Bancor 3, a DeFi liquidity solution by decentralized trading protocol Bancor, has incorporated more than 100 tokens, such as USD Coin (USDC), Polygon (MATIC), and Enjin (ENJ), for more sustainable and safer DeFi yields through community sourcing.
Per the announcement:
“Users can now provide liquidity to over 100 tokens on Bancor 3 with no deposit limits and earn single-sided yield with zero risk of Impermanent Loss.”
With Bancor 3 initially integrating Ethereum (ETH), MakerDAO (DAI), Bancor (BNT), and Chainlink (LINK), the incorporation of the new tokens will help address some of the high-risk strategies that DeFi users are accustomed to because yields will be triggered by actual user activity other than short-term inflationary measures.
The report noted:
“The launch of Bancor 3 comes amid a period of reckoning for the DeFi industry. Token holders have grown wary of the high-risk and high-frequency strategies that fueled growth in DeFi but have often led to heavy user losses. Users are increasingly turning to safer venues to park their assets.”
Bancor 3 aims to raise decentralized autonomous organizations (DAOs) awareness about token management and smart contract risks.
The DeFi liquidity solution provider also emphasizes the importance of long-term token holders staying in pools because they can offer liquidity with near-zero maintenance and less risk. The report stated:
“Bancor helps token projects build sustainable on-chain liquidity without the need for costly incentives by giving token holders the ability to deposit in decentralized liquidity pools and earn with single-asset exposure, auto-compounding gains and 100% protection against Impermanent Loss.”
As a DAO treasury management provider, Bancor offers the “Impermanent Loss” guarantee through an automated safe staking system.
In March, Nexus Mutual, an Ethereum-based insurance platform, staked some of its treasury funds in Bancor to gain durable decentralized liquidity. As a result, it joined more than 30 DAOs using Bancor’s treasury management solution, Blockchain.News reported.
To gain durable decentralized liquidity, ethereum-based insurance platform Nexus Mutualstaked treasury funds worth $2 million in the form of wrapped NXM (wNXM) tokens in decentralized trading protocol Bancor.
Joining more than 30 decentralized autonomous organizations (DAOs) using Bancor’s treasury management solution, Nexus Mutual seeks to earn yield with its treasury deposit without selling its native tokens.
Hugh Karp, Nexus Mutual founder, acknowledged:
“Bancor doesn’t require any maintenance, is battle-tested and will ultimately drive higher income to our DAO and community due to there being no Impermanent Loss. We’re able to fund our pool with wNXM-only liquidity and attract loyal token holders as long-term liquidity providers without needing to sell tokens or issue incentives.”
Bancor is emerging as a sought-after DAO treasury management provider based on its “Impermanent Loss” guarantee. It uses an automated safe staking system where depositors earn yield from more than 150 integrated tokens. They include Chainlink (LINK), Synthetix (SNX), Basic Attention Token (BAT), and Enjin Coin (ENJ).
The decentralized liquidity arena is ticking
More players are entering the decentralized finance (DeFi) staking arena, given that Bancor paid liquidity providers more than $200 million in 2021.
Nate Hindman, a Bancor contributor, acknowledged that the decentralized liquidity route was the way to go and stated:
“We are very excited to have Nexus Mutual join the growing list of projects building sustainable decentralized liquidity for their tokens on Bancor. Both Nexus and Bancor are focused on designing decentralized solutions for risk-averse users seeking safe and reliable access to DeFi.”
With Bancor allowing DAOs to offer liquidity, they are able to safeguard their native tokens from sell pressure, enabling them to optimize the productivity of their staked funds.
Some of the DAOs supported include Harvest Finance, Paraswap, UMA, KeeperDAO, Saffron Finance, WOO Network, and Instadapp.
Institutions are continuously seeking the diversification of digital assets for maximum returns, per a recent Genesis report.
The study acknowledged investors’ promptness to expand their digital asset investments while demonstrating an avid interest in DeFi coins. Furthermore, institutional investors took a deeper approach to participating in the crypto market.
The Grayscale Investment manager undertakes another phase of balancing its Grayscale DeFi fund. This round of rebalance inculcate the adjustment of the project’s Digital Large Cap Funds. This move marks its second balancing process after its launch in July 2021.
An announcement on January 3 revealed the in-depth adjustments to Grayscale’s two funds. The first rebalancing employed the Flexa payment network’s native collateral coin.
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Hence, Grayscale DeFi Fund’s weighting was rebalanced with the addition of AMP. Conversely, the rebalancing process led to the removal of Universal Market Access (UMA) and Bancor (BNT).
Though Grayscale created some adjustments to its funds’ weightings, the Grayscale Digital Large Cap Fund (GDLC) suffered no alteration to its token list. According to Grayscale’s announcement, the rebalancing process is the time to include AMP within a Grayscale investment vehicle.
Using its native token, Flexa can collateralize crypto payments and engage in fiat settlements. Thus, merchants and other users could quickly receive cryptocurrencies without delays.
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Significance Of Grayscale Rebalancing Process
Following this second rebalancing process, the addition of AMP brings the number of crypto assets within the Grayscale DeFi Fund to nine in the DeFi ecosystem. Also, the alteration to the Grayscale Fund reflects the changes on the DeFi Index (DFX) of CoinDesk. Among the components of crypto assets that made the Fund, the highest weighting goes to Uniswap (UNI) with 42.33%. The newly added AMP takes up 7.39% of the Fund’s weighting.
Having its popularity as Grayscale Bitcoin Trust, Grayscale now has about $30.1 billion assets under management (AUM). The share trading at $34.27 shows a 23% up from July 14, 2021, and a 59.16% up within the last 12 months.
The share price of Grayscale DeFi Fund at the press time is $5.56. This depicts an 11.2% rise from its launch price of $5 on July 14, 2021. Moreover, the Fund’s assets under management as of its launch period were $11.6 million with a share outstanding of 2.08 million.
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The ‘s performanceGrayscale Bitcoin Trust’s performance and its DeFi Funds is highly above the DeFi Pulse Index (DPI), which is the biggest retail DeFi Index based on the market cap from July 14. However, despite the huge trading volume of the DPI, it still indicates a dip of about 2% within the same interval.
Bitcoin continues to drop | Source: BTCUSD on TradingView.com
Among all spot Bitcoin ETFs and Corporations, Grayscale possessed the most significant upsurge of BTC holdings through 2021. By the end of the year, the Fund accrued 645,199 BTC. This explains 71% of the corporate market and spot ETF BTC holdings.
Featured image from Pexels, Charts from TradingView.com
Decentralized automated market maker (AMM) Bancor is set to launch new staking pools and an upgrade to its impermanent loss protection mechanism as part of its long-awaited Bancor 3 update.
Bancor was founded in 2017 and was the first DeFi protocol to introduce AMMs to the blockchain. The Ethereum-based exchange and lending platform also allows users to earn staking rewards via various liquidity pools.
In a Nov. 30 blog post introducing the upcoming Bancor 3 update, the platform announced several new features and upgrades including the Omnipool, Infinity pools, and “Instant Impermanent Loss Protection.”
Introducing Bancor 3 pic.twitter.com/TuIyUnN13U
— Bancor (@Bancor) November 29, 2021
Impermanent loss (IL) occurs on AMMs like Bancor or Uniswap when the prices of two assets in a liquidity pool diverge significantly, with one side going strongly up or down in value.
In October 2020, Bancor first introduced a mechanism to combat the issue by rolling out (IL) insurance, which guarantees that liquidity providers will receive up to 100% of their initial capital, plus fees accrued after a 100 day wait period.
As part of the Instant Impermanent Loss Protection update, users will no longer need to wait the initial 100 days as they will receive full protection from day one.
The new Omnipool feature will see the creation of a single pool to stake BNT that offers yield from the entire network, as opposed to the current method of offering yield from separate asset pair pools such as ETH/BNT.
“The Omnipool allows for all trades on the network to occur in a single transaction. In Bancor’s previous versions, trades required transfers via BNT, creating an extra transaction and added gas costs compared with competing DEXs.”
Infinity Pools will offer unlimited deposits on Bancor, and no longer require users to wait for “space to open up in a pool before being able to deposit tokens.”
Other notable updates in Bancor 3 will include auto-compounding liquidity mining rewards, dual-sided rewards to “allow third-party token projects to offer IL-free incentives on their pools” and further multi-chain and layer two support.
Related:How liquid staking disrupts parachain auctions on Polkadot
Bancor is governed by a decentralized autonomous organization (DAO) and currently offers cross-chain support to the EOSIO blockchain. The platform said that Bancor 3 will be rolled out in three stages dubbed “Dawn, Sunrise, and Daylight,” and is targeting a release in Q1 2022 pending a vote by the BancorDAO.
According to data from DeFi Llama, Bancor ranks at the thirty-second largest DeFi platform in terms of total value locked at $1.65 billion. At the time of writing, Bancor’s native token BNT has gained 2.3% over the past 24 hours to sit at $4.06 with a total market cap of at $949.4 million.
According to a new study, approximately half of Uniswap liquidity providers underperformed a basic buy-and-hold strategy.
In one pool, the number of liquidity providers suffering negative returns was as high as 74%.
The study raises questions about the efficacy of constant function-based decentralized exchanges.
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A Bancor-backed study has found that as many as half of Uniswap V3 liquidity providers are suffering negative returns.
Study Investigates Uniswap Liquidity Provision
Liquidity providers on decentralized exchanges may be getting a bad deal despite high yield rates.
A new study conducted in collaboration between Topaze Blue and Bancor has found that approximately half of the liquidity providers on Uniswap V3 yielded negative returns compared to just holding assets. Bancor was Ethereum’s earliest automated market maker. It’s a competitor to Uniswap, one of the DeFi ecosystem’s most popular decentralized exchanges. Topaze Blue, meanwhile, is a boutique advisory firm specializing in the crypto and fintech sectors.
The study analyzed more than 17,000 wallets providing liquidity across 17 Uniswap V3 pools, which accounted for 43% of the exchange’s total value locked. It found that, while the pools generated $199 million in fee income during the sample period of five months, they incurred over $260 million in impermanent loss, leaving 49.5% of the liquidity providers with negative returns.
Impermanent loss describes the difference in value between depositing assets in dual token liquidity pools or simply holding the same assets. It refers to the value liquidity providers would have had if they passively held onto their assets instead of providing liquidity. The study found that the number of liquidity providers underperforming a buy-and-hold strategy exceeded 50% in multiple pools, including MATIC/ETH (51%), COMP/ETH (59%), USDC/ETH (62%), and MKR/ETH (74%).
Interestingly, the researchers also found no difference in profitability between “active” liquidity providers who managed or adjusted their positions more frequently and “passive” users who didn’t.
The only group that consistently outperformed a basic buy-and-hold strategy were so-called “just-in-time” liquidity providers who provide liquidity for a single block to absorb the fees and instantly remove their position. These are more sophisticated market makers who leverage automated bots to provide liquidity and represent a tiny fraction of the broader user base.
Commenting on the findings, the authors of the study said:
“Our core finding is that overall, and for almost all analyzed pools, impermanent loss surpasses the fees earned during this period. Importantly, this conclusion appears broadly applicable; we have collected evidence that suggests both inexperienced retail users and sophisticated professionals struggle to turn a profit under this model.”
Uniswap launched its V3 update in May, introducing a pioneering “concentrated liquidity” feature that allows liquidity providers to select the price range they provide liquidity for. Uniswap Labs, the team behind the project, sparked controversy in the DeFi community by protecting the update with a business source license. Several other decentralized exchanges including Curve Finance and Sushi’s upcoming Trident project have adopted their own takes on concentrated liquidity since Uniswap V3 shipped.
The study’s findings raise questions about the efficacy of constant function-based decentralized exchanges like Uniswap and Sushi. As the DeFi market matures and ever more liquidity providers realize the dangers of impermanent loss, liquidity on decentralized exchanges could dry up, leading to higher slippage and significantly reduced efficiency and usage.
Disclosure: At the time of writing, the author of this feature owned ETH, SUSHI, and several other cryptocurrencies.
This news was brought to you by ANKR, our preferred DeFi Partner.
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The information on or accessed through this website is obtained from independent sources we believe to be accurate and reliable, but Decentral Media, Inc. makes no representation or warranty as to the timeliness, completeness, or accuracy of any information on or accessed through this website. Decentral Media, Inc. is not an investment advisor. We do not give personalized investment advice or other financial advice. The information on this website is subject to change without notice. Some or all of the information on this website may become outdated, or it may be or become incomplete or inaccurate. We may, but are not obligated to, update any outdated, incomplete, or inaccurate information.
You should never make an investment decision on an ICO, IEO, or other investment based on the information on this website, and you should never interpret or otherwise rely on any of the information on this website as investment advice. We strongly recommend that you consult a licensed investment advisor or other qualified financial professional if you are seeking investment advice on an ICO, IEO, or other investment. We do not accept compensation in any form for analyzing or reporting on any ICO, IEO, cryptocurrency, currency, tokenized sales, securities, or commodities.
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Mark Cuban holds BNT — the token for decentralized finance (DeFi) protocol Bancor, citing the simplicity, impermanent-loss protection, and user-friendly nature of the DeFi platform as his major reasons.
Mark Cuban Chooses Bancor (BNT)
Billionaire Mark Cuban, aformerbitcoin (BTC) skeptic that has now embraced decentralized finance (DeFi), has been welcomed by the Bancor Network team for choosing the platform as his preferred decentralized exchange (DEX).
Bancortweeted:
We’re thrilled to welcome @mcuban to the #BancorDAO
Mark told us he was drawn to Bancor & $BNT because the simplicity of providing liquidity
🔹 No impermanent loss
🔹 Single-token exposure
🔹 Just sit back & earn yield on your favorite tokens
Whether you’re a whale 🐟 🐳 or 🦈 pic.twitter.com/k50vOLdMp8
— Bancor (@Bancor) June 8, 2021
For those who are unaware, Mark Cuban is the owner ofDallas Mavericks, an American professional basketball team and he’s also an executive producer of the Shark Tank reality television show.
Bitcoin has had its fair share of critics in its entire history and Cuban used to be one of them. In December 2019, Cubanreportedlysaid the world’s flagship cryptocurrency has no chance of becoming a reliable currency, as it is “too difficult to use, too easy to hack, way too easy to lose, too hard to understand, and too hard to assess a value.”
The Bancor (BNT) Advantage
While Bancor remains a pioneer in the decentralized finance (DeFi) space, the coming of automated market makers like Uniswap (UNI), amongst others, somehow took the shine away from the former. However, the team has been integrating innovative features into the Bancor Network aimed at making it more attractive to users.
In 2020, Bancor rolled outBancor v2.1, an upgrade to the first iteration of its AMM and the protocol’sprofitabilityhas been on the increase since then. The major advantage Bancor v2.1 has over other DEXs is the impermanent loss protection, which makes it impossible for liquidity providers to incur losses due to the price volatility of their staked tokens. To escape impermanent loss, Bancor LPs must provide liquidity for at least 100 days.
That’s not all, Bancor V2 offers users more flexibility and simplicity via its “Single-Sided Exposure” feature, which allows users to provide liquidity with just one token instead of two different pairs at once, as obtainable in other protocols.
More recently, in February 2021, the team launchedBancor Vortex, a yield farming solution designed to offer Bancor users a passive revenue stream. Even with its impressive milestones, Bancor is not relaxing on its laurels, as the team is currently working on Bancor v3, which will bring even more exciting features to LPs.
At press time, the total value locked (TVL) in the Bancor protocol sits at $1.37 billion according to DeFi Llama, while the price of BNT is hovering around $4.14, as seen on CoinMarketCap.
Bancor (BNT) has joined forces with xToken Market to launch an automated and dynamic liquidity allocator dubbed xBNT. The team claims xBNT removes the complexities associated with BNT liquidity provision, while also saving liquidity providers gas costs, according to a blog post on April 26, 2021.
xBNT Launched for Easier BNT Staking
While Bancor (BNT) remains a pioneer in the world of decentralized finance (DeFi), as it invented the world’s first blockchain-based automated liquidity pool, a vast array of automated market makers (AMMs) have gone live in recent times, almost relegating Bancor protocol to the background, in terms of total value locked (TVL).
Having launchedBancor Vortexin February, followed by the$vBNT Burnerearlier this month, it appears the Bancor team is ready to reposition the protocol at the forefront of DeFi and that effort is graduallypaying off.
Not resting on its oars, Bancor has announced the launch of xBNT, a feature the team calls a “composable, set-and-forget solution for BNT liquidity provision.”
As stated in its blogpost, xBNT, the latest introduction to the rapidly evolving Bancor ecosystem, is designed to eliminate the complexities and crazy gas fees associated with liquidity provision on Bancor, while also offering investors full staking returns.
Enter xBNT
It’s no news that Ethereum gas fees have been hitting the moon in recent times, with the average now sitting at 62.69 at press time, a366.5 percent increasefrom a year ago.
Interestingly, the team has made it clear that with xBNT, BNT liquidity providers will no longer have to bother about paying gas fees when they stake, re-stake, or claim their tokens. They will only be required to pay gas fees when they mint on xToken or buy on a DEX and when they burn or sell their xBNT.
What’s more, xBNT will also offer BNT liquidity providers a plethora of exciting benefits, including tax efficiency, representation in governance, compounding returns, and more.
“Staking BNT is an active process. Deciding on a pool, deciding when and how to claim or re-stake and knowing when it’s safe to withdraw with full impermanent loss protection are all facets of management that require frequent attention from investors. In contrast, xBNT is entirely set-and-forget. You do not have to do anything. Ever,” declared the team.
At press time, the price of Bancor (BNT) sits at $6.51, with a market capitalization of 110.52 million, as seen on CoinMarketCap.
In 2017, Bancor pioneered automated market makers (AMMs) to replace order books using a native reserve asset, the BNT token. After losing ground to otherdecentralized exchangessuch as Uniswap or Sushiswap, Bancor’s v2.1 showed that the project is far from over.
Re-Introducing Bancor
Understanding Bancor can be tricky because of the system’s complexity, but there is a reason why the total value locked in the protocol has skyrocketed in 2021.
Bancor’s USD monthly volume. Data fromDune Analytics
In October 2020, Bancorreleased v2.1to an enthusiastic user base. Still, it took the market some time to notice that Bancor has been working to solve some of the most significant problems users face when they stake their coins.
To understand these improvements, a broader explanation of Bancor’s system is needed.
In 2017, Bancor came up with a method to trade coins on-chain through a new system. Instead of leveraging order books, the protocol introduced pooled trading. By creating different pools of ERC-20 tokens and Bancor’s native token, BNT, traders could effectively exchange with the pool instead of each other. The more liquidity provided to the pool, the lesser the price impact for any transaction. To attract funds, liquidity providers were promised part of the swap fee from these transactions. To this day, this system is fundamentally unchanged in all of DeFi. Decentralized exchanges all function with liquidity pools used by traders to exchange currencies.
The next big innovation in decentralized exchanges was creating pools between any two ERC-20 tokens, removing the necessity for a central currency. Largely, Ethereum took on that role as it makes up$3.4 billionout of Uniswap’s $7.6 billion current liquidity. This convenience is largely why Bancor struggled to keep up with Uniswap or Sushiswap, especially during the summer of 2020.
BNT is at the center of Bancor. All liquidity pools are divided equally between an ERC-20 token and BNT. In that sense, BNT is a sort of neutral unit of exchange. Interestingly, this idea of a neutral exchange currency to facilitate global trade stems from economist John Maynard Keynes.
At the Bretton Woods conference, he proposed a supranational currency called “bancor,” which would be used internationally to settle transactions between different national currencies.
Current ranking of decentralized exchanges by total value locked. Data fromDeFi Pulse
However, Bancor’s unique system allows specific innovations which would be impossible for its competitors. In v.2.1, for example, Bancor introduced impermanent loss protection and single-sided liquidity provision.
The Project’s Advantages
When users stake funds in a liquidity pool, they expose themselves to impermanent loss. In simple terms, this means that they will become increasingly exposed to the weaker asset they provided over time. As the price of both assets change, originally supplied equally, the liquidity pool automatically updates the user’s liquidity to keep a 50/50 split in value between the two.
In ablog post, the Bancor team illustrated this issue by comparing holding LINK from April 2019 to April 2020 and supplying liquidity to an AMM like Uniswap in the same period.
LINK/ETH profit LP vs. holding. Source:Bancor
As the price of LINK quickly grew during that year, AMMs consistently sold it for Ethereum to conserve a 50/50 split of assets in the liquidity pool. While both LINK/ETH liquidity providers and holders made a profit, the fees generated by supplying funds to Uniswap were insufficient to cover the impermanent loss.
In v2.1, Bancor aimed to solve the impermanent loss (IL) issue by subsidizing potential impermanent loss. Everyday funds are staked in Bancor; users receive 1% of impermanent loss “insurance.” After 100 days, liquidity providers are entirely insured from any losses they might have suffered because their preferred asset’s price grew much quicker than the second one in the liquidity pool.
Besides this impermanent loss protection, Bancor’s BNT system is uniquely suited to allow single-sided liquidity. This means that, contrary to other decentralized exchanges, users can choose to supply only one of the two assets in Bancor’s liquidity pools. While Balancer offers a similar service, they immediately sell part of the supplied coin for the other one. Bancor, however, co-invests in pools with its native coin BNT to keep the pools balanced.
When users invest in a Bancor pool, Bancor essentially provides as much value in BNT as in the users’ token. From this invested BNT, the protocol earns swap fees and uses them to reimburse any impermanent loss incurred by the users during their time in the liquidity pool. However, when users add BNT to the pool, the protocol burns its added BNT and the fees accrued, diminishing the total amount of BNT in circulation.
Visualization of Bancor’s monetary policy and impermanent loss insurance. Source:Bancor
As Uniswap founder Hayden Adams, the creator of Uniswap,explained, users face two types of risks when they supply funds to a liquidity pool.
First, there are unavoidable impermanent loss risks in a liquidity pool between two tokens whose value is unrelated. Eventually, as the price of the two tokens diverges, users end up with different quantities of each token, changing the user’s amount of exposure to these two tokens. But, just as problematic, one takes inventory risk by supplying two tokens in equal measure while expecting much better results from one of the two.
11/
Inventory risk is price risk you take on by holding less of your wealth in your preferred store of value
If you prefer ETH, the more DAI you hold the greater your inventory risk
If you prefer DAI, the more ETH you hold the greater your inventory risk
— Hayden Adams 🦄 (@haydenzadams) March 24, 2021
With v2.1, Bancor solved inventory risk by allowing single-sided liquidity and subsidizing any impermanent loss in the liquidity pools. This system is made possible by Bancor’s unique model and can’t be replicated by decentralized exchanges such asUniswap,Sushiswap, orCurve.
To further incentivize participation, Bancor has also started offering substantial liquidity mining rewards on certain pools selected by governance. The current liquidity mining rewards for providing major cryptocurrencies such as LINK, ETH, WBTC, SNX, or AAVE hover between 10% and 20% APY while supplying BNT to these pools can pay up to 70% APY in BNT. These rewards are voted on by governance roughly every two months.
Current Bancor liquidity mining rewards.
The Shortcomings of Bancor
According to DeFi Pulse, Bancor has $1.78 billion currently staked in its smart contracts, 31% of the current biggest decentralized exchange Uniswap. In contrast, Uniswap did$1 billionin volume over the last 24 hours, according to CoinGecko. Compared to that, Bancor’s $70 million in volume only represents 7% of its competitor.
In essence, while Bancor is doing a phenomenal job at incentivizing users to provide liquidity on their platform, they do not seem to attract as much traffic and volume on their exchange. This is an important issue as volume represents liquidity provider fees. If those disappear, then the incentive to LP on Bancor disappears as well.
This lack of volume could be due to two different issues—first, the strength of network effects. Uniswap became the dominant exchange during DeFi summer and has been the go-to address for any project launching its coins. In contrast, Bancor’s whitelisting process adds a lot of security to its pools but lacks the speed and openness of Uniswap.
Anyone can make a pool on Uniswap at any time. In a sector as fast-paced as DeFi, this is an incredible advantage that can turn dangerous very quickly. Rugpulls, scam tokens, and many other issues can arise from this policy. For now, though, these drawbacks aren’t enough for the Uniswap team to reconsider its stance.
The second issue is the gas fees, which are exacerbated by the current congestion on the Ethereum blockchain. One of the most important innovations of Uniswap was gas optimization.
In a test swap operated on Apr. 9 at fast gas prices of 126 gwei, an identical swap between ETH and DAI cost $90 on Bancor compared to $41 on Uniswap. If the transaction included BNT, the gas fee on Bancor dropped to $55.
This is almost unavoidable due to the structure of Bancor. Bancor doesn’t have an ETH/DAI liquidity pool. To swap ETH with DAI, the protocol must use BNT as a medium of exchange. Due to the rise in the price of ETH and blockchain technology’s inherent limits, gas fees have become a significant issue.
Looking Ahead
Before v2.1, liquidity providers needed to supply equal parts BNT and their token of choice to Bancor’s liquidity pools. The addition of single-sided liquidity was nothing less than a game-changer for Bancor by removing this problematic barrier. The new liquidity provision system also allows for improved tokenomics and subsidizes the tricky issue of impermanent loss.
As the numbers show, the future looks bright for Bancor. Liquidity has grown, but most importantly, the amount of unique users has also seen a sharp rise. Liquidity providers have taken notice and with improved liquidity comes improved prices for traders with lower slippage. This creates a positive spiral that improves the protocol as more people use it.
The number of unique wallets benefitting from Bancor’s impermanent loss protection system. Source:Dune Analytics.
In the last few months, Bancor has also doubled down on adding features facilitating access to the protocol. In March, they added afiat rampallowing users to access Bancor directly from their fiat bank accounts.
The tokenomics of Bancor have also been given additional thought. Starting with their next update, Bancor will use 5% of all swap fees to repurchase vBNT from the open market and burn it. As vBNT is received by users when they lock BNT in the protocol, this will gradually lock an increasing amount of BNT in the liquidity pools forever, reducing the circulating supply.
While gas optimization will be a determining factor for Bancor’s future, the hottest topic in DeFi right now is layer 2 solutions.
Bancor suffers from Ethereum congestion and high gas fees like many other DeFi protocols. WithUniswap’s v3 announcement, the pressure on other protocols to offer layer 2 solutions has increased. On a call with the Bancor team, Crypto Briefing learned that this is something they’re keeping a close eye on. The team insisted on the necessity of doing it right and not rushing an incomplete solution.
More information on a layer 2 solution can be expected in the coming weeks.
Disclaimer: The author held ETH, BNT, and several other cryptocurrencies at the time of writing.
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The information on or accessed through this website is obtained from independent sources we believe to be accurate and reliable, but Decentral Media, Inc. makes no representation or warranty as to the timeliness, completeness, or accuracy of any information on or accessed through this website. Decentral Media, Inc. is not an investment advisor. We do not give personalized investment advice or other financial advice. The information on this website is subject to change without notice. Some or all of the information on this website may become outdated, or it may be or become incomplete or inaccurate. We may, but are not obligated to, update any outdated, incomplete, or inaccurate information.
You should never make an investment decision on an ICO, IEO, or other investment based on the information on this website, and you should never interpret or otherwise rely on any of the information on this website as investment advice. We strongly recommend that you consult a licensed investment advisor or other qualified financial professional if you are seeking investment advice on an ICO, IEO, or other investment. We do not accept compensation in any form for analyzing or reporting on any ICO, IEO, cryptocurrency, currency, tokenized sales, securities, or commodities.
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Bancor (BNT) has announced the introduction of the Bancor Vortex ($vBNT) burn program, which is designed to use five percent of swap fees on the protocol to purchase and burn the vBNT token. This way Bancor’s total value locked (TVL) will continue to rise over time, as swap volume increases, according to a blog post on April 4, 2021.
Bancor Launches Vortex Burner
Barely two months after launchingBancor Vortex, an innovative liquidity mining platform that allows users to stake BNT, provide leverage liquidity, and still borrow against the staked cryptoasset, the team has launched Bancor Vortex Burner to further strengthen the ecosystem.
As stated in its blogpost, Vortex Burner is designed to boost the total value locked in the Bancor protocol by collecting five percent of the total swap fee revenue and use it to buy and burn vBNT, the network’s governance token, which liquidity providers who stake BNT in Bancor liquidity pools get as a reward.
The team says the Vortex Burner will boost Bancor’s TVL in the long run, while also ushering in several other positives into the protocol, including reduced supply, lower risks for liquidity providers, and more.
Enter Vortex Burner
The team wrote:
“Vortex Burner introduces an adjustable-fee taken from swap revenue generated by liquidity providers (BIP9) and addendum. For example, if a$100,000 trade is executed in a pool with a 0.2 percent fee, $200 is collected by liquidity providers as commission. The vBNT burner takes a five percent portion ($10) and uses it to buy vBNT and burn it.”
🔥 The Bancor Vortex $vBNT burner is LIVE 🔥
As of today, 5% of all swap fees on Bancor will be used to buy & burn vBNT!
🔒 Burned $vBNT = $BNT locked in Bancor forever
⚡️ As swap volume rises, burning accelerates, increasing TVL & reducing the circulating supply of $BNT
👇 pic.twitter.com/me1GyHuYPx
— Bancor (@Bancor) April 4, 2021
What’s more, as the protocol continues to purchase and burn vBNT, it will translate to increased value for BNT token, since the circulating supply will continue to reduce as it will be staked in the protocol forever, while the price of vBNT, will, in turn, be experiencing an upward pressure, thereby increasing the lending power of users, as well as the network’s capacity to offer credit.
Notably, the team has made it clear that vBNT burning is not an automatic process, as a user will need to trigger the burn at every point in time by withdrawing the accumulated swap fees in the Network Fee Wallet and sending them to the Vortex Burner smart contract where the vBNT will get burned. However, users will get an incentive when theyperform the operation.
The total value locked (TVL) in the Bancor protocol has surged bymore than 10xin the past six months. As seen on DeFi Pulse, Bancor (BNT) is currently the10th-largestDeFi protocol in the world, with a TVL of 1.75 billion.
In the same vein, the price of Bancor (BNT) token is up by 3.25 percent in the past seven days, trading at $7.58, with a market cap of $1.34 billion, according to CoinMarketCap.
