What is BNT?
Bancor (BNT) is a decentralized network of on-chain automated market makers (AMMs) with the stated goal of supporting instant, low-cost trading, as well as Single-Sided Staking and 100% Impermanent Loss Protection for any listed token. The protocol is overseen by the Bancor Decentralized Autonomous Organization (DAO), and its mission is to facilitate simple and safe access to decentralized trading and yield.
Bancor protocol was first launched in 2017, and was amongst one of the first Decentralized Finance (DeFI) protocols to be established. Today, it reports generating millions in fees per month for depositors on 70+ tokens such as ETH, WBTC, LINK, MATIC, and more. The protocol is reportedly levered by many DeFI protocols including UMA, Paraswap, Nexus Mutual, KeeperDAO and others.
The Bancor Network Token, or BNT, is an ERC-20 utility token that allows traders to provide liquidity for the pools available on the network. BNT tokens are used as an intermediary currency when tokens are traded, and as such they are key to supporting the protocol’s AMM activity. Notably, the Bancor Network requires a user to lock only one asset in the pool as opposed to most of its competitors like Uniswap, which requires a user to lock a pair of assets. Users may stake their BNT on the Bancor network to generate rewards from providing liquidity, as well as earning fees from trading activity. The BNT token also allows holders to vote on any proposed changes to the network. Please note that governance participation is not available through the Wealthsimple Platform. If you wish to participate, you will need to withdraw your tokens to an external wallet.
How does BNT compare to Bitcoin?
BNT differs from Bitcoin in a few important ways.
First, Bitcoin is a “coin” and BNT is a “token.” That is because Bitcoin powers the Bitcoin blockchain, and it is mined by a decentralized network of computers that solve complicated math puzzles to verify transactions. By contrast, BNT is a token that runs on the Ethereum blockchain. On Ethereum, ETH is the only coin that can be mined and miners mine ETH to process BNT transactions. It is what is known as an ERC-20 token, the name applied to the generic token standard for the Ethereum blockchain.
Being an ERC-20 token has perks. Blockchains aren’t great at speaking to each other—you can’t get an Ethereum contract to work with a Bitcoin smart contract without some complicated engineering. However, it’s very easy for ERC-20 tokens to speak to one another, which means that BNT can be used in most other decentralized finance applications.
In addition, unlike Bitcoin, BNT is a utility token. While, like Bitcoin, BNT can be used as a means of payment or a store of value, its market price may be very volatile and so it may not be useful for payments or storing value.
Finally, BNT’s market capitalization is smaller than Bitcoin’s. As of May 2022, BNT’s market capitalization was estimated to be $400 million, as compared to Bitcoin’s market capitalization of $600 billion.
Before trading any crypto assets it is important to understand the risks. This overview is a starting point for you to perform your own research prior to investing in a crypto asset. First and foremost:
No Canadian securities regulatory authority has expressed an opinion about BNT, including an opinion that BNT is not itself a security and/or derivative.
Wealthsimple has performed a legal assessment of BNT prior to making it available on Wealthsimple Crypto and has concluded that BNT is not and is unlikely to be deemed a security or derivative. However, there is a risk that this conclusion could change in the future and the impact of this on an asset’s value is outlined in our Product Disclosure.
We evaluated BNT based on publicly available information, including (but not limited to):
- The creation, governance, usage and design of BNT, including the source code, security and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that first created BNT;
- The supply, demand, maturity, utility and liquidity of BNT;
- Material technical risks associated with BNT, including any code defects, security breaches and other threats concerning BNT and its supporting blockchain (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them; and
- Legal and regulatory risks associated with BNT, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of BNT.
Like all other crypto assets, there are some general risks to investing in BNT. These include short history risk, volatility risk, liquidity risk, demand risk, forking risk, cryptography risk, regulatory risk, concentration risk, electronic trading risk and cyber security risk. Each of these risks are described in more detail in our in-app Product Disclosure.
Further to these general risks, Bancor, the Bancor development team and other affiliated entities are not under any legal or regulatory obligation to disclose material information to the public regarding its activities. Holders of BNT have no recourse to Bancor or Wealthsimple if BNT declines in value for any reason.
We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading BNT. Investors should perform their own assessment to determine the appropriate level of risk for their personal circumstances.
WDA is offering Crypto Contracts in reliance on a prospectus exemption contained in the exemptive relief decision Re Wealthsimple Digital Assets Inc. dated June 18, 2021. Please be aware that the statutory rights of action for damages and the right of rescission in the securities legislation of each province and territory of Canada would not apply to a misrepresentation in this Statement.