Bancor, the decentralized protocol for token liquidity, has now opened up its staking pools to the public. Whereas previously, only relay token issuers could contribute liquidity, this development means that anyone can now stake their cryptos by buying a relay token on the Bancor network. Liquidity pools on Bancor generate fees with each conversion they process, so anyone now has the opportunity to realize interest through Bancor by staking their crypto holdings.
What’s a Relay Token?
Unlike most exchanges, centralized or decentralized, Bancor doesn’t rely on the order book system, which depends on each buy order having a counterparty seller. With this system, traders struggle with liquidity for lesser-known altcoins, as fewer traders means waiting until there’s an order match.
Instead, Bancor relays depend on on-chain token reserves to provide a continuous supply of any token, reducing incidences of price slippage or unpredictable swings in the value of a token. By connecting these relays across the Bancor network, it becomes possible to trade any network token for any other.
Until now, token issuers were the only parties who stake the necessary liquidity to ensure their token could be traded on the Bancor network. Now, any token holder can put it to work on Bancor, earning a percentage of the transaction fees paid by users who swap their tokens on the network. Users have the option to sell their relay tokens at any time, thus withdrawing liquidity from the token pool.
Accelerating Growth Potential
By opening up its liquidity pools to any token holder, Bancor has set the stage for community-driven liquidity. There is a vast appetite for decentralized finance applications among crypto users, who have proven keen to put idle tokens to work by staking them for the chance of earning interest.