Bancor Voting to Burn Over 10% of Token

Here's one for the crypto pyromaniacs.

DeFi Protocol Bancor Voting to Burn Over 10% Of BNT Token Supply

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.

Maybe. And the key here is the "at a later stage."

The Bancor discussions can be followed here. This recovery plan gives far more details regarding the financial reasons for the economic changes that including the BNT burn as part of the whole package.

On Bancor: The Design, The Flaw, and The Future

One thing that made Bancor stand out from Uniswap was their protection against impermanent losses. But there was a flaw.

In June, Celsius’s unwind was the tail event that exposed the flaw. Liquidity on the Bancor network was low as market conditions led to depositor withdrawals, especially after the UST collapse in May. This happened across DeFi and is not unique to Bancor. Celsius had a large BNT position, along with other assets. They sold hoards of BNT, driving the price down and the protocol into deficit. As Celsius entered the cooldown period to withdraw their ETH, their principal protection would cause a substantial new mint of BNT. It was clear there would be a potentially catastrophic outcome. A “run on the Bancor.”

So, the proposed burn is not entirely about attempting to improve the BNT market price, but is mainly to bring their internal ecosystem back into some form of stability, and the price of that will be a major redesign of the whole system.

The B3 design was an incredible attempt to create a new DeFi protocol with a utility token. The protocol did not solve for tail risks and the DAO increased the probability of facing such a tail with liquidity mining rewards.

The wisdom of the DAOs.