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Protocol tokens work best when there is a service that investors perform for users.
E.g. SNX stakers mint synths and bear their debt on behalf of users. Usage increase = fee increase = SNX appreciation = more minting. So the system scales better than if it (just) used ETH.
E.g. SNX stakers mint synths and bear their debt on behalf of users. Usage increase = fee increase = SNX appreciation = more minting. So the system scales better than if it (just) used ETH.
This model is also harder to fork, because forks must first attract a community of stakeholders that take the job seriously.
These systems are difficult to bootstrap, on account of the feedback loop being a chicken & egg problem. But once running, can scale almost effortlessly.
These systems are difficult to bootstrap, on account of the feedback loop being a chicken & egg problem. But once running, can scale almost effortlessly.
Bancor v2 is an example of applying this model to AMMs. Since Bv2 allows single asset LPs, BNT stakers take the role of supporting the other side of AMM pools. This service (performed by BNT holders) is what enables LPs to provide just one token instead of two.
In return for this service, BNT stakers receive ~1/2 of the the fees. More volume = more fees = BNT appreciation = bigger AMM pools.
Could this model use ETH instead of BNT? Absolutely. But scaling would be harder due to the lack of a strong feedback loop.
Could this model use ETH instead of BNT? Absolutely. But scaling would be harder due to the lack of a strong feedback loop.
People have been waking up to the power of tokenomics like $SNX, $LINK, $RUNE, and even EIP-1559 all of which encourage feedback loops. And as a result, many teams are implementing new ways for token stakers to service users (such as Aave's proposed Safety Module).
For better or worse, Bancor is not a fan favorite in the DeFi space. But neither were SNX, LINK, or RUNE not long ago.
Ppl are very excited about synthetics, derivatives, and oracles these days. And rightfully so. But, right now, today, DEX's are where the most value capture is.
Ppl are very excited about synthetics, derivatives, and oracles these days. And rightfully so. But, right now, today, DEX's are where the most value capture is.
I have little doubt that synthetics, derivatives, and oracles will be absolutely massive. But it could be a number of years still before this happens. And if Bancor can capture a sizeable portion of Uniswap's volume, then BNT stakers will be making very good money.
Of course, BNT has risks as well. The AMM space is competitive and things change fast. But the more I learn about Bancor's plans, the more confident I am it is undervalued, based on *next year's* potential earnings, which is something that few projects can boast.
I'll leave it at that for now, or I'm scared there may be no end to this thread ahah
If you wanna learn more I recommend Nate's AMA with Aave yesterday (in the 'ecosystem' channel of their discord). Nate will also be discussing yield farming tomorrow
https://twitter.com/NateHindman/status/1290229586488258560?s=20
If you wanna learn more I recommend Nate's AMA with Aave yesterday (in the 'ecosystem' channel of their discord). Nate will also be discussing yield farming tomorrow
https://twitter.com/NateHindman/status/1290229586488258560?s=20
