There’s no denying the fact that the global macroeconomic landscape has continued to deteriorate rapidly over the past year or so, thanks, in large part, to the Federal Reserve’s quantitative easing measures (such as interest rate hikes).
This has caused liquidity to dry up globally, thereby affecting a whole host of markets, including stocks, commodities, and crypto.
To this point, over the last few weeks, several crypto projects have taken matters into their hands to help spur the price action of their favored assets.
For example, community members associated with the popular Decentralized exchange protocol Bancor have recently voted on a critical proposal that reduces the Total Supply of its native cryptocurrency — Bancor network token (BNT) — by burning BNT to help bolster the asset’s potential price action.
In its simplest sense, a token burn can be thought of as a mechanism that allows for the removal of a fixed number of coins from a currency’s circulatory pool. This helps improve an asset’s supply-demand ratio, thus allowing for a possible appreciation in its value at a later stage.
Many exchanges and popular crypto projects, including KuCoin, Binance, Gate.io and MEXC Global, partake in these activities regularly.
What is changing and how is it affecting Bancor?
In June 2022, Bancor halted the distribution of its BNT tokens, resulting in the suspension of its Permanent Loss Protection (ILP) program. Since then, the project has been rebuilding its digital infrastructure, with particular emphasis on mitigating any Inflation risks associated with BNT as well as restoring its token reserves.
As mentioned earlier, a couple of days ago, 1M BNT was burned successfully after being brought and collected within Bancor’s v3 vault. The one-time BNT burn, which was voted on by the protocol’s DAO participants, was performed, with 0.5% of the currency’s Circulating Supply now having been destroyed irrevocably.
These burning efforts stand to be quite beneficial for the protocol’s future health because they allow the value of BNT to rise in relation to listed tokens while naturally refilling the platform’s TKN reserves.
Additionally, a 21M BNT burn is also being discussed as part of Bancor’s migration from v2.1 to v3. To elaborate, the associated POL BNT that could be eliminated from the fray lies around approx. $10.3M or 21.9M BNT which works out to a little over 10% of BNT’s circulating supply (200M).
Lastly, it is also worth noting that BNT minting has been placed on pause, a move that has added more deflationary pressure on the asset. Not only that, to counter any inflationary risks associated with the coin, Bancor’s governance community has passed a proposal to discontinue BNT liquidity mining rewards.
vBNT continues to burn
Another important step Bancor has taken to strengthen its economic framework is to increase the percentage of internal fees used to purchase BNT and burn vBNT. vBNT is Bancor’s governance token issued to users who deposit BNT across bancor’s various liquidity pools.
In this regard, it bears highlighting that 90% of fees on Bancor v3 is currently being harnessed to acquire new BNT, while 100% of fees on Bancor v2.1 are being used to buy BNT and burn vBNT. The total amount of vBNT that has been burnt over the course of 2022 has grown exponentially with each passing month, currently standing close to the $2.8M mark.
The BNT token is currently trading at around $0.4. However, at the height of the 2021 bull run the asset scaled up to an all-time high of $9. Lastly, BNTs total circulating supply currently lies at 198.85 million, down from over 240 million at the beginning of the year.
Source: bitcoinist.com
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