TLDR: Kyber Network and Uniswap pushing Bancor out of business by not forcing their token and being more friendly to liquidity providers.

When Bancor appeared on the radar — it’s potential was recognized by many individuals many of which immediately purchased BNT tokens in order to participate in transformation of liquidity landscape. Bancor was uniq and unprecedented. Well — not anymore. Kyber Network and later Uniswap later implemented their approaches to automated liquidity using very similar concepts. Given the fact that Uniswap is booming in terms of liquidity and trade volumes while Kyber integrates with Uniswap it seem like now it is a good time for critical analysis of Bancor’s progress.

For the sake of discussion I would like to highlight 3 facets of reserves and liquidity space:

Intrachain liquidity — like it or not, but blockchains are not interconnected so far, and one has to face reality of somewhat isolated blockchain ecosystems, where each ecosystem has native token and set of tokens ‘hosted’ in the ecosystem. Ethereum is, without any doubt a number one ecosystem of tokens. Uniswap recognized this fact and introduced solution where native token is used for liquidity, which was widely accepted by Ethereum community. EOSUniswap will emerge soon enough — it is only matter of time at current phase. Fact is — Ethereum intrachain liquidity is where majority of trading happens today, and for other ecosystems usage of native token for programmatic liquidity looks trivial and attractive. Interchain liquidity — the very difference between intrachain and interchain liquidity is predicated on reality of non-triviality of interblockchain communication — but this “technicality” is fundamental so far. While Bancor without any doubt is a pioneer of interblockchain liquidity — challenges are obvious — there is no strong argument why bancor would be superior to emerging crosschain solutions. Bancor formula is strong, but utility of BNT is not necessary that strong.

1 & 2. Liquidity in general. During first months of BNT Relay tokens were accessible and somewhat usable — and they are not anymore. The whole participation in Bancor network is not user friendly or transparent or trivial. Forget the fact that you have to use BNT — just try to pool some liquidity into BNT-DAI relay with your Metamask, or try to add your token to network — not that easy, right? In UniSwap you’ll handle those tasks in 5 clicks, and without $50 000 worth of tokens. Liquidity protocol that is not friendly to liquidity providers? Hmm…

3. Liquid reserves — the very promise of automated liquid reserves is interesting, but let’s see real use-cases out there. Creation of multi-token reserves from UI is impossible in Bancor, and only thing you may get this days is a reserves of BNT and whatever else. BNT is being pushed into your reserves. In early days BNT had potential of eating lunch of MLN, and ZRX, while providing interchain connectivity, the very existence of MKR, MLN looks like a surprise in the world of BNT.

Ecosystem of independent focused and interoperational protocols emerges — and this ecosystem eats Bancor’s lunch. Second mover’s advantage is being used against Bancor, and once interchain liquidity solutions will emerge — that part of the game will be lost too.

Bancor lost it’s direction by being substandard provider of intrachain liquidity, while investing heavy into interchain liquidity which is not yet demanded by the market, and failing to attract liquidity or to recognize demand for stablecoins and loans. Swarm of focused competetive microprotocols is killing colossus.