DeFiance Capital Joins Bancor (BNT) Ecosystem as Strategic Advisors

DeFi investment fund DeFiance Capital has become part of the DeFi protocol Bancor’s ecosystem and will provide advice on tokenomics, financial and institutional liquidity management in the capacity of strategic advisors.

DeFiance in Bancor Protocol

DeFiance will use its BNT token to provide Bancor with network liquidity while enjoying impermanent loss security and earning a return on exchanges’ fees and cash mining income.

In a recent article on Bancor by Deribit Insights, members of the DeFiance group stated that Bancor was the trendsetter of the Automated Market Maker (AMM) model on Ethereum.

The Bancor team continued to iterate their original product despite the unstoppable success of Uniswap and the increase of similar competitors like SushiSwap.

The combination of the one-sided liquidity and the impermanent loss assurance was a game-changer in the competitive DEX space within the wider cryptocurrency industry.

Until Bancor v2.1 was recently launched, AMM pools required liquidity providers to default in their position on volatile tokens and get exposed to other assets within a collection. LPs are also at risk of impermanent loss, which may allow them to have less of their primary interests even after fees and rewards are taken into account.

Such risks affect many liquidity users because AMMs can fail to implement the basic buy-and-hold strategy, unlike most staking products. Bancor v2.1 offers users the possibility of collecting attractive yields from their favorite token via swap fees and awards by eliminating IL risks for LPs and offering single-asset exposure.

It puts AMMs in line and can attract a new wave of HODLers and institutional liquidity.

Bancor Developments

In an update recently published, Bancor has laid out an aggressive road map that includes the next release of the protocol’s Bancor Vortex (the native lending engine of the protocol), gasless management, and new pool design for stablecoins. 

They are also looking into the extension of BNT liquidity mining program, focus on joint liquidity mining, increase incentives for BNT holders to participate in the protocol, and lower the barrier for new access to the latest features in Bancor (single-asset exposure & impermanent loss insurance).

Over the past month, the overall value of digital assets locked in the Bancor Protocol (over $1.6 billion) has doubled. Bancor has entered TVL’s top 10 projects and is now the fifth-largest in DEX in existence.

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Bancor’s (BNT) TVL Rises Over 10x in 6 Months after Release of v2.1, Single-Sided AMM Staking

The total value locked (TVL) in Bancor, a non-custodial exchange and one of the oldest DEXes in the crypto world, is up 10x in six months, trackers on March 11 reveal.

The Exponential Rise of Bancor TVL

TVL is a metric that shows the dollar-value of digital assets a given protocol manages at any point in time.

Within the Ethereum DeFi ecosystem, Bancor presently manages $1.54 billion of tokens, up from around $175 million in July 2020. The rapid expansion of the protocol’s TVL is at the back of users’ rising interest in DeFi and innovation.

Reflecting the demand for the native token, BNT, is the parabolic rise of prices over the last few months.

Year-to-date, the price of BNT is up  33x, presently trading at $8.45, adding an impressive 217 percent in the last month versus the greenback.

Outperforming Bitcoin and Ethereum

At the same time, it has added triple-digits versus BTC and ETH.

What’s notable is that within the same period, BTC and ETH prices have been on a tear. Specifically, Bitcoin prices surged past $20k, more than doubling, peaking at around $58k, where prices are currently perched.

Accordingly, that the BNT token outmatched BTC during the same period shows the level of interest, the utility of the platform, the unprecedented demand for DeFi over the last few months.

The Rise of AMMs

While DeFi dominated proceedings, the rise of Bancor is because of the release of V2.1, introducing single-sided exposure, and impermanent loss insurance.

Launched in Nov 2020, the new, differentiated product is the fuel rocketing the protocol’s TVL. The approach adopted by Bancor is unique, diverging from those of Uniswap and Sushiswap, for instance.

The innovation stems from the Automated Market Maker (AMM) model’s weakness, which allows ordinary token holders to be potential liquidity providers, supplying digital assets to liquidity pools.

As an incentive, AMM-powered protocols often offer airdrops and rewards relative to LP tokens’ amount. These incentives and rewards are meant to cushion the liquidity provider against impermanent loss.

The Impermanent Loss Problem

It is comparable to opportunity cost since once a user supplies two assets to a given pool, he/she forfeit capital gains. Instead, he/she gets exposure to another asset.

Typically, the larger the divergence, the more losses there are.

This is an undesirable aspect of AMM and double-sided asset exposure tagged by AMM models. While it may be “temporary” and only applicable when supplying liquidity to a given pool, a new approach was required.

Notably, eliminating the need to supply two assets of a pool (of which one is more volatile than the other) at a pre-determined ratio (of say 50:50) could spark demand, even allowing users who, ordinarily, won’t supply liquidity, but prefer holding, to participate.

Bancor v2.1 to Mitigate Impermanent Loss

Bancor’s approach to building a sustainable DeFi protocol suitable for all cadre of investors circled on mitigating the impermanent loss problem. Their solution was in the release of v2.1. The new update introduced insurance for liquidity providers in any approved pool and the concept of single-sided asset exposure.

Here, the protocol offers to protect the value of the digital asset deposited while concurrently introducing flexibility.

In Bancor v2.1, a liquidity provider can earn swapping fees and have the freedom of pooling out liquidity if his interest shifts, booking capital gains.

However, the take is that the LP provider has to supply liquidity for longer for their impermanent loss protection to be larger. It tags along added benefits. The longer the liquidity provision period, the higher the ROI for the user.

BNT is Central to v2.1

For every BNT deposit to an approved, protected pool, the user earns vBNT tokens. These are tokens that can be used in governance, determining how the pool can be managed while not causing a differentiation between ordinary holders and liquidity providers.

The system improves on v2, which introduced price oracles. This new arrangement–and a reason attributed to sparking interest in the project, subsequently pushing TVL higher, is their use of the elastic BNT supply.

For every deposit, the protocol co-invests. The BNT token acts as a counterparty asset in each pool. Bancor also covers for impermanent loss from swap fees earned from its co-investment.

So far, there are over 60 approved pools with single-asset exposure insurance against impermanent loss.

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