Decrypt’s Art, Fashion, and Entertainment Hub.
Decentralized exchange protocol Bancor has revealed its upcoming airdrop, worth around $2.6 million, will happen in the two weeks following an upgrade to its network, which will happen sometime in December. It has also provided a few details regarding why it is happening and how it will work.
Bancor functions similarly to a decentralized exchange where users can buy and sell coins directly to one another—however the company plays a more active role in maintaining the network. But to ensure there’s enough liquidity on the exchange, Bancor uses a mechanism that creates pools of coins, called liquidity pools, that people can dig into. And it even has an innovative mechanism that stops them from drying up—you can read more about that here.
Later this year, the network will go through a change that affects how Bancor’s native token BNT will work. At the moment, 10% of every BNT token is backed by ether (ETH)—made inaccessible through the use of smart contracts. But instead of having all of this ether locked up and made unusable, Bancor wants its users to be able to use it instead.
So, Bancor is airdropping a token that represents—and is backed by—both this ether and BNT, split 50:50 down the middle. The new token will be called BNTETH.
The token will also have a function on the Bancor network. People will be able to use it to create liquidity pools—as we discussed earlier—in a way running their own micro-exchanges. The tokens will be distributed proportionally between those who hold the BNT token. Bancor hopes this will create 60,000 new liquidity providers on the Bancor network, helping to keep the network running and healthy.
The side benefit for users is that they receive a share of fees from trades of ether on Bancor. But it’ll only work if they can get their heads around the increasingly complex nature of the product.
“Mainstreaming first of its kind tech ain’t easy,” tweeted Nate Hindman, growth at Bancor. He’s not wrong.