself propelled Bancor (BNT) to first place, as the best performing decentralized finance token in Q2. Even after 542% growth in Q2, it is still the most undervalued decentralized finance token based on transaction fees (token price over earnings per token), according to TokenTerminal.
Our perspective is that decentralized exchanges with Automated Market Makers have proven to be one of the decentralized finance innovations with a big impact. They enable the creation of open on-chain liquidity for a range of different tokens. Instead of using a traditional buy/sell order books, both sides of trades are pre-funded by on-chain liquidity pools. This allows users to seamlessly swap between tokens on-chain in a completely decentralized and non-custodial manner, and for everyday users to participate in market-making for their favorite token project.
The Flipside Crypto Asset Score Tracker provides institutional and sophisticated retail investors the ability to track over 500 cryptocurrencies' fundamentals. FCAS Tracker is currently free to a select group of new users as it continues to develop the product. Visit Flipside here to gain access to Flipside Analytics.