Decentralized exchanges have risen in popularity because of the gaps that exists in conventional exchanges. The cryptocurrency market is advocating the concept of decentralization and exchanges play a vital role in this. Decentralized exchanges are also known as automated market makers (AMM) as the automate all the processes of an exchange – eliminating the need for an intermediary as well as making the exchange more efficient and cheaper.
However, decentralized exchanges usually suffer from the problem of liquidity. With centralized exchanges, the liquidity is secured by the intermediary but the absence of centralized intermediaries in decentralized exchanges makes securing liquidity a problem. The problem is more rampant with small tokens. AMMs like Bancor are focusing on eliminating the problem of lack of liquidity.
What is Bancor?
Bancor is an on-chain liquidity protocol that enables the exchange of cryptocurrencies on Ethereum and other protocols. It is a software based on blockchain technology which is designed to incentivize users to lock their cryptocurrency assets into the protocol in return for rewards in the native token, BNT.
Users’ assets are locked in liquidity pools. The liquidity pools enable trade on the protocol and the users earn share through the fees paid by traders for executing their transactions. This incentivizing mechanism ensures the protocol does not suffer from liquidity problems. Moreover, Bancor focuses specifically on smaller tokens due to their unavailability on popular conventional or non-conventional exchanges. Smaller tokens are harder to trade in because of a lack of liquidity which makes their transaction costs much higher. Bancor’s smart token and smart contract technology is curated for the buying and selling of these smaller-cap token with minimal transaction fees.
Future outlook
Bancor is one of the popular automates market makers in the crypto market. The protocol stands at a rank of 102 in terms of capitalization. Currently, the token stands at a price level of $4.18 with the market capitalization at $35 million and the total value locked at $1.6 billion – indicating good liquidity.
The protocol recently underwent a huge revamp to Bancor V3. The newer iteration of the network has focused on some key problems that were rampant with the network – making it more efficient. A proposal to increase the burner rate of BNT from 10% to 15% was also approved which resulted in larger liquidity. The developments of the network have been fueling a bullish future outlook for the cryptocurrency.
According to the estimates of Wallet Investor, the cryptocurrency is expected to trade at a price level of $6.9 in a year’s time while the five-year projection places it at $18.2. Digital Coin Price predicts a price of $14 by 2026.
