Thanks in part to a New Year's promotional campaign, a rising star in the world of decentralized finance (DeFi) is Bancor.
But before getting into the name, let's give some context around it. At the core of the DeFi movement are decentralized exchanges (DEX), an emerging type of peer-to-peer exchange that lacks a third party. You can think of DEXs, that exploded in popularity over the last year, kind of like the difference between paying someone one-on-one with cash vs. through Paypal (PYPL) - Get Report or with a credit card. It bypasses the middleman.
As we get into 2020, Bancor is fast becoming a big name in this type of service.
Bancor, which has its own token called BNT, is an "on-chain" liquidity protocol. It lets users trade various tokens directly on the Ethereum and EOS blockchains, using so-called "smart contracts" that manage pools liquid funds for each trading pair. The users can then tap into those pools when making an exchange. Market makers can earn fees for providing liquidity to each pool and all trades are facilitated through the native BNT token.
New Year's Airdrop
On New Year's Day, Bancor conducted a snapshot of all addresses holding 10 BNT who would then receive one ETHBNT in an airdrop between Jan. 3 and this Friday. This means, in laymen's terms, that all holders of BNT would immediately become liquidity providers who could collect fees from ETH conversions on the Bancor Network.
This massive airdrop was supported by five major exchanges including Binance and Bitfinex, as well as 13 popular wallets like Metamask and MyEtherWallet. BNT User Activity has been on the rise since Dec. 20 in anticipation of the event, as users likely accumulated BNT to receive the airdrop and overall activity on the network climbed. In total, Bancor estimated that the airdrop would create a network of 60,000 liquidity providers who would get a taste of earning passive income by “owning” a piece of an exchange.
Bancor User Activity has climbed 21-points as the team executed its airdrop to stimulate network utilization. Price has rebounded 11% since Jan. 3 after a 23% drop over the new year.
FCAS is up 4-points (0.57%)
User Activity is up 21-points (2.7%)
Developer Behavior is down 6-points (-0.97%)
Market Maturity is up 18-points (2.6%)
Our Hot Take
Decentralized exchanges exploded in 2019, but overall DEX volumes are still relatively small compared to centralized exchanges, so decentralized finance markets have their work cut out to dominate trading volumes. Bancor hopes that with community development initiatives like the airdrop, more users will be driven to support and grow the network.
Looking ahead, 2020 is poised to be a transformative year for decentralized exchanges as they continue to integrate with a number of high profile user wallets, and Ethereum-based DEXs benefit from the recent Istanbul upgrade which promises cheaper gas fees and higher throughput on the network.
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Correction: An earlier version of this story misstated Bancor's ranking in terms of ETH traded and total DEX volumes.