Bancor3 launches with new staking pools and instant permanent loss protection
The prominent decentralized finance protocol, Bancor, announced the launch of its version 3 (Bancor3). Bancor3 promises a new liquidity solution - to offer protection against impermanent loss to liquidity providers and minimal gas fees. It will focus on making on-chain liquidity sustainable and simplify DeFi staking for DAOs.
Product architect at Bancor Mark Richardson said that ‘Bancor 3 aims to put DeFi liquidity back in the hands of DAOs and their loyal token holders’ after the DeFi boom ‘attracted a number of opportunistic participants.’
Improvements and new features
Bancor emphasized failure of token projects to create long-term liquidity and creates risks related to negative returns from impermanent loss. This deters traders from staking their assets to the liquidity pool, according to Bancor’s blogpost. A majority of the liquidity mining reward programs ‘end up in the hands of mercenary yield farmers who hop from pool to pool liquidating earned rewards into their preferred asset.’
As such, Bancor introduces new architectural changes and features with Omnipool, to enable unlimited single-sided staking as a way to provide liquidity and earn yield in a single token, auto-compounding rewards (to ensure trading fees and rewards are auto-compounded with no transaction fees and used as liquidity in the pool), dual earning enabled by auto-compounding rewards and superfluid liquidity and other features.
Bancor’s ERC-20 token, BNT tokens are also used to protect traders against impermanent loss.
Impermanent loss occurs when the price of a token changes after a liquidity provider deposited it in a liquidity pool. The value of assets drops and falls lower to their price before they are first deposited. Liquidity pools are systems using trading pairs with half of the dollar value being one token and the rest being the other token. The result is asset price fluctuations.
The Bancor3 beta went live on April 19. On April 23, its total value locked (TVL) rose over US$ 1 million. Prior to Bancor3, Bancor2 was used to protect traders against impermanent losses but suffered from a high barrier to entry and high gas fees.
Bancor3 has already attracted more than 30 projects and tokens including Polygon’s MATIC, Synthetic Network Token SNX, Tearn.finance’s YFI, Enjin and multiple other DAOs to support its new protocol launch.