Nate Hindman on Bancor’s liquidity solutions

0:00I'm Ashlyn Addison from event chain for investmentpitch media and FinTech news network and today on blockchain interviews we have Nate Hindman the head of growth at Bank or Nate thanks so much for being on the show it's a pleasure to have you here today thanks for having me appreciate it you're very welcome I'm very excited to talk about Bank or I've been following

0:20the project for a few years I know that it has a decentralized exchange portion to it and a liquidity token pool which I know a lot of people are eager to learn about could you give a little bit of just the background of of Bank or before we dive deep into it sure so Bank or has been around since late 2017 it's technically called a decentralized I'm

0:43sorry an automated exchange protocol and it's sort of a new way to build Dex's based off of this primitive you mentioned called liquidity pools that sort of automate all the core functionality of an exchange so the listing of tokens the order matching of trades and also the circulation of trading fees to liquidity providers this is something that you can do all on the

1:06protocol level with a permissionless set of smart contracts it will really design the sort of first model to do that and you can think of sort of two main types of users of Bank that's one the sort of end users who use the protocol to trade tokens and to perform token a token trades on the network and then the other really important user group are liquidity providers who are just

1:30everyday users who can add their liquidity to the exchange and then generate trading fees from the exchange where as you know a typical exchange would be built on just a few liquidity providers bankers protocol can scale to an infinite number of folks that contribute liquidity and also generate fees off the exchange Wow well it's very interesting I know a lot of our viewers

1:54are very familiar with centralized exchanges and you know there's been this notion of decentralized exchanges but they haven't quite gotten the popularity that people would have hoped for yet and now you guys are you know you have an automated exchange I'm not sure if there's a difference between those two but I'm guessing that the competitive advantage is this liquidity pool where

2:14you know everyday traders can actually help support the exchange is that make it different from a traditional decentralized exchange yeah exactly so Dex's were in 2017 and 2018 everyone was very excited about the capacity of decentralized exchanges all of a sudden we could perform non-custodial trades where we wouldn't have a central party owning our information and there

2:40wouldn't be a central point of attack you know you wouldn't have to store funds on the exchange that would you know lead to to hackers and all those big hacks we've seen on centralized exchanges but you know today two years later we only see that decentralized exchanges makeup you know way way less volume than centralized exchanges and one of the main issues in addition to

3:01sort of the Cata the challenges of non-custodial key management is really the lack of liquidity on decentralized exchanges and what can sort of happen when you have low liquidity on an exchange as it can you know cost really high slippage costs for traders there's lots of volatility and so what we really found is there is sort of this this flaw in in order buff based exchanges and

3:26decentralized exchanges were sort of replicating this order book based model and so what Bank has done is it removed the author book and replaced it essentially with on chain reserves that make up these liquidity equals and like like I said with what this allows to do is it really lowers the technical barrier to any everyday user becoming a market maker and contributing their

3:51funds to the exchange and sort of staking them on the exchange in in exchange for some of the trading fees that are generated so so the real idea is that you know everyone's tokens are just sitting around in their wallet you might as well stake them on a exchange protocol and generate passive income from from that exchange and this we hope and we're starting to see is really

4:19starting to solve the liquidity problem that decentralized exchanges have faced when when anyone can be a market maker as opposed to just industrial players or or whales mm-hmm yeah and this is a huge initiative Nate because you know I've personally used decentralized exchanges and and you're right there are all those problems and this is something that I know you guys

4:40are planning to tackle throughout 2020 and you know to kick it off on the first day of the year you guys are planning this you know eath B&T airdrop and this is supposed to play into the whole liquidity token pool can you talk about you know what are the goals for this airdrop and what does it mean for for the protocol yeah so I mean I think there was a really interesting

5:01point made the other day with respect to its changes which is they're only as decentralized as their liquidity sources so if the folks providing liquidity if you're marking makers if it's concentrated between a small handful of say like I said institutional market makers or whales then you know your liquidity sources really aren't decentralized and and the the vision of

5:25a bank or is really having user owned exchanges where I mean there's thousands and thousands of users providing liquidity to the to the network and to the protocol and exchange and getting these conversion fees so the goal of this upcoming airdrop is essentially we're taking 10% of the bank or networks token of its market cap and we are air dropping it in the form of something

5:52called a pool token which is a share in one of the largest liquidity pools on bank or and what's going to happen is is every user who holds BMT the bank or network token at 12 a.m. on January 1st 2020 so just as the clock strikes midnight we'll we'll get this pool token land in their wallet and it'll be equal to 10% of their of their BMT holdings

6:22and the real and so this this pool token generates feeds off of all aetherium based conversions and trades within the bank or network so we're really allowing you know thousands and thousands of new everyday users to own a piece of the exchange and generate fees office conversion volume and our real hope is that this will give people a sort of taste of what its to be like

6:48as a sort of a market maker to an exchange and that will see you know thousands and thousands of thousands of more users serving as this sort of crucial piece in this new type of exchange Wow well it's very cool and I know that Bangor is already very popular but there's a lot of people that are stuck in just centralized exchanges and part of the reason is because they love

7:12the hand-holding and it makes it easy you know so for those people that have not used Bank or yet what is you know is it really easy for them to just get bank or tokens and get involved in the airdrop and start getting on there or is there a you know technical barriers to entry how easily can they get a hold of this airdrop you know so III would say

7:34that that bankers real focus is on the protocol level and we're sort of beyond this idea that there will be one central front end or one central interface that users will be able to access the exchange that Bank or is now partnered with many different developers the sort of amazing part about contract based liquidity which is what Bank or is is that anyone can tap into this this

8:01liquidity so where the– we're seeing you know many many different competing interfaces that are really competing on the user experience to make it as easy for their users to trade tokens on bank or and to also serve as liquidity providers on the exchange so a really interesting implementation has been done by one inch so they're sort of you can access bank or through one inch and a

8:28bunch of different sort of defy protocols through them and there's the bank or network interface and there's another interface called code trader so we're seeing all these different interfaces popping up that are really competing on user experience and making sure that the experience you know feels exactly like centralized exchanges and then some and and really honing in on

8:53the ability for users to sort of take of this new form of exchange mm-hmm that's great and I'm glad that you mentioned defy decentralized finance it's been growing ever more popular you know I saw this week 30% more ethers being staked than last week and this movement has been getting popular through aetherium and through the dice table coin for the most part for those

9:17people that aren't familiar with it yet can you just explain a little bit about what is decentralized finance how does it apply in this situation and how can those users actually earn income from from the tokens that they're holding yeah so I'd say that metric that you pointed to is very tallying the sort of total liquidity locked within these decentralized finance applications

9:39because what's really happening is we're seeing more everyday users lend their tokens and contribute their resources in order to power a new type of financial services one that where there's no bank involved where there's no central party involved where it's just these sort of protocols that users can contribute their sort of idle acts debts and allow

10:06other users to perform financial services in a decentralized way whether that is you know lending or derivatives or payments or in the case of Bank or exchange and so it's this idea of really removing the sort of middlemen not only to remove a lot of the costs of these financial services but to ensure that they are censorship resistant and and and you know I think bank or is an

10:37example of that in that like I said before it's really a protocol level innovation and that these websites are the front ends and also the protocol are not controlled by any central party and potentially anyone can spin up a front-end that utilizes bank or technology the protocol and the protocol itself is you know an autonomous and an autonomous sort of entity

11:05sort of you can think of it as a Dao a decentralized autonomous organization where you know the smart contracts are not controlled by anyone and they really perform all the operations of the organization mm-hmm yeah totally and part of the reason you know speaking of defy why why diet become so popular is because they had a stable coin they have multiple coins but they have a stable

11:29coin built-in as well and I know that bank or is doing the same with at USD B coin can you talk a little bit about how that fits into the picture and the advantages of having that stability sure so we have this kind of radical view on stable coins which is that really every token project that has a clear utility so that is you know that has a utility

11:51token should have a volatile version of its token so one that can you know be changed with with can have price fluctuations and serve the needs of speculators and also a stable version of its token so that folks who really access the service and use the token in order to use the service they're not they don't have to be exposed to price fluctuations based on you know usage of

12:20the of the protocol and so and so you can have your speculators holding your your volatile asset and all the folks who are you and who want exposure to the price movements and then also the the folks that are using the platform as well can have the option of using the stable version of your token that is backed by the volatile asset so in bank or skates that that what we did was we

12:48created a stable version of our network token BNT and again VNT is used in every liquidity pool on the bank or network so when users create a pool or when they want to add liquidity to a pool they're doing it in equal parts that want the token they're providing liquidity to and the bank or network token and then a trade say from you know OMG – that would

13:11go OMG – VNT and then be ante to back so it's this intermediary currency that's needed to power the network but what we found is that users who want to add liquidity create liquidity pools they what add liquidity to a token they don't necessarily want exposure to be entities price movements so we've created a stable version that allows them to add liquidity or create liquidity pools but

13:36only have exposure to the token they're providing liquidity to and not necessarily have exposure to be ante and then what we found is that these actual liquidity pools that are based on stable coins tend to be more profitable for the liquidity providers because you're not seeing these price fluctuations and the underlying assets that this is a sort of

14:00new and better way to build these liquidity pools and and so so so USD B is really allowing I'm bank or two to sort of rebuild the network and have users more easily add liquidity based on sort of the stable coin based liquidity pools that makes sense yeah that's great Nate and no kind of lock no you know that was thorough is good and it makes

14:30total sense you know and that sort of leads to the next question and I think that's the first part of the answer but there's other parts to it you know what is the overall big picture of this air drop and it's you know obviously with the stable coin it's limiting exposure but also probably increasing more people bringing them into the d phi movement

14:51and just bringing more liquidity for traders on autonomous exchanges you know what are you guys hoping to get out of this when it's all said and done yeah there's this sort of virtuous cycle with Bank or where the more liquidity that's staked on the protocol the less slippage there is and the less cost there are for traders to to trade on the network and

15:12the more trades that occur on the network the more fees that are generated for liquidity providers so our real goal is having as much liquidity on bank or as possible making it easy as possible for users to add liquidity and then the more liquidity that comes the more traders that will come and the more the exchange will be profitable for liquidity providers

15:36so Bank or you know overnight as we ring in this sort of new decade on January 1st at midnight will see the network go from protocol with you know a few hundred liquidity providers to all of a sudden having over 60,000 new liquidity providers that will see this new type of asset land in their wallet that will generate automatic fees off of the conversion volume on bank or and we're

16:05really hoping that they then look at that asset they you know maybe shift liquidity into a different liquidity pool on bank or to maybe try out some of these stable coin based liquidity pools that really allow them to maximize fees and then we'll really see this sort of flood of liquidity come to the network and hopefully see even more decentralized exchanges being built in

16:32this way where we can really solve the liquidity problem that exchanges have faced but we can do so in a way that really decentralizes the liquidity sources across thousands of users so that the users absolute the exchanges of the future are essentially user owned amazing well all the best in this it sounds like you guys are taking some huge steps forward to move you know the

16:58whole exchange movement in in the cryptocurrency industry which needs to move forward and we're running out of time but I will leave the the links to more information about Bank and about the air drop in the description box below and and I really appreciate you coming on the show I think that there's a lot of valuable knowledge and education and a great opportunity to get

17:19involved with bank or and to see your project grow so let's follow up in the near future in in the beginning of 2020 yeah I hope to do that and just all your your listeners you know if you're interested about getting involved it's as simple as as holding VNT on January 1st at midnight you can hold it in a noncustodial wallet to receive the airdrop or you can hold it on you know

17:42some of the bigger exchanges like finance and LA token and and okx so just hold VNT to get involved and if you want to sort of be a part of our conversation please start join us and there's a telegram channel t dot me slash bank or developers and also at bank or protocol is another telegram channel where you know that the the core development team is always here to

18:09answer questions and to help and hold BN t on midnight and you'll get a ten percent free money you know a ten percent boost in your holdings to dare drop great thank you so much name thanks take care