Month: December 2021

Ribbon Finance (RBN) is an Ethereum token that governs Ribbon Finance, a decentralized finance protocol designed to generate yield by combining options, futures, and fixed income to improve a portfolio’s risk-return profile. RBN is the protocol’s governance token and can be used to propose and vote on the future of the platform.

What is Ribbon Finance?Ribbon Finance is a new protocol that creates crypto structured products for DeFi.Does Ribbon have a token?

Yes, we have a token. You can find more information about the $RBN Airdrop in the blog post. Be aware that there are scammers that have created fake Ribbon tokens and are actively distributing them on DEXes. Do not buy them. Official RBN address: 0x6123B0049F904d730dB3C36a31167D9d4121fA6B.What are structured products?Structured products are packaged financial instruments that use a combination of derivatives to achieve some specific risk-return objective, such as betting on volatility, enhancing yields or principal protection.What kinds of structured products does Ribbon have?Ribbon currently offers a high yield product on ETH which generates yield through an automated option strategy. Ribbon will continue to expand the product offerings over time, including community-generated structured products.What is the Theta Vault?

Theta Vault is a new product that automates a covered call strategy to earn high yield on ETH. The vault runs a covered call strategy and sells out of the money call options on a weekly basis for yield. You can read more about the strategy here.What Options Protocol does the Theta Vault use?Theta Vault currently uses Opyn’s infrastructure to mint and trade the options tokens on-chain. We chose Opyn because the protocol lets us create tokenized ETH options with custom parameters out of the box. This allows us to be flexible on the choice of strikes, expiries, and exchange method. What is the expected yield for the Theta Vault?

The yield is variable, but we expect it to be in the 20-30% range. We performed a backtest on the strategy throughout 2020 and 2021, and you can see the results here.

The yield in production will likely be lower due to transaction costs and so on, but we can expect something in the double-digit APY range.What are the risks of the Theta Vault?

The primary risk for running this strategy is that depositors could potentially give up upside in exchange for guaranteed yield. By selling a call option, users are basically promising to sell the asset at the strike price, even if it goes above it (a.k.a selling early). Because of this, if the price of the asset moves up significantly in a short period of time, it is possible for depositors to have “negative yield” on their ETH.

However, this only happens if ETH/USD appreciates significantly, so depositors will still be up in USD terms. The vault also sells call options that are very out of the money, which means there is a relatively low chance of the options getting exercised.

The smart contracts are audited by Peckshield, ChainSafe and Quantstamp. Despite that, users are advised to exercise caution and only risk funds they can afford to lose. Why do I need to give Theta Vaults approval to spend my assets?

On the Ethereum blockchain, wallets have full control over their ERC20 tokens. In order to let an application spend a wallet’s tokens, the user has to explicitly give permission to the application to spend them. This is what’s called an ERC20 allowance. Theta Vaults prompt users to approve an unlimited amount so that users do not have to re-approve the application on a subsequent deposit.

Which products support RBN? 

What regions support RBN? 

Crypto to fiat trading pairs

Note: Coinbase Wallet does not support direct bank transactions. You’ll need to transfer your crypto to Coinbase.com or send it to an external address in order to cash out.

Crypto to crypto trading pairs 

See the full list of countries that Coinbase supports for crypto-to-crypto trading.

Note: Only assets hosted on the Ethereum blockchain can be converted through the Coinbase Wallet mobile app at this time. Learn more about trading on Coinbase Wallet.

How many confirmations are needed for RBN?

RBN requires 35 network confirmations. Learn about transaction confirmations.

Which blockchain network hosts RBN?

RBN is hosted on Ethereum. 

What are the minimum and maximum withdrawal amounts?

Coinbase has implemented safeguards to ensure a healthy and efficient network both on-chain and through our platform.  

These safeguards include both minimum and maximum amounts for each cryptocurrency we allow customers to send through the blockchain. These amounts vary by asset and are subject to change.

By Ribbon Finance and Coinbase

Spell Token (SPELL) is a token that governs Abracadabra.money, a platform that lets users deposit collateral in the form of interest-bearing crypto assets (such as yvYFI, yvUSDT, yvUSDC, xSUSHI) in order to mint MIM, a stablecoin that attempts to maintain a value of US$1.00. SPELL can be staked to earn sSPELL, which grants governance rights and other rewards.

What Is Abracadabra?

The launch of DeFi 2.0 has unfortunately seen a repeat of the inefficiencies that existed in its predecessor, with capital inefficiency key among them. Abracadabra Money is a lending protocol that aims to solve this problem by using interest-bearing tokens like yvWETH, yvUSDC and xSUSHI to serve as collateral to borrow Magic Internet Money, otherwise known as MIM.

MIM is a stablecoin that mirrors the stability of the U.S. dollar and does what virtually every other stable coin (e.g., DAI and Tether) does. With Abracadabra Money, cash doesn’t need to sit idly in the bank. There’s a new way to passively earn, using leverage, with close-to-zero risk involved.

What Is the Spell Token (SPELL)?

The Abracadabra protocol has two major tokens working in its ecosystem. The first is SPELL, the governance token of the platform, and the other is MIM (Magic Internet Money). Among other benefits, the primary function of the Spell Token is staking. Like most other tokens using the Ethereum platform, SPELL can be staked to gain various benefits. Two of them are:

Governance: Since the Abracadabra protocol is truly decentralized, the number of Spell Tokens you have will determine how much weight your opinion has in changing features such as liquidation fees, collateral and total value locked (TVL).

Passive Income: When Spell Tokens are staked, users earn a percentage of trading fees from the platform. These fees are interest that’s earned primarily from users borrowing MIM. 75% of the fee goes to token holders; 20% is allocated to the governance treasury, which aids liquidity pools; and the last 5% is kept in a multisig treasury that helps mitigate risks when market conditions worsen.

How Does Abracadabra Work?

Abracadabra Money uses a technique which is different from that of most protocols to provide lending services to traders. Called “isolated lending market,” the technique was first used with Kashi, a SushiSwap-owned lending platform. By using isolated lending, Abracadabra can successfully leverage the use of interest-bearing tokens and eventually allow users to produce Magic Internet Money. There are a few steps involved in this process:

Step 1 — Users need to deposit collateral (first USDT into yEarn, then collateralization of yvUSDT) on Abracadabra.

Step 2 — Abracadabra allocates a debt allocation, with interest, to the borrower.

Step 3 — After that, MIM tokens are deposited into the borrower’s wallet at the borrower’s chosen level of leverage.

Step 4 — Users take their MIM wherever they like. They can swap it to USDT, withdraw it or repeat the process of depositing in yEarn to get yvUSDT and more MIM.

The question now is, how can you get your collateral back? The answer is that after you repay your debt with the accrued interest, you’ll be able to withdraw your collateral.

The Magic Internet Money Token (MIM)

An integral part of the protocol, the MIM token is a dollar-pegged stablecoin that’s supported by ibTKNs. MIM tokens are Ethereum-based and minted by Ethereum multisig holders.

The good thing about stablecoins is that they’re not injected into circulation until they’ve been collateralized. There are persuasive (though unverified) claims that future improvements will include a bridge to other blockchains.

The amount of MIM you get as a loan depends primarily on two factors:

1.    The collateral you’ve put down in USDT.

2.    The loan-to-value ratio.

To help you understand how Abracadabra Money works, let’s run through a hypothetical scenario.

Lukas is an average crypto trader who got lucky with an ETH airdropAn airdrop is a marketing stunt, in which tokens or coins are sent out to blockchain wallets. Most commonly, it is done …, and now has $100,000 USDT to his name. Since he has some knowledge of yEarn, he decides to stake his newly found wealth to earn returns, and uses the USDT V2 yVault for this. 

Now, Lukas has approximately $100,000 worth of yvUSDT, an amount that will grow, thanks to loan fees. Lukas then decides to start a business and wants to adopt a low- or no-risk approach with his money. How can he do this? Well, if you suggest that he convert yvUSDT to USDT, then USDT to cash to fund the business … you’re on the right track.

However, he can also choose to deposit his yvUSDT into Abracadabra. Let’s assume he mints 60% of his tokens: then, he’ll be given 60,000 MIM. He’ll pay interest of 0.8% on the loan, but his initial capital is still on yEarn, yielding returns.

SPELL Tokenomics

The figures below are accurate as of this writing. 

SPELL Token

• Name & Ticker: Spell Token (SPELL)
• Token Standard: ERC20
• Token Type: Governance
• Maximum Supply: 420 billion SPELL
• Circulating SupplyCirculating supply is the number of cryptocurrencies or tokens that are publicly available and circulating in the crypto…: 70 billion SPELL
• 24h Trading Volume: ~290 million SPELL
• Contract Address: 0x090185f2135308BaD17527004364eBcC2D37e5F6

MIM Token

• Name & Ticker: Magic Internet Money (MIM)
• Token Standard: ERC20
• Token Type: Utility
• Maximum Supply: Unlimited
• Circulating Supply: 1.6 billion MIM 
• 24h Trading Volume: ~280 million MIM
• Contract address: 0x99d8a9c45b2eca8864373a26d1459e3dff1e17f3

Pros and Cons of Abracadabra

Let’s take a look at some strengths and demerits of Abracadabra. 

Pros

• Few protocols allow you to borrow tokens and still earn interest on your collateral, and Abracadabra is one of them.
• With isolated risk markets, you can calculate the risks you want to undertake in order to maximize returns.

Cons

• The risk of liquidation is high because the collateral value can drop below the point where your loans are covered.
• The Abracadabra protocol is decentralized; hence, it uses smart contracts, which can be vulnerable to bugs and data leaks.

Is Abracadabra (SPELL) a Good Investment?

We’ve yet to fully grasp the complexities of DeFi 1.0, but improvements being made to it give us a great preview of DeFi 2.0. One noteworthy feature DeFi 2.0 brings to the table is capital efficiency, and Abracadabra Money has been amazing in this regard.

What the market is saying about Abracadabra Money will help us gauge its relevance. In just two months, the TVL of Abracadabra Money has increased by 354%, from $1.07 billion to $4.86 billion. This stems from the effective work model of the platform and from investors’ generally warm reception to it. We strongly believe the real bull run has not yet begun for this crypto. As the project migrates into multichain, more room for growth will be created.

To dive deeper, MIM is actually a decentralized stable coin. So far, we’ve not seen many truly decentralized stablecoins — only names such as DAI (MakerDAO) and UST (Terra) are well-known in the market. With the recent collaboration between MIM and UST, however, decentralized stablecoins could well be the catalyst for the next trend.

Over time, centralized stablecoins (full-reserve stablecoins) such as USDT and USDC have revealed their legal shortcomings, paving the way for decentralized stablecoins such as MIM to grow and possibly outperform them eventually. MIM is one of the stablecoins that could help achieve this vision.

Which products support SPELL? 

What regions support SPELL? 

Crypto to fiat trading pairs

Note: Coinbase Wallet does not support direct bank transactions. You’ll need to transfer your crypto to Coinbase.com or send it to an external address in order to cash out.

Crypto to crypto trading pairs 

See the full list of countries that Coinbase supports for crypto-to-crypto trading.

Note: Only assets hosted on the Ethereum blockchain can be converted through the Coinbase Wallet mobile app at this time. Learn more about trading on Coinbase Wallet.

How many confirmations are needed for SPELL?

SPELL requires 35 network confirmations. Learn about transaction confirmations.

Which blockchain network hosts SPELL?

SPELL is hosted on Ethereum. 

What are the minimum and maximum withdrawal amounts?

Coinbase has implemented safeguards to ensure a healthy and efficient network both on-chain and through our platform.  

These safeguards include both minimum and maximum amounts for each cryptocurrency we allow customers to send through the blockchain. These amounts vary by asset and are subject to change.

By Coinbase and Bybit Learn

eCash is a digital currency that was developed after a hard fork of the Bitcoin Cash blockchain. At the time of the hard fork to the Bitcoin Cash blockchain. eCash was initially referred to as Bitcoin Cash ABC with the ticker symbol BCHA.Since Bitcoin Cash is a hard fork of Bitcoin, the Bitcoin Cash ABC token shares several similarities with the top digital asset Bitcoin; For example, the Bitcoin Cash ABC token had a total supply of 21 million tokens. Additionally, both digital assets have adopted the same consensus model for their operations.A dispute between members of the Bitcoin Cash ABC developers led to the creation of the eCash token.

Disagreement arose over the 1 MB token’s block size and payment method, with each side advocating different approaches. The split became official after both teams disagreed on the Bitcoin Cash ABC token’s payment method.An additional part of the problem that led to the split was the 8% miner’s tax dev team wanted to impose on every purchase that involved Bitcoin Cash ABC tokens. As a reward, a newly mined cryptocurrency coin is given to miners on the Bitcoin Cash ABC blockchain, however, because both teams disagreed with regards to the method of payment. A split in the network became inevitable.

E-Cash’s token was redenominated to 1:100000 before its launch and was officially launched in July 2021. The redenomination of the token will see the decimal places of the eCash coin reduce from eight to two. The ticker symbol for this new token is XEC, and it currently has a market cap worth over $3 billion.The tokens market cap and acceptance places it among the top 50 digital currencies in the world. The token’s total supply is capped at 21 trillion coins, while its current circulating supply is over $18.7 trillion.Despite being a hard fork of the Bitcoin Cash ABC token, the eCash has implemented several upgrades to improve the overall quality of the network. For example, this digital asset uses a 1 TB block size for transactions on its network. Additionally, the network plans to move to a Proof-of-Stake consensus layer called “Avalanche,” allowing holders of XEC coins to stake their tokens to earn rewards.

Furthermore, this upgrade will increase the speed with which transactions are linked to the network. Finally, the move to a Proof of Stake consensus will allow the eCash project to access the DeFi ecosystem and the Ethereum Virtual Machine (EVM). Compatibility with the EVM indicates the team at the project is working toward interoperability with Ethereum-based projects.

eCash Coin Price

When the eCash token was launched in July 2020, its opening price was set at $0.00002. Towards the end of August, the coin price hit $0.00008, marking some token value growth. By September 4, the coin’s price had reached an all-time high of $0.0004 per token. The coin is currently priced between $0.0002 and $0.0003, which is an excellent potential price for a young coin. As of Dec 14, 2021, the price is $0.000104.

Endorsements and Partnerships

Although relatively new to the digital space, the eCash project is available on many top crypto exchanges. These include popular crypto exchanges like Binance, Huobi Global, Mandala, Upbit, and Okex.The eCash token has been adopted as a payment option by Weownomy, a new social network company located in Delaware, USA. Weownomy aims to provide a social media platform that is built to reward users for joining the platform. Weownomy says the eCash token will be used to pay their users and creators of content on their platform. This move further exemplifies the primary use case of eCash, i.e., a fast and inexpensive payment option.

Comparison Of eCash With Other Tokens

Compared with other digital currencies, the eCash token holds its own and offers several excellent features that holders will enjoy. A comparison of eCash with Bitcoin Cash helps to highlight this point well.Following the hard fork of the Bitcoin blockchain in 2017, Bitcoin Cash was born. The Bitcoin Cash operates on a proof-of-work consensus just like Bitcoin. As a result, this digital currency does not support many decentralized features like the staking of tokens for rewards. Similarly, the Bitcoin Cash token is not yet integrated with the Ethereum Virtual Machine (EVM), meaning that the token is not compatible with Ethereum-based projects.Even though the eCash token still uses the proof of work consensus, the devs team is currently working to shift to a proof of stake consensus while also integrating with the Ethereum Virtual Machine. These upgrades will significantly upscale the transaction speed of the token and allow the eCash to merge with several Ethereum-based projects and can be used as a payment option for these projects.

By Adegbasa Timothy

• DFI.Money (YFII) is a Decentralized Finance (DeFi) platform which aims to build products on aggregated liquidity provision, leveraged trading, automated marketing making, and more.
• DFI.Money (YFII) is a fork of yearn.finance (YFI), after yEarn Improvement Proposal #8 (YIP-8) which proposed to prolong the minting of the platform utility token YFI by another 2 months and with a weekly-halving emission curve was rejected.
• The YFII token is the native utility token of the DFI.Money platform. Users can earn it by contributing liquidity to DFI.Money’s aggregated liquidity pool, and use the token for platform governance.
• DFI.Money currently provides a profit optimizing service for lending providers, moving providers’ funds between lending protocols such as Aave, and Compound autonomously for highest return. Future strategies are being developed in its vaults section.

What products support YFII?

What regions support YFII?

Crypto to fiat trading pairs

Note: Coinbase Wallet does not support direct bank transactions. You’ll need to transfer your crypto to Coinbase.com or send it to an external address in order to cash out.

Crypto to crypto trading pairs

See the full list of countries that Coinbase supports for crypto-to-crypto trading.

Note: Only assets hosted on the Ethereum blockchain can be converted through the Coinbase Wallet mobile app at this time. Learn more about trading on Coinbase Wallet.

How many confirmations are needed for YFII?

YFII requires 35 network confirmations. Learn about transaction confirmations.

Which blockchain network hosts YFII?

YFII is hosted on Ethereum.

What are the minimum and maximum withdrawal amounts?

Coinbase has implemented safeguards to ensure a healthy and efficient network both on-chain and through our platform.  

These safeguards include both minimum and maximum amounts for each cryptocurrency we allow customers to send through the blockchain.

Minimum: 0.000000000000000001 YFII

Maximum: 31 YFII

By Binance Research and Coinbase

Paxos Standard Token (PAX) is an ERC-20 token issued on Ethereum blockchain. As a regulated stablecoin collateralized by the U.S. dollar, it brings benefits of the blockchain technology and stability of fiat currencies together.

It results in a steady cryptocurrency which offers:

• Instant worldwide transactions
• Immutability
• Decentralized accounting
• 24/7 transactions

On top of that, every PAX token is fully backed by the equivalent amount of U.S. dollars, meaning it can also be redeemed for USD at any time. However, according to U.S. Law, Paxos Standard isn’t a security.

PAX Standard was established in the light of the infamous Tether controversy, where the leading market stablecoin has come under scrutiny for printing Tethers out of thin air during the early 2018 crypto market bull run. Paxos team has noticed the opportunity and made an extra effort to be as transparent as possible. Paxos issues and burns its tokens using an audited smart contract, inspected by smart contract auditor Nomic Labs. Withum, one of the top U.S. auditing companies, regularly verifies the reserves.

Who Is The Team Behind Paxos?
Paxos team consists of seasoned professionals from diverse backgrounds, including former Wall Street and Silicon Valley employees. The company is led by its co-founder and CEO Charles Cascarilla.

Paxos Vision
Paxos team sees a future in which blockchain isn’t a part of a major financial revolution, but an essential element of its evolution. In the big picture, the company wants to improve the economic ecosystem by developing a global frictionless network for simple, mobile and instant exchange of assets.

How Does Paxos Standard Token Work?

Paxos Standard is designed to have growing use cases. Today, it’s primary use case is to limit crypto asset volatility, remove friction from cross-border transactions, and become a reliable payment vehicle for crypto assets and other blockchain assets.

In the future, Paxos expects to be used for consumer payments and the stable store of value for people outside the U.S., especially in countries with unstable national currencies.

Here’s how tokenizing USD to PAX works:

1). A user sends USD to the token issuer’s bank account.
2). The issuer creates the equivalent amount of PAX using PAX smart contract.
3). The freshly minted PAX are delivered to the user while the USD is held in the bank account.

The same but reversed process is used to redeem PAX for USD. Every Paxos Standard token can be purchased and redeemed using Paxos.com. Upon PAX token redemption, the tokens are immediately burned and taken out of the circulation.

It’s worthy to note the company doesn’t charge any fees for both converting and redeeming PAX tokens. The minimal conversion amount starts at $100.

Paxos uses third-party auditors for proving they hold the corresponding amount of dollars. The monthly attestation reports can be found here.

Is Paxos Standard Token Different From Other Stablecoins?

The Paxos website emphasizes the following features of PAX:

• Regulation. Paxos is regulated by the New York State Department of Financial Services.
• Guaranteed cash deposits. Every collateralizing deposit is held at FDIC-insured U.S. banks.
• Audited. Every Paxos Standard bank account is overseen by U.S. auditing firm Withum.
• Security. Paxos employs additional transaction monitoring and surveillance partners for an extra layer of compliance.
• Daily purchase and redemption windows. PAX tokenization and redemption requests are processed in regular windows that facilitate free and frequent fund movement. Every operation is usually done within one business day
• No fees. Paxos Standard tokens are issued and redeemed without any extra charges.

These features make PAX like the other recently emerged stablecoins – USD Coin (USDC), TrueUSD (TUSD) and Gemini Dollar (GUSD). All of them are fully redeemable regulated ERC-20 tokens backed 1:1 which are backed by U.S. Dollars, uses Ethereum smart contracts to issue and burn tokens, and are overseen by the U.S. auditors and regulators. Besides, none of these platforms charge transaction/conversion fees (despite few exceptions).

The most significant difference between PAX and its rivals are different partner organizations and more efficient operations due to its “processing windows.”

All the fresh stablecoin projects are designed to decrown the longstanding market leader Tether (USDT). It employs a similar model but has refused to conduct regular audits and provide credible attestations. Yet, most USDT coins are issued on Omni protocol.

The only fundamentally different stablecoin within top 100 coins is DAI. This Maker’s project isn’t fiat-collateralized but still strives to retain value relative to USD.

Here’s a brief overview of four different types of stablecoin projects:

• Fiat-collateralized. These include all stablecoins pegged to reserved fiat value. All fiat-collateralized coins are centralized by design. Examples: Tether (USDT); TrueUSD (TUSD); Gemini Dollar (GUSD); Paxos Standard Token (PAX); Digix Gold (DGX); USD Coin (USDC).
• Crypto-collateralized. These are the stablecoins whose value is pegged to reserved crypto assets. Examples: Makercoin (MKR & DAI); Havven (nUSD & HAV).
• Algorithmic non-collateralized. Software-based economic models that seek to provide price stability without any collateralized assets. Example projects: Basis; Kowala; Fragments.
• Hybrid. The stablecoins which rely on a blend of the approaches listed above. Example projects: Carbon.

BitBay, another crypto stablecoin project, recently has shared an interesting crypto comparison matrix, which sheds some light on how the most popular stablecoin projects stack up. Although, the axes of “enforceability” and “decentralization” are vague.

Where to Get Paxos Standard Token?

Paxos keeps on landing new partnerships with popular exchanges. Some of them are:

Binance (paired with BTC, USDT, ETH, XRP, EOS, XLM, BNB).
Bittrex (paired with BTC, USDT).
DigiFinex (paired with USDT).
OKEx (paired with BTC, USDT).
ZB.COM (paired with BTC, USDT, ETH, ETC, LTC).
CoinBene (paired with USDT).
CPDAX (paired with BTC).
Hotbit (paired with BTC, USDT, ETH).
BCEX (paired with USDT).
Coinsuper (paired with USD, BTC).
Gate.io (paired with USDT).
UEX (paired with BTC, USDT).
Bitrue (paired with BTC, ETH, USDT, XRP).
Kucoin (paired with BTC, ETH).
Bit-Z (paired with BTC, ETH, USDT).
Upbit (paired with BTC).
ABCC (paired with BTC, USDT).
OKCoin International (paired with USD).
FCoin (paired with USDT).

Paxos Standard Tokens can also be exchanged using Paxos.com website.

Where to Store Paxos Standard Token?

PAX is an ERC-20 token issued on the Ethereum blockchain. Therefore, it can be stored in any Ethereum wallet. The most common ETH wallet options include MyEtherWallet, MetaMask, Mint or Jaxx. If this is your first time getting involved with Ethereum, you can find guidance in one of our quick Ethereum guides.

What products support PAX? 

What regions support PAX?

Crypto to fiat trading pairs

Crypto to crypto trading pairs

See the full list of countries that Coinbase supports for crypto-to-crypto trading.

How many confirmations are needed for PAX?

PAX requires 35 network confirmations. Learn about transaction confirmations.

Which blockchain network hosts PAX?

PAX is hosted on Ethereum.

What are the minimum and maximum withdrawal amounts?

Coinbase has implemented safeguards to ensure a healthy and efficient network both on-chain and through our platform.  

These safeguards include both minimum and maximum amounts for each cryptocurrency we allow customers to send through the blockchain.

Minimum: 0.000000000000000001

Maximum: 125,000

By Paxos Standard and Coinbase

Bancor is a blockchain protocol that allows users to convert different virtual currency tokens directly and instantly instead of exchanging them on cryptocurrency exchanges like Coinbase.

BNT is the Bancor Network Token, which is the primary token used within the Bancor network. As of September 2021, BNT is the 98th most valuable cryptocurrency by market cap, with an aggregate value of around $1.06 billion, with one BNT trading at $4.54.

KEY TAKEAWAYS

• Bancor is a decentralized financial network that seeks to provide liquidity to small- and micro-cap coins and returns for liquidity providers.
• Bancor utilizes two token layers that facilitate its liquidity pools and functionality: BNT and ETHBNT.
• Bancor and its competitor Uniswap are the leaders in a new wave of decentralized financial systems.

Understanding Bancor

According to the Bancor website, “Bancor is an on-chain liquidity protocol that enables automated, decentralized exchange on Ethereum and across blockchains.”The protocol was initially developed in Israel in 2017 by Eyal Hertzog, Galia Benartzi, and Guy Benartzi. Their whitepaper (dated March 18, 2018) states Bancor, “enables automatic price determination and an autonomous liquidity mechanism for tokens on smart contract blockchains.”

The name Bancor was chosen as an homage to John Maynard Keynes who coined “Bancor” as the name for a supra-national reserve currency he proposed at the Bretton Woods conference in 1944.

Bancor’s Crypto Liquidity Pools

Many small crypto coins are illiquid given their market cap and whether or not they are listed on an exchange. The transaction costs can also be higher than the costs of the most liquid cryptocurrencies, like BTC and ETH.

For traders who want to deal in small- or micro-cap coins, Bancor’s smart token and smart contract technology, which are self-executing contracts with deal terms between transacting parties written into lines of code, allows these kinds of coins to be bought and sold with minimal friction and fees.

A standard cryptocurrency transaction occurring on a cryptocurrency exchange, whether a centralized exchange or a decentralized exchange involves the transfer of tokens between two parties: a buyer and a seller with the exchange acting as a market maker.

Bancor Network Token (BNT)

Bancor’s purpose is to remove the middleman by creating a virtual reserve currency, which they call Bancor Network Token (BNT), and an automatic exchange mechanism where prices and trading volumes are controlled automatically through the protocol.⁵

Bancor’s native reserve currency token, BNT, is the default reserve currency for all smart tokens created on the Bancor network.⁵ One of the promises of BNT’s ICO was that investors in the coin would gain interest on the transaction fees as other crypto coins are converted into and out of BNT.

Bancor’s protocol converts between different ERC-20 compatible tokens. Each smart token is linked to smart contracts that hold reserves of other ERC-20 tokens. The tokens are converted internally based on these reserves and depending upon the volume of user requests.

Essentially, smart tokens can be thought of as coins that hold the monetary value of other compatible virtual coins. It is the same in principle to a central bank that holds foreign currency reserves and converts between them as required.

The Bancor protocol supports all virtual currency tokens that are compatible with the ERC-20 format. Any smart token created on the Bancor network is also ERC-20 compatible, and therefore compatible with other tokens on the network.

Bancor’s ETHBNT Airdrop

Beginning on Jan. 1, 2020, Bancor airdropped $60,000 worth of ETHBNT into wallets holding a minimum BNT. ETHBNT is a Bancor pool token representing shares in the ETH:BNT liquidity pool. ETHBNT collects fees from ETH-based conversions on Bancor.

The move was meant to increase liquidity by increasing providers, though it is unclear how extra liquidity was added to the Bancor liquidity pools outside of Bancor investing its fiat currency reserves into their platform.

Criticisms of Bancor

Internally, the Bancor network uses the concept of Constant Reserve Ratio (CRR) in all smart token contracts, which purports to eliminate the possibility of the reserve value of smart tokens being depleted. The rate of conversion between various crypto coins is fairly maintained by various formulas and algorithms internally implemented by the Bancor network.

The claim that Bancor guarantees liquidity is contested, however. A pseudonymous blogger “bitcoinchaser” points out that “The level of cryptocurrency liquidity that Bancor has, is relative. If there is a massive run on the token or any other token under it, its price will plummet, and that 20% reserve will be wiped out in minutes. The point is that in the cryptocurrency market, any other comparable token or any new token, would be wiped out faster under similar circumstances.”

Bancor’s foundational claim that its superior technology can prevent a run on any individual coin—even its own tokens—is questionable. As its airdrop of ETHBNT shows, the liquidity on its platform is funded, at least initially, by using fiat currency reserves. As “bitcoinchaser” argues, Bancor provides liquidity for less liquid coins, but in the event of a market panic, BNT itself may become illiquid.

Bancor isn’t the only player in the liquidity pool, decentralized exchange space either. Competitor Uniswap also provides liquidity pools to small coin projects that need liquidity to grow, and an analysis of Uniswap pools argues that any negative change in the price of the underlying asset in the pool can create negative returns for the liquidity provider, outweighing the profit from fees.

Representatives of Bancor gloss over these losses and how they could undermine the exchange by referring vaguely to “arbitrageurs” who will step in to perform the magic of markets function to restore balance.

Traders Magazine puts it like this:

“The biggest problem faced by liquidity suppliers to pools like Uniswap is the risk of major relative price movements between the paired assets. It is therefore ideal to supply liquidity in terms of a stable asset, instead of a volatile one like ETH. This problem is exacerbated by Bancor’s dependence on its native token, BNT, which is even less stable than ETH. Moreover, transactions on Bancor are structured in such a way that they can incur high gas fees, and they are not presently planning to utilize layer 2 scaling technologies to alleviate those pains.”

What products support BNT?

What regions support BNT? 

Crypto to fiat trading pairs

Note: Coinbase Wallet does not support direct bank transactions. You’ll need to transfer your crypto to Coinbase.com or send it to an external address in order to cash out.

Crypto to crypto trading pairs

See the full list of countries that Coinbase supports for crypto-to-crypto trading.

Note: Only assets hosted on the Ethereum blockchain can be converted through the Coinbase Wallet mobile app at this time. Learn more about trading on Coinbase Wallet.

How many confirmations are needed for BNT?

BNT requires 35 network confirmations. Learn about transaction confirmations.

Which blockchain network hosts BNT?

BNT is hosted on the Ethereum blockchain.

What are the minimum and maximum withdrawal amounts?

Coinbase has implemented safeguards to ensure a healthy and efficient network both on-chain and through our platform.  

These safeguards include both minimum and maximum amounts for each cryptocurrency we allow customers to send through the blockchain.

There is a withdrawal minimum of 5.87 Bancor (BNT) and a maximum of 250,000 to send from Coinbase to an external address.

By Adam Hayes and Coinbase