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According to Bancor’s announcement, the vBNT burning rate is set to become a critical part of BancorDAO’s flexible monetary policy. The Vortex Burner was designed to increase the protocol’s liquidity by permanently locking a portion of every swap, and also reduce the circulating supply of BNT, as the token will be continuously bought and then removed from circulation forever.

For example, on a $100,000 trade executed on a pool with a 0.2% pool fee, liquidity providers collect $200 as commission. The Bancor Vortex Burner then takes a 5% cut ($10) and uses it to buy vBNT and burn it.

Aside from its liquidity increasing and supply control benefits, the new mechanism will also significantly improve the lending capacity of the protocol. Bancor explained that by putting continuous upward pressure on the vBNT price, burning vBNT will lower the borrowing risk for users who want to take leverage on their staked BNT.

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Now fully launched on the mainnet, the Bancor Vortex can be accessed to perform swapping, staking, and borrowing against staked BNT.

Bancor’s deep liquidity pools enable traders to swap tokens at low rates. Swapping tokens will then generate fees that increase the amount of vBNT bought and burned by the protocol. Providing BNT to a Bancor pool will mint a vBNT liquidity position that works similar to a pool token. The position earns yield from swap fees and liquidity mining rewards.

Users that provided BNT liquidity can sell their vBNT for other tokens on the network and use them to earn more yield by providing additional liquidity on Bancor or another DeFi protocol.

Analytics showing the total vBNT burned over time will be released in the bancor.network front-end and on Bancor’s Dune Analytics dashboard, the company said. Bancor added that it expects to see the rate of vBNT burning increase as whitelisted pools opt into the network upgrade.

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