While traditional market investors are waiting for the U.S. Federal Reserve to abandon liquidity tightening and inject life back into stocks, some participants in the crypto market have taken it upon themselves to support the price of their favorite tokens.
For instance, the native community of Bancor, an Ethereum-based decentralized exchange, is voting on a proposal to destroy a significant chunk of the protocol's endemic coin, the bancor network token (BNT), in the hope that the so-called token burn will bode well for the cryptocurrency's price.
"DAO [decentralized autonomous organization] members have cited the fact that 'burns' have a psychological effect on market participants and the same can happen if such an experiment is allowed to be carried out," according to the proposal, which opened for voting for vBNT holders on Sept. 25. "For this reason, this proposal is seeking a one-time burn of 1 million BNT when this amount has accumulated in the Bancor [version]3 vault."
The proposal adds that the DAO will push for more token burns if the proposed measure has the desired effect on BNT's price. vBNT is the governance token issued to users who stake BNT in Bancor liquidity pools.
Token burn is a mechanism to remove a certain number of coins from circulation, thereby skewing demand-supply factors in favor of price appreciation. Early this month, the luna classic (LUNC) token surged on expectations of a community-approved plan to reduce the cryptocurrency's hyper-inflated supply. Dominant crypto exchange Binance destroys a significant chunk of its native cryptocurrency, BNB, every quarter.
The voting on Bancor's token burn proposal is set to expire on Sept. 28. At press time, 99% of votes favored destroying BNT once the total amount collected by the Bancor Vortex in the v3 vault reached 1 million.
The Bancor Vortex, launched early last year, collects a protocol-wide administration fee from liquidity providers. In version 2, the vortex collected fees in various tokens, which were then exchanged for BNT. The BNT was then used to buy and burn vBNT, ultimately reducing the circulating supply of BNT.
However, the v3 unveiled early this year simplified the process, removing the need to collect fees in different tokens and allowing the fees to be immediately swapped for BNT continuously, according to The TIE research.
At press time, the vortex vault held around 860,000 BNT tokens. The proposal estimates that the tally could rise to 1 million in the next 30 days.
The BNT token, susceptible to inflation, changed hands at 46 cents at press time, having peaked above $9 during the height of the crypto bull run in April 2021, CoinDesk data show. As of writing, BNT's circulating supply was 198.85 million.
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