DeFi Update | Week #14, 2021
Bancor Network, one of the oldest DeFi platforms, keeps innovating with the introduction of Vortex. They are creating a mechanism that automatically burns vBNT, locking BNT. This creates more value, as the platform is looking to catch up with competitors like 1inch and Uniswap.
This week Bancor continues building on the introduction of Vortex by adding buy-and-burn for vBNT. Instadapp announced INST, while BadgerDAO looks to the institutional segment. Furthermore Fei Protocol tries to reestablish the peg in what was another exciting week for the DeFi sector.
The DeFi sector maintained its upward trajectory, and now stands over $100 billion across different blockchains according to CoinGecko. Another major project without a token, announced a governance token launch. This time it was Instadapp. Instadapp is expected to introduce the INST token in Q2 along with a host of other improvements catalyzed by the DeFi smart-layer protocol.
BadgerDAO secured a partnership with Fireblocks, in an attempt to venture into the institutional segment of the market. Given that institutional investors tend to have a higher comfort level dealing with BTC than with other crypto assets, BadgerDAO may be in a good position to create a bridge from the institutional world to DeFi.
However, not everything has been smooth this week. In particular, the Fei Protocol has had a tough first few days after its launch. The algorithmic stablecoin project has found it difficult to maintain the peg, and had to deal with a vulnerability. The project has turned off the “burn incentive” and hopes that will help return the stablecoin back to its peg.
Bancor looking to burn own BNT token
Bancor has introduced the buy-and-burn to its protocol, which will see 5% of the protocol fees used to buy and burn vBNT, locking BNT.
The plaform is one of the oldest DeFi projects around, having started before the term DeFi became popular. It raised around $153M in ETH during its 2017 ICO, to become one of the first AMM exchanges. In 2018 the project had to deal with a hack, but it persevered.
The protocol had to survive the crypto winter, and it even airdropped its ETH reserves in the form of ETHBNT Bancor Pool Token to support user engagement. The protocol survived and in April 2020 announced a V2, followed by V2.1 in October 2020. This latest version saw the introduction of concepts like single-sided exposure and impermanent loss insurance. Impermanent loss has been a major obstacle for AMMs and Bancor’s attempt to address may be an important step in the evolution of the DeFi segment.
Recently, Bancor introduced Vortex, which enabled users to stake BNT in exchange for vBNT, meaning that they could borrow against staked BNT. The buy-and-borrow works off of the Vortex setup, using a variable portion (controlled by governance) of the fees to burn vBNT, which in turn locks BNT. It will be interesting to see if vBNT will be integrated in other DeFi protocols similar to yield bearing tokens like Compound’s cTokens.
Bancor has continued to evolve since its initial launch, and its fortitude has allowed it to become one of the top DeFi applications in regards to TVL. The competition in the AMM segment is growing, especially with Uniswap announcing its v3. However, Bancor has shown the ability to adapt, and this quality should serve it well going forward.
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The information provided here is for informational purposes only. This is not investment advice and should not be treated as such. Strategic Round Capital and/or the author of this article holds a position in BTC, ETH, COMP, AAVE, YFI.