[Exclusive]: Bancor is Airdropping BNT's Ether Reserve and Allowing Inflation

Good morning defiers! Here’s what’s going on in decentralized finance:

  • Bancor announced an airdrop and new inflation model

  • MakerDAO cuts rates

  • ETHBoston DeFi winner


Bancor is Airdropping the Entire BNT Token’s Ether Reserve

Bancor is stepping up efforts to increase use.

The decentralized liquidity network plans to airdrop all of BNT’s ether reserve to BNT holders, according to a Bancor statement shared exclusively with The Defiant. It will also allow token inflation so that network participants can be rewarded with BNT, the statement said. BNT, or Bancor’s network token, is used as a reserve token to facilitate exchanging other tokens listed in the network.

BNT holders will receive airdropped tokens in proportion to the BNT they hold, Bancor spokesman Nate Hindman said in an email. The tokens entitle holders to a proportional share of the BNT/ETH Liquidity Pool, including the accumulated fees, Hindman said. That way, token holders instantly become liquidity providers, or they can also sell their tokens in exchange for ETH or any other token in the Bancor network or other exchanges. The date of the airdrop hasn’t been announced but is planned to happen in about a month after today’s announcement.

BNT holds an ether reserve equal to 10 percent of BNT’s market cap, which is currently $22.5 million. That means the value of the airdrop would be about $2.2 million as of today, which would make it one of the the largest airdrops ever. The record was Blockchain.com and Stellar’s giveaway of $125 million, and there have been few other airdrops topping $1 million.

Image source: Bancor

The 10 percent ether reserve backing BNT was set in Bancor’s June 2017 ICO. By airdropping the reserve, Bancor wants to instantly create thousands of new liquidity providers. Maybe that way, more users will see the advantage of gaining fees and will want to provide additional liquidity for the rest of the network. Bancor represents just 2 percent of total transactions out of decentralized exchanges tracked by Etherscan in the past seven days.

In another step to incentivize participation, it’s allowing token holders to vote to increase BNT inflation. After the airdrop, BNT inflation will be set to 0 percent. If the community votes to increase the inflation rate of BNT, inflation will be applied by issuing new BNT. BNT inflation could be used to fund liquidity pools, oracles and developers, as voted on by BNT holders. 

Separately, the Bancor Foundation also announced a new grants program. Initial grants are awarded by the Bancor Foundation, and BNT holders will vote for grant winners in the future. The first two grant recipients are PEG Network, which is developing a stable version of BNT called USDB, and CoTrader, which is developing a permissionless liquidity portal.


MakerDAO Stability Fee Cut to 14.5%

MakerDAO’s stability fee was cut by two percentage points to 14.5%. It was as high as 20.5 percent less than two months ago. The interest rate to borrow Dai is now lower than Compound v2 for the first time ever.

More competitive rates on Compound had caused Maker’s dominance in DeFi, as measured by amount of value locked in the protocol, erode from about 80 percent at the start of the year, to just above 50 percent now, according to DeFi Pulse. Tools like InstaDApp’s bridge, which made it easy for borrowers to switch from Maker to Compound, helped.

It will be interesting to watch in the coming days whether Maker dominance starts to grow again and the InstaDApp bridge is used the other way.

ETHBoston DeFi Winners

The sixth Ethereum hackathon this year, ETHBoston, just wrapped up. DeFi has dominated project submissions in the past. This time, two of the six winners were DeFi-focused; SwanDAI and ZeroPool.

SwanDAI is a synthetic asset built with UMA Token Builder that tracks the deviation of DAI's price from its dollar peg. The payout increases exponentially as the deviation increases.

Companies issuing DAI salaries could hedge against a DAI “death spiral,” while “Speculators and stablecoin naysayers can now put their money where their mouth is and bet on the DAI peg breaking,” according to the three Wills who made the hack.

ZeroPool is an anonymous multi-asset pool implemented as a smart contract with zero-knowledge proofs. Asset types, asset values, transfers and atomic swaps are all private.

[Check out my analysis of past hackathon winners]


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About the author: I’m Camila Russo, a financial journalist writing a book on Ethereum with Harper Collins. I was previously at Bloomberg News in New York, Madrid and Buenos Aires covering markets. I’ve extensively covered crypto and finance, and now I’m diving into DeFi, the intersection of the two.