Part 5– Thriving Amid Chaos: DeFi, Global Markets, and the Fight Against Inflation
For the full series, see Part 1, Part 2, Part 3, Part 4, Part 5.
You might associate blockchain or Bitcoin with digital gold or get-rich-quick schemes, but beneath the surface, this technology holds a much deeper purpose — one that is transforming global finance in profound ways.
Since 2017, Bancor has been at the forefront of this transformation, leveraging blockchain to build systems that promote financial inclusion, stability, and empowerment on a global scale.
The Origins: A Community Currency
The concept was simple: create a local digital currency to facilitate the exchange of goods and services without relying on traditional banks, fostering economic resilience in small communities. The “Hearts” project’s success, with over 40,000 mothers trading $24 million in “hearts” for services and goods, demonstrated the potential of decentralizing the financial system. This initiative laid the foundation for Bancor’s mission: leveraging blockchain technology to create decentralized financial ecosystems that prioritize both stability and inclusivity.
Inventing DeFi: Constant Product AMMs (2017)
Following the success of the “Hearts” initiative, Bancor turned its focus to a broader application of decentralized finance, leading to the invention of Constant Product Automated Market Makers (AMMs). This innovation marked the birth of DeFi, revolutionizing how liquidity was provided on the blockchain. Constant Product AMMs allowed users to trade assets directly against a pool of liquidity in a decentralized, peer to peer manner. This breakthrough allowed Bancor to extend its impact beyond local currencies, providing a foundation for the entire DeFi ecosystem as we know it today.
Expanding the Vision: Kenya’s Blockchain-Based Currencies
Building on the principles established by the “Hearts” project, Bancor expanded its vision to Kenya in 2018. The goal was to implement blockchain-based currencies that could facilitate economic activity in underbanked regions, where traditional financial services were either unavailable or unreliable. By introducing these local currencies, Bancor provided a stable and reliable alternative to national currencies, which were often subject to volatility and devaluation. This initiative showcased the practical benefits of blockchain technology in real-world scenarios, helping communities transact securely and efficiently, even in challenging economic conditions.
Smart Tokens (AKA, LP Tokens) and Concentrated Liquidity (2017–2020)
As Bancor’s vision grew, so did its technological innovations. In 2017, Bancor introduced Smart Tokens, now commonly referred to as LP (“Liquidity Provider” or “Liquidity Pool”) tokens. These tokens served a necessary account-keeping role in the system, enabling users to pool assets, provide liquidity in decentralized exchanges, and participate in the DeFi ecosystem.
By 2020, Bancor took liquidity provisioning to the next level with Amplified Liquidity, more commonly referred to as Concentrated Liquidity. This innovation allowed liquidity providers to concentrate their assets within specific price ranges, making liquidity provision more capital-efficient and effective. For stablecoins, in particular, this meant maintaining tighter control over their peg, ensuring greater stability and reliability in volatile markets.
Asymmetric Liquidity DEX and Adjustable Bonding Curves (2022)
In 2022, Bancor unveiled two groundbreaking innovations: Asymmetric Liquidity and Adjustable Bonding Curves, which form the core of Carbon DeFi, Bancor’s advanced orderbook-style DEX. Carbon DeFi empowers users with unparalleled flexibility and control over their capital and enables the creation of liquid markets tailored to specific needs. These innovations have opened the door to more sophisticated trading strategies and nuanced liquidity management, enhancing the stability and sustainability of projects across the DeFi space.
The Arb Fast Lane Protocol (2023)
Bancor’s introduction of the Arb Fast Lane Protocol was another leap forward in maintaining market efficiency. This first-of-its-kind arbitrage trading bot plays a crucial role in supporting the stability of markets chain-wide by ensuring that prices remain aligned across different exchanges, further enhancing the robustness of the DeFi ecosystem.
Aligning with Celo: A Continuation of the Mission (2024)
Bancor’s most recent deployment represents a significant continuation of its mission to enhance financial stability and inclusion. Celo blockchain is scaling Ethereum with a clear mission to provide financial prosperity for all, aligning perfectly with Bancor’s longstanding vision. By deploying Carbon DeFi and the Arb Fast Lane on Celo, Bancor is expanding its reach and continuing with its ongoing commitment to making decentralized finance accessible and impactful, especially in regions where financial inclusion is critically needed.
A Legacy of Empowerment and Collective Impact
Sometimes, I get so distracted by the noise of my Crypto Twitter feed, or the constant onslaught of buzzwords and price speculation, that I temporarily lose sight of why I was so drawn to this industry, to DeFi and blockchain technology. It was, and still is the real-world impact it has the potential to make.
Bancor has a legacy, and even though it was a big part of my career change 3 years ago, our legacy is greater than one project — it’s the collective force driving our industry forward, the shared commitment to empowering people, continuously redefining what financial inclusion can look like, and pushing the boundaries of what’s possible with blockchain technology. Here’s to all the projects tirelessly working to build this legacy. Cheers.
Full Series of “Thriving Amid Chaos: DeFi, Global Markets, and the Fight Against Inflation”
Part 1: Thriving Amid Chaos: DeFi, Global Markets, and the Fight Against Inflation
Part 2: A Lifeline in Inflationary Economies: The Broader Impact of Stablecoins
Part 3: Capitalizing on the Volatility of Stablecoins
Part 4: Safeguarding Stability: Project-Level Approaches to Stablecoin Security
Part 5: Technology with Purpose: Revolutionizing Blockchain Beyond Bitcoin
