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Decentralised exchange protocol Bancor will soon be airdropping what could amount to millions of dollars’ worth of ether onto holders of its proprietary token, BNT.
Through a complex mechanism known as “staking,” the ether gifted will allow users to essentially run their own micro-exchanges on the platform. The idea is to jumpstart a colorful—and more importantly, liquid—economy of crypto-tokens, and onboard new users from outside of crypto.
Here's how it works: Bancor functions as a network of “liquidity pools” that allow users to trade all manner of tokens—some high volume, like Ether and EOS, and smaller ones, like ENJ and IQ. When you trade one of these tokens, the underlying liquidity pool of the same tokens—essentially a reserve — depletes or replenishes depending on the trade.
So if I trade OmiseGo for BAT, for instance, the reserves will adjust to account for the trade. These reserves generate liquidity for even the most far-flung of tokens.
To encourage greater liquidity, Bancor recently released provisions allowing anybody to “stake” their own tokens in these reserves. Doing so grants them a “relay token,” which entitles them to a) small fees extracted from each trade in the relevant pool, and b) the ability to withdraw the funds deposited, with interest. As Bancor communications director Nate Hindman puts it, this allows the individual user to “become the exchange.”
How does this relate to the airdrop? Simple. Sort of. Anybody who holds BNT will soon receive a stake in the BNT-ETH liquidity pool—one of the largest—proportionate to how much BNT they hold at the time of the airdrop. So if you have 1 percent of the BNT in circulation, you’ll receive a 1 percent stake in the BNT-ETH pool. You’ll be able to extract fees from any trades processed by the pool, and draw out your proportionate stake, with interest, whenever you want.
All of this will happen automatically: no complex setup, no forms to file, just immediate ownership of a portion of the liquidity.
The airdrop will also grant BNT-holders other privileges: for one, BNT holders will now be able to vote on the rate of BNT inflation and its recipients - such as an indie developer building new features on the Bancor Protocol. Handing BNT holders this level of control, says Hindman, could make Bancor similar to a decentralized autonomous organization, or DAO; that is, a protocol run entirely by its users with no central control.
What’s the point of all this?
Bancor hopes that by freely granting these privileges, users will better understand the possibilities of—and profit to be gained from—having a stake in a decentralized liquidity network. In turn that could encourage them to stake funds in other pools, expanding the network and allowing even obscure tokens to flourish.
And that all plays into a new platform, Creator, developed by Bancor’s core developer LocalCoin, which allows digital “content creators” to create their own tokens to fund their work. Each “creator” token uses BNT, so can be traded for tokens and regular currency. A freelance blogger could, for instance, launch a token accessible only to those holding a certain number of tokens (similar to what LocalCoin’s co-founder is doing). The hope is that the economics of supply and demand would play out, generating dividends for the creator’s audience.