There is no denying that the global macroeconomic landscape has continued to deteriorate rapidly over the past year, in large part due to the Federal Reserve’s quantitative easing measures (such as interest rate hikes). This has caused liquidity to dry up globally, affecting a whole range of markets including equities, commodities and crypto.
To this point, several crypto projects have taken matters into their own hands to boost the price action of their favorite assets over the past few weeks. For example, community members associated with popular decentralized exchange protocol Bancor recently voted on a critical proposal that reduces the overall supply of its native cryptocurrency — Bancor Network Token (BNT) — by burning BNT to avoid potential price action of the asset to support.
In its simplest terms, a token burn can be thought of as a mechanism that allows a fixed number of coins to be removed from a currency’s circulating pool. This helps to improve the supply and demand balance of an asset, allowing for potential appreciation at a later date. Many exchanges and popular crypto projects, including KuCoin, Binance, Gate.io, and MEXC Global, regularly participate in these activities.
What is changing and how will it affect Bancor?
Earlier this year, in June, Bancor halted the distribution of its BNT token, leading to the suspension of its popular Impermanent Loss Protection (ILP) program. Since then, the project has been rebuilding its digital infrastructure with a particular focus on redefining its tokenomics to mitigate the inflation risk associated with BNT and restore its token reserves.
As mentioned, a few days ago 1M BNT was successfully burned after being placed in Bancor’s v3 vault and collected. The one-off BNT burn voted on by the Protocol’s DAO participants was carried out, with 0.5% of the currency’s circulating supplies now irrevocably destroyed. These burning efforts will be highly beneficial to the future health of the protocol as they allow the value of BNT to increase relative to listed tokens while the platform’s TKN reserves are naturally replenished.
In addition, a 21 million BNT burn is also being discussed as part of the Bancor migration from v2.1 to v3. More specifically, the related POL BNT that could be eliminated from the fight is around $10.3M or 21.9M BNT, which is just over 10% of the circulating supply of BNT (200M). .
Finally, it’s also worth noting that BNT’s minting has been paused, a move that has increased deflationary pressures on the asset. Not only that, to counter inflationary risks associated with the coin, Bancor’s governance community has passed a proposal to discontinue BNT liquidity mining rewards.
vBNT continues to be burned
Another important step Bancor has taken to strengthen its economic framework is increasing the rate at which internal fees are used to purchase BNT and burn vBNT. vBNT is Bancor’s governance token issued to users who deploy BNT across Bancor’s various liquidity pools.
In this regard, it is worth noting that 90% of Bancor v3 fees are currently used to acquire new BNT, while 100% of Bancor v2.1 fees are used to buy BNT and burn vBNT. The total amount of vBNT burned throughout 2022 has been growing exponentially each month and is currently near the $2.8 million mark.
The BNT token is currently trading at around $0.4. However, at the peak of the 2021 bull run, the asset surged to an all-time high of $9. Finally, BNT’s total circulating supply currently stands at 198.85 million, up from over 240 million at the start of the year
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