Bancor

As thousands of tokens have been created and continue to be created, there is a growing need to swap between them. Traditional exchanges require there to be a willing buyer and seller for each token pair to trade, also called liquidity. However, insufficient liquidity for many long-tail cryptoassets prevented centralized exchanges from listing them. Bancor was designed to create permissionless token trading markets for a burgeoning token economy.

Bancor launched on June 12, 2017, with the largest initial coin offering, or ICO, at the time. It raised $153 million, distributing half of the initial BNT supply in the process. The other half was distributed among Bancor's founders, investors, and treasury. Bancor was the first DEX to use an AMM to facilitate swaps between Ethereum-based tokens. Instead of a central order book that matched buyers and sellers according to their bid and ask prices, the AMM fulfilled orders with on-chain liquidity pools.

In July 2018, an attacker stole 25,000 ETH, 2.5 million BNT, and 230 million NPXS tokens from the Bancor protocol. The team was able to recover, freeze, or destroy the stolen BNT, but no ETH nor NPXS were recovered. The Bancor team's recovery sparked controversy about the protocol's centralized governance that enabled the team to unilaterally manipulate the BNT supply. The event pushed the team to decentralize its platform by transitioning governance to a DAO. The Bancor went live towards the end of 2020. It allows BNT holders to propose and vote on upgrades and protocol governance issues.

In September 2019, Bancor announced it would airdrop its entire Ethereum reserve to BNT holders. The team also altered the token model to create an inflationary model to reward liquidity pools, oracles, and developers as determined by the community.

Bancor V2.1 launched in March 2021 with new BNT supply and governance updates to address issues common to AMM exchanges. The previous Bancor iteration required LPs to deposit two assets to each pool, BNT and its paired token, in proportional amounts. This often resulted in involuntary exposure to either token. Liquidity providers experienced impermanent loss when token prices on Bancor lagged prices elsewhere. The new BNT supply is elastic to mitigate both problems. Single-sided deposits are now accepted and paired with newly minted BNT, eliminating involuntary exposure. As LPs deposit BNT in the same pool, minted BNT is burned to balance BNT's circulating supply. Bancor now requires a minimum BNT staking time to receive vBNT, the protocol's new governance token. The Bancor Vortex provides BNT depositors with additional rewards for subsequently staking their vBNT.